{"id":724,"date":"2023-08-09T09:05:48","date_gmt":"2023-08-09T13:05:48","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=724"},"modified":"2023-08-09T09:05:48","modified_gmt":"2023-08-09T13:05:48","slug":"georgia-federal-court-declines-to-dismiss-erisa-prohibited-transaction-claims-and-certifies-class-despite-differences-in-class-wide-investment-choices","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2023\/08\/09\/georgia-federal-court-declines-to-dismiss-erisa-prohibited-transaction-claims-and-certifies-class-despite-differences-in-class-wide-investment-choices\/","title":{"rendered":"Georgia Federal Court Declines To Dismiss ERISA Prohibited Transaction Claims And Certifies Class Despite Differences In Class-wide Investment Choices"},"content":{"rendered":"

\"\"<\/a>By Gerald L. Maatman, Jr., Brian W. Sullivan, and Jesse S. Stavis<\/p>\n

Duane Morris Takeaways<\/u>:\u00a0 On August 2, 2023, Judge Clay Land of the U.S. District Court for the Middle District of Georgia granted<\/a>\u00a0a motion to certify a class of participants in an ERISA class action involving an employer-sponsored defined contribution plan in Goodman v. Columbus Regional Healthcare System, Inc., No. 21-CV-15, 2023 WL 4935004 (M.D. Ga. Aug. 2, 2023). The Court rejected defense arguments to deny certification of one large class in favor of smaller sub-classes based on differences in the investment choices and resulting injuries of putative class members.\u00a0 Instead, the Court concluded that allegations that the asserted injuries were caused by Defendant\u2019s common conduct warranted class certification without regard to such differences.\u00a0 For these reasons, the Goodman decision is instructive for ERISA plans and fiduciaries defending putative class claims under the ERISA.<\/em><\/p>\n

Case Background<\/u><\/em><\/p>\n

Plaintiffs were participants in a defined contribution plan (the \u201cPlan\u201d) sponsored by their employer, Defendant Columbus Regional Healthcare System, Inc.\u00a0 Plaintiffs alleged that Defendant violated its fiduciary duties under the ERISA by failing to prudently monitor and control the Plan\u2019s investments and expenses and because it caused the Plan to engage in prohibited transactions with the Plan\u2019s record-keeper and investment advisor (together, the \u201cService Providers\u201d).\u00a0 Goodman<\/em>, 2023 WL 4935004, at *1-2.\u00a0 Plaintiffs moved to certify a class under Rule 23(b)(1) consisting of all plan participants or beneficiaries of the plan with an account balance on or after February 2, 2015 through the termination of the Plan.\u00a0 Id.<\/em><\/p>\n

Class Certification Granted<\/u><\/em><\/p>\n

Plaintiffs sought to certify a class with respect to their three ERISA claims that Defendant violated its duty to prudently monitor investments and expenses and had engaged in prohibited transactions.\u00a0 Id.<\/em> at *3.\u00a0 Defendant opposed certification on the grounds that \u201cthe class proposed by Plaintiffs is so broad that Plaintiffs did not meet their burden to establish standing, commonality, and typicality\u201d as required by Rule 23.\u00a0 Id.<\/em> at *4.<\/p>\n

Addressing Defendant\u2019s standing challenge first, the Court acknowledged that, to have standing, Plaintiffs and other Plan participants \u201cmust have suffered a decrease in value of their defined contribution accounts due to a breach of fiduciary duty.\u201d\u00a0 Id.<\/em>\u00a0 The Court rejected Defendant\u2019s argument that \u201cit is possible that some members of the putative class as presently defined did not suffer any loss due to the alleged breaches of fiduciary duties.\u201d The Court reasoned that \u201cthis is not a standing problem but a liability issue.\u201d\u00a0 Id.<\/em>\u00a0 It explained that \u201c[t]he possibility that some putative class members may not ultimately make a recovery does not eliminate standing for class certification purposes,\u201d particularly where evidence of specific losses \u201cshould be readily ascertainable.\u201d\u00a0 Id.<\/em><\/p>\n

The Court likewise rejected Defendant\u2019s arguments that Plaintiffs failed to establish the commonality or typicality requirements of Rule 23(a).\u00a0 The Court explained that commonality requires a showing that class members have suffered \u201cthe same injury\u201d and that their claims depend on \u201ccommon questions or law or fact\u201d with common answers.\u00a0 Id.<\/em> at *5.\u00a0 Typicality, the Court explained, requires evidence of \u201ca sufficient nexus\u201d between the claims of the Plaintiffs and those of the putative class as shown by claims or defenses arising \u201cfrom the same event or pattern or practice\u201d and \u201cbased on the same legal theory.\u201d\u00a0 Id.<\/em>\u00a0 Together, the Court opined that commonality and typicality require Plaintiffs and the class members to have the same interest and suffer the same injury, even though the Plaintiffs need not have suffered injury \u201cat the same place and on the same day as the class members.\u201d\u00a0 Id.<\/em><\/p>\n

Applying these principles, the Court rejected Defendant\u2019s suggestions \u201cthat there must be a separate sub-class for each allegedly imprudent investment and that the named Plaintiffs cannot establish typicality for allegedly imprudent investments options in which they did not invest.\u201d\u00a0 Id.<\/em>\u00a0 Instead, the Court held that this \u201clevel of granularity\u201d was not \u201crequired at the class certification stage\u201d where Plaintiffs had alleged that Defendant employed \u201cflawed selection and monitoring practices\u201d that were the same for class members across all investment options.\u00a0 Id.<\/em>\u00a0 The same was true of \u201cthe excessive fee and prohibited transaction claims,\u201d which were based on Defendant\u2019s \u201calleged failure to insist\u201d that the Service Providers charge \u201cno more than reasonable fees, which resulted in harm to Plan participants\u201d invested in relevant funds.<\/p>\n

As such, the Court concluded that \u201cthe alleged cause of the injury remains the same across all funds.\u201d\u00a0 Id.\u00a0 <\/em>On these allegations, the Court found that there were common questions capable of class-wide resolution and for which Plaintiffs\u2019 claims were typical of the class \u2013 whether Defendant breached its fiduciary duties by offering imprudent investments and by allowing the Service Providers to collect unreasonable fees.\u00a0 The Court determined that more granular issues concerning the specific investments and injuries of particular class members \u201crelate to the degree of injury and level of recovery\u201d such that the Court did \u201cnot see the benefit of dividing the proposed class into sub-classes by investment option.\u201d\u00a0 Id<\/em>. at 5-6.\u00a0 For these reasons, the Court granted Plaintiffs\u2019 motion to certify the class.<\/p>\n

Implications for Employers and Plan Administrators<\/u><\/em><\/p>\n

Goodman<\/em> is typical of federal court decisions in the last several years addressing motions to certify classes in cases asserting breach of fiduciary duty claims under the ERISA.\u00a0 The ruling underscores that the focus for class certification of such claims remains on the existence of common, injury-producing conduct rather than the similarity of the resulting injuries.\u00a0 Courts generally will not decline to certify a class based on differences in the investment options chosen or injuries suffered by class members so long as those investments or injuries are linked by a defendant\u2019s common conduct, at even high levels.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Gerald L. Maatman, Jr., Brian W. Sullivan, and Jesse S. Stavis Duane Morris Takeaways:\u00a0 On August 2, 2023, Judge Clay Land of the U.S. District Court for the Middle District of Georgia granted\u00a0a motion to certify a class of participants in an ERISA class action involving an employer-sponsored defined contribution plan in Goodman v. … <\/p>\n

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