October 21, 2021

Volume XI, Number 294

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Third Circuit to Consider Class Certification Issues Percolating in ERISA Fee Litigation

The Third Circuit will review a Pennsylvania district court’s decision to certify a 60,000+ person class in an ERISA fiduciary breach lawsuit claiming mismanagement of a defined contribution plan’s investments and recordkeeping fees. This appeal queues up guidance on a hotly litigated issue in recent ERISA cases:  can defined contribution plan participants challenge the prudence and loyalty of retaining a plan investment option they never invested in? For example, in Boley, the named plaintiffs collectively invested in only seven of the plan’s investments, but their lawsuit challenges all 37 investment options in the plan’s portfolio at various points in the putative class period.

This issue has been recently litigated in the context of a motion to dismiss for lack of standing. The Supreme Court held in Thole v. U.S. Bank N.A. that defined benefit plan participants do not have standing to pursue a claim that the plan’s fiduciaries mismanaged the plan if they did not suffer a loss. Based on Thole, defendants have argued that defined contribution plan participants similarly lack standing when challenging investments in which they did not invest because they could not have suffered a loss.

The district court in Boley rejected that argument in 2020. The defendants then raised a similar challenge to oppose class certification, arguing that plaintiffs’ claim failed to meet FRCP 23’s typicality standards because the named plaintiffs suffered no injury with respect to the performance or fees of the 30 investment options in which they did not invest. The district court disagreed, finding that plaintiffs’ mismanagement claims challenge uniform conduct across the plan.  Defendants sought immediate review of class certification under FRCP 23(f), and the Third Circuit granted the request.

That the Third Circuit granted the defendants’ request is significant, especially in light of the rash of similar lawsuits pending in the district courts and heading towards motions for class certification. Recent statistics indicate that, in about half of the 23(f) petitions filed by defendants that were granted by the Third Circuit, class certification was reversed. See Bryan Lammon, An Empirical Study of Class-Action Appeals (April 30, 2020) available at SSRN: https://ssrn.com/abstract=3589733. The Jackson Lewis ERISA Complex  Litigation Group  is closely monitoring this appeal.

The referenced decisions are: Boley v. Universal Health Servs., No. 20-2644, 2021 U.S. Dist. LEXIS 42257 (E.D. Pa. Mar. 8, 2021); Boley v. Universal Health Servs., 2020 U.S. Dist. LEXIS 202565, 2020 WL 6381395 (E.D. Pa. Oct. 30, 2020); Boley v. Universal Health Servs., No. 21-8014, Dkt. 12-1 (3rd Cir. May 18, 2021); Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020).

Jackson Lewis P.C. © 2021National Law Review, Volume XI, Number 145
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About this Author

Principal

Stacey C.S. Cerrone is a Principal in the New Orleans, Louisiana, office of Jackson Lewis P.C. Her practice focuses on representing employers in workplace law matters, including preventive advice and counseling.

Practices

  • Employee Benefits

Admitted to Practice

  • 5th Circuit Court of Appeals, 1998
  • 6th Circuit Court of Appeals, 2014
  • Louisiana - E.D. La., 1999
  • Louisiana - M.D. La., 1998
  • Louisiana - W.D. La., 1998
  • Louisiana, 1998
504-208-1755
Associate

Lindsey H. Chopin is an Associate in the New Orleans, Louisiana, office of Jackson Lewis P.C. and a member of the firm’s ERISA Complex Class Action, Employee Benefits and Class Action groups.

Ms. Chopin focuses her practice on the defense of complex ERISA class-actions filed against public and private single employer ERISA plan sponsors and fiduciaries, as well as multi-employer plans and fiduciaries and ERISA plan services providers.  She has litigated a wide variety of class action claims, including 401(k) fee claims,...

504-208-1755
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