Groussman v. Motorola Inc et al

Filing 135

MEMORANDUM Opinion Signed by the Honorable Samuel Der-Yeghiayan on 11/15/2011: Mailed notice (mw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JOE M. GROUSSMAN, et al.,

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Plaintiffs,
v.
MOTOROLA, INC., et al.,
Defendants.

No. 10 C 911

MEMORANDUM OPINION
SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Plaintiffs’ motion for class certification. For
the reasons stated below, the motion for class certification is denied.

BACKGROUND
During the period from July 1, 2007 through December 31, 2008, Plaintiffs
were participants in the Motorola 401(k) Plan (Plan) for employees of Defendant
Motorola, Inc. (Motorola). Defendants were allegedly all fiduciaries of the Plan.
Defendants include certain individuals that were on Motorola’s Board of Directors
(collectively referred to as “Director Defendants”). Director Defendants allegedly
delegated their responsibility to appoint the administrator of the Plan (Administrator
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Committee) to the Compensation Committee (Committee). In 2007, the Retirement
Benefits Committee allegedly acted as the Administrator Committee. In 2008, the
Retirement Benefits Committee was split into the Motorola 401(k) Plan Committee
and the Motorola Pension Plan Committee. The Motorola 401(k) Plan Committee
allegedly served as the Administrator Committee beginning in 2008. Defendants
also include individuals that were members of the Administrator Committee
(collectively referred to as “Administrator Defendants”). According to Plaintiffs, all
Defendants controlled the management of the Plan investments. Defendants
allegedly controlled which stock was available for Plan participants to invest in, and
Defendants allegedly imprudently decided to continue to offer Motorola stock as an
investment option in the Plan. Defendants allegedly breached their fiduciary duties
by allegedly failing to conduct an appropriate investigation into whether Motorola
stock was a prudent investment, failing to develop appropriate investment guidelines
for the Plan, failing to divest the Plan of Motorola stock, failing to remove Motorola
stock as an investment option for Plan participants, failing to consult with or appoint
independent fiduciaries to investigate the wisdom of investing in Motorola stock, and
failing to resign as fiduciaries of the Plan if they could not loyally serve the Plan and
its participants. Defendants allegedly possessed negative information about
Motorola’s business and failed to either act based on such information in

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administering the Plan or communicate such information to Plan participants.
Defendants’ alleged breaches of fiduciary duties allegedly caused millions of
dollars in losses to the Plan and its participants. Plaintiffs include in their complaint
claims brought under the Employee Retirement Income Security Act (ERISA), 29
U.S.C. § 1001 et seq., alleging a failure to prudently and loyally manage the Plan and
Plan assets (Count I), ERISA claims based on a failure to provide complete and
accurate information to Plan participants and beneficiaries (Count II), ERISA claims
based on a failure to monitor Plan fiduciaries (Count III), ERISA claims based on a
breach of the duty to avoid conflicts of interest (Count IV), and ERISA co-fiduciary
liability claims (Count V). On October 7, 2010, the court granted Plaintiffs’ oral
motion to voluntarily dismiss Defendant Motorola Retirement Benefits Committee.
The remaining Defendants moved to dismiss the instant action, and on January 18,
2011, the court denied the motion to dismiss. Plaintiffs now move for class
certification in this case.

LEGAL STANDARD
A plaintiff can move for class certification pursuant to Federal Rule of Civil
Procedure 23(a) (Rule 23(a)), which provides the following:
(a) Prerequisites. One or more members of a class may sue or be sued as
representative parties on behalf of all members only if:
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(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims
or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of
the class.
Fed. R. Civ. P. 23(a). The Seventh Circuit has indicated that “[c]ertification as a
class action can coerce a defendant into settling on highly disadvantageous terms
regardless of the merits of the suit,” and thus a class can be certified by a court only
if the court is convinced “after a rigorous analysis, that the prerequisites of Rule
23(a) have been satisfied.” CE Design Ltd. v. King Architectural Metals, Inc., 637
F.3d 721, 724 (7th Cir. 2011)(emphasis in original)(internal quotations omitted).
The certification of a class in a case is “an exception to the usual rule that litigation is
conducted by and on behalf of the individual named parties only.” Wal-Mart Stores,
Inc. v. Dukes, 131 S.Ct. 2541, 2550 (2011)(quoting Califano v. Yamasaki, 442 U.S.
682, 700-01 (1979)).
A court may certify a class if the “numerosity, commonality, typicality, and
adequate representation” requirements of Rule 23(a) are met and one of the
requirements of Rule 23(b) are met. Fed. R. Civ. P. 23(b); Dukes, 131 S.Ct. at 2550;
see also Oshana v. Coca-Cola Co., 472 F.3d 506, 513 (7th Cir. 2006)(stating that a
“district court may certify a class of plaintiffs if the putative class satisfies all four

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requirements of Federal Rule of Civil Procedure 23(a)-numerosity, commonality,
typicality, and adequacy of representation-and any one of the conditions of Rule
23(b)”); Payton v. County of Kane, 308 F.3d 673, 677 (7th Cir. 2002)(stating that “a
determination of the propriety of class certification should not turn on likelihood of
success on the merits”); Keele v. Wexler, 149 F.3d 589, 592 (7th Cir. 1998)(stating
that “[t]he Federal Rules of Civil Procedure provide the federal district courts with
broad discretion to determine whether certification of a class-action lawsuit is
appropriate”).

DISCUSSION
Plaintiffs seek to certify a proposed 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 accounts included investments in Motorola stock.
(Mem. Cert. 1). Plaintiffs argue that they have satisfied the requirements of Rule
23(a) and the requirements of Rule 23(b)(1) and (3). (Mem. Cert. 1). Defendants
argue that Plaintiffs have failed to satisfy the commonality or typicality requirements
of Rule 23(a) or show that Plaintiffs are adequate class representatives. Defendants
also argue that Plaintiffs have not satisfied the requirements in Rule 23(b)(1) or (3).

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I. Numerosity Requirement
Plaintiffs argue that they can satisfy the numerosity requirement in Rule 23(a).
As indicated above, to satisfy the numerosity requirement a plaintiff must show that
“the class is so numerous that joinder of all members is impracticable. . . .” Fed. R.
Civ. P. 23(a). A plaintiff seeking certification “cannot rely on ‘mere speculation’ or
‘conclusory allegations’ as to the size of the putative class to prove that joinder is
impractical for numerosity purposes.” Arreola v. Godinez, 546 F.3d 788, 797 (7th
Cir. 2008)(quoting Roe v. Town of Highland, 909 F.2d 1097, 1100 n. 4 (7th Cir.
1990). Defendants do not contest that the numerosity requirement is met in this case.
(Ans. Cert. 7). Plaintiffs have presented support for their contention that there were
more than 45,000 participants in the Plan during the class period who fall within the
proposed class. (Mem. Cert. 6). Therefore, Plaintiffs have shown that the
numerosity requirement is met in this case.

II. Commonality Requirement
Defendants argue that Plaintiffs have failed to satisfy the commonality
requirement in Rule 23(a). As indicated above, to satisfy the commonality
requirement a plaintiff must show that “there are questions of law or fact common to
the class. . . .” Fed. R. Civ. P. 23(a). Plaintiffs argue that for the commonality
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requirement, a plaintiff need only show a common nucleus of operative facts among
the claims of the proposed class members. (Mem. Cert. 7). However, Plaintiffs fail,
in citing caselaw for the commonality requirement, to recognize the recent decision
in Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011). (Mem. Cert. 7). In Dukes,
the Supreme Court indicated that a plaintiff must do more than simply point to some
questions of fact or law relevant to potential class members or a common nucleus of
operative fact. Dukes, 131 S.Ct. at 2551. The Court in Dukes indicated that it would
be incorrect to read the language in Section 23(a) to provide a lenient standard since
“any competently crafted class complaint literally raises common ‘questions.’” Id.
(internal quotations omitted). The Court in Dukes made clear that class certification
should only be granted after a “rigorous analysis” by the court. Id.
In Dukes, the Supreme Court stated that for the commonality requirement, a
plaintiff must show that “class members ‘have suffered the same injury,’ . . . [which]
does not mean merely that they have all suffered a violation of the same provision of
law.” Id. A plaintiff must show that the contended common question of law or fact
is “of such a nature that it is capable of classwide resolution—which means that
determination of its truth or falsity will resolve an issue that is central to the validity
of each one of the claims in one stroke.” Id.
Plaintiffs argue that Defendants’ alleged violations of ERISA arise from a

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common set of facts. Plaintiffs also point to certain issues of law that proposed class
members share in common, such as for example, whether each Defendant owed a
fiduciary duty to Plaintiffs and proposed class members. However, for the
commonality requirement more is required than merely some common aspects
among class members. Plaintiffs have not shown that class members in the proposed
class have suffered the same injury or that key common issues of fact or law are
capable of resolution in a class action. Plaintiffs’ argument that the commonality
requirement is met simply because all proposed class members were participants in
the Plan and had invested in Motorola stock is the type of loose factual connections
among class members that does not suffice under Dukes. Nor can Plaintiffs satisfy
the commonality requirement by general allegations that all proposed class members
will argue that Defendants violated ERISA and that Defendants breached their
fiduciary duties. Plaintiffs contend that courts in other cases of this type have found
such cases to be “particularly suitable for class certification.” (Mem. Cert. 1).
However, the determination of whether the requirements are met in this case must be
made based upon a detailed and rigorous evaluation of the facts and law in this case,
not based on rulings in other cases, particularly pre-Dukes cases, or such general
statements provided by Plaintiffs.
Defendants have shown that in regard to the proposed class members the

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relevant facts for each class member will vary widely. The proposed class does not
consist of individuals who uniformly invested in Motorola stock at a set time and
suffered in a similar manner. Defendants have shown that depending on the
individualized investment strategies of proposed class members, each class member
will have suffered damages in a different manner. The Defendants have in fact
shown that some individuals that fall within the scope of the proposed class could
actually have gained funds based on the investments in Motorola stock.
Defendants have also shown that while there may be some general
overlapping common issues of fact and law, the assessment of damages for each
Plaintiff and proposed class member will require an individualized analysis for each
class member. This case will, in essence, after resolving some of general issues in
common, become a massive series of individualized analyses. Judicial economy is
not best served by using a class action in order to engage in such individualized
analyses. Plaintiffs contend that “[c]ourts routinely reject Defendants’ speculative
argument . . . based upon purported intra-class conflicts from the trading position of
the Plaintiffs and other Participants in Motorola stock during the class period. . . .”
(Reply Cert . 9). However, Plaintiffs fail to cite controlling precedent to support
their position. (Reply Cert. 9-10). Plaintiffs also argue that “courts in this District
have frequently certified ERISA breach of fiduciary duty cases involving company

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stock as class actions.” (Mem. Cert. 1). However, Plaintiffs again fail to cite
controlling precedent, and cite precedent that preceded the Supreme Court’s ruling in
Dukes. (Mem. Cert. 1). In order for Plaintiffs to meet their burden in regard to the
instant motion, Plaintiffs must show more than that other courts certified classes in
other ERISA cases based on different facts.
In addition, although Plaintiffs argue that Defendants merely speculate that
there may be differences in damages based on trading patterns among class members,
Defendants’ position is much more reasonable than Plaintiffs’ position. It is
Plaintiffs who can only hope and speculate that among the many proposed class
members, they all individually happened to engage in similar trading patterns and
used similar trading strategies, which would allow all claims to be efficiently dealt
with in a class action format. Plaintiffs have not shown that their supposition is
likely or a reasonable conclusion based on the facts in this case. Therefore, Plaintiffs
have failed to satisfy the commonality requirement. Even though, this in itself
defeats the instant motion, the court will examine the other factors as well.

III. Typicality Requirement
Defendants also argue that Plaintiffs have failed to satisfy the typicality
requirement in Rule 23(a). As indicated above, to satisfy the typicality requirement a
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plaintiff must show that “the claims or defenses of the representative parties are
typical of the claims or defenses of the class. . . .” Fed. R. Civ. P. 23(a); see also CE
Design Ltd., 637 F.3d at 724 (stating that “[i]n many cases . . . the requirement of
typicality merges with the further requirement that the class representative will fairly
and adequately protect the interests of the class”)(internal quotations omitted). A
claim is deemed to be a typical claim under Rule 23(a) “if it arises from the same
event or practice or course of conduct that gives rise to the claims of other class
members and . . . her claims are based on the same legal theory” and “[e]ven though
some factual variations may not defeat typicality, the requirement is meant to ensure
that the named representative’s claims have the same essential characteristics as the
claims of the class at large.” Oshana, 472 F.3d at 514 (internal quotations
omitted)(quoting Rosario v. Livaditis, 963 F.2d 1013, 1018 (7th Cir. 1992) and
Retired Chi. Police Ass'n v. City of Chi., 7 F.3d 584, 597 (7th Cir. 1993)).
Plaintiffs contend that their claims are typical of the proposed class members.
Plaintiffs argue that their claims and the claims of the proposed class members are
based on the “same legal theories, namely that Defendants breached their fiduciary
duties to the Plan and its participants who held shares of Motorola stock through the
Plan.” (Mem. Cert. 9). However, it is not enough for the typicality requirement that
Plaintiffs will present the same legal theories as the proposed class members.

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Defendants have shown that each proposed class member will want to argue that on a
certain date it became imprudent to invest in Motorola stock and that chosen date
will vary based on the each class member’s unique trading pattern and investment
strategy. In addition, although Plaintiffs argue that their claims are typical of the
proposed class members that suffered “losses to their retirement savings,”
Defendants have shown that it is likely that a portion of the proposed class members
actually acquired a net gain during the class period as a result of the investments in
Motorola stock. (Mem. Cert. 8-9).
Plaintiffs also fail to identify the alleged specific misrepresentations and
misleading statements that class members and Plaintiffs relied upon and have failed
to show that they and the proposed class members were deceived in a uniform
fashion. Defendants have shown 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. Plaintiffs
have thus failed to show consistency even among their own claims, much less show
that their claims are typical of the proposed class. Plaintiffs also contend that
“[c]ourts in this District and elsewhere have also rejected Defendants’ typicality
arguments with regard to Plaintiffs’ non-disclosure claims.” (Reply Cert. 5-6). Yet
Plaintiffs fail to cite any controlling precedent to support their position. (Reply Cert.

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5-6). Therefore, Plaintiffs have failed to satisfy the typicality requirement.

IV. Adequate Representation Requirement
Defendants argue that Plaintiffs have failed to satisfy the adequate
representation requirement in Rule 23(a). As indicated above, to satisfy the adequate
representation requirement, a plaintiff must show that “the representative parties will
fairly and adequately protect the interests of the class.” Fed. R. Civ. P. 23(a).
Plaintiffs argue that they can adequately represent the proposed class and do not have
interests antagonistic to other class members. However, as indicated above, each
Plaintiff and proposed class member will want to tailor the liability and damages
arguments in order to maximize the recovery. Plaintiffs may want to argue that it
became imprudent on a certain date to invest in Motorola stock in order to maximize
their recovery at the expense of proposed class members who would have recovered
more if another date had been chosen. Plaintiffs also have an incentive to tailor their
arguments about the alleged misrepresentations and deception to their particular
situations as opposed to the situations of proposed class members in order to
maximize Plaintiffs’ recovery.
The Supreme Court also recognized in Dukes that a “rigorous analysis” in
assessing a motion for class certification “will entail some overlap with the merits of
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the plaintiff's underlying claim.” 131 S.Ct. at 2551 -52. Defendants have pointed to
evidence from Plaintiffs’ depositions that indicate that it is likely that Plaintiffs will
not be able to show that they took any actions in reliance of any misrepresentations
or misleading statements by Defendants. (Ans. Cert. 13). Defendants have shown
that neither of Plaintiffs made any changes to their Plan investments during the class
period. Thus, even if Plaintiffs could show that some proposed class members are
able to prevail on the merits in this case as to liability, Plaintiffs, who themselves
likely cannot establish liability for their own claims, are not appropriate
representatives of the proposed class. Therefore, Plaintiffs have failed to satisfy the
adequate representation requirement.

V. Rule 23(b)(1) and (3) Requirements
Defendants argue that Plaintiffs have failed to satisfy the requirements of Rule
23(b)(1) or 23(b)(3). Rule 23(b)(1) and (3) provide the following:
(b) Types of Class Actions. A class action may be maintained if Rule 23(a) is
satisfied and if: . . .
(1) prosecuting separate actions by or against individual class members would
create a risk of:
(A) inconsistent or varying adjudications with respect to individual class
members that would establish incompatible standards of conduct for the party
opposing the class; or (B) adjudications with respect to individual class
members that, as a practical matter, would be dispositive of the interests of the
other members not parties to the individual adjudications or would
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substantially impair or impede their ability to protect their interests; [or] . . .
(3) the court finds that the questions of law or fact common to class members
predominate over any questions affecting only individual members, and that a
class action is superior to other available methods for fairly and efficiently
adjudicating the controversy. The matters pertinent to these findings include:
(A) the class members' interests in individually controlling the prosecution or
defense of separate actions;
(B) the extent and nature of any litigation concerning the controversy already
begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation of the
claims in the particular forum; and
(D) the likely difficulties in managing a class action.
Fed. R. Civ. P. 23(b)(3). In the instant action Plaintiffs have not shown that there is a
risk of inconsistent or varying adjudications or that rulings in regard to the claims of
proposed class members would be dispositive of the claims of other class members.
Nor have Plaintiffs shown that questions of law or fact common to class members
predominate in this case. Defendants have shown that individualized issues of fact
and law predominate in regard to the claims of the proposed class members.
Plaintiffs have thus failed to satisfy the requirements of Rule 23(b)(1) or (b)(3).

VI. Proposed Class Definition
Defendants also argue that the proposed class definition is overbroad,
arbitrary, and vague. Plaintiffs have not provided an adequate basis for the definition
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of the proposed class. Plaintiffs have not even been consistent as to what class they
seek to certify. For example, in Plaintiffs’ memorandum in support of the motion for
class certification, Plaintiffs sought to “certify a class consisting of all person who
were participants in, or beneficiaries of, the Plan at any time between July 1, 2007
and December 31, 2008. . . and whose accounts included investments in Motorola
stock. . . .” (Mem. Cert. 1). However, apparently recognizing the merits of some of
Defendants’ arguments in opposition to the motion for class certification, Plaintiffs
now claim in a recent supplemental filing that they are seeking to certify a class
consisting of “all of whom invested in the Motorola Stock Fund during the same
proposed Class Period (July1, 2007 through December 31, 2008) and suffered losses
as a result.” (P Supp. Mem. 3). The court is not required to guess as to which of
Plaintiffs’ filings represents their final decision, and Plaintiffs cannot shift positions
after Defendants’ opportunity to respond to the instant motion has passed.
There are no facts in the record that indicate that the proposed beginning and
ending dates of the class period are anything other than arbitrarily chosen dates. In
addition, the proposed class fails to specify any particular alleged misrepresentations
or misleading statements by Defendants. Thus, the class is overly broad and vaguely
defined. Plaintiffs have also failed to define the class in a manner that would limit
proposed class members to those that acted in a similar or uniform fashion in regard

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to their trading activities. Plaintiffs, as movants, had the burden to delineate an
appropriate proposed class definition and have failed to do so. Therefore, the failure
of Plaintiffs to delineate an appropriate class is another basis to deny the instant
motion for class certification.

VII. Motion For Leave to File Supplemental Memorandum
Defendants move for leave to file a supplemental memorandum with attached
supplemental authority. Defendants contend that a recent ruling in George v. Kraft
Foods Global, Inc., 2011 WL 5118815 (N.D. Ill. 2011) is comparable to the instant
action. (Mot. Supp. 2). Defendants’ motion is granted and the court has considered
the supplemental memorandum and although the supplemental authority cited in the
memorandum is not controlling precedent, the court has considered the filing. In
addition, Plaintiffs have filed a response to the motion for leave to file supplemental
authority and the court has considered Plaintiffs’ arguments in regard to such
supplemental filing.
As Plaintiffs themselves indicate, this court has broad discretion in
determining whether class certification would be appropriate. (Mem. Cert. 5).
Based upon the facts presented in this case, the court concludes that a class action
would not be an efficient manner in which to resolve all the claims of the proposed
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class members. Plaintiffs have failed to satisfy the requirements of Rule 23(a) or
Rule 23(b), and this court concludes that certification would not be appropriate in
this action. Therefore, based on the above, the motion for class certification is
denied.

CONCLUSION
Based on the foregoing analysis, the motion for class certification is denied.

___________________________________
Samuel Der-Yeghiayan
United States District Court Judge

Dated: November 15, 2011

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