Schlichter Settlement Highlights the Costs of Litigation

The final order approving a $55 million settlement in an excessive fee case offers some compelling insights into the costs of litigation – on both sides.

Noting that “this kind of litigation has made a “national contribution” in the clarification and refinement of a fiduciary’s responsibilities and duties,” and that “this litigation not only educated plan administrators throughout the country, it educated the Department of Labor,” the terms of the proposed settlement in Tussey v. ABB which were announced earlier this year have now been approved (Tussey et al. v. ABB Inc., case number 2:06-cv-04305, in the U.S. District Court for the Western District of Missouri) by U.S. District Judge Nanette K. Laughrey. 

The calculation of damages in this case has been a long-standing issue as it has bounced its way up to the U.S. Supreme Court and back (the Court denied review of the case in 2014 and 2017). Ultimately, the settlement was more than monetary[i]– as was acknowledged in the order approving the terms. Moreover the work – and the expense – of litigation was borne by both parties over a decade.

The Schlichter Bogard & Denton team said they put in 28,700 hours of work over more than a decade in a case whose outcome was “uncertain, sharply contested, often protracted, and required willingness by class counsel to risk unusual resources in time and money,” Judge Laughrey wrote in support of the settlement terms. The settlement included an $18,331,500 award to the plaintiff’s attorneys (a third of the settlement amount, which, as Judge Laughrey notes, is “common in these cases”), reimbursement of costs and expenses of $2,256,805 and $25,000 for the three named plaintiffs.[ii]

“Not only was the claim novel, but Class Counsel was required to fight for over a decade with well-funded defendants represented by highly-qualified national attorneys to achieve this result. Unless that risk is compensated with a commensurate award, no firm, no matter how large or well-financed, will have the incentive to consider pursuing a case such as this,” she wrote.

And they weren’t the only ones. Judge Laughrey noted as a matter of public record that “the two Defendants’ legal fees in this case, not including expenses, exceeded $42 million – through the trial in 2010” – a figure, she acknowledged that does not include fees paid for experts or other expenses, which were substantial. In fact, the cost for just one of ABB’s experts, Glenn Hubbard, and his research was $3.2 million, far exceeding the entire requested expenses for Class Counsel in the 12 years of this case.

“Class Counsel brought this case without guarantee of reimbursement or recovery, so they had a strong incentive to keep costs to a reasonable level, and they did so,” Judge Laughrey concluded. Noting that “an empirical study of the costs awarded in class action litigation found that the average cost award was equal to 4% of the relief obtained for the class,” she concluded that the requested reimbursement of costs and expenses totaling $2,256,805 – less than 3% of the recovery sought – were “well within the range to be considered “generally reasonable.”