Conclusion of Duane Morris: On August 2, 2023, Judge Clay Land of the U.S. District Court for the Middle District of Georgia granted a motion for certification by a group of participants in an ERISA class action involving an employer-sponsored defined contribution plan in the Goodman v . Columbus Regional Healthcare System, Inc., #21-CV-15, 2023 WL 4935004 (MD Ga. August 2, 2023). The court dismissed defense arguments denying certification of a large class in favor of smaller subclasses based on differences in investment decisions and resulting injuries to alleged class members. Instead, the court concluded that the allegation that the alleged violations were caused by the defendant’s mean conduct warranted class certification regardless of such differences. For these reasons, the Goodman decision is instructive to ERISA plans and trustees defending putative collection claims under ERISA.
fall background
The plaintiffs were participants in a defined contribution plan (the “Plan”) sponsored by their employer, the defendant, Columbus Regional Healthcare System, Inc. Plaintiffs alleged that the Defendant breached its fiduciary duties under ERISA by failing to diligently monitor and control the Plan’s investments and expenditures and because it resulted in the Plan entering into prohibited transactions with the Plan’s clerk and investment adviser ( collectively the “Service Providers”). Goodman, 2023 WL 4935004, at *1-2. Plaintiffs have applied to certify under Rule 23(b)(1) a group consisting of all plan participants or beneficiaries of the plan with an account balance on or after February 2, 2015 until termination of the plan. ID.
Class certification granted
Plaintiffs wished to establish a class action in respect of their three ERISA claims alleging that the defendant breached its duty to diligently monitor investments and expenditures and engaged in prohibited transactions. ID. um 3. The Defendant refused certification on the grounds that “the class proposed by the plaintiffs is so broad that the plaintiffs have failed in their duty to determine status, commonality and typicality” as required by Rule 23. Id at 4
The court first dealt with defendants’ challenge, acknowledging that in order for plaintiffs and other plan participants to have standing, “they must have suffered a decrease in the value of their defined contribution accounts as a result of a breach of fiduciary duty.” ID. The court rejected the defendant’s argument that “it is possible that some members of the putative class, as currently defined, did not suffer loss as a result of the alleged breaches of fiduciary duties.” The court ruled: “This is not an existing problem, but an issue of liability.” It explained: “[t]”The possibility that some putative class members may not ultimately recover their rights does not preclude eligibility for class certification purposes,” particularly when evidence of specific losses “should be readily ascertainable.” ID.
The Court also rejected the defendants’ arguments that the plaintiffs failed to demonstrate the commonality or typicality requirements of Rule 23(a). The court explained that commonality requires proof that the group members suffered “the same harm” and that their claims depend on “common questions, laws, or facts” with common answers. ID. um 5. Typicality requires, the court explained, evidence of “sufficient association” between the plaintiffs’ claims and those of the alleged group, as shown by claims or defenses “arising from the same event, pattern or practice” and “are based on the same legal basis”. Theory.” ID. Collectively, the court held that commonality and typicality require that the plaintiffs and the class members have the same interest and suffer the same harm, even if the plaintiffs are not “in the same place and on the same day as the class members “ Must have suffered damage. ” ID card.
Using those principles, the court dismissed the defendants’ suggestions “that there must be a separate subclass for each allegedly imprudent investment and that the named plaintiffs cannot demonstrate typical options for allegedly imprudent investments in which they have not invested.” . Instead, the court ruled that this “level of granularity” was not “required at the group certification stage” because the plaintiffs had alleged that the defendant engaged in “flawed selection and monitoring practices” that were common to group members across all investment options . ID. The same was true of “the excessive fees and prohibited transaction claims” based on the “defendant’s alleged failure to insist” that the service providers “charge no more than reasonable fees, resulting in harm to the plan participants” that were in relevant funds invested .
Therefore, the court concluded that “the alleged causation of damage remains the same for all funds”. ID. On these allegations, the court concluded that there were common questions that could be resolved group-wide and where the plaintiffs’ claims were typical of the class — whether the defendant breached its fiduciary duties by offering imprudent investments and the allowed service providers to charge unreasonable fees. The court noted that more detailed questions about the specific investments and injuries of certain class members “concern the extent of the injury and the extent of recovery,” so the court “saw no merit in subdividing the proposed class into subclasses by investment.” Possibility.” ID. at 5-6. For these reasons, the court granted the plaintiffs’ motion for certification of the class action.
Implications for Employers and Plan Administrators
Goodman is typical of recent federal court decisions regarding applications for class certification in cases alleging breach of fiduciary duty claims under ERISA. The ruling underscores that group certification of such claims continues to focus on the existence of common injurious behavior rather than the similarity of the resulting injuries. Courts generally do not refuse to certify a class of plaintiffs because of differences in investment options chosen or because of injuries suffered by class members, so long as those investments or injuries are related, even to a large extent, to a defendant’s usual conduct .
