One Los Angeles law firm has placed its bet on the profitability of class action pension lawsuits filed on behalf of employees and so far the strategy is paying off.
Liner Yankelevitz Sunshine & Regenstreif LLP, with 92 lawyers and average profits per partner of over $750,000, has grown so fast that it's had to move four times in the last eight years. Its San Francisco office has moved three times.
The firm's growth has been driven by a decision to target large corporations whose pension funds have plummeted in value following a drastic decline in their stock.
"We've carved out a nice niche," said Stuart Liner, co-founder and name partner of Liner Yankelevitz. "That area of class action litigation has exploded nationally, and we have been successful in taking some very good cases."
The class action cases involve alleged violations of the U.S. Employee Retirement Income Security Act of 1974. Commonly known as ERISA, the law sets minimum standards to protect individuals who enroll in pension and health plans in private industry.
The law has spawned thousands of cases, especially as the stock market tumbled and corporations made changes to their benefit plans to save money.
Four years ago the firm seized on what was to become its specialty when it took on several ERISA cases and began to file more class action lawsuits on behalf of policyholders and consumers. Now, it is among a handful of firms nationwide that have specialized in ERISA class actions.
Most ERISA firms are quite small and represent only the plaintiffs in an ERISA case, but Liner Yankelevitz has been able to reap bigger rewards by representing both plaintiffs and defendants, such as pension funds.
"They're unusual in that they straddle both sides of the fence," said Daniel Feinberg, a partner at Lewis Feinberg Renakar & Jackson PC, which has been filing employee stock lawsuits for 20 years.
In recent years, corporations have paid tens of millions of dollars to settle a growing number of class action lawsuits involving alleged ERISA violations. "It's become a major business among some law firms," said Mark Ugoretz, president of the ERISA Industry Committee, an employer association, who called the increase "monumental."
In many cases plaintiffs can score a victory if they can prove a company or its executives violated a fiduciary duty to their employees one reason why most companies settle so quickly.
Last year, IBM Corp. agreed to pay $320 million to 130,000 current and former employees in a class action alleging that the computer giant discriminated against its older workers when it changed its pension plan twice during the 1990s. Other ERISA suits have been filed against WorldCom Inc., Electronic Data Systems Corp. and Global Crossing, which settled for $79 million last year.
Among those Liner has sued are Prudential Financial Inc. and Rite Aid Corp., which paid $67.7 million in 2003 to settle a class action lawsuit by employees. Their pension plans dropped to one-sixth of their value after Rite Aid re-stated its earnings in 2000, recording $1.6 billion in losses over about three years.
The settlement process in the Rite Aid case took eight separate mediation hearings, instead of the typical one or two, and involved multiple agreements for payments and pledges to correct wrongdoing, said Liner Yankelevitz partner Randall Sunshine.
"To put all that together and get an agreement on that was the most complicated process I've ever been involved in," he said.
Rite Aid and other big settlements have greatly added to the firm's profits, especially since it takes some of the cases on a contingency basis, getting paid a percentage of the settlement.
That's more of a risk than simply billing for hours worked, but it has allowed the firm to score big with some cases. And that's important for a mid-sized firm such as Liner Yankelevitz, which couldn't bill at the top rates being asked by the largest firms.
"You need to come up with a solution to avoid that sort of hourly grind," Liner said.
Still, it's an approach that few firms want to take. "In contingency work, it's possible that after an enormous outlay of time and money, the case could be lost," said Bruce Broillet, a partner at Greene Broillet Panish & Wheeler LLP, which has worked with Liner Yankelevitz on several intellectual property and entertainment lawsuits.
No master plan
Liner, a litigation attorney, co-founded the firm in 1996 with Steven Yankelevitz, a corporate lawyer. The two had worked at Levinson Miller Jacobs & Phillips, which dissolved several years later.
Later joining them were Sunshine, a former partner at Christensen White Miller Fink & Jacobs, which is now Christensen Miller Fink Jacobs Glaser Weil & Shapiro LLP, and Mitchell Regenstreif, who was recruited from the now defunct Brobeck Phleger & Harrison LLP.
"There wasn't any master plan, as embarrassing as that may sound," Liner said.
With its financial success, the firm has become a player in local affairs, making significant contributions to local election campaigns.
Four years ago, the firm's lawyers gave more than $15,000 to Los Angeles City Councilman Antonio Villaraigosa in his mayoral bid. During this year's primaries, the firm's lawyers gave $14,450 to attorney Bob Hertzberg and $29,650 to Mayor James Hahn.
Liner said no particular issue convinced the firm to support Hahn this time. "To be honest," he said, "Villaraigosa hasn't asked. That's really what it comes down to."
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