On June 26, 2007, U.S. District Judge John W. Darrah certified a class of former, current, and future 401(k) Plan participants in Loomis v. Exelon Corp., No. 1:06-CV-04900 (N.D. Ill.). Plaintiffs in this case have sued the employer (the sponsor of the 401(k) Plan) and various other defendants alleged to be Plan fiduciaries, claiming that defendants have breached their fiduciary duties to the participants by allowing investment managers and other service providers to charge allegedly unreasonable fees to the Plan and by allegedly failing to disclose those fees to participants.

The certified class is defined as follows:

All persons, excluding the Defendants, the Committees and/or other individuals who are or may be liable for the conduct described in the Complaint, who are or were participants or beneficiaries of the Exelon Employee Savings Plan and who are, were or may have been affected by the conduct set forth in this Complaint, as well as those who will become participants or beneficiaries of the Exelon Employee Savings Plan in the Future.

The class was certified under Rule 23(b)(1)(B). According to the court, both the plaintiffs and defendants agreed that if a class was certified, certification would be most appropriate under Rule 23(b)(1)(B). The court stated that this was a “paradigmatic” 23(b)(1)(B) case, in that plaintiffs sought to bring suit in a representative capacity to recover losses for a plan as a whole based on actions that took place on a plan-wide basis.

The court also found all of the Rule 23(a) requirements satisfied:

  • Numerosity – the court found that the class will be made up of about 23,000 participants, satisfying the numerosity requirement. 
  • Commonality – the court noted that plaintiffs had identified 14 common issues of law and/or fact, including whether the defendants were Plan fiduciaries, whether defendants breached one or more fiduciary duties, and whether the alleged breaches of fiduciary duty resulted in damage to the Plan.
  • Typicality – plaintiffs alleged that defendants caused or allowed excessive or unreasonable fees to be charged to the Plan as a whole. While noting that the loss amount attributable to the allegedly excessive fees could differ amongst participants, the court held that “individual damages will not defeat a named plaintiff’s typicality.” (Quoting Alexander v. Q.T.S. Corp., No. 98-C-3234, 1999 WL 573358 at *6 (N.D. Ill. 1999).
  • Adequacy – in finding that the interests of the named plaintiffs were sufficiently aligned with those of the non-named class members, the court noted 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.

The proposed class was certified over several objections by defendants as to its scope:

  • Defendants had objected that future Plan participants should be excluded for lack of constitutional standing. Judge Darrah, citing Hodges v. Public Bldg. Comm’n, No. 93 C 4328, 1994 WL 603105 (N.D. Ill. 1994), rejected this argument, stating that “there is no shortage of cases which have certified classes incorporating future class members into their definition.” 
  • Judge Darrah also rejected the defendants’ assertion that former Plan participants should be excluded from the class definition because they lack standing, holding that the question raised factual issues better suited for resolution at a later time. 
  • Defendants’ argument that Plan participants who signed releases when they terminated employment should be excluded from the class definition was also rejected. Judge Darrah ruled that releases, signed with respect to individual claims, might not release claims participants could bring on behalf of the Plan, and also that whether a release actually waived all the claims a participant might bring was a factual issue not properly before the court at this stage. Defendants’ contention that ERISA’s six-year limitation period required that the class period should begin no earlier than September 11, 2000 was similarly rejected. The court held that the complaint could be read to allege fraud such that the claims would not be barred until six years after “the date of discovery.”
  • The court also rejected defendants’ argument that any class certification should be restricted to claims under section 502(a)(3) of ERISA and that no claims could be certified under section 502(a)(2), because the plaintiffs are suing for individual relief, whereas section 502(a)(2) permits only relief on behalf of the plan as a whole. (The Supreme Court recently agreed to review the relief available in the individual account plan context under both section 502(a)(2) and section 502(a)(3) in LaRue v. Dewolff, No. 06-856. Click here for our prior alert on LaRue.)

Two days after entering the certification order, the court in Loomis granted defendants’ motion to stay the case pending the anticipated appeal to the Seventh Circuit of the order dismissing all claims in a similar ERISA “revenue sharing” case in Hecker v. Deere & Co., No. 06-C-719-S (W.D. Wis. June 20, 2007). Click here for our prior alert on the Hecker decision.