Duane Morris Class Action Review - 2023 - Report - Page 201
thus explained that certification under Rule 23(b)(1) was appropriate because the
plaintiffs’ allegations concerned the defendants’ breaches of fiduciary duties to the plan
as a whole such that those “duties rise and fall with all plaintiffs. For these reasons, the
court granted the plaintiffs’ motion for class certification.
E.
Rulings Granting Certification Of Modified Classes Due To Standing Issues
Despite the repeated refusal to side with defendants arguing that class representatives’
failure to invest in all of the funds challenged in 401(k) litigation deprives them of
constitutional standing and precludes findings of commonality, typicality, or adequacy
under Rule 23(a), many courts have agreed that putative class members who lack
standing or whose claims are not typical of the class representatives should be
excluded from certification.
The decision in Lannone, et al. v. Autozone, Inc., 2022 U.S. Dist. LEXIS 185251 (W.D.
Tenn. Aug. 12, 2022), illustrates the point. There, the plaintiffs sought to certify a class
of participants in the defendants’ 401(k) plan, alleging that the defendants breached
their fiduciary duties by failing to monitor excessive fees and the performance of the
plan’s investments. As in other cases, the defendants opposed class certification,
arguing that the plaintiffs lacked Article III standing to pursue any claims concerning
funds in which they did not invest and likewise failed to satisfy Rule 23(a)’s
requirements. As to standing, the defendants argued that the plaintiffs had suffered no
injury-in-fact with respect to six of the sixteen funds challenged and otherwise lacked
standing to bring claims for time periods in which they were not invested in the Plan.
Citing the Sixth Circuit’s decision in Fallick, et al. v. Nationwide Mut. Insurance Co., 162
F.3d 410, 422-23 (6th Cir. 1998), which held that a plaintiff “did not have to be a
member of every plan at issue to maintain ERISA class claims that challenged the
defendant’s common conduct across multiple plans,” the court rejected both standing
arguments. First, the court held that the plaintiffs had standing to bring claims “related to
excessive fees” because their allegations challenged “the practices of defendants,
rather than specific funds.” 2022 U.S. Dist. LEXIS 185251, *25-26 (emphasis in
original). The court likewise held that the plaintiffs had standing to challenge the
defendants’ monitoring and selection of funds “regardless of whether they personally
were invested in all of the funds during the entire proposed class period” because the
allegations focused on the “defendants’ process in choosing and monitoring the Plan’s
investment menu” and resulting “injuries to the plan.” Id. In short, the court concluded
that the plaintiffs need only establish constitutional standing with respect to their own
claims, not those of the absent class members, and the further ability to represent a
putative class depends only on the plaintiffs’ ability to satisfy Rule 23’s requirements.
Notwithstanding its conclusions on constitutional standing with respect to the named
plaintiffs, the court agreed with the defendants that the class definition was overbroad
because it included all participants in the plan from the beginning of the class period,
including “Plan participants who exclusively invested in unchallenged funds.” Id. at *2930. Although that subset of class members had “statutory standing under the ERISA as
members of the Plan, [they] have not suffered an injury-in-fact, and therefore lack Article
III standing.” Id. The court therefore modified the class definition to exclude them.
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Duane Morris Class Action Review – 2023
