A federal judge has rejected an attempt by the Schlichter law firm to disqualify Marcia Wagner as an expert witness in an excessive fee case.
The lawsuit in question, Marshall v. Northrop Grumman Corp., was filed in September 2016 by the law firm of Schlichter, Bogard & Denton on behalf of seven former employees of Northrop Grumman Corp. It alleges that the $19 billion plan paid nearly $10 million (between $1.7 million and $2.1 million per year) in administrative fees associated with the company’s retirement plan – even though the plan was already paying millions of dollars in fees to a third-party recordkeeper, Hewitt Associates. (Effective April 1, 2016, Fidelity Investments replaced Hewitt as the plan’s recordkeeper.) The suit claims that Northrop executives had “unfettered control” over the amounts taken from the retirement plan, allowing the company to receive plan assets “in the guise of compensation” that wasn’t reasonable or necessary for the plan’s administration.
The plaintiffs in the case had challenged ERISA attorney Marcia Wagner’s involvement in February because during a separate (although allegedly similar) case involving a Northrup Grumman participant, the plaintiffs’ law firm employed an associate, another ERISA attorney well known to the retirement community – Thomas E. Clark, Jr. – who, the plaintiffs allege, “…was deeply involved in developing the claims asserted in Grabek and later in Marshall, and acquired confidential information, including sensitive work product of Plaintiffs’ attorneys.”
Specifically, in late September 2018, the defendants retained Wagner, founder of the Wagner Law Group, to rebut the opinion of the plaintiffs’ expert, David Witz (wait, it gets more interesting). According to an outline of the case (Clifton W. Marshall et al. v. Northrop Grumman Corp. et al., case number 2:16-cv-06794) presented, U.S. District Judge Andre Birotte Jr. noted that the Wagner firm’s conflicts check revealed that Clark had represented the plaintiffs in a related action (while working as an associate from 2008 to 2013 at Schlichter, Bogard & Denton, the same law firm as Plaintiffs’ current counsel), was “an attorney of record in Grabek, and “was materially involved in all aspects of that representation.”
The court noted that after learning of Clark’s involvement in Grabek, Wagner’s firm researched the relevant ethics rules, determined that there was no conflict preventing her from serving as an expert in this case, but then nonetheless “immediately instituted an ethical screen to prevent Mr. Clark from disclosing client confidences.” This included personal instruction from Wagner to Clark that “he could not work on this case, access files related to this case, or contact or discuss this case with any attorneys or staff involved in this case.”
Citing precedent that concluded “there is no bright-line rule for expert disqualification,” Judge Birotte noted that courts must “balance the policy objectives that favor disqualification—ensuring fairness and preventing conflicts of interest—against policies militating against disqualification, including guaranteeing that parties have access to witnesses who possess specialized knowledge and allowing witnesses to pursue their professional callings.”
Judge Birotte cited two major points of contention by the plaintiffs: that “Clark’s alleged conflict of interest is imputed to Ms. Wagner;” and that Wagner’s testimony that Plaintiffs’ “proffered expert” David Witz is “not qualified to offer an expert opinion in this case creates a conflict because Mr. Witz is a client of Ms. Wagner’s firm.”
With regard to the first challenge, Judge Birotte pointed out that there was no evidence presented that Clark disclosed any of the confidential information he had access to during his tenure at the Schlichter firm, nor had they articulated “any prejudice that they might suffer from Ms. Wagner’s retention as an expert.” But perhaps most tellingly, he explained that, “Plaintiffs overlook the fact that Mr. Clark and Ms. Wagner “are not the same person and instead ... rely upon a theory of imputed disqualification.”
As for the second claim, Judge Birotte explained that under the rules in Massachusetts (Wagner’s location), a class action is deemed to represent only the named plaintiffs for purposes of determining a conflict of interest. “Here, the class representatives in Grabek are not class representatives in this matter. Because Mr. Clark is not conflicted under the Massachusetts rules, neither is Ms. Wagner.” Regarding the rules in California (where the current case is being tried), the court drew a distinction between the role of an attorney/advocate and that of an expert witness. “Attorneys are advocates, charged with selflessly serving their client’s interests. Expert witnesses, on the other hand, are employed to assist the parties in their pretrial preparation, and if called to testify, to give their unbiased opinion in order to assist the trier of fact in understanding the relevant evidence,” Judge Birotte explained. “Because Ms. Wagner does not ‘represent’ Defendants in the current matter, Rule 1.9 does not bar her from testifying as an expert witness.”
He did conclude that, under California law, Clark would be disqualified as an expert witness in this case because, while not identical, the issues presented in Grabek and this case “…could reasonably be determined to be substantially related.”
After a bit of discussion about the conditions of, and necessity for establishing, effective screening procedures inside the firm, and noting “evidence that Mr. Clark was immediately screened from the case and has no access to files relating to this case,” and that “Mr. Clark and Ms. Wagner have had no interactions with each other with respect to this matter apart from Mr. Clark disclosing that he represented the plaintiffs in Grabek,” while Wagner “also declares that she has received no confidential information from Mr. Clark. Ms. Wagner works in the Boston office of her firm and is thus physically and geographically isolated from Mr. Clark in the St. Louis office,” Birotte declared himself “satisfied that the screening procedures are effective.”
Finally, noting that, “As a general rule, courts do not disqualify an attorney on the grounds of conflict of interest unless the former client moves for disqualification,” and even if it were deemed to have standing, Judge Birotte declared that there was no conflict because “Mr. Witz is not—and has never been—a client of Ms. Wagner’s firm; rather, Mr. Witz’s company is the client.” Moreover, he explained, it was Clark, not Wagner, who represented Witz’s company – and, as noted earlier, Clark was deemed to have been “screened from this litigation.”
And thus, “having considered the parties’ submissions, the relevant law, and the record in this case, as well as the arguments of counsel at oral argument, the Court DENIES Plaintiffs’ Motion.”