Seyfarth Synopsis: A recent decision from the Eastern District of Michigan serves as a reminder that—while courts are often quick to certify classes in ERISA cases—plaintiffs must satisfy the requirements of Rule 23 and that courts can (and do) refuse class certification where those requirements are not met.
In Davis v. Magna International of America, Inc., Plaintiffs Melvin Davis and Dakota King sought to represent a class of more than 20,000 participants in the Magna Group of Companies Retirement Savings Plan (the “Plan”), on claims broadly alleging that the Plan’s fiduciaries breached ERISA’s duties of loyalty and prudence with respect to the Plan’s investment lineup. The Court denied the motion for class certification, finding that Plaintiffs failed to satisfy the adequacy requirement for class certification under Rule 23(a).
With respect to Plaintiff Davis, the Court noted that he had pleaded guilty to federal wire fraud—a crime of dishonesty—years earlier. While Plaintiffs’ conduct and credibility would not be a focus of a bench trial involving defendants’ alleged actions, the Court found that—combined with his lack of knowledge about the case overall—Davis’s fraud conviction weighed against his adequacy as a class representative.
Turning to Plaintiff King, the Court found “concerning” King’s testimony about the quantity of prior criminal charges against him, as well as testimony that he may still owe fines related to some of those charges, and the general “vagueness about the status of his prior alcohol-related convictions.” Compounding those issues, the Court also found that certain “confusing” testimony King gave as to the circumstances surrounding his termination from Magna—while “probably not enough to find him an inadequate representative” on in its own—took on more significance when combined with his “past legal problems.”
The Court outlined a number of issues with Plaintiffs’ personal knowledge of, and commitment to, their own case. Plaintiff Davis, for example, testified that he had not read the full complaint, and—though the parties had agreed to schedule his deposition around his work schedule—Davis attended his deposition via Zoom on his cell phone, first sitting in his car in his employer’s parking lot, and later walking into a facility where other employees were present. King, for his part, was not clear on whether the case was a class action, or what his role would be as a class representative. The Court found this knowledge to be insufficient and noted that Plaintiffs had identified no cases in which a court certified a class with representatives who were “less familiar” with the claims presented in the case, or “less prepared” to serve as class representative, than Plaintiffs.
Ultimately—based on a combination of all these factors—the Court was “unpersuaded that the Plaintiffs are in a position to take any form of ‘supervisory role over lead counsel,’ including as to decisions regarding settlement.” Instead, the Court found Plaintiffs had done “no more than ‘simply lend their names to a suit controlled entirely by the class attorney[s],’” and were not adequate class representatives. While courts tend to certify non-opt out classes in ERISA excessive fee cases (and some defendants have recently chosen to stipulate to certification), this decision—and others like it—demonstrate that it remains plaintiffs’ burden to demonstrate that they can meet the certification requirements set out in Rule 23. To that end, thorough investigation throughout discovery can play a vital role in defense of these actions, and can serve to develop facts related to plaintiffs’ individualized circumstances that can be used to defeat showings of adequacy or commonality, or to identify intra-class conflicts sufficient to defeat class certification.