Duane Morris Class Action Review - 2023 - Report - Page 198
conduct by ERISA fiduciaries that affected multiple funds in the same way, their claims
are typical of those in the class.” Id. Here, the plan offered 37 investment options in
which the three class representatives, current and former plan participants, invested in
only seven. In addition, the plaintiffs were charged the plan’s annual recordkeeping and
administrative services fees. The plaintiffs asserted that the defendants breached their
fiduciaries duties by charging excessive fees and maintaining excessively expensive
investment options in the plan despite the availability of lower-cost alternatives. Id. at
129-30.
The Third Circuit first addressed the defendants’ argument that the plaintiffs lacked
standing with respect to several of the challenged funds because the plaintiffs,
themselves, had not personally invested in them. The Third Circuit disagreed.
Explaining that the plaintiffs alleged that all of the challenged funds were excessively
expensive and their inclusion in the plan was the result of the defendants’ lack of a
“prudent investment evaluation process,” the Third Circuit reasoned that the fact that the
plaintiffs had not personally invested in each of the funds did not deprive them of
standing. Id. at 131-32. Instead, it determined that by alleging “concrete injuries
traceable to the challenged decisions and courses of conduct of the defendants,” the
plaintiffs met the requirements for standing. Id. at 132. The Third Circuit explained that
“Article III does not prevent the named plaintiffs from representing parties who invested
in funds that were allegedly imprudent due to the same decisions or courses of
conduct.” Id. The Third Circuit noted that the plaintiffs” do not allege thirty-seven
individual breaches of fiduciary duty, but rather several broader failures by [the
defendants] affecting multiple funds in the same way.” Id.
Turning to the defendants’ typicality challenge, the Third Circuit noted that “[i]n
evaluating typicality, we focus on whether the class representatives’ legal theory and
claim, or the individual circumstances on which those theories and claims are based,
are different from those of the class.” Id. at 133. The defendants argued that the
plaintiffs’ claims were not typical of the class because they lacked incentive to prosecute
claims concerning funds in which they did not personally invest. Reiterating the
reasoning of its conclusions on standing, the Third Circuit rejected these arguments. It
explained that the “named plaintiffs have alleged that [the defendants] employed a
flawed fund selection process resulting in a menu of excessively expensive funds” and
otherwise “failed to monitor expense ratios and consider ways to less fees charged to
participants.” Id. at 134. Because “[t]hese claims are the same for participants across all
the Plan’s thirty-seven funds,” each participant’s recovery “is under the same legal
theory — [the defendants’] breach of fiduciary duty” under the ERISA “in managing the
plans investment options.” Id. The Third Circuit concluded that factual differences
between the funds did not matter; “[s]o long as the alleged cause of the injury remains
the same across all funds, even relatively pronounced factual differences’ will not
preclude finding of typicality.” Id. at 134-35. Finding the other requirements for class
certification satisfied, the Third Circuit affirmed the class certification order.
The court in Falberg, et al. v. Goldman Sachs Group, 2022 U.S. Dist. LEXIS 34012
(S.D.N.Y. Feb. 14, 2022), reached a similar conclusion. The plaintiff moved for class
certification of an ERISA action asserting breaches of fiduciary duties and related claims
197
© Duane Morris LLP 2023
Duane Morris Class Action Review – 2023
