PHILADELPHIA - The former Philadelphia firm Schnader Harrison will face a class action lawsuit from a former employee who says her retirement money was used to dissolve the firm in 2023.
Schnader Harrison Segal & Lewis failed financially two years shy of its 90th birthday, after having operated nationwide and employing more than 300 lawyers in its heyday. By 2022, though, operations had been scaled back considerably and the firm announced plans to close.
Jo Bennett said in her lawsuit that contributions she made to her 401(k) were commingled with firm funds during this time, in violation of the Employee Retirement Income Security Act. Defendants are equity partners for their roles as fiduciaries of retirement plans.
"Here, disputes of fact remain that go to the heart of Plaintiff's claims and make dismissal inappropriate," Philadelphia federal judge John Milton Younge wrote July 22 in denying Schnader's motion to dismiss.
"The parties disagree on whether the contributions in question should be considered employee or employer contributions, which are governed by different requirements under ERISA."
The issues require further discovery, Younge added. Bennett was a non-equity partner required to deposit deferrals from her paycheck into her 401(k) plan.
She says that despite requirements that employers remit such employee contributions after segregating them from their general assets, Schnader did not. Instead, it used that deferred money for its own purposes while the firm was going under.
It was in September 2023 that it told non-equity partners like Bennett that it would not remit the deferrals because it lacked the funds to do so, Bennett alleges. In its last two years of operation, Schnader illegally commingled her deferrals with the firm's general assets, she says.
She said the practice had even occurred before 2022. But Schnader argued in its motion to dismiss that the funds at issue were the matching contributions it paid for her 401(k).
Younge needs more to go on.
"(ERISA) is silent as to when employer, rather than employee, contributions become Plan assets, requiring examination of the relevant contract," he wrote.
Bennett now works at Culhane Meadows. She is represented by lawyers at The Garner Firm and Barton & Downs.