Articles
How To Get The Most Out Of Your Lawyer Without Spending More
by Robert D. Klausner
It may seem incongruous that a law firm’s website would be advising visitors and clients on how to save money on legal fees. Yet, in the area of fiduciary representation for retirement plans, that is precisely part of the lawyer’s duty.
WHAT DO LAWYERS DO BEST?
Lawyers bring the most value for the dollar to retirement plans in the area of planning. Through advance attention to potential problems, litigation can be more easily avoided, thereby saving unnecessary plan expenditures. For example, the following areas should be the primary focus of the use of legal resources:
Document Review - No document of any consequence should be executed by fund officials without an advance view by counsel. This is particularly true in the area of professional services such as investment managers, investment consultants, actuaries, computer systems, etc. The lawyer’s focus is not on the substance of the service, but, rather to ensure that the rights of the fund in the event of a dispute are adequately protected.
Education - An educated trustee or staff member is the one least likely to make errors that have adverse consequences for the plan. Lawyers should perform an educational role by organizing and delivering educational programs on fiduciary duties, tax issues, pre-retirement counseling, loss prevention, etc.
Legal updates - Lawyers should be providing clients with regular legal updates concerning cases, legislative actions, etc. that impact the performance of the trustees’ duties. These updates can come in the form of an attorney’s report at the Board meeting; mailed bulletins; or website information. Keeping the Board and staff informed of cutting edge issues can assist the fund in avoiding the troubles already encountered by other funds by allowing the development of policies that take account of previously unconsidered issues.
Plan drafting - In the final analysis, plan trustees and staff are part of the executive branch of government. They are responsible for administering the plan as written by the legislative branch of government. Unfortunately, retirement plan documents are rarely created as a seamless document. Often they are amended on a piece-meal basis to add additional benefits or comply with changing tax law requirements. It is part of the plan counsel’s duty to continually review the plan document; recognize and identify potential deficiencies; and, finally recommend amendments to the board. This is not intended as a means of enhancing benefits; rather, it is to identify administrative issues or gaps in the plan which may give rise to legal challenges to the administration of the plan by the board or staff.
WHAT DO LAWYERS DO THAT COST THE MOST?
The answer is simple....litigation, litigation, litigation.
Once an issue has found its way to the courthouse, the fund has lost control over costs. To a large measure, control of litigation costs of a pending action is impossible. More often than not, the plan is the defendant and must respond to an action whether it wants to or not. There are, however, some tools which can be employed to bring litigation to an early conclusion.
Counsel should keep the board and staff apprised of all aspects of the litigation. This allows the early development of a cogent policy for the management of the case. Attempting to make policy decisions with less than full information can lead to disastrous results.
Staff can often provide excellent litigation support, particularly in answering discovery requests and preparing documents. Additionally, staff and trustees provide an excellent source of institutional history.
On occasion, the plan may wish to consider participation in cases of universal importance as a friend of the court, also known as amicus curiae. Recently, for example, the Jacksonville Police and Fire Pension Plan and a number of other city pension plans intervened in an action affecting the cost of conducting disability hearings for all of Florida’s 400 police and fire pension plans. In successfully supporting a small plan, the intervening systems were able to play an instrumental role in overturning a potentially disastrous trial court decision before it confronted them directly.
Above all, it must be remembered that litigation involves the same business decision-making process that is used in the management of the rest of the retirement system. Sometimes, it is in the best interest of the plan to settle a case that the board or staff may feel should be pursued on principle. While it is important to avoid setting bad precedent by conceding matters that will invite more litigation, some cases should be settled because it makes economic sense to do so. In other words, regardless of the emotions of the case, it may be more economically feasible to reach a settlement.
CAN A FUND HAVE EFFECTIVE LEGAL ADVICE AND STILL SAVE MONEY?
If a few simple rules are followed, the answer is clearly yes.
Not every meeting needs a lawyer - Often, the business of the board involves no issues requiring the immediate presence of counsel. Lawyer time can often be best spent by detailed agenda preparation with staff members and advance written reports to trustees.
Be clear about the assignments - Time, in legal issues, is money. Careful consideration of the task at the time of assignment can yield more expeditious and useful results.
Pursue fees in litigation - Wherever possible, attorneys fees should be sought from opposing parties in litigation, including correction of property settlement orders in divorce cases that require action by the fund’s counsel.
Have the right lawyer for the job - This is perhaps the best guarantee of cost effective legal services. Of the hundreds of thousands of lawyers in the United States, only a relative handful have experience in the representation of state and local government retirement systems. Just as the board and staff perform extensive due diligence in selecting investment managers and consultants, the same care should be given to the lawyers who will guide the plan through complex and challenging legal issues. In the end, it is a relationship of trust, confidence and cooperation that yields the longest lasting and most successful results for the plan.
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