February 14, 2019
A recent Law 360 story by Dean Seal, “Citigroup Class’ Attys Spar Over $2.3M in Fee in 401K Row,” reports that, one day after McTigue Law LLP sought court intervention for a dispute with former co-counsel Bailey Glasser LLP over $2.3 million in attorneys' fees in a case for a class of Citigroup 401(k) plan participants, Bailey Glasser told a New York federal judge the McTigue attorney "forg[ot] to mention" that the fee dispute must go to arbitration, not the courts. Bailey Glasser’s Gregory Y. Porter asked U.S. District Judge Sidney Stein to remind James A. Moore of McTigue that in March 2009, the firms signed an agreement as co-counsel for a class of over 300,000 Citigroup Inc. 401(k) plan participants who scored a $6.9 million settlement in their long-running Employee Retirement Income Security Act suit last August.
That agreement contained a clause stating that any disputes must first be mediated and, if that failed, arbitrated, yet that agreement was unmentioned in Moore’s letter to the court asking for a status conference to discuss Bailey Glasser’s attempt to take back a percentage of the attorneys' fees award, according to Porter’s letter. "Instead, we urge the court to convene a status conference so Mr. Moore can explain why he failed to bring the arbitration agreement to the court’s attention and why the arbitration clause should not be enforced," Porter said.
In his letter, Moore accused Porter of holding the attorneys' fees hostage as leverage in negotiating for a higher percentage of the $2.3 million award by refusing to give consent for a single dollar of the award, held in escrow, to be distributed. According to Moore, Porter is contesting the allocation of fees because Bailey Glasser paid roughly 10 percent more in expenses than was laid out in the allocation agreement. Moore said that Bailey Glasser had already been fully reimbursed for that amount through the total expenses award and has incurred no losses, and even if the minor dispute were merited, it would not be affected by the distribution of the majority of the fees award.
"The timing of Mr. Porter’s communications raising his objections and withholding his approval were apparently calculated to prevent my firm from seeking to have the court resolve this matter through the fee petition and final approval process," Moore said before asking that the court either dictate the allocation of the fees or simply order their distribution. Porter followed up the next day, saying that he would not address Moore’s views on the fees allocations "except to note that Mr. Moore’s firm breached the agreement and its duties to the class in Spring 2018 by failing to pay its share of expert expenses (which share my firm paid)."
According to Porter, McTigue refused to respond to emails from Porter asking to confer on the management and financing of the case "given McTigue’s financial condition." The letter goes into no further details on the expense dispute. "In sum, the court should not entertain the issues raised in Mr. Moore’s letter without first deciding our motion to compel arbitration," Porter said.
The two firms secured a $6.9 million settlement last summer for a class of current, former and retired Citigroup employees who claimed since 2007 that a Citigroup committee stuffed the company’s 401(k) plan with Citigroup-affiliated funds even though other funds charged lower fees. Moore, whose firm was allocated more than 77 percent of the lodestar, said in August, "the case was hard-fought for over a decade, and we think the result is an excellent one for plan participants."
The case is Leber et al. v. The Citigroup 401(k) Plan Investment Committee et al., case number 1:07-cv-09329, in the U.S. District Court for the Southern District of New York.