SANTOMENNO et al v. TRANSAMERICA LIFE INSURANCE COMPANY et al
Filing
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ORDER DENYING DEFENDANTS MOTION TO STRIKE CLASS ALLEGATIONS 143 by Judge Dean D. Pregerson (lc). Modified on 5/21/2013 .(lc).
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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA
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JACLYN SANTOMENNO; KAREN
POLEY; BARBARA POLEY,
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Plaintiffs,
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v.
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TRANSAMERICA LIFE INSURANCE
COMPANY; TRANSAMERICA
INVESTMENT MANAGEMENT, LLC;
TRANSAMERICA ASSET
MANAGEMENT INC.,
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Defendants.
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___________________________
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Case No. CV 12-02782 DDP (MANx)
ORDER DENYING DEFENDANTS’ MOTION
TO STRIKE CLASS ALLEGATIONS
[Dkt. No. 143]
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Before the court is Defendants Transamerica Life Insurance
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Company (“TLIC”), Transamerica Investment Management, LLC, and
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Transamerica Asset Management Inc.’s Motion to Strike Class
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Allegations in Part.
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the court adopts the following order.
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I. Background
Having considered the parties’ submissions,
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The background of this case is explained in detail in the
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court’s Order of February 19, 2013, Granting in Part and Denying in
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Part Defendants’ Motions to Dismiss. (Dkt. No. 137.)
In that
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Motion, Defendants argued that TLIC is not a fiduciary with respect
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to the terms of its own compensation because those terms were
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negotiated by a named fiduciary prior to TLIC assuming a fiduciary
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duty.
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claim for TLIC’s fiduciary duty to Plaintiffs with respect to the
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fees they charge in their 401(k) plan product.
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II.
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This court disagreed and found that Plaintiffs had stated a
Legal Standard
Under Rule 23, “[a]t an early practicable time after a person
sues or is sued as a class representative, the court must determine
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by order whether to certify the action as a class action.”
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Civ. P. 23(c)(1)(A).
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may issue orders that . . . require that the pleadings be amended
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to eliminate allegations about representation of absent persons and
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that the action proceed accordingly.”
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III. Defendants’ Claims
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Fed. R.
In conducting a Rule 23 action, “the court
Fed. R. Civ. P. 23(d)(1)(D).
Defendants move to strike the class allegations “with respect
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to plans in which Plaintiffs themselves have not participated.”
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(Mot. at 18.)
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excludes from the litigation the named fiduciaries of the employee
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benefit plans in which putative class members are participants.
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Defendants maintain that this is improper for a number of reasons.
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They argue that the class definition improperly
First, Defendants argue that excluding the named fiduciaries
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undermines ERISA’s structure of fiduciary responsibility because it
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denies those named fiduciaries a voice in the litigation, despite
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the named fiduciaries’ roles in selecting TLIC as a service
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provider and managing their respective ERISA plans.
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this exclusion, TLIC argues, the named fiduciaries will be unable
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to fulfill their duty to protect the plans from harmful costs of
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As a result of
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litigation and from the loss of their service plans that would
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result from the litigation’s success.
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Second, Defendants argue that only the named fiduciaries have
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the authority to settle or release claims on behalf of plans, and
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that the relief Plaintiffs seek - which Defendants understand as
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disgorgement of all or some of the fees they have charged plans -
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would necessarily require TLIC to terminate its service contracts
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with the plans, thus requiring the named fiduciaries to obtain
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replacement service providers.
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Third, Defendants argue that the only way a multi-plan class
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would be appropriate is if the named fiduciaries were the class
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representatives, because those named fiduciaries retained TLIC as a
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service provider and are responsible for monitoring TLIC’s ongoing
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performance and fees.
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Finally, Defendants argue that Plaintiffs are not adequate
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representatives for a class that comprises participants in other
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employee benefit plans because they have no connection to those
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plans and would be in effect usurping the role of the named
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fiduciaries.
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IV. Discussion
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Defendants seek to limit the class to participants in the
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employee benefit plans in which the named plaintiffs are also
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participants.
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limiting the class can the plans’ named fiduciaries participate
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fully in the litigation, and their full participation is required
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to protect the plans’ interests both during and after the
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litigation.
Defendants’ logic appears to be that only by
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The court notes, first, that while every employee benefit plan
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has one or more “named fiduciaries” who are named in the plan
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instrument and who have certain responsibilities with respect to
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the plan, 29 U.S.C. § 1102, all parties who have fiduciary duty to
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the plan are subject to liability for breach of such duty.
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29 U.S.C. § 1109 (“Any person who is a fiduciary with respect to a
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plan who breaches any of the responsibilities, obligations, or
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duties imposed upon fiduciaries . . . shall be personally liable to
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make good to such plan any losses to the plan resulting from each
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such breach, and to restore to such plan any profits of such
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fiduciary which have been made through use of assets of the plan by
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the fiduciary, and shall be subject to such other equitable or
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remedial relief as the court may deem appropriate, including
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removal of such fiduciary.”).
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The court has already determined that Plaintiffs have stated a
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claim for TLIC’s fiduciary duty to them with respect to their fees.
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This means that Plaintiffs may hold TLIC accountable for the
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reasonableness of their fees, among other things.
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acknowledging or disavowing this duty, Defendants propose a litany
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of reasons why Plaintiffs’ claims must nonetheless pass through the
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named fiduciaries.
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employee benefit plans, Plaintiffs do not have the responsibility
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to consider the interest of the plan but only their interest in
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pursuing the litigation.
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problems for the ERISA structure because a successful outcome of
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the litigation is likely to involve modifications to or termination
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of numerous employee benefit plans, which would have adverse
Without either
They argue that as individual participants in
Defendants argue that this causes
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implications for all plan participants, even if it also involved a
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payout of damages to Plaintiffs.
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Assuming arguendo that Defendants have breached their
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fiduciary duty to Plaintiffs and that Plaintiffs are entitled to
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damages, the issue of such a breach is distinct from the issue of
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whether the employee benefit plan provisions will need to be
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modified.
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would feel it is appropriate to modify the plan provisions.
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decision is independent of whether Plaintiffs are entitled to
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Presumably if Plaintiffs are successful, Defendants
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damages for past alleged conduct.
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Defendants make the apocalyptic argument that they will by
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choice or necessity cease providing any services to employee
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benefit plans if they are obligated to return or reduce their fees.
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This sidesteps the issue of Defendants’ alleged breach of fiduciary
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duty.
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This matter is at an early stage in the proceedings.
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no opinion on whether any fees charged were excessive and does not
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presume it to be the case.
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reasonable fees.
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Defendants’ Motions to Dismiss at 13 (February 19, 2013)(“TLIC is
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entitled to reasonable fees and profits for the services that it
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provides to the plans, but as a fiduciary TLIC is accountable for
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the reasonableness of those fees.”).)
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reasonable; Plaintiffs have the burden of proof on that issue.
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the determination of reasonableness is separate from the subsequent
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question of how the plans would be modified if a breach were to be
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found.
Plaintiffs have alleged that TLIC charges excessive fees.
The court has
Defendants are entitled to charge
(Order Granting in Part and Denying in Part
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Defendants’ fees may well be
But
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Defendants’ arguments do not directly challenge the
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suitability of Plaintiffs’ claims for class treatment.
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appear to argue that the named fiduciaries are necessary parties to
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the action and, indeed, are the only proper parties to bring such
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an action because only they may make all plan decisions and only
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they can settle and release any claims of the plan.
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point out, this argument is not specific to the class context; to
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the extent that it is valid, it should apply as much to the
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individual Plaintiffs as to the putative class.
Defendants
As Plaintiffs
Defendants’
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argument thus appears to be less a challenge to class allegations
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and more another 12(b)(6)-type challenge to Plaintiffs’ ability to
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bring their claims at all.
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motion to strike class allegations.
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Hence, it bears little weight in a
At this stage of the litigation, the court sees no need to
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amend class allegations by limiting the class to participants in
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those benefit plans in which Plaintiffs have participated.
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Plaintiffs have stated a claim for TLIC’s fiduciary responsibility
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to them and to the potential class members.
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fiduciary, Plaintiffs may bring an action against TLIC for breach
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of fiduciary duty.
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putative class fails to meet the Rule 23 requirements as a matter
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of law, or that the issues in the case cannot be handled with
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common proof.
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district court found that individualized issues would predominate
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and on that ground denied certification before Plaintiffs had filed
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a motion to certify.
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in contrast, Defendants’ concerns pertain more to the consequences
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of such litigation and how remedies might be handled.
If TLIC is a
Defendants have not demonstrated that the
In Vinole v. Countrywide Home Loans, Inc., the
571 F.3d 935, 946-47 (9th Cir. 2009).
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These
Here,
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concerns do not go to the question of whether Plaintiffs’ claims
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that TLIC’s fees are excessive are susceptible to class treatment.
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Defendants will have the opportunity to make factual arguments
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against certification at a later stage in the litigation.
The
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court has already considered Defendants’ arguments regarding their
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fiduciary duty to Plaintiffs in the Motion to Dismiss.
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declines now to find that despite Defendants’ potential fiduciary
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duty to benefit plan participants, only a plan’s named fiduciaries
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are in a position to challenge TLIC’s fees as potentially
The court
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excessive.
To the extent that these issues arise and are developed
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through facts and then presented in opposition to a class
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certification motion, the court will address them at that time.
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IT IS SO ORDERED.
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Dated: May 21, 2013
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DEAN D. PREGERSON
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United States District Judge
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