N.Y. lawyers could win big in state suit

If Alaska wins full claim, firm could earn $174 million

Posted: Tuesday, December 18, 2007

If the state of Alaska wins big in its lawsuit against a company it says shares the blame for its retirement system travails, a New York law firm may win big as well.

Sound off on the important issues at

Paul, Weiss, Rifkind, Wharton & Garrison LLP of New York City, and Lessmeier & Winters LLC of Juneau, are representing the Alaska Retirement Management Board in a $1.8 billion lawsuit against Mercer Inc., a division of the huge Marsh and McLellan Cos. consulting firm.

Alaska says that as its actuary, Mercer was expected to tell the state how much money it should put aside for future benefits. The number it gave the state was too low, the suit says, and now Alaska expects to have to pay benefits totaling $8.4 billion more than it has saved.

Department of Law representatives told legislators during the last session they had a strong case against Mercer, but the Legislature declined to act on a request for $12 million to finance the lawsuit.

Instead, the Department of Law hired the New York City firm on contingency, meaning the firm will front the costs of the suit and get a percentage of whatever winnings there are. The department signed a contract with the firm and filed suit in early December.

The contingency fee is calculated on a sliding scale that will decrease with the size of any award or settlement.

If the state were to win the entire amount sought, the firm's fee would amount to $174 million, said Mike Barnhill, assistant attorney general with the Alaska Department of Law.

Sen. Bert Stedman, R-Sitka, said he was comfortable with paying out a higher amount in legal fees to take less risk with the state's money, even though Barnhill thought the state had a strong case.

In law, there are no guarantees, he said.

"The firm feels they have a very good case, obviously, because they're taking it on contingency," he said.

Stedman, co-chairman of the Senate's powerful Finance Committee, was one of those reluctant to authorize the $12 million.

Another was Rep. Mike Hawker, R-Anchorage, and chairman of the House Ways and Means Committee.

He said at the time he was reluctant to spend the money because he didn't think the state had a strong chance of winning. He likened the case to suing the weatherman for a bad forecast.

State officials said Mercer's prediction of future retirement costs was so bad a lawsuit was merited, and it even contained mathematical errors.

Mercer denied the accusations, and said it was being held responsible for factors outside its control.

• Contact Pat Forgey at 523-2250 or patrick.forgey@juneauempire.com.

Trending this week:


© 2018. All Rights Reserved.  | Contact Us