At a shuttered Philly law firm, partners reach an agreement over allegedly mismanaged pension funds

After Philadelphia law firm Schnader Harrison Segal & Lewis announced its closure in 2023, a group of senior lawyers there were told they would not get back their contributions to the firm’s retirement fund.

One of those lawyers sued over the loss in a class action on behalf of all those affected. She alleged that the firm’s equity partners improperly used the retirement funds to pay themselves and keep Schnader operating in its final months.

Now that group is poised to get back some of their retirement savings, if a settlement reached this month gets court approval.

In a federal lawsuit filed last year, lawyer Jo Bennett alleged that the Schnader’s equity partners — the lawyers who shared ownership of the firm — did not put employees’ retirement contributions into its 401(k) plan when it should have.

Instead, Bennett alleged, the firm “commingled the employee contributions” with the firm’s other assets and used them “for their own purposes, including funding Schnader’s operations and funding the distributions made to the firm’s equity partners.”

The settlement, which the parties submitted for court approval earlier this month, would recover $675,000 for any Schnader lawyers with the title income partner or counsel who made retirement contributions between Feb.7, 2018, and June 30, 2023.

The $675,000 will be distributed after attorney fees and litigation expenses are deducted, court documents note.

The total amount that should have been placed in the plan in 2022 and 2023 was just over $682,000, court documents said. Including interest, the documents say, the maximum loss for the employees’ retirement funds was calculated at $990,208.

In a June filing, Bennett’s lawyers estimated that the firm had at least 46 non-equity partners and counsel in 2022 and 2023.

Adam H. Garner, a lawyer for Bennett, declined to comment on the settlement.

Bennett was a “non-equity owning income partner” at Schnader, her lawsuit said. So while she held a more senior position compared to associates and counsel there, she did not own a portion of the business as equity partners did.

“It was obvious in 2022 that Schnader was experiencing a significant decline in operating revenue,” Bennett’s suit said.

But equity partners did not make contributions to the firm to help it continue paying bills, and instead they continued to collect their regular distributions from the firm, the suit alleged. Meanwhile, Schnader was sued for not paying rent on its offices in Philadelphia and San Francisco.

“At the same time the equity partners were continuing to pay themselves, the firm was struggling to meet its other financial obligations,” the suit said.

The firm announced its plans to dissolve in August 2023.

The next month, the equity partners tasked with liquidating the firm’s assets sent a letter to income partners and counsel that said their employee retirement contributions would not be returned to them. The reason given was that the firm “lacked access to the funds in question, which had been commingled with the firm’s general assets,” Bennett’s lawsuit said.

The firm was founded in 1934 as Schnader & Lewis.

It became known for its litigation practice and grew to a roster of about 200 lawyers. That number began to shrink in the years before the firm’s closure. Schnader was down to 122 lawyers in June 2022 and then 91 just before it announced it would shutter in August 2023.

“We’re all very sad that we’ve come to this point,” Keith Whitson, a Pittsburgh-based partner who served as the law firm’s general counsel, said at the time. “We want to be sure we preserve our client relationships, protect our staff and attorneys, and maintain the legacy we’ve created over almost 90 years.”