Defunct law firm Schnader Harrison loses bid to dismiss ERISA suit over handling of retirement money
A federal judge in Philadelphia has refused to toss a lawsuit accusing the now-defunct law firm Schnader Harrison Segal & Lewis of using 401(k) contributions to fund operations and make distributions to equity partners. (Image from Shutterstock)
A federal judge in Philadelphia has refused to toss a lawsuit accusing the now-defunct law firm Schnader Harrison Segal & Lewis of using 401(k) contributions to fund operations and make distributions to equity partners.
U.S. District Judge John Milton Younge of the Eastern District of Pennsylvania denied a motion to dismiss the proposed class action suit in a July 22 opinion. Younge said discovery was needed to resolve disputes of fact.
Reuters and Law360 have coverage.
The suit was filed by Jo Bennett, a nonequity partner at the firm, against the firm’s retirement and savings plan and former partners who acted as plan fiduciaries. The suit claims that the plan was supposed to be funded with mandatory deferred compensation, but the money was wrongly commingled with the firm’s general assets in 2022 and 2023 despite known financial difficulties.
Deferred compensation was withheld from the retirement and savings plan for up to 18 months at a time, according to the suit.
Bennett is currently a lawyer at Culhane Meadows Haughian & Walsh, where she is the labor and employment chair. Schnader Harrison began its dissolution in August 2023.
Younge said Bennett had “plausibly alleged interrelated violations” of the Employee Retirement Income Security Act of 1974. The law requires employers to segregate from its general assets any amounts withheld from paychecks for contributions to the retirement plan “as of the earliest date on which such contributions … can reasonably be segregated.”
Younge said dismissal was inappropriate because of disputes of fact “that go to the heart of plaintiff’s claims.”
“The parties disagree on whether the contributions in question should be considered employee or employer contributions, which are governed by different requirements under ERISA,” Younge wrote. “The factual issues present in this case, including any inconsistencies between the plan, any other internal policies, and actual practice, the extent and length of commingled funds, and the involvement and knowledge held by the relevant parties, necessitate further discovery.”
