Duane Morris Class Action Review - 2023 - Report - Page 199
in connection with the management of the defendants’ 401(k) plan. Specifically, the
plaintiff asserted breaches of the fiduciary duties of prudence and loyalty, alleging that
the defendants overlooked conflicts of interest and imprudently maintained expensive
and underperforming funds as investment options in the plan. The defendants
challenged whether the plaintiff had established class-wide standing “in that he has not
offered any methodology for proving injury to the class and the proposed class includes
many uninjured plan participants who obtained returns net of fees that were better than
the returns” they would have obtained from the plaintiffs proffered alternatives. Id. at
*14. The court disagreed. It opined that establishing “class standing” requires the
plaintiff to demonstrate an injury-in-fact resulting from the defendant’s conduct, and that
the defendant’s conduct implicates the same set of concerns as the conduct alleged to
have caused injury to the putative class. Id. at *15. Concluding that the plaintiff had
established his own injury by virtue of having invested in some of the challenged funds,
the court held that the plaintiff had established class-wide standing because “the
conduct he challenges — namely, the defendants’ allegedly disloyal and imprudent
conduct — implicates the same concerns for all members of the proposed class
invested in the challenged” funds during the relevant time period. Id. at *15-16. While
the defendants offered evidence to demonstrate that the plaintiff had not proven the
proposed class members had been injured by high fees or the defendants’ other
conduct, the court rejected the arguments: “[w]hile this evidence certainly challenges
the plaintiff’s allegations of damages . . . these arguments go to the merits and are not
ripe for adjudication at this time.” Id. at *19-20.
The court likewise rejected the defendants’ challenges to the plaintiff’s typicality and
adequacy under Rule 23(a). The defendants argued that the plaintiff was not a typical or
adequate class representative because he had not invested in all of the challenged
funds; some putative class members’ claims may be barred by the statute of limitations;
and thousands of class members’ claims are subject to binding arbitration agreements.
Id. at *24. The court rejected the first argument, explaining that, as with standing,
“[b]ecause the plaintiff challenges the Plan’s process as it pertained to all participants,
and because damages will inure to the Plan, there is no intra-class conflict” and the
plaintiff therefore satisfied the typicality and adequacy requirements. Id. at *27-28. Nor
did the fact that some class members’ claims might be barred by the statute of
limitations or subject to an arbitration agreement preclude a finding of typicality or
adequacy at this stage. The court held that both of these questions were too speculative
and related to individual defenses rather than certification. As such, it held that the
requirements of Rule 23(a) were satisfied. Id. at *28-32.
Finally, the defendants challenged the propriety of certification under Rules 23(b)(1)(A)
and (B). Specifically, they argued that, because the plaintiff’s claims fundamentally
sought individualized money damages rather than equitable relief, certification of an optout class under Rule 23(b)(3) was more appropriate. The court again disagreed. It
explained that, given “the derivative nature of the suit and the fact that the plaintiff
challenges procedures and practices common to the entire Plan, certification under
Rule 23(b)(1) is appropriate.” Id. at *34-35. Thus, “[b]ecause resolution of the plaintiff’s
claims with regards to the defendants’ administration of the Plan will be dispositive of
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Duane Morris Class Action Review – 2023
