Trauernicht and Wright, two former employees of Genworth Financial, sued Genworth on their own behalf and on behalf of a class of all others similarly situated, alleging that the company, as the sponsor of their defined contribution retirement plan, breached its fiduciary duties in selecting and retaining certain investment opportunities for the plan — namely, the BlackRock LifePath Index Funds — because those funds, as a whole, were imprudent investments. The action was brought under ERISA §§ 502(a)(2) and 409(a), seeking primarily the recovery of monetary losses.  The district court entered an order certifying the class under Rule 23(b)(1), but the U.S. Fourth Circuit Court of Appeal reversed.

In sum, the Court concluded that the plaintiffs’ ERISA § 502(a)(2) claims brought in the context of a defined contribution plan are individualized monetary claims, which cannot be joined in a mandatory class certified under Rule 23(b)(1). Moreover, because the plaintiffs’ and purported class members’ individual circumstances differed dramatically and all did not suffer the same injury, the Court found that their claims did not satisfy commonality. The Court noted, in this regard, that many persons included in the class suffered no injury, as they fared better for having made their investments in the BlackRock LifePath Index Funds than they would have had they invested in an appropriate substitute fund.  More particularly:

“ERISA § 502(a)(2) provides that a plan participant, beneficiary or fiduciary may bring a civil action for appropriate relief under ERISA § 409, and ERISA § 409, in turn, provides that any person who is a fiduciary with respect to a plan who breaches a fiduciary duty imposed by the statute shall be personally liable to make good to such plan any losses to the plan resulting from each such breach. Thus, under this portion of ERISA § 409(a), an ERISA fiduciary who breaches its duties is personally liable to the plan for damages.  And when ERISA § 409(a) is combined with the cause of action for appropriate relief created by ERISA § 502(a)(2), the two sections allow for a derivative action to be brought by a retirement plan participant on behalf of the plan to obtain recovery for losses sustained by the plan because of breaches of fiduciary duties. These provisions authorize such ‘derivative’ claims with respect to both defined contribution plans and defined benefit plans….  In the context of a defined benefit plan, where the plan assets are undifferentiated and held collectively in trust for the payment of defined and fixed retirement benefits, a plan participant injured by a fiduciary’s breach must, by necessity, seek losses on behalf of the plan as a whole — there is no other way to make good to such plan the losses to the plan resulting from the fiduciary breach.”

However:

“The structural features shaping the contours of relief for a defined benefit plan are not the same with respect to a defined contribution plan, where the plan assets are allocated to individual accounts, and a participant’s benefits are based solely upon the amount held in his individual account. In that distinct context, a plan participant can bring an ERISA § 502(a)(2) claim to seek monetary relief, again on behalf of the plan, for the losses sustained with respect to the plan assets in his individual account. And such recovery would be paid not to the plan generally, nor to the participant directly, but rather to the participant’s individual retirement account based on the losses that particular account sustained as a result of the fiduciary breach…. Consequently, when ERISA § 502(a)(2) claims are brought in the context of a defined contribution plan, they are indeed ‘individualized monetary claims’ and therefore cannot be joined in a mandatory class certified under Rule 23(b)(1)….  The Supreme Court has instructed that individualized monetary claims belong in Rule 23(b)(3).  This is because there are greater procedural protections attending Rule 23(b)(3) classes, which are considered unnecessary for proper Rule 23(b)(1) and Rule 23(b)(2) classes, but which are necessary when each class member has an individualized claim for money….”

With respect to commonality: “the plaintiffs alleged injury by comparing the performance of the BlackRock LifePath Index Funds to four comparator funds — two that invest in actively managed funds and two that invest in passively managed funds. Genworth Financial argued, however, that because the BlackRock LifePath Index Funds were passive funds, they must be compared only to the two passive comparators that the plaintiffs identified in their complaint as appropriate substitutes. And Genworth Financial pointed out that when such comparison is made, the record shows that there were many members of the class who suffered no injury as the result of Genworth Financial’s alleged fiduciary breach. Indeed, the two passive comparator funds underperformed the BlackRock LifePath Index Funds during the class period for three separate vintages — the 2050 Fund, the 2060 Fund, and the Retirement Fund — which accounted for as much as 42% of the Plan assets invested in the BlackRock LifePath Index Funds. Thus, Genworth Financial concluded that, because many purported class members suffered no injury, they did not suffer the same injury, as necessary for commonality…. When the district court confronted this evidence and the parties’ dispute, it postponed the necessary rigorous analysis of commonality, concluding that it did not need to resolve the parties’ dispute regarding appropriate comparators at this juncture. The district court, instead, relied on what it described as the ‘inherent’ commonality of § 502(a)(2) claims. This approach was error….  A rigorous analysis of commonality would also have required the court to address whether class members suffered different injuries resulting from their different circumstances arising in the context of a defined contribution plan. The record shows that each plaintiff, as well as each class member, participated in the plan in a materially different way. Each participant made his or her own investment decisions with respect to his or her individual account, and the participant could change that decision on any given day. Moreover, the participants selected different vintages of the BlackRock LifePath Index Funds at different times during different market conditions. And the different BlackRock TDF vintages carried different risks, depending on the retirement date selected. Finally, each participant withdrew assets from the Plan at different times. And during these times, the market performed uniquely each day. The district court thus failed to address commonality with any particularity — relying instead on a perceived ‘inherent’ commonality that Genworth Financial’s fiduciary breach was with respect to the Plan. This overgeneralized approach failed to recognize that a given statute can be violated in many ways, and, quite obviously, the mere claim by the plaintiffs that they purportedly suffered similar injuries gives no cause to believe that all their claims can productively be litigated at once.”

 

Trauernicht v. Genworth Financial, 169 F.4th 459 (4th Cir. 2026)