Canfield v. SS&C Technologies Holdings, Inc.

Background

This opinion addresses two related Employee Retirement Income Security Act (ERISA) actions: Canfield, No. 1:18-cv-8913 (ALC), and Mendon, No. 1:18-cv-10252 (ALC). The plaintiffs are current or former employees of DST Systems, Inc., now identified in the opinion as SS&C Technologies Holdings, Inc., and participants in DST’s 401(k) Profit Sharing Plan. They sued DST, Ruane, Cunniff & Goldfarb & Co., Inc., the Plan’s Advisory Committee and its individual members, and the Plan’s Compensation Committee. The plaintiffs alleged that the defendants breached fiduciary duties under ERISA, causing losses in their Plan accounts.

On July 10, 2020, the court disqualified the Klaymann Group, which represented the plaintiffs in these cases. The firm also represented individuals in arbitration proceedings against DST and Ruane. Three of those arbitration claimants were former members of the Plan’s Advisory Committee, and all three had left the Committee by mid-October 2013. The court previously concluded that at least two former Committee members represented by the Klaymann Group were sued in the plaintiffs’ original complaints. It found that this concurrent representation created a severe risk of tainting the trial.

Motion for reconsideration

The Klaymann Group moved for reconsideration of the disqualification decision. Reconsideration is an extraordinary remedy generally limited to an intervening change in controlling law, new evidence, or the need to correct clear error or prevent manifest injustice. The court explained that a party may not use reconsideration simply to present new theories or get a second opportunity to argue the case.

The firm made three arguments: that the court applied the wrong legal standard, that it overlooked important facts, and that new evidence required reversal. The firm correctly identified the general disqualification standard: a lawyer should be disqualified only when the lawyer’s conduct tends to taint the underlying trial, and an appearance of impropriety alone is insufficient. But the court explained that when the alleged conflict involves apparently improper concurrent representation, the burden shifts to the lawyer. The lawyer must show, at minimum, that there will be no actual or apparent conflict in loyalties or reduction in the vigor of the representation. The court described this as a very heavy burden.

The Klaymann Group argued that references to conduct before 2014 in the complaints were typographical errors and that the plaintiffs’ claims concerned only later conduct. It also argued that pursuing pre-2014 conduct would hurt its clients and help DST. The court rejected that reasoning for reconsideration purposes. It noted that the arbitration claimants disputed the position that pre-2014 conduct caused no losses and had alleged that the defendants knew or should have known by at least 2011 that an investment was especially risky and imprudent. The court found that allowing the Klaymann Group to remain could cause the plaintiffs to abandon claims they initially considered worth pursuing, creating a significant risk of taint if those claims had merit.

The firm also submitted new evidence. An arbitrator in a related arbitration had found DST jointly and severally liable under ERISA for losses calculated from May 29, 2015, onward. The court said this finding might support the firm’s position about the relevant time period, but it did not establish that the plaintiffs had received advice unaffected by the conflict when deciding whether to abandon their pre-2014 claims. The firm also submitted a settlement agreement with Ruane, but the court found that the firm had not explained, and the court did not see, how that agreement supported reconsideration.

Disposition

The court denied the Klaymann Group’s motion for reconsideration. It also granted the specified motions to seal in Canfield—ECF Nos. 39, 51, 56, and 67—and in Mendon—ECF Nos. 36, 38, 50, 55, and 66. Judge Andrew L. Carter, Jr. signed the opinion and order.