Disqualification of an expert witness “is a drastic measure that courts should impose only hesitantly, reluctantly, and rarely.” Thus begins a rebuttal to an attempt to disqualify well-known ERISA attorney Marcia Wagner as an expert witness in an excessive fee case.
The plaintiffs in the case, represented by the law firm of Schlichter, Bogard & Denton LLP, had challenged 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.”
The plaintiffs alleged that Clark – now a partner at the Wagner Law Group – would have “a direct and unavoidable conflict of interest, if he were to be involved for Northrop Grumman, because he previously represented the plaintiff class in Grabek.”
In that case, in 2017 the parties struck a $16.75 million settlement with the Schlichter law firm garnering a $5.58 million fee for its representation of a suit that had been filed way back in September 2006, as part of the first wave of the so-called excessive fee lawsuits. The plaintiffs argue that this involves “similar ERISA claims on behalf of the same retirement Plan and certified classes of Plan participants against the Plan’s fiduciaries related to the unlawful payment of Plan assets to Northrop Grumman.”
How similar? Well, the lawsuit in question alleged that the $19 billion plan paid nearly $10 million (between $1.7 million and $2.1 million/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 record keeper, Hewitt Associates. 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.
As for the now-settled suit, it had alleged that during the five-year period preceding spring 2006, the Northrop Grumman Stock Fund paid an average of $454,588.88 per year in investment management expenses, “even though that Fund’s singular investment directive is to invest in Northrop Grumman Corporation common stock.”
The motion also raised a separate issue requiring the disqualification: that Wagner’s office, through Clark,” has directly contacted one of Plaintiffs’ expert witnesses, David Witz,” and that her disqualification “…is the only remedy that can protect the confidentiality of information disclosed to Mr. Clark, avoid the conflict with her client, Mr. Witz, and avoid the appearance of impropriety in these proceedings.” Here it should be noted that Wagner was selected as an expert witness to rebut the testimony of Witz on behalf of the plaintiffs. More on that in a minute.
For their part, the defendants have now argued (Marshall v. Northrop Grumman Corp., Bankr. C.D. Cal., No. 2:16-cv-06794-AB-JC, opposition to disqualification motion 5/17/19) that the attempt to disqualify Wagner “…not because she has had any exposure to Plaintiffs’ confidential information or litigation strategy, but because a different attorney in her firm represented different plaintiffs in a different case, while working at a different law firm.” Moreover, the defendants claims that the plaintiffs “…do so knowing that the supposedly conflicted attorney has been screened from any participation in, or even discussion of, Ms. Wagner’s work as an expert in this case.”
The defendants argue that the Grabek case involved a different time period (prior to May 12, 2009, while this case covers a period beginning Sept. 9, 2010), and different named plaintiffs/class representatives. Moreover, they argue that Clark departed Schlichter three years before Grabek was settled. “Mr. Clark could not possibly have had a view of the strengths and weaknesses of each side” of the claim at issue in this case when he was working at the Schlichter firm in 2013 – not only was that claim years away from being brought, but “due to the discovery limitations in Grabek, Plaintiffs’ counsel had no access to evidence regarding the post-2009 period at issue here,” they argue.
However, they further argue that, “out of an abundance of caution,” Wagner’s firm “immediately instituted an ethical screen that prevented Mr. Clark from having any involvement with, or discussion about, this case or Ms. Wagner’s expert testimony.” Which, they argue means that whatever Clark knows, it’s not the same as Wagner knowing it – not to mention that, with the passage of time and the publication of summary judgment and reconsideration motions, pretrial briefing and three days of the plaintiffs’ trial presentation before the case settled… “It is thus no longer confidential.”
Another concern of the plaintiffs seemed to be that Witz’ relationship with Wagner’s firm – more specifically, his firm’s relationship as a client of that firm – might be problematic.
In rebuttal, the defendants argued that “Ms. Wagner’s opinion is not that Mr. Witz is unqualified as an expert by virtue of being incompetent or unqualified to do his day job; her point is simply that his professional experience is not a match for the facts of this case” – specifically that “he is only familiar with small and mid-market plans, whereas the Northrop Plan is more than 4,000 times larger (as measured by participant count) than the average plan serviced by Plaintiffs’ expert.”
The case is pending before Judge Andre Birotte Jr. of the U.S. District Court for the Central District of California. Will the court be persuaded?