A federal district court this week certified a class of former, current, and future 401(k) Plan participants in Tussey v. ABB, Inc., No. 2:06-04305-CV-NKL (W.D. Mo.) (originally filed as Kennedy v. ABB, Inc.). Plaintiffs have sued their employer (ABB, Inc.), the financial services provider for the Plan (Fidelity Management Trust Company), and various other defendants alleged to be Plan fiduciaries. Plaintiffs claim that defendants breached their fiduciary duties to the participants by steering the Plan to invest in funds that charged allegedly unreasonable fees and by allegedly failing to disclose those fees to participants.

In its opinion (click here), the court certified a class defined as follows:

All persons, excluding individual employees who are liable for the conduct described in the Complaint, who are or were participants or beneficiaries of the Plans and who are or were affected by the conduct set forth in this Complaint, as well as those who will become participants or beneficiaries of the Plans in the future. The court certified the class under Rule 23(b)(1)(A) and (B), stating that “[a]lleged breaches by a fiduciary to a large class of beneficiaries present an especially appropriate instance for treatment under Rule 23(b)(1).”

The court devoted the bulk of its opinion to addressing Rule 23(a)’s requirements, and the defendants’ objections to certification:

  • Numerosity: The court noted that the Plan had approximately 12,567 participants at the end of 2005, and found the numerosity requirement satisfied.
  • Adequacy: In concluding that the interests of the named plaintiffs were sufficiently aligned with those of the non-named class members, the court found that all the participants have a financial stake in the Plan, and that the relief sought by the named plaintiffs would go to the Plan.
  • Commonality: 
    • The court found that plaintiffs had identified a number of common issues of law and/or fact, including whether the defendants breached their fiduciary duties owed to the Plan, and whether the defendants’ communications provided complete and accurate information.
    • Citing Blades v. Monsanto Co., 400 F.3d 562, 567 (8th Cir. 2005), the court held that an inquiry into the merits was justified only insofar as necessary to “determine the nature of the evidence that would be sufficient, if the plaintiff’s general allegations are true, to make out a prima facie case for the class.” The court found that plaintiffs had made the required showing with respect to their claims that excessive fees were collected.
    • Defendants had objected that determining damages would be a highly individualized process, but the court held that distribution of damages was not a bar to certification and would be a question for the Plan administrator to determine should the plaintiffs recover any damages.
  • Typicality: 
    • The court found the typicality requirement satisfied, given the “representative nature” of the ERISA § 502(a)(2) claims and the injunctive relief sought under ERISA § 502(a)(3). 
    • Because the lawsuit was brought on behalf of the Plan, the Court found that whether individual participants would have varying damages was irrelevant to the typicality inquiry. 
    • The Court ruled that plaintiffs did not need to prove individual reliance.

In the alternative to their objections to certifying any class, defendants objected to the scope of plaintiffs’ proposed class definition. The court modified plaintiffs’ proposed class definition in one respect, declining to include persons who “may have been affected by” defendants’ alleged conduct and instead limiting it to those who “are or were affected” by such conduct. The court stated that the plaintiffs’ proposed phrasing would improperly widen the scope of the conduct and claims at issue. Otherwise, the court adopted the definition as requested.

Defendants had objected that future Plan participants should be excluded for lack of constitutional standing. Judge Laughrey rejected this argument on the grounds that the request for injunctive relief made it appropriate to include future Plan participants. She also rejected objections to inclusion of former participants, at least where their claims were not time-barred. She also indicated, however, that the statute of limitations was an affirmative defense that was being addressed in a separate briefing.

This decision follows class certification decisions in two other ERISA “revenue sharing” cases earlier this year. In June, a class was certified in Loomis v. Exelon Corp., No. 1:06-CV-04900 (N.D. Ill.). (Click here for our prior alert describing the Loomis Order in more detail.) Unlike the order in Tussey, the Loomis order adopted the language proposed by plaintiffs that includes those who “may have been” affected by the defendants’ conduct. Defendants in Loomis did not seek appellate review of that order. By contrast, on August 6, 2007, the court denied class certification in Waldbuesser v. Northrop Grumman Corp., No. 2:06-CV-06213-R-JC (C.D. Cal.), another “revenue sharing” case. The Ninth Circuit has since granted the plaintiffs’ petition for permission to appeal that ruling.