Southern District of New York Certifies (b)(1) Class Claims under ERISA for Mismanagement of 401(k) Plan

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“Defendants object to class certification under Rule 23(b)(1) as improper in the wake of the Supreme Court’s decisions in LaRue and Wal-Mart. Although courts are split over whether Rule 23(b)(1)(B) remains an appropriate class vehicle for fiduciary-breach claims under ERISA, a majority have held that it is….

“Defendants argue that, because the Supreme Court in LaRue held that §1132(a)(2) allows a participant to assert a claim based on fiduciary breaches that impair the value of plan assets in a participant’s individual account, resolution of named plaintiffs’ claims would not foreclose a fiduciary-breach action filed by an absent class member. Defendants misapprehend Plaintiff’s theory of liability. Plaintiffs do not assert harms based on Defendants’ misconduct that is specific to his or her individual account. Rather, named Plaintiffs — whose collective participation in the Plan covers the entire class period — challenge Defendants’ process for selecting and retaining the investment options presented to all Plan participants. Adjudicating their claims challenging Defendants’ management of the Plan as a whole would necessarily affect the resolution of any concurrent or future actions by other Plan participants.

“As to Wal-Mart, Defendants contend that a Rule 23(b)(1)(B) class is unavailable given Wal-Mart’s observation that individualized monetary claims belong in Rule 23(b)(3), and the opinion’s language about the due-process concerns with respect to notice and the opportunity to opt out. Defendants’ reliance on Wal-Mart — which held that Rule 23(b)(2) does not permit the combination of individualized awards of monetary damages and classwide relief — is misplaced.  In contrast to the claims in Wal-Mart, Plaintiffs’ class claims under Rule 23(b)(1) are derivative in nature, not individualized. Any monetary relief will be paid to the Plan, and the Plan fiduciaries would be responsible for allocating the recovery among participants. ‘The fact that damages awarded to the Plan may provide plaintiffs with an indirect benefit,’ such as compensation for any losses, ‘does not convert their derivative suit into an action for individual relief.’”

 

Moreno v. Deutsche Bank, No.15-9936, 2017 WL 3868803 (S.D.N.Y. Sept. 5, 2017).

 

 

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