Spano et al v. Boeing Company, The et al

Filing 397

ORDER GRANTING 309 Motion to Certify Class; denying as moot 387 Motion to Strike and denying as moot 311 Motion (alternatively) to pursue direct action for breach of fiduciary duties. SEE ORDER FOR DETAILS. Signed by Chief Judge David R. Herndon on 9/19/13. (klh, )

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
GARY SPANO, et al.,
Plaintiffs,
v.
THE BOEING COMPANY, et al.,
Defendants.

06-0743-DRH
MEMORANDUM and ORDER

HERNDON, Chief Judge:
I.

Introduction and Background

Pending before the Court is Plaintiffs= amended motion for class certification
(Docs. 309, 310, 340, 358 & 393). Defendants again sternly oppose the motion
contending that A[p]laintiffs are trying to lead this Court, once more, down the path
to reversal.@ (Doc. 349 & 396).

Based on the following, the Court grants the

amended motion for class certification.
Plaintiffs Gary Spano, John Bunk and James White, Jr., bring this action
against defendants, The Boeing Company (ABoeing@), Employee Benefits Plans
Committee, Scott M. Buchanan and Employee Benefits Investment Committee
pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. ' '
1001 - 1461 (AERISA@), on behalf of The Boeing Company Voluntary Investment
Plan (Athe Plan@). Plaintiffs allege breach of fiduciary duty pursuant to ERISA '
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409, 29 U.S.C. ' 1109, ERISA '' 502(a)(2), (3), 29 U.S.C. ' ' 1132(a)(2), (3) and
seek to remedy the Plan=s losses and to obtain injunctive and other equitable relief
for the Plan from defendants. Plaintiffs claim that the breaches occurred on a
plan-wide basis, and were the result of decisions made at the Plan, rather than the
individual level, affecting all of the participants and beneficiaries in the
Boeing-sponsored 401(k) plan. Plaintiffs= Second Amended Complaint contains
two counts: Count I - breach of fiduciary duty pursuant to ERISA 502(a)(2) and
Count II - other remedies for breach of fiduciary duty pursuant to ERISA 502(a)(3)
(Doc. 186).
In September 2008, the Court granted plaintiffs= motion for class
certification certifying the following as a class:
All persons, excluding the Defendants and/or other individuals who
are or may be liable for the conduct described in this Complaint, who
are or were participants or beneficiaries of the Plan and who are, were
or may have been affected by the conduct set forth in this Complaint,
as well as those who will become participants or beneficiaries of the
Plan in the future.
(Doc. 193). Thereafter, defendants filed a petition for permission to appeal the
class certification Order and the Seventh Circuit granted the petition on August 10,
2009 (Doc. 279).
In January 2011, the Seventh Circuit reversed this Court=s Order granting
class certification and remanded the case for further proceedings. See Spano v.
The Boeing Co., 633 F.3d 574 (7th Cir. 2011). The Seventh Circuit found that the
class definition was Abreathtaking in its scope@ ... and Adefined so broadly that the
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requirements of Rule 23(a) cannot be met. Accordingly, additional proceedings to
consider the requirements of both Rule 23(a) and Rule 23(b) are required.@ Id. at
586 & 591. Specifically, the Seventh Circuit found that the class definition did not
meet the typicality and adequacy requirements of Rule 23(a) or the requirements of
Rule 23(b)(1).

Id. at 589-591.

Regarding typicality, the Seventh Circuit

emphasized that this requirement ensures that there is Aenough congruence
between the named representative=s claim and that of the unnamed members of the
class to justify allowing the named party to litigate on behalf of the group.@ Id. at
586.

Similarly, adequacy ensures not only that the counsel representing the

plaintiffs are competent, but also that the named representatives have no conflicts
with the other proposed class members. Id. at 586-587.
The relevant facts of this case are set forth in Spano and the Court=s previous
class certification Order, as well as other orders, and will not be recounted here
except as pertinent to the pending motion. Defendant Boeing offers a 401(k) plan
to its employees known as The Boeing Voluntary Investment Plan. It is a defined
contribution plan governed by ERISA.

1

Participants contribute varying

percentages of their before-tax (and in some cases, after tax) earnings to the Plan.
Boeing matches these contributions in varying percentages. Boeing makes use of a
1

AThis means that participants may contribute up to a specified amount to individual
accounts: those contributions are often (as here) matched to some degree by the employer. Upon
retirement, the participating employee has whatever amount the account has accumulated through
contributions and earnings. Unlike a defined benefit plan, it does not assure any fixed level of
retirement income.@ Howell v. Motorola, Inc., 633 F.3d 552, 556 (7th Cir. 2011)(citing LaRue v.
DeWolff, Boberg & Associates, Inc., 552 U.S. 248, 250 n. 1, 128 S.Ct. 1020, 169 L.Ed.2d 847
(2008)).

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Master Trust to hold the assets of the Plan.

The Plan shares the services of

record-keepers, investment managers, consultants, and other service providers
directly and/or through the Master Trust.

The Plan holds over $24 billion in

assets.
Plaintiffs are participants in the Plan. In their Second Amended Complaint,
plaintiffs allege, inter alia, that defendants breached their fiduciary duties by
causing or allowing unreasonable fees and expenses to be charged against the
assets of the Plan and by failing to ensure that the Plan=s assets were used solely for
the exclusive purposes of providing benefits to participants. Plaintiffs allege that
these excessive fees were imposed on the Plan through a combination of both AHard
Dollar@ payments and hidden ARevenue Sharing@ transfers. Plaintiffs further allege
that defendants breached their core fiduciary obligations by causing the Boeing
Stock Fund (ABSF@) to incur unnecessary fees and to hold excess cash; again
impairing the value of, and return on, the Plan=s assets.
The Second Amended Complaint also alleges that defendants further violated
their fiduciary duties by failing to disclose and/or concealing material information
regarding Plan fees and expenses. Plaintiffs also allege that defendants selected
and retained mutual funds as Plan investment options until 2006- which not only
charged excessive investment management expenses - but were also the vehicle
defendants used to funnel excessive Plan record keeping and administrative fees to
State Street/CitiStreet via their undisclosed revenue sharing program.
Pursuant to Rule 23(a) and 23(b)(1) and alternatively 23(b)(3), plaintiffs
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again seek certification this time for a class with subclasses. Plaintiffs propose the
following for their Administrative Fee claim and class:
All participants or beneficiaries of the Boeing Voluntary Investment
Plan, excluding the Defendants, members of the Defendant
committees, and the Boeing directors, who had an account balance at
any time between September 28, 2000 and December 31, 2006, as all
participants during that time paid recordkeeping fees.
Further, plaintiffs propose the following sub-classes:
Mutual Fund Subclass: All participants or beneficiaries of the Boeing
Voluntary Investment Plan, excluding the Defendants, members of the
Defendant committees, and the Boeing directors, who, between
September 28, 2000 and December 31, 2005, invested in any of the
Plan=s mutual funds, since each mutual fund during this time were
laden with imprudently excessive fees.
Small Cap Fund Subclass: All participants or beneficiaries of the
Boeing Voluntary Investment Plan, excluding the Defendants,
members of the Defendant committees, and the Boeing directors, who,
between September 28, 2000 and December 31, 2005, invested in the
Small Cap mutual fund in the Plan.
Technology Fund Subclass: All participants or beneficiaries of the
Boeing Voluntary Investment Plan, excluding the Defendants,
members of the Defendant committees, and the Boeing directors, who,
between September 28, 2000 and December 31, 2005 invested in the
Plan=s Technology Fund and whose investment in the Technology Fund
underperformed that of the diversified domestic equity markets as
represented by the Standard and Poor=s 500 Index Fund minus 5 basis
points for investment management.
Company Stock Fund Subclass: All participants or beneficiaries of the
Boeing Voluntary Investment Plan, excluding the Defendants,
members of the Defendant committees, and the Boeing directors, who,
between September 28, 2000 and December 31, 2006 invested in the
Plan=s Boeing Company Stock Fund and whose investment in the
Boeing Company Stock Fund underperformed that of Boeing
Company Stock.

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In their amended motion for class certification, plaintiffs summarize their
allegations against defendants as the following: (1) defendants caused the Plan to
pay unreasonable administrative fees to its recordkeeper CitiStreet; (2) defendants
imprudently included, among the Plan=s 11 investment options, four mutual funds,
when superior institutional investment products were available; (3) that these same
four mutual funds charged excessive fees which included kickbacks to CitiStreet in
the form of revenue sharing; (4) that among these four mutual options, the
Technology Fund was included in the Plan even though it was undiversified and
imprudent for a retirement plan, and the Small Cap Fund was included even
though it failed defendants= standards of prudence, because it provided additional
revenue sharing fees to CitiStreet; and (5) that the Boeing Company Stock Fund
imprudently held high levels of low-yielding cash, allowing State Street to place cash
in its own funds and receive multiple layers of fees.
Plaintiffs argue that the revised class definition refines the class further to
comport to the applicable limitations period; that the common question of Aliability
of the defendant to the class@ alone is enough for commonality, even if a separate
hearing is required for allocation of the recovered losses among class members.
Further, the classes have common questions of fact and law, including the
prudence of foregoing the massive bargaining power of the Plan by entering into a
contract for recordkeeping services which required high priced mutual funds, the
prudence of the decision to impose excessive revenue-sharing kickback fees on
mutual fund investors, and the decision to select actively managed products which
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were not reasonable expected to outperform low cost passive index funds.
III.

Class Certification Standard

A plaintiff seeking class certification has the burden of proving that the
proposed class meets the requirements of Rule 23. WalBMart Stores v. Dukes, BBB
U.S. BBBB BBB, 131 S.Ct. 2541, 2551, 180 L.Ed.2d 374 (2011). ARule 23 does not
set forth a mere pleading standard.@ Id.

Rather, the plaintiff seeking class

certification Amust affirmatively demonstrate@ her compliance with Rule 23. Id. In
addition, an implicit prerequisite to class certification is that a sufficiently definite
class must exist. Alliance to End Repression v. Rochford, 565 F.2d 975, 977B78
(7th Cir. 1977). If these requirements are met, the district court has broad
discretion to determine whether certification is appropriate in a particular case.
Retired Chi. Police Ass'n v. City of Chi., 7 F.3d 584, 596 (7th Cir. 1993); Gulf Oil
Co. v. Bernard, 452 U.S. 89, 100 (1983). Before deciding whether to allow a case
to proceed as a class action, a district court judge should make whatever factual
and legal inquiries are necessary under Rule 23, even if those considerations
overlap the merits of the case. Dukes, 131 S.Ct. at 2552. However, Athe court
should not turn the class certification proceedings into a dress rehearsal for trial on
the merits.@ Messner v. Northshore University HealthSystem, 669 F.3d 802, 811
(7th Cir. 2012).
AA plaintiff who moves for class certification must satisfy the numerosity,
commonality, typicality and adequacy of representation requirements of Rule 23(a),
as well as at least one subsection of Rule 23(b).@ Puffer v. Allstate Ins. Co., 675
Page 7 of 29

F.3d 709, 716 (7th Cir. 2012); Spano, 633 F.3d at 582.
Rule 23(b)(1) provides for a non-opt-out class action where individual
actions could Aestablish incompatible standards of conduct for the party opposing
the class@ or Aas a practical matter, would be dispositive of the interests of the other
members of the class@ or Aas a practical matter, would be dispositive of the interests
of the other members not parties to the individual adjudications.@ Fed.R.Civ.P
23(b)(1).

Rule 23(b)(2) allows class certification for an action seeking Afinal

injunctive relief or corresponding declaratory relief.@

Fed.R.Civ.P. 23(b)(2).

Finally, Rule 23(b)(3) is appropriate for Aa case in which the common questions
predominate and class treatment is superior.@ Spano, 633 F.3d at 583. If the
requirements of Rule 23 have been satisfied, the court must certify the class action.
ABy its terms [Rule 23] creates a categorical rule entitling a plaintiff whose suit
meets the specified criteria to pursue his claim as a class action.@ Shady Grove
Orthopedic Associates, P.A. v. Allstate Ins. Co., 559 U.S.393, 130 S.Ct. 1431,
1437, 176 L.Ed.2d 311 (2010).
In Spano, the Seventh Circuit held that for class certification in ERISA cases
courts must: Adistinguish between an injury to one person=s retirement account that
affects only that person, and an injury to one account that qualifies as a plan injury.
The latter kind of injury would be appropriate for class treatment, while the former
would not.@ Id. 633 F.3d at 581. In the case of a defined contribution plan, as
this one, it is possible that the injury suffered by a plaintiff may affect Athe plan as a
whole@ even if the injury was not shared by any other participant in the plan. Id. at
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582. In such an instance, class treatment is not proper. If however, the plans=
fiduciaries= conduct resulted in an injury shared by other plan participants, a class
action may be proper under Rule 23. See id. Accordingly, A[t]he propriety of
class treatment will thus turn on the circumstances of each case.@ Id. With these
principles in mind, the Court turns to consider the amended motion for class
certification.
IV.
A.

Analysis

Administrative Fee claim and class

Plaintiffs seek to certify a Plan-wide class on the basis that defendants caused
the plan to pay unreasonable fees to its recorder. Plaintiffs request certification of
the following class:
All participants or beneficiaries of the Boeing Voluntary Investment
Plan, excluding the Defendants, members of the Defendant
committees, and the Boeing directors, who had an account balance at
any time between September 28, 2000 and December 31, 2006, as all
participants during that time paid recordkeeping fees.
1. Numerosity
Rule 23(a)(1) requires that the class be so Anumerous that joinder of all the
members is impracticable.@

Fed.R.Civ.P. 23(a)(1).

Defendants do not dispute

that the requirement of numerosity is satisfied and, therefore, have forfeited any
objection to plaintiffs= satisfaction of this requirement.

See Volovsek v. Wisc.

Dep=t of Agr., Trade & Consuer Prot., 344 F.3d 680, 689 n.6 (7th Cir.
2003)(absence of legal argument forfeits consideration of claim). Thus, it is clear

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that the requirement of numerosity is met for the class.
2. Commonality
Rule 23(a)(2) requires a Court to find that Athere are questions of law or fact
common to the class,@ Fed.R.Civ.P. 23(a)(2), such that the class has Asuffered the
same injury as@ the named plaintiff.

General Telephone Co. of Southwest v.

Falcon, 457 U.S. 147, 157, 102 S.Ct. 2364 (1982). As the Supreme Court stated
in Wal-Mart Stores, Inc. v. Dukes, Rule 23(a)(2) requires that the claims of the
named plaintiff and the class:
depend on common contention.... That common contention,
moreover, must be of such a nature that it is capable of classwide
resolution Bwhich 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.... What matters to class certification ... is not the raising
of common Aquestions= Ceven in drovesC but, rather the capacity of a
classwide proceeding to generate common answers apt to drive the
resolution of the litigation. Dissimilarities within the proposed class
are what have the potential to impede the generation of common
answers.
131 S.Ct. at 2551 (quote omitted). A Asuperficial@ common question is not enough,
but Aeven a single common question@ can suffice for commonality. Jamie S. v.
Milwaukee Public Schools, 668 F.3d 481, 497 (7th Cir. 2012)(internal citations
and quotations omitted); see also Spano, 663 F.3d at 558 (ABut this assumes that
every question must be common, and, as we have discussed, that is not what Rule
23(a)(2) demands@). A[A] common nucleus of operative fact is usually enough to
satisfy the commonality requirement.@ Rosario v. Livaditis, 963 F.2d 1013, 1018
(7th Cir. 1992).

Courts have found a common nucleus of operative fact in
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situations where a defendant has engaged in standardized conduct toward
members of the class. See, e.g. Keele v. Wexler, 149 F.3d 589, 594 (7th Cir.
1998)(listing cases).
As the Court previously found, the Court concludes that common issues of
law and fact are present. Here, plaintiffs contend that defendants indisputably
made decisions regarding the Plan=s administrative expenses and investment
options for the Plan as a whole, affecting all participants in the same manner and
did not act individually to particular participants. These are allegations that affect
the Plan as a whole and all of the participants in the plan. Plaintiffs challenge the
reasonableness of the total compensation defendants caused the Plan to pay
CitiStreet from any and all sources as defendants managed and controlled the
Plan=s assets and directed the Plan=s investment options. According to plaintiffs,
every participant in the Plan is entitled to a refund of the excessive amount. AThe
assertion that Boeing imposes excessive fees on all participants, as well as the
assertion that Boeing has failed to satisfy its fiduciary duties in its selection of
investment options, both describe problems that would operate across the plan
rather than at the individual level. Cf. Hecker v. Deere & Co., 556 F.3d 575,
584-87 (7th Cir. 2009)(noting that the record showed sufficient variety in
investments and fee levels to satisfy ERISA requirements). We thus conclude, as
did our colleagues in Schering, that the class met the commonality requirement of
Rule 23(a)(2).@ Spano, 633 F.3d at 586. Hence, the Administrative Fee Class
meets the commonality requirement of Rule 23(a)(2).
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3. Typicality
The typicality requirement of Rule 23(a)(3) is closely related to the
commonality requirement of Rule 23(a)(2).

Rosario, 963 F.2d at 1018.

The

typicality requirement Ais meant to ensure that the named representative=s claims
have the same essential characteristics as the claims of the class at large.@
Oshana v. Coca-Cola, 472 F.3d 506, 514 (7th Cir. 2006)(quotation and citation
omitted). In Spano, the Seventh Circuit stated that the Astarting point@ for the
typicality analysis is Athat there must be enough congruence between the named
representative=s claim and that of the unnamed members of the class to justify
allowing the named party to litigate on behalf of the group.@ Spano, 633 F.3d at
586. AIn keeping with the teachings of General Telephone, it seems that a class
representative in defined-contribution case would at a minimum need to have
invested in the same funds as the class members. It is entirely possible, after all,
that out of the 11 options a particular plan might offer, 10 were sound and one was
ill-advised and should never have been offered.@ Id.
The Court concludes that plaintiffs= claims are typical of those of the putative
class. Plaintiffs maintain that defendants had a fiduciary duty to ensure that the
expenses of administering the Plan were reasonable. In fact, Plaintiffs challenge
the reasonableness of the total compensation defendants caused the Plan to pay
CitiStreet from any and all sources.

Plaintiffs= proposed class contains every

participant in the Plan, regardless of the chosen investment options, that invested
in the Plan from September 28, 2000 to December 31, 2006. The class definition
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is no longer Abreathtaking in scope.@

The definition no longer contains

participants from the past and the future. It has been limited to the time frame of
September 28, 2000 to December 31, 2006. The named plaintiffs Spano, Bunk
and White were participants in the Plan during the entire class period. Plaintiffs
maintain Aall of which paid revenue sharing in addition to the per participant and
float compensation paid by all participants to CitiStreet.@ The named plaintiffs
and each member of the class have an identical claim, that defendants breached
their

fiduciary

duties

by

permitting

CitiStreet

to

receive

recordkeeping

compensation from the Plan that was excessive and caused the Plan to pay
CitiStreet fees from any and all sources. The Court concludes that Spano, Bunk
and White satisfy the typicality requirement.
4. Adequacy
The final requirement of Rule 23(a) is that Athe representative parties will
fairly and adequately protect the interests of the class.@

Fed.R.Civ.P. 23(a)(4).

This inquiry Aserves to uncover conflicts of interest between named parties and the
class they seek to represent.@ Amchem Prods. v. Windsor, 521 U.S. 591, 625
(1997)(citation omitted). In order to satisfy the requirements of Rule 23(a)(4), the
class representative must Apossess the same interest and suffer the same injury as
the class members.@ Uhl v. Thoroughbred Tech. & Telecomms., Inc., 309 F.3d
978, 985 (7th Cir. 2002). A[T]here is a constitutional dimension to this part of the
inquiry; absentee members of a class will not be bound by the final result if they
were represented by someone who had a conflict of interest with them or who was
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otherwise inadequate.@

Spano, 633 F.3d at 587 (citing Richards v. Jefferson

County, Ala., 517 U.S. 793, 116 S.Ct. 1761, 135 L.Ed.2d 76 (1996); Hansberry v.
Lee, 311 U.S. 32, 61 S.Ct. 115, 85 L.Ed 22 (1940)). Courts do not deny class
certification on speculative or hypothetical conflicts. See Rosario, 963 F.2d at
1018-19.
Here, based on the new definition, the Court finds that no conflict exists
between the named representatives and the unnamed class members. Plaintiffs
have identified all of the named plaintiffs as class representatives for the
administrative fees claim class. Each class member has a complaint concerning
excessive fees. There is no indication that a participant will be harmed by the
recovery of the excessive fees. The Court concludes that plaintiffs have no conflicts
of interest with the members of the proposed class that prevent them from serving
as adequate class representatives. The Court concludes that Spano, Bunk and
White satisfy the adequacy requirement.

Thus, as to the Administrative fees

claims and class the requirements of Rule 23(a) are met.
5. Rule 23(b)
After fulfilling the requirements of Rule 23(a), plaintiffs must also meet one of
the subsections of Rule 23(b). Plaintiffs contend that they meet the requirements
of Rule 23(b)(1)(A) or Rule 23(b)(1) or alternatively meet the requirements of both
Rule 23(b)(2) and (b)(3).
Rule 23(b)(1) allows for certification of the class if:
T]he prosecution of separate actions by or against individual members
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of the class would create a risk of (A) inconsistent or varying
adjudications with respect to individual members of the class which
would establish incompatible standards of conduct for the party
opposing the class, or (B) adjudications with respect to individual
members of the class which would as a practical matter be dispositive
of the interests of the other members not parties to the adjudications
or substantially impair or impede their ability to protect their
interests.
Fed.R.Civ.P. 23(b)(1).

Though the Supreme Court has cautioned that Rule

23(b)(1) should be Anarrowly interpreted,@ it also advised that A[a]mong the
traditional varieties of representative suit encompassed by Rule 23(b)(1)(B) were
those involving the >presence of property which called for distribution or
management.= @ Ortiz v. Fibreboard Corp., 527 U.S. 815, 833 (1999) (citations
omitted). As to this issue, the Seventh Circuit stated:
AFocusing only on the class that the district court actually certified, we
cannot find the necessary identity of interest among all class members.
A claim of imprudent management, for example, is not common if the
alleged conduct harmed some participants and helped others which
appears to be the case. Without the common interest, there is no
reason to assume that an adjudication of one person=s claim >as a
practical matter would be dispositive of the interests of the other
members not parties to the individual adjudications or would
substantially impair or impede their ability to protect their interests.=
Fed.R.Civ.P. 23(b)(1)(b).@
Spano, 633 F.3d at 588.
In this class, the Court finds that the failure to certify the proposed class
would result in inconsistent or varying adjudications with respect to individual
members of the class, which would establish incompatible standards of conduct for
defendants, thereby making this action appropriate for class certification under
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Rule 23(b)(1)(A). In addition, adjudications with respect to individual members of
the proposed class would, as a practical matter, be dispositive of the interests of the
other members who are not parties to the adjudication or substantially impair or
impede their ability to protect their interests, making certification under Rule
23(b)(1)(B) appropriate as well.
B.

The Mutual Fund claim and subclass

Like the administrative fee claims, plaintiffs contend that the four mutual
funds contained in the Plan were imprudent investments because the participants
in each of the four funds paid excessive fees. Plaintiffs seek to certify a subclass on
the basis that the four mutual funds caused them to incur unreasonable
administrative expenses. Plaintiffs request certification of the following subclass:
Mutual Fund Subclass: All participants or beneficiaries of the Boeing
Voluntary Investment Plan, excluding the Defendants, members of the
Defendant committees, and the Boeing directors, who, between
September 28, 2000 and December 31, 2005, invested in any of the
Plan=s mutual funds, since each mutual fund during this time were
laden with imprudently excessive fees.
1. Numerosity
As stated earlier, the parties do not dispute that numerosity has been met.
According to plaintiffs, in 2002 the mutual fund subclass contained more than
170,000 participants. That is sufficient to satisfy the requirement of Rule 23(a)(1).
2. Commonality
As to the fees, plaintiffs challenge, at least in part, the propriety of fees that
were charged to every participant that held the mutual funds offered by defendants.
Page 16 of 29

AIt is enough that there be one or more common questions of law or fact.@ Spano,
633 F.3d at 585. In a defined contribution plan, Afund participants operate against
a common background.@ Id. Thus, plaintiffs= mutual fund subclass satisfies the
requirement of Rule 23(a)(2).
3. Typicality
Here, mutual fund subclass is warranted because the claimed excessive fees
were imposed on all the participants in the funds. See Id. at 590. Plaintiffs claim
that the fees were in excessive in that they: (1) paid revenue sharing to CitiStreet; (2)
were mutual funds instead of far less expensive, institutionally priced separate
accounts; (3) were requirements of defendants= contract with CitiStreet. Plaintiffs
have specified that the disputed fees were charged to each participant with a mutual
fund and the relief sought by the named plaintiffs will compensate each class
member for the excessive fees based on the amount of time and amount of money
the participant invested in each mutual fund.

To the extent that there are

differences among class members= damages, those differences would be a product
of mathematics based on their account balances in the mutual funds during the
relevant time frame. Because every participant that had a mutual fund paid a
portion of the alleged excessive fee, any participant=s claim is typical of the class.
Id.
Plaintiffs have identified each of the named plaintiffs as a class representative
for the mutual fund subclass for the excessive fees claim. Plaintiff Bunk invested
in the Boeing Company Stock Fund and the Small Cap Fund, plaintiff Spano
Page 17 of 29

invested in the Growth Fund and the Technology Fund, and plaintiff White invested
in the Growth Fund, Value Fund, Technology Fund and the Small Cap Fund. The
Court concludes that plaintiffs Spano, White and Bunk satisfy the typicality
requirement.
4. Adequacy
As with the Administrative Fee claim, plaintiffs have identified all of the
named plaintiffs as representatives for the mutual fund subclass. Each class
member has a complaint concerning excessive fees. The Court concludes that
plaintiffs have no conflicts of interest with the members of the proposed class that
prevent them from serving as adequate class representatives. Similarly, the Court
finds that Spano, White and Bunk satisfy the adequacy requirement.
5. Rule 23(b)
As with the Administrative Fee claim, the Court finds that the failure to certify
the proposed mutual fund subclass would result in inconsistent or varying
adjudications with respect to individual members of the class, which would
establish incompatible standards of conduct for defendants, thereby making this
action appropriate for class certification under Rule 23(b)(1)(A).

In addition,

adjudications with respect to individual members of the proposed class would, as a
practical matter, be dispositive of the interests of the other members who are not
parties to the adjudication or substantially impair or impede their ability to protect
their interests, making certification under Rule 23(b)(1)(B) appropriate as well.

Page 18 of 29

C. The Small Cap Fund
Plaintiffs seek to certify a subclass on that basis that participants in the
Small Cap Fund were charged excessive fees. Plaintiffs claim that the Small Cap
Fund charged its investors 107 basis points per year in fees which plaintiffs
maintain was grossly excessive. Plaintiffs also claim that the Small Cap Fund
allowed State Street to syphon off all but 15 basis points of that fee forcing all of the
fund=s investors, including each participant in the Small Cap Fund to pay excess
fees. In compliance with Spano, the Small Cap Fund is temporally limited. 633
F.3d at 583-584. Plaintiffs propose the following subclass:
Small Cap Fund Subclass: All participants or beneficiaries of the
Boeing Voluntary Investment Plan, excluding the Defendants,
members of the Defendant committees, and the Boeing directors, who,
between September 28, 2000 and December 31, 2005, invested in the
Small Cap mutual fund in the Plan.
1. Numerosity
Rule 23(a)(1) requires that the class be Aso numerous that joinder of all
members is impracticable.@ Plaintiff maintain that 68,160 individuals invested in
the Small Cap Fund during the class period. Defendants do not dispute that this
element has been met. Thus, plaintiffs satisfy the numerosity requirement.
2. Commonality
Rule 23(a)(2) requires that Athere are questions of law or fact common to the
class.@ AIt is enough that there be one or more common questions of law or fact.@
Spano, 633 F.3d at 585.

As to fees, plaintiffs challenge, at least in part, the
Page 19 of 29

propriety of the fees that were charged to every participant in the Small Cap Fund.
That is sufficient to satisfy the requirement of Rule 23(a)(2).
3. Typicality
Here, the Small Cap Fund subclass is warranted because the claimed
excessive fees were imposed on all the participants in the Small Cap Fund. See id.
at 590.

Plaintiffs have specified that the excessive fees were charged to each

participant in the Small Cap Fund and the relief sought by the named plaintiffs will
compensate each class member for the excessive fees. Because every participant
in the Small Cap Fund paid a portion of the excessive fee, any participant=s claim is
typical of the class. Id.
Plaintiffs have identified plaintiffs Bunk and White as representatives for the
Small Cap Fund subclass as these two named plaintiffs invested in the Small Cap
Fund during the class period. These named plaintiffs and each member of the
subclass have an identical claim. The Court concludes that plaintiffs Bunk and
White satisfy the typicality requirement.
4. Adequacy
Rule 23(a)(4) requires that Athe representative parties will fairly and
adequately protect the interests of the class.@ A court must make sure that there
are no inconsistencies between the interests of the named party and the class that
he or she represents. Uhl, 309 F.3d at 985 (citing Amchem Prods., 521 U.S. at
625).
Plaintiffs have identified plaintiffs Bunk and White as class representatives
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for the Small Cap Fund subclass. The Court finds that the named plaintiffs have
no conflicts of interest with the members of the proposed subclass that prevent
them from serving as adequate class representatives. The Court concludes that
named plaintiffs Bunk and White satisfy the adequacy requirement.
5. Rule 23(b)
As with the Administrative Fee claim and the Mutual Fund claim, the Court
finds that the failure to certify the proposed Small Cap Fund subclass would result
in inconsistent or varying adjudications with respect to individual members of the
class, which would establish incompatible standards of conduct for defendants,
thereby making this action appropriate for class certification under Rule
23(b)(1)(A). In addition, adjudications with respect to individual members of the
proposed class would, as a practical matter, be dispositive of the interests of the
other members who are not parties to the adjudication or substantially impair or
impede their ability to protect their interests, making certification under Rule
23(b)(1)(B) appropriate as well.
D.

The Technology Fund Claim

In this claim, plaintiffs allege that the Technology Fund was imprudent
because it was imprudently selected, undiversified and excessively (unnecessarily)
risky in that defendants knew that participants were, predictably, using the
Technology Fund to chase the technology bubble even while the fund itself became
increasingly volatile. Plaintiffs maintain that defendants persisted in offering a
Technology Fund that they knew to be excessively risky, undiversified and
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imprudent for a retirement plan. In compliance with Spano, the Technology Fund
subclass is temporally limited. 633 F.3d at 583-84. Plaintiffs seek certification of
the following subclass:
Technology Fund Subclass: All participants or beneficiaries of the
Boeing Voluntary Investment Plan, excluding the Defendants,
members of the Defendant committees, and the Boeing directors, who,
between September 28, 2000 and December 31, 2005 invested in the
Plan=s Technology Fund and whose investment in the Technology Fund
underperformed that of the diversified domestic equity markets as
represented by the Standard and Poor=s 500 Index Fund minus 5 basis
points for investment management.
1. Numerosity and Commonality
Plaintiffs contend that this subclass contains 104,190 plan participants and
defendants do not dispute that this element has been met. Thus, the Court finds
that numerosity has been met pursuant to Rule 23(a)(1).

Further, the Court finds

that plaintiffs= challenge to the Technology Fund as a whole raises at least one
common question that satisfies the requirement of commonality, such as whether
defendants breached their duties under 29 U.S.C. ' 1104(a)(1) in its management
of the Technology Fund and what prudent alternative exists by to determine the
Plan=s losses under 29 U.S.C. ' 1109(a), from which each subclass member will
derive his or her individual loss.
2. Typicality and Adequacy
Plaintiffs contend that the S&P 500 Index is the prudent alternative to the
Technology Fund; (1) because it is the Adiversified equity portfolio[]@ that is the
opposite of the imprudently concentrated portfolio of that small sector investment
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and (2) because the S&P Index, which covers 85% of the market capitalization of US
stocks, approximates returns of an equity portfolio. Plaintiffs contend that since
the class members and plaintiffs White and Spano suffered losses to their
retirement savings when compared to prudent alternative investments, plaintiffs
have demonstrated Aenough congruence between the named representative=s claims
and that of the unnamed members of the class...@ Further, plaintiffs contend that
their interests are clearly aligned with those of the other class members.
Defendants counter that plaintiffs have offered no tenable explanation for choosing
the S&P 500 Index as the comparator for the Technology fund, and they certainly
cannot prove it can be appropriately applied on a class wide basis. Specifically,
defendants argue that the investments the Plan participants would have held in the
absence of the Technology Fund must be determined by looking to the actual
investments the participants chose and plaintiffs have not done that. Based on the
following, the Court rejects defendants’ arguments and agrees with plaintiffs.
Just last month, the Seventh Circuit, in a very similar case, found the Hueler
FirstSource Universe index (“Hueler Index”) 2 as a proper benchmark for class
certification of a “stable-value fund” class based on an imprudent management
claim. Abbott v. Lockheed Martin Corp., --- F.3d ---, 2013 WL 4010226, Slip No.
12-3736 (7th Cir. August 7, 2013). Specifically, the Seventh Circuit held:
In concluding that the reference to the Hueler Index prejudged
the merits of the SVF claim, the district court appears to have assumed
that accepting the class definition also required him to accept the
2 That index tracks the person of a variety of stable value funds over time.

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conclusion that the SVF was mismanaged because it underperformed
relative to the Hueler Index.
Any such assumption would be
mistaken. It misunderstands both the nature of the SVF claim and
the relation between the class definition and the merits. Plaintiffs are
not arguing that the SVF was imprudently managed in violation of
ERISA because it did not match or outperform the Heuler Index;
rather, Plaintiffs allege that the SVF was imprudently managed
because its mix of investments was not structured to allow the fund to
beat inflation and therefore that it could not serve as a prudent
retirement investment for Lockheed employees. If Plaintiffs prevail
on this theory, they may offer the Hueler Index as one basis for
calculating damages. For now, however, the reference to the Hueler
Index in the class definition in no way binds the district court to the
use of the Hueler Index as the damages measure should Plaintiffs
prevail. If the court concludes that a different measure be better, it is
free to use one.
Id. Slip at 12-13. “In such cases, a district court should not certify a class
that fails to address that danger (say, through the use of subclasses or by defining
the class more narrowly). But this court has never held, and Spano did not imply,
that the mere possibility that a trivial level of intra-class conflict may materialize as
the litigation progresses forecloses class certification entirely. Id. Slip at 20-21
(citations and quotations omitted). Here, plaintiffs used an identical method to
define the Technology Fund as the SVF in Abbott, thus, the requirements of
typicality are met. Further, plaintiffs have identified named plaintiffs Spano and
White who lost retirement savings compared to the benchmark as a result of
defendant’s decision to include the Technology Fund as class representatives. The
Court finds no inconsistencies between the interests of the names parties and the
subclass they seek to represent. Therefore, the Court concludes that plaintiffs
Spano and White satisfy the typicality and adequacy requirement.
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3. Rule 23(b)
Likewise, the Court finds that the failure to certify the proposed Technology
Fund subclass would result in inconsistent or varying adjudications with respect to
individual members of the class, which would establish incompatible standards of
conduct for defendants, thereby making this action appropriate for class
certification under Rule 23(b)(1)(A). In addition, adjudications with respect to
individual members of the proposed class would, as a practical matter, be
dispositive of the interests of the other members who are not parties to the
adjudication or substantially impair or impede their ability to protect their
interests, making certification under Rule 23(b)(1)(B) appropriate as well.
E. Company Stock Fund Subclass
Plaintiffs claim that the Company Stock Fund was imprudently run in that it
paid excessive fees to State Street and held excessive levels of cash which acted as a
drag, reducing the performance of the fund when compared to Boeing stock itself.
Specifically, plaintiffs allege that defendants breached their fiduciary duties in
managing the Boeing Stock Fund in that the manner in which defendants ran the
fund required the Plan to pay Ainvestment management fees@ to State Street.
Plaintiffs maintain that investment management of an employer stock fund is not
necessary, as the fund invests only in the company stock. Plaintiffs seek to recover
the difference between their performance and the performance they would have had
had the Company Stock Fund been prudently managed. Plaintiffs propose the
following subclass.
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Company Stock Fund Subclass: All participants or beneficiaries of the
Boeing Voluntary Investment Plan, excluding the Defendants,
members of the Defendant committees, and the Boeing directors, who,
between September 28, 2000 and December 31, 2006 invested in the
Plan=s Boeing Company Stock Fund and whose investment in the
Boeing Company Stock Fund underperformed that of Boeing
Company Stock.
1. Numerosity and Commonality
Plaintiffs contend that this subclass contains 124,997 individuals that lost
money during the class period and defendants do not dispute that this element has
been met. Thus, the Court finds that numerosity has been met pursuant to Rule
23(a)(1).

Further, the Court finds that this subclass contains common questions

of law and fact. These questions include whether defendants mismanaged the
Company Stock Fund and what is the proper measure of the losses to the Plan that
defendants would have to make good under ' 1109(a).

Thus, this subclass

satisfies Rule 23(a)(2).
2. Typicality and Adequacy
Plaintiffs allege the Company Stock Fund was imprudently run in that it paid
excessive fees to State Street and held excessive levels of cash which acted as a drag,
reducing the performance of the fund when compared to Boeing stock itself.
Plaintiffs’ company Stock Fund subclass is restricted to participants who were
invested in Company Stock Fund during the statutory and discovery period and
who suffered a monetary loss to their individual accounts as a result of defendants’
breaches of fiduciary duties unique to that option. Further, Rule 23(a)(4) requires
Page 26 of 29

that “the representative parties will fairly and adequately protect the interests of the
class.” In order to satisfy the requirements of Rule 23(4), the class representative
must “possess the same interest and suffer the same injury as the class members.”
Uhl, 309 F.3d at 985 (quoting E. Tex. Motor Freight Sys. Inc., 431 U.S. at 403).
Plaintiffs have identified named plaintiffs Bunk and Spano, who suffered
losses in this subclass, as class representatives.

The Court finds no

inconsistencies between the interests of the names parties and the subclass they
seek to represent. Therefore, the Court concludes that plaintiffs Bunk and Spano
satisfy the typicality and adequacy requirement.
3. Rule 23(b)
Having concluded that the requirements of Rule 23(a) are satisfied, the Court
turns to the question of whether a class can be maintained under one of Rule
23(b)=s three subsections. Here, the Court concludes that the failure to certify the
Company Stock Fund subclass would result in inconsistent or varying
adjudications with respect to the individual members of the subclass, which would
establish incompatible standards of conduct for defendants, thereby making this
action appropriate for certification under Rule 23(b)(1)(A).

Furthermore,

adjudications with respect to individual members of the Company Stock Fund
subclass would, as a practical matter, be dispositive of the interests of the other
members who are not parties to the adjudication or substantially impair or impede
their ability to protect their interests, making certification under Rule 23(b)(1)(B)
appropriate as well.
Page 27 of 29

Adequacy of Counsel
This issue is not in dispute as to the class or the subclasses. Thus, the
Court finds that class counsel is adequate and that the law firm of Schlichter
Bogard & Denton is qualified to proceed as class counsel for the administrative fee
claim class, the mutual fund subclass, the small cap fund subclass and the
company stock fund subclass.
V.

Conclusion

Accordingly, the Court GRANTS plaintiffs= amended motion for class
certification (Doc. 309).

The Court CERTIFIES the following class with

subclasses:
Administrative Fee claim and class: All participants or
beneficiaries of the Boeing Voluntary Investment Plan, excluding the
Defendants, members of the Defendant committees, and the Boeing
directors, who had an account balance at any time between September
28, 2000 and December 31, 2006, as all participants during that time
paid recordkeeping fees.
Mutual Fund Subclass: All participants or beneficiaries of the
Boeing Voluntary Investment Plan, excluding the Defendants,
members of the Defendant committees, and the Boeing directors, who,
between September 28, 2000 and December 31, 2005, invested in any
of the Plan=s mutual funds, since each mutual fund during this time
were laden with imprudently excessive fees.
Small Cap Fund Subclass: All participants or beneficiaries of
the Boeing Voluntary Investment Plan, excluding the Defendants,
members of the Defendant committees, and the Boeing directors, who,
between September 28, 2000 and December 31, 2005, invested in the
Small Cap mutual fund in the Plan.
Technology Fund Subclass: All participants or beneficiaries of
the Boeing Voluntary Investment Plan, excluding the Defendants,
Page 28 of 29

members of the Defendant committees, and the Boeing directors, who,
between September 28, 2000 and December 31, 2005 invested in the
Plan’s Technology Fund and whose investment in the Technology Fund
underperformed that of the diversified domestic equity markets as
represented by the Standard and Poor’s 500 Index Fund minus 5 basis
points for investment management.
Company Stock Fund Subclass: All participants or beneficiaries
of the Boeing Voluntary Investment Plan, excluding the Defendants,
members of the Defendant committees, and the Boeing directors, who,
between September 28, 2000 and December 31, 2006 invested in the
Plan=s Boeing Company Stock Fund and whose investment in the
Boeing Company Stock Fund underperformed that of Boeing
Company Stock.
Further, the Court APPOINTS Plaintiffs Gary Spano, John Bunk, and James
White, Jr., as representatives of the class and the mutual fund and small cap fund
subclasses. The Court, also, APPOINTS the law firm of Schlichter, Bogard &
Denton as class counsel.

Further, the Court DENIES as moot plaintiffs=

alternative motion to pursue direct cause of action for breach of fiduciary duties
pursuant to ERISA section 502(A)(2) (Doc. 311). Lastly, the Court DENIES as
moot plaintiffs’ motion to strike notice of supplemental authority (Doc. 387).
IT IS SO ORDERED.
Signed this 19th day of September, 2013.

Digitally signed by
David R. Herndon
Date: 2013.09.19
14:45:08 -05'00'
Chief Judge
United States District Court

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