In his opinion, U.S. District Judge Stephen J. Murphy,
III said certain allegations in the complaint against law
firm Sullivan, Ward, Asher and Patton, P.C. "appear
sufficient, if proved, to support a finding that Sullivan
Ward was a 'fiduciary' under ERISA and thus state a
claim upon which relief can be granted." According to
the opinion, the allegations include that Sullivan Ward was
provided "a virtual open checkbook" for expenses
in the Iron Workers Local 25 Pension Fund's litigation
against Watson Wyatt, and more importantly that Sullivan
Ward rejected, without first conferring with the fund, a
$110 million offer of settlement, later accepting a similar
offer, and filing a motion to enforce the settlement, all
without advising or obtaining approval of the fund.
"An attorney with carte blanche authority to settle
a case is more akin to a fiduciary with discretion over the
client's assets, than an attorney performing the usual
professional functions," Murphy said. He added that
the question of whether Sullivan Ward was a fiduciary and
whether it breached its fiduciary duties under ERISA should
be decided by a jury.
The court dismissed plan participants' claims that
Sullivan Ward breached its legal contract and that the law
firm committed malpractice or legal negligence, saying the
participants did not have legal standing to make the claims
since they did not have a direct attorney-client
relationship with the firm.
After a contract with Watson Wyatt as a service provider
to perform actuarial services for the fund was terminated,
Sullivan Ward began investigating Watson Wyatt for possible
actuarial negligence, without prior approval from the fund
trustees, according to the court opinion. In its research,
the law firm found actuarial negligence, decided to sue
Watson Wyatt and determined the fund would claim damages
exceeding $100 million.
Three years after the suit was filed, Sullivan Ward
rejected, without first communicating to the trustees, an
offer to settle the Watson Wyatt litigation in the amount
of $110 million, allegedly because according to the
proposed settlement, Watson Wyatt would be granted
subrogation rights to bring suit against Sullivan Ward.
However, weeks later, Sullivan Ward settled the case for
$110 million, without the trustees' authorization, and
filed a motion to enforce the settlement before telling the
trustees or fund participants that the case was
settled.
When Sullivan Ward advised the trustees that the case
had been settled, over two months after settlement, it did
so in a way that prevented the trustees from reviewing the
settlement agreement in a meaningful way, the plaintiffs
claim. Yet, at the meeting, five of the six trustees
approved the settlement by signing a resolution.
In addition, the suit claimed Sullivan Ward threatened
one of the trustees because he had hired his own attorney
to advise him concerning his own fiduciary
responsibilities, and potentially jeopardized the
settlement. Months later that trustee and two other
participants and/or beneficiaries of the plan filed a
motion to intervene in the Watson Wyatt case and the $36
million Sullivan Ward was seeking in attorneys' fees
was ordered to be placed in an interest-bearing account for
later disbursement by the court.
The case is Iron Workers Local 25 Pension Fund v.
Watson Wyatt and Co.,
E.D. Mich., No. 04-cv-40243, 11/4/09.