Schlichter Bogard Sanctioned for ‘Reckless’ Great-West Trial

Schlichter Bogard & Denton LLP was sanctioned up to $1.5 million by a Colorado federal judge who said the St. Louis firm “recklessly pursued” its case against Great-West Capital Management to trial while ignoring red flags with the expert witness it relied on to calculate damages related to the company’s mutual fund fees.

Schlichter’s own filings acknowledge that “no plaintiff who has pursued a claim under §36(b) of the Investment Company Act has ever won in the 50 years of that section’s existence,” Judge Christine M. Arguello of the U.S. District Court for the District of Colorado said Monday.

The firm nevertheless proceeded with its “up-hill battle,” even after the court pointed out serious flaws with the expert witness it tapped as the sole means of calculating damages at trial, she said.

“Proceeding to trial under those circumstances was, therefore, objectively reckless,” Arguello said. “That reckless choice cost Defendants millions of dollars litigating this case and wasted valuable judicial resources which could have otherwise been allocated to the resolution of meritorious claims brought by deserving litigants.”

Arguello ordered the Schlichter attorneys to be “personally liable” for up to $1.5 million, representing Great-West’s defense costs from the first day of the parties’ January trial to the day Great-West sought sanctions earlier this month.

Arguello’s ruling comes seven weeks after she ruled for Great-West on all counts of the shareholder derivative action, which alleged its mutual fund fees were excessive.

Arguello attributed the loss to the plaintiffs’ expert witness on damages, who she said “dealt a fatal blow to Plaintiffs’ case” when he was “thoroughly discredited” at trial.

Schlichter is known for its lawsuits challenging 401(k) plan fees and its multimillion-dollar settlements with Lockheed Martin Corp., Boeing Co., ABB Inc., and Massachusetts Institute of Technology, and others.

Milbank LLP and Wheeler Trigg O’Donnell LLP represented Great-West.

The case is Obeslo v. Great-West Capital Mgmt., LLC, D. Colo., No. 1:16-cv-00230, 9/28/20.