By Gerald L. Maatman, Jr. and Jeffrey R. Zohn
Duane Morris Takeaways: On July 28, 2023, Judge Michael P. Shea of the U.S. District Court For The District Of Connecticut granted class certification for current and former employees of Yale-New Haven Hospital in Ruilova et al. v. Yale-New Haven Hospital, Inc. et al., Case No. 3:22-CV-00111 (D. Conn. July 28, 2023). Plaintiffs alleged that their retirement accounts were not appropriately managed, which resulted in poor investment decisions and excessive fees. Although many class action defendants are emboldened to fight on every aspect of plaintiffs’ claims, the Defendants in Ruilova took a different approach. Prior to the Court granting certification, Defendants stipulated to the certification of an over 25,000-person class in order to streamline the litigation and efficiently manage the litigation. Per Rule 23, the Court deemed that the motion satisfied the requirements for class certification.
Case History
In January 2022, Plaintiffs Kaity Ruilova and Eileen Brannigan (“Plaintiffs”) filed a class action lawsuit against Yale-New Haven Hospital, Inc. and its Board of Directors and Investment Oversight Committee (“Defendants”) alleging breach of fiduciary duty under the Employee Retirement Income Security Act (“ERISA”). Plaintiffs sought to represent over 25,000 former and current employees that participated in the Yale-New Haven ERISA Plan (“the Plan”). The Plan had assets totaling approximately $1.66 billion.
The lawsuit alleged that Defendants failed to fully disclose the expenses and risks of the Plan’s investment options to participants, allowed unreasonable expenses to be charged to participants (at a rate around 33% higher than comparable plans), and accepted high-cost and poorly-performing investments. Plaintiffs sought to recover all losses resulting from each breach of fiduciary duty.
Defendants filed a motion to dismiss that the Court granted in part and denied in part. The Court dismissed the claims made against the Board of Directors because the Board of Directors was not a fiduciary of the Plan. The Court denied the motion to dismiss as to the claim alleging that the Plan incurred excessive recordkeeping and administrative fees and the related failure-to-monitor claims.
While still denying that they are liable to Plaintiffs, approximately four months later, Defendants struck a deal with Plaintiffs to jointly file a stipulation to certify the class just as Plaintiffs articulated in the Complaint. The Court certified the class in a brief half page order one month later. Per its duty under Rule 23, the Court analyzed the motion and determined that Plaintiffs met the prerequisites for class certification.
Implications for Class Action Defendants
While a court certifying a class does not always make headlines, this one is unique. Defendants proactively agreed to stipulate to the certification of the class that Plaintiffs’ counsel alleged in the Complaint. The parties’ conversations and thought processes that led to this decision will never be known, but this strategy is a good reminder to always assess the merits of plaintiffs’ claims and only attack the weakest aspects of the case. Doing more is a waste of everyone’s resources, may demonstrate a lack of good faith, and could damage credibility in the eyes of the court.