A lot of small cases and a lot of small screens added up to a big series of arbitration awards for a Kansas City litigation team — with more on the way.
On Oct. 4, U.S. District Judge Nanette Laughrey of the Western District of Missouri approved awards totaling $3.29 million in damages for 20 individual plaintiffs who had alleged that DST Systems had poorly managed its employee retirement plan. Four days later, she entered a nearly identical award for 11 more claimants, with damages totaling $911,000, plus about $545,000 in attorneys’ fees and costs.
Ken McClain of Humphrey, Farrington & McClain said those awards are just a small subset of more than 300 claims that he and lawyers from three other firms have been trying painstakingly since September 2020. When the cases are complete, he said, he expects the total damages to exceed $30 million.
“There’s a lot more to come,” he said.
The claims initially were made in a class-action lawsuit filed in the Western District of Missouri in 2017. The suit claimed that DST allowed the profit-sharing portion of its retirement plan to be heavily concentrated in a single company’s stock that dropped 90 percent of its value in six months, resulting in $395 million in losses. The plaintiffs alleged that DST violated the federal Employee Retirement Income Security Act by failing to monitor and rebalance the plan.
DST won dismissal of the suit, successfully arguing that the employees’ claims were subject to arbitration and that they had waived any right to a collective action. Individually, the claims were worth relatively little money — those confirmed by the federal court in October ranged from as much as $420,000 to as little as $3,500. Clearly, arbitrating hundreds of them individually would be onerous.
Nonetheless, that’s what McClain’s team did, litigating separate arbitrations for 554 DST employees who participated in the 401(k) plan.
“They never expected that to happen,” he said. “They expected that we would just give up.”
SS&C Technologies Inc., DST’s parent company, didn’t respond to an emailed request for comment.
The year’s worth of weekly trials was the result of a group effort involving Humphrey, Farrington & McClain and three other Kansas City-area firms: the Klamann Law Firm, Kapke & Willerth and White Graham Buckley & Carr. They split the work between four trial teams, with one group of attorneys conducting all the discovery, one lawyer handling briefing and another assigned to scheduling. Trials were held via videoconference during the pandemic.
According to Laughrey’s order, 342 claims have been tried, with 214 claimants having received awards in their favor and 61 other claimants awaiting awards.
DST urged the federal court not to confirm the awards, arguing that the claims should have been litigated collectively — specifically in an ongoing class-action suit pending in the Southern District of New York that another DST plan participant had initiated.
Laughrey, however, said that action was filed after the arbitration claims were made. What’s more, she said DST had previously made the opposite argument in Missouri’s federal court by opposing the class action there.
“DST was not dragged into arbitration against its will,” she wrote. “It initiated these arbitrations voluntarily, whether its consent was manifested in the terms of the original arbitration agreement found valid in [the New York class action] or by inviting the Arbitration Claimants to arbitrate and then participating fully in the arbitrations. The only thing that would be unfair would be to let DST escape the consequences of the arbitration proceedings in which it voluntarily participated because they did not turn out as DST hoped they would.”
McClain said he expects hundreds of similar orders confirming additional arbitration awards will be forthcoming. However, he said he expects that completing the remaining arbitrations and confirming the resulting awards could take another two years.
Despite his and his colleagues’ success, McClain said he still thinks mandatory arbitration is an “abomination” and that plaintiffs should be able to bring their suits in court.
“Nonetheless, we bent it to our will to satisfy the legitimate interests that ERISA has in protecting retirees’ pension plans,” he said. “It’s fortunate that we were creative enough to do this.”
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$4.7 million arbitration awards
Breakdown: $4,202,800.92 in damages, $335,991.66 in attorneys’ fees, $208,080.57 in costs
Venue: U.S District Court for the Western District of Missouri
Case Number/Date: 4:21-cv-09038 and 4:21-cv-09051/Oct. 8, 2021
Judge: Nanette Laughrey
Caption: Theresa Hursh et al. and David Eisenberger et al. v. DST Systems Inc.
Plaintiffs’ Attorneys: Ken B. McClain, Jonathan M. Soper, Chelsea McClain-Pierce and J’nan C. Kimak, Humphrey, Farrington & McClain, Independence; John M. Klamann and Andrew Schermerhorn, Klamann Law Firm, Kansas City; George E. Kapke Jr. and Mike Fleming, Kapke & Willerth, Lee’s Summit; William Carr and Bryan T. White, White Graham Buckley & Carr, Independence
Defendants’ Attorneys: Lewis R. Clayton, Jessica S. Carey, Jeffrey J. Recher and Nina Kovalenko, Paul, Weiss, Rifkind, Wharton & Garrison, New York; Robert T. Adams, Ann M. Songer, Michael S. Cargnel, Megan Egli and Richard Shearer, Shook, Hardy & Bacon, Kansas City