By: Amanda Sonneborn and Meg Troy
In the first case to rely substantially on Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), to deny class certification in a putative ERISA class action, the Northern District of Illinois recently rejected the plaintiffs’ motion for class certification of a stock drop claim. In Groussman et al. v. Motorola, Inc., No. 1:10-cv-00911, the court explained that after Dukes, class certification should only be granted after a “‘rigorous analysis’ by the court” and plaintiffs must show “more than that other courts certified classes in other ERISA cases based on different facts” to meet their burden under Rule 23.
In Groussman, plaintiffs alleged that defendants imprudently offered Motorola stock as a 401(k) plan investment option. Plaintiffs sought to certify a class consisting of “all persons who were participants in, or beneficiaries of, the Plan at any time between July 1, 2007 and December 31, 2008 and whose account included investments in Motorola stock.” The plaintiffs asserted claims that Motorola stock was an imprudent investment, that the defendants had failed to make adequate disclosures about Motorola’s business, and various claims derivative of those theories.
In refusing to certify plaintiffs’ proposed class, the Court first concluded that the proposed class did not meet the Rule 23(a) commonality requirement, because plaintiffs failed to show that members of the proposed class suffered the same injury or that key common issues of fact or law were capable of resolution in a class action. The Court noted that the assessment of damages for each proposed class member would become “a massive series of individualized analyses,” in-appropriate for class treatment after Dukes because class members must all “have suffered the same injury.” The Court also concluded that the plaintiffs’ proposed class did not meet the Rule 23(a) typicality requirement, noting “[i]t is not enough for the typicality requirement that Plaintiffs will present the same legal theories as the proposed class members.” The Court agreed with defendants that each proposed class member would want to argue that it became imprudent to invest in Motorola stock on different dates based on their unique investment strategies, and that plaintiffs failed to identify the specific alleged misrepresentations and misleading statements that they relied upon to show they were deceived in a uniform fashion. The Court noted that “among just Plaintiffs, there is a difference as to what each Plaintiff understood at any given time, and that Plaintiffs did not rely upon the same information or statements in making their investment decisions.” The Court also found that plaintiffs failed to meet the Rule 23(a) adequacy requirement, because no one plaintiff could fairly and adequately represent the class, given that each proposed class member would want to tailor the liability and damages arguments in order to maximize his or her individual recovery.
The Court also concluded that the class could not be certified under Rule 23(b)(1), because there was no risk of varying or inconsistent decisions. In addition, the Court found that the class could not be certified under Rule 23(b)(3), because common questions of law or fact do not predominate.
The Groussman decision highlights the difficulty of obtaining class certification post-Dukes and shows that motions to certify classes in ERISA cases will receive higher scrutiny in the future. Dukes and recent appellate court decisions are forcing district court judges to carefully examine whether cases truly involve uniform issues suited for class treatment or whether individual issues such as proof of causation, harm, and reliance predominate.