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Fee Allocation Dispute in Citigroup 401K Class Action

March 12, 2019 | Posted in : Class Action, Fee Agreements, Fee Allocation / Splitting, Fee Award, Fee Dispute, Fee Dispute Litigation / ADR

A recent Law 360 story by Andrew Strickler, “Firm Ordered to Drop Arbitration Bid in $2.3M Atty Fee Fight,” reports that the New York federal judge who oversaw the settlement of a case focused on a Citigroup employee retirement plan ordered one of the plaintiff co-counsels to withdraw a request for court-ordered arbitration to resolve a dispute over $2.3 million in legal fees.  U.S. District Judge Sidney Stein's order arrives amid a scrap between the co-leads in the Citigroup case, McTigue Law LLP and Bailey & Glasser LLP, over the split of the January award.

Attorneys at the McTigue firm, a Washington, D.C. pension boutique, had asked the court to reject Bailey & Glasser LLP's call for arbitration as "premature and, arguably, nonsensical," because the dispute has "no legal existence" in terms of a motion pending before the court.  The previous day, Bailey & Glasser had asked the court to compel arbitration of the fee split dispute, saying the co-counsels had agreed to do so in a 2009 agreement.  That deal "was drafted by Mr. McTigue himself," the firm said in a motion.  "As such, any ambiguities in whether and to what extent the arbitration clause governs the dispute should be resolved in favor of Bailey & Glasser."

In January, Judge Stein put his final stamp of approval on a $6.9 million settlement for a class of over 300,000 Citigroup 401(k) plan participants who had argued that the company stacked the plan with Citigroup-affiliated funds in order to boost its own profits, even as other funds charged lower fees.  Judge Stein also signed an order awarding $2.3 million to the plaintiffs' attorneys, $15,000 to each of two class representatives, and putting $374,100 toward case-related expenses.  That left approximately $4.2 million for the class.

Last month, both firms filed letters with the court about a disagreement on the fee allocation.  In his letter, James Moore of McTigue Law accused Bailey & Glasser's Gregory Porter of holding the attorneys' fees hostage as leverage in negotiating for a bigger cut of the $2.3 million by refusing to give consent for any of the money to be distributed.  According to Moore, Porter is contesting an agreed-to allocation, because Bailey & Glasser paid roughly 10 percent more in expenses in the case than was anticipated.

Porter in turn said the McTigue firm breached their deal last spring by failing to pay its share of expert expenses and then refusing to respond to emails "to confer on the management and financing of the case given the McTigue firm's financial condition."  In a second set of tit-for-tat filings, Bailey & Glasser told the court that, after it filed its arbitration motion, the McTigue firm had agreed to proceed to mediation.  The McTigue firm responded with its own filings stating that the Bailey firm's notification was "unilaterally filed" and gives the "misleading impression" of being about a joint agreement of class counsels.

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