Johnson et al v. Evangelical Lutheran Church in America, The et al
Filing
228
MEMORANDUM OF LAW & ORDER. IT IS HEREBY ORDERED: 1. Defendant's Motion to Strike the Expert Report of Mark Johnson (Dkt. No. 188-1) 195 is GRANTED. 2. Plaintiffs' Motion for Class Certification and Appointment of Class Representatives and Lead and Liaison Counsel 157 is DENIED. (Written Opinion). Signed by Chief Judge Michael J. Davis on 3/26/13. (GRR)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
PASTOR BENJAMIN A. JOHNSON,
DR. RONALD A. LUNDEEN,
and PASTOR ARTHUR F. HAIMERL
on behalf of themselves and
all other similarly situated,
Plaintiffs,
v.
MEMORANDUM OF LAW & ORDER
Civil No. 11-00023 (MJD/LIB)
EVANGELICAL LUTHERAN
CHURCH IN AMERICA, and
THE BOARD OF PENSIONS
OF THE EVANGELICAL
LUTHERAN CHURCH IN AMERICA,
Defendants.
Scott W. Carlson, Vincent J. Esades, and Katherine T. Kelly, Heins, Mills & Olson,
P.L.C.; Daniel R. Karon, Laura K. Mummert, Brian D. Penny, and Paul J. Scarlato,
Goldman Scarlato & Karon, P.C.; Jackson D. Bigham and Brian M. Sund,
Morrison Fenske & Sund, P.A., John S. Chapman, John S. Chapman & Associates,
L.L.C., Counsel for Plaintiffs.
Nicole A. Diller, Charles C. Jackson, S. Bradley Perkins, Alison B. Willard,
Morgan Lewis & Bockius L.L.P.; and Thomas S. Fraser, Lousene M. Hoppe,
Nicole M. Moen, Fredrikson & Byron, P.A., Counsel for Defendants.
I.
Introduction
This matter is before the Court on Plaintiffs’ Motion for Class Certification
1
and Appointment of Class Representatives and Lead and Liaison Counsel.
[Docket No. 159] This matter is also before the Court on Defendant’s Motion to
Strike the Expert Report of Mark Johnson (Dkt. No. 188-1). [Docket No. 195] The
Court heard oral argument on March 1, 2013. For the reasons that follow, the
Court grants the motion to strike and denies the motion for class certification.
II.
Background
A.
Factual Background
1.
Defendants and The Plan
The Evangelical Lutheran Church in America (“ELCA”) is a non-profit
corporation organized under Minnesota law. (Third Amended Complaint
(“TAC”) ¶ 11.) ELCA was formed in 1988 as the result of a merger between the
Lutheran Church in America, the American Lutheran Church, and the
Association of Evangelical Lutheran Churches. (Id.) ELCA was initially named
as a defendant in this litigation, but was subsequently dismissed with prejudice.
[Docket Nos. 128, 140]
Defendant Board of Pensions of the Evangelical Lutheran Church in
America (the “Board”) is a non-profit corporation organized under Minnesota
law. (TAC ¶ 12.) ELCA established the Board in 1988 to provide and administer
2
retirement, health, and other benefits to individuals who work for ELCA or other
faith-based organizations associated with ELCA. (Id.) As of December 2009,
there were 51,481 persons enrolled in ELCA benefits plans, 10,473 of whom were
retired. (Id.) The Board is governed by a 17-member Board of Trustees that is
elected from the churchwide membership of ELCA. (Id.)
The Board manages the Evangelical Lutheran Church in America
Retirement Plan (“the Plan”). (TAC ¶ 13.) The Plan is a defined contribution
retirement plan under 26 U.S.C. § 403(b)(9), under which participating employers
make defined contributions on behalf of participants. (Id.; Kelly Decl., Ex. 1, 1988
Plan Document at §1.03.) The Plan provides that the Board is “responsible for all
administrative decisions with regard to the form, commencement and amount of
payments from this Retirement Plan.” (Kelly Decl., Ex. 27, 2003 Plan § 1.03.)
The Plan is a “church plan.” (TAC ¶ 17; Kelly Decl., Ex. 1, 1988 Plan
Document at § 1.03.) Therefore, it is exempt from ERISA, absent an election to
the contrary. 28 U.S.C. §§ 411(e)(2)(B), 414(e); 29 U.S.C. §§ 1002(33), 1003(b).
Under the Plan, defined contributions are made on behalf of participating
members into their individual accounts. (TAC ¶ 13.) Plan participants have
options for directing their Plan accumulations. Before retirement, the accounts
3
are considered “active,” and Plan participants can direct their accumulations into
funds invested in the equity or fixed income markets. (TAC ¶ 18.)
Before 2001, all participants were required to annuitize their
accumulations upon retirement. The accounts were then no longer considered
“active.” (TAC ¶¶ 23-28.) Starting in 2001, at retirement, participants had the
choice of annuitizing their accumulations and receiving a monthly annuity for
life, leaving their accounts “active,” or a combination of the two. (TAC ¶¶ 16, 2830; Kelly Decl., Ex. 14, 2001 Summary Plan Description at 14.) Only the first
choice is at issue in this lawsuit. (TAC ¶ 16.)
Between 1988 and 1996, participants were paid their monthly annuity out
of three separate funds, depending on their elections – the balanced fund, bond
fund, and stock fund. (Kelly Decl., Ex. 4, 1996 Summary Plan Description at 1819.) Between 1997 and 2003, annuity payments were paid from a single “Pension
Reserve Fund” instead of the specific funds in which participants were invested.
(Kelly Decl., Ex. 6, 1997 Summary Plan Description at 15.) Between 2004 and
2007, the single fund was known as the “Participating Annuity Fund.” (Kelly
Decl., Ex. 19, 2004 Summary Plan Description at 22.) In 2008, it was renamed the
“ELCA Annuity Fund.” (Kelly Decl., Ex. 23, 2008 Summary Plan Description at
4
14.) The parties both refer to the single fund as the “Annuity Fund,” and this
name will be used in this Order.
2.
The Plaintiffs
Plaintiffs are three retired participants in the ELCA Plan, all of whom
served as pastors at one point. Plaintiff Pastor Benjamin A. Johnson retired in
1995 and began receiving monthly annuity payments. (TAC ¶ 7.) In 1995, when
Johnson retired, the Plan mandated the annuitization of benefits. (Id. ¶ 16; Diller
Decl., Johnson Dep. at 247.) His monthly annuity payments were “permanently”
increased each year until January 2010, when his monthly annuity payments
were reduced. (TAC ¶ 7.)
Plaintiff Dr. Ronald A. Lundeen retired in 2002 and elected monthly
annuity payments, but deferred his payments until 2007. (Id. ¶ 8.) He began
receiving monthly annuity payments in 2007. (Id.) They were “permanently”
increased each year until January 2010, when they were reduced. (Id.)
Plaintiff Pastor Arthur F. Haimerl retired in February 2000. (Id. ¶ 10.) At
that time, he was required to annuitize his account. (Id. ¶ 16; Diller Decl.,
Haimerl Dep. at 118-20.) His monthly payments “permanently” increased each
year until January 2010, when they were reduced. (Id. ¶ 16)
5
A fourth individual, Larry D. Cartford, was a named plaintiff until he filed
a notice of voluntary dismissal on August 31, 2011. [Docket No. 71]
Plaintiffs claim that their annuity payments were guaranteed for life and
that increases in these guaranteed lifetime annuity payments would be
permanent. (TAC ¶ 1.)
3.
The Annuity Fund’s Asset Allocation and Benchmark
The Board uses asset allocation to determine the risk and return in the
Annuity Fund. (Kapanke Decl. ¶ 2.) The Board manages the Annuity Fund
within ranges of its target allocation. (Id. at ¶ 3.) According to Defendant,
“[f]rom its inception through December 2011, the Annuity Fund outperformed
its benchmark – achieving a cumulative net return of about 177%, compared to
its benchmark’s cumulative return of about 155%.” [Dkt. No. 169 at 18.] The
Board maintains that it “closely monitors the Annuity Fund’s funded status to
ensure that it has adequate assets to support lifetime annuity payments.”
(Adams Decl. ¶ 8.) The Annuity Fund was 96% funded as of December 31, 2007.
(Id.)
4.
The Annuity Fund’s Losses in 2008-2009 and The Board’s
Response
In 2008, the Annuity Fund experienced a 24% investment loss, which
6
caused the funded ratio to drop to 67% as of December 31, 2008. (Grenadier
Expert Report ¶¶ 30-34.) In December 2008, the Board sent a letter to Plaintiffs
stating that annuity payments were subject to market risk and that they should
expect their annuity payments to be decreased in 2010. (TAC ¶ 47.)
In early 2009, the Board formed a subcommittee to address the underfunded status of the Annuity Fund. (Kapanke Decl., Ex. 1; Adams Decl., Exs. 45.) The Board concluded that it could not rely solely on investment gains to close
the funding gap. (Adams Decl. ¶ 9.) The Board decided to make downward
annual adjustments over a three-year period to bring the Annuity Fund’s funded
ratio to 100%. (Kapanke Decl., Ex. 1.)
In June 2009, the Board issued the 2008 Annual Report, which added
statements about potential market risk in the Annuity Fund. (TAC ¶ 48.) Such
warnings were not included in prior Annual Reports. (Id.) In August 2009, the
Plan was revised to close the Annuity Fund to new entrants effective April 3,
2009. (Kelly Decl., Ex. 24, 2009 Plan.)
In September 2009, ELCA CEO and President John Kapanke informed Plan
participants that, due to the market downturn, the Annuity Fund was
underfunded by 26% and that, effective January 1, 2010, their monthly annuity
7
payments would decrease by 9% and would likely decrease by an additional 9%
in both 2011 and 2012. (Kelly Decl., Ex. 25, September 2009 Letter to Plan
Participants (noting that the “historic and unexpected downturn in the
investment markets . . . created a significant gap between the net assets in the
[Participating Annuity Fund] and the projected lifetime benefit obligations to
members”); Kapanke Decl., Ex. 1) Actual investment returns have allowed for
smaller annuity decreases and higher interest crediting rates in 2011 and 2012.
(Adams Decl. ¶ 10.) In November 2010, the Board announced monthly annuity
payment cuts of an additional 6% for 2011, and in November 2011, the Board
announced an additional cut of 3.8% for 2012. (Kelly Decl., Ex. 28, November
2010 Letter at 1; Ex. 29, November 2011 Letter at 1.)
B.
Procedural Posture
On December 3, 2010, Plaintiffs filed a Complaint in Hennepin County
District Court against ELCA, the Board, and two Board executives. On January
4, 2011, Defendants removed the case to this Court based on the Class Action
Fairness Act of 2005 (“CAFA”). On February 10, 2011, the parties filed a
stipulation of dismissal for the two Board executives.
On March 3, 2011, Plaintiffs filed their Second Amended Complaint
8
(“SAC”) against the ELCA and the Board. On March 21, 2011, both Defendants
filed a motion to dismiss, and on July 22, 2011, this Court denied the motion to
dismiss as it applied to the Board, granted the motion to dismiss as it applied to
ELCA, and permitted Plaintiffs the opportunity to amend with regard to ELCA.
On August 22, 2011, Plaintiffs filed their Third Amended Complaint
against ELCA and the Board. The Third Amended Complaint alleges: Count
One: Breach of Contract under Minnesota Law against both Defendants; Count
Two: Breach of Fiduciary Duty of Prudence under Minnesota Common and
Statutory Law against the Board; Count III: Breach of Fiduciary Duty of
Disclosure under Minnesota Common and Statutory Law against both
Defendants; and Count IV: Breach of Fiduciary Duty of Disclosure under
Minnesota Common and Statutory Law against both Defendants. Plaintiffs seek
to sue on behalf of a class of Plan participants who elected, from January 1, 1988
through November 2009 pursuant to the ELCA Retirement Plan, to receive
retirement accumulations in the form of a lifetime annuity or pension. (TAC
¶ 66.)
On September 21, 2011, the Board answered the TAC and the ELCA
moved to dismiss. On June 22, 2012, this Court adopted the Report &
9
Recommendation of Magistrate Judge Leo I. Brisbois, which granted ELCA’s
motion to dismiss. Therefore, the Board is the only remaining defendant.
On July 23, 2012, Plaintiffs filed a motion for class certification and
appointment of class representatives and lead and liaison counsel. [Docket No.
157] The Board opposes Plaintiffs’ motion. [Docket No. 169]
On November 16, 2012, Defendant filed a Motion to Strike Mark Johnson’s
Expert Report, which was filed in conjunction with Plaintiff’s Reply in support of
its motion for class certification. [Docket No. 195]
III.
DISCUSSION
A.
Motion to Strike the Expert Report of Mark Johnson Ph.D., J.D.
1.
Procedural Posture
On March 7, 2012, Magistrate Judge Brisbois ruled on Plaintiffs’ motion to
amend the pretrial order to extend expert disclosure deadlines. [Docket No. 139]
Magistrate Judge Brisbois ordered Plaintiffs to disclose any class certification
experts “no later than in conjunction with service of their opening brief
requesting class certification” under Rule 23. [Id. at 6] The Court also “strongly
encourage[d] the Plaintiffs to disclose their class certification experts before their
opening class certification brief in order to foster complete and adequate briefing
10
on the appropriateness of class certification.” [Id.]
On July 23, 2012 Plaintiffs filed their motion for class certification. [Docket
No. 157] Plaintiffs did not disclose any experts at this time.
On September 10, 2012, Defendant filed its opposition to the motion for
class certification. [Docket No. 169] In support of its opposition, Defendant filed
an expert report for Dr. Steven R. Grenadier. [Docket No. 170] Dr. Grenadier is a
Professor of Financial Economics at the Graduate School of Business at Stanford
University. [Docket No. 170] Dr. Grenadier states that he was retained to
“determine based on economic and financial evidence whether the adjustment
actions implemented by the Board between 2010 and 2012 have potential
differential impact on the proposed class members.” [Docket No. 170-1 at 3]
On September 12, 2012, the parties filed a joint stipulation to extend expert
and dispositive motion deadlines. [Docket No. 176] On September 21, 2012,
Magistrate Judge Brisbois issued an order on the stipulation. [Docket No. 182]
Magistrate Judge Brisbois interpreted the request to extend expert disclosures for
merits experts. [Docket No. 182 at 2 n.2 (“In Docket No. 139, the Court
established a deadline for the disclosure of class certification experts linked to the
briefing schedule for any class certification motion that the plaintiffs might bring.
11
A class certification motion has previously been served, filed, and the hearing
thereon is set before Chief Judge Michael J. Davis on November 30, 2012.
Therefore, the only remaining expert disclosures and expert discovery that
would be the subject of any amendment to the pretrial schedule would be for
merits experts.”) Magistrate Judge Brisbois extended the deadline for Plaintiffs’
merits expert disclosures to March 30, 2013 and Defendant’s merits expert
disclosures to April 30, 2013. [Docket No. 182 at 3]
On October 25, 2012, Plaintiffs submitted a Preliminary Expert Report
from Mark Johnson, Ph.D., J.D. in connection with their reply in support of their
motion to certify the class. [Docket No. 188] Dr. Johnson founded ERISA
Benefits Consulting, Inc., where he currently provides expert witness and other
consulting services. [Docket No. 188 at Ex. A] Dr. Johnson is also currently an
Adjunct Professor of Business Communication at Tarrant County College in
Hurst, Texas. [Id. at Ex. 1] Dr. Johnson states that he was retained by Plaintiffs
“to review the plan documents and decisions of the Board of Pensions and offer
my opinion and analysis on the appropriateness of these actions in light of the
nature of the governing plan documents and the applicable fiduciary standards.”
[Id. at Ex. A]
12
On November 9, 2012, Defendant deposed Dr. Johnson. On November 16,
2012, Defendant filed a Motion to Strike Dr. Johnson’s expert report. [Docket No.
195.]
2.
Merits of the Motion to Strike
Defendant asserts that Dr. Johnson’s report should be stricken because it is
irrelevant to class certification; because it fails to comply with Federal Rule of
Evidence 702; and because the report was filed after the deadline set forth by this
Court’s scheduling orders.
The Court grants Defendant’s motion to strike for several reasons. First,
Dr. Johnson’s report is irrelevant to class certification. The Defendant, Plaintiffs,
and Dr. Johnson himself, agree that Dr. Johnson’s report has nothing to do with
whether the purported class should be certified. Dr. Johnson’s report purports to
opine on the merits of whether the Defendant breached its fiduciary duty of
prudence. This issue is not presently before the Court.
Second, the Court finds that Dr. Johnson’s report fails to comply with
Federal Rule of Evidence 702. Dr. Johnson’s report is not helpful to the Court
because it consists solely of inappropriate plan interpretation and legal
conclusions. See In re Acceptance Ins. Cos. Sec. Litig., 423 F.3d 899, 905 (8th Cir.
13
2005) (affirming exclusion of expert opinions that were “more or less legal
conclusions about the facts of the case . . . meant to substitute the judgment of the
district court”); see also Nalbandian v. Lockheed Martin Corp., No. 10-CV-1242LHK, 2011 WL 3881473, at *5 n.1 (N.D. Cal. Sept. 1, 2011) (“Plaintiffs’ expert [Dr.
Johnson] has submitted a report largely limited to a review [of] the factual record
and legal conclusions regarding interpretation of the Plan, functioning at best as
supplemental briefing for Plaintiffs . . . Thus the Court will not rely upon the
expert reports in its abuse of discretion review.”); Rengifo v. Hartford Life &
Accident Ins. Co., No. 8:09-CV-1725-T-17MAP, 2010 WL 5253137, at *9 (M.D. Fla.
Dec. 13, 2010) (“Because the determination of whether an ERISA plan exists and
has been established or maintained calls for a legal conclusion by the Court
based on the above relevant factors, the Court has not considered the affidavit of
Plaintiff’s expert, Mark Johnson, Ph.D., J.D., in its determination of the issue.”);
Halbach v. Great-West Life & Annuity Ins. Co., No. 4:05CV02399 ERW, 2007 WL
2108454, at *1, *4 (E.D. Mo. July 18, 2007) (excluding Dr. Johnson’s testimony
“regarding the general usage of the terms at issue in the plan documents”).
Additionally, Dr. Johnson’s report fails to provide any explanation or basis for
his opinions. Instead, Dr. Johnson’s report interprets the Plan as disallowing
14
annuity reductions, assumes that the Defendant made reductions to the annuity,
and then concludes that there was a fiduciary breach. The report fails to identify
or apply any methodology, and improperly makes conclusory statements.
Finally, Magistrate Judge Brisbois clearly ordered Plaintiffs to disclose any
class certification experts on July 23, 2012, when they filed their class certification
motion. The Plaintiffs decided not to disclose an expert at that time and
therefore the Court finds that they should not be permitted to rely on one now.
B.
Motion for Class Certification
1. Class Action Standard
The class action serves to conserve “the resources of both the courts and
the parties by permitting an issue potentially affecting every [class member] to be
litigated in an economical fashion under Rule 23.” Gen. Tel. Co. of the Southwest
v. Falcon, 457 U.S. 147, 155 (1982).
Pursuant to Rule 23(a), there are four threshold requirements to class
certification:
(1) the putative class is so numerous that it makes joinder of all
members impractical; (2) questions of law or fact are common to the
class; (3) the class representatives’ claims or defenses 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.
15
In re St. Jude Med., Inc., 425 F.3d 1116, 1119 (8th Cir. 2005) (citing Fed. R.
Civ. P. 23(a)) (footnote and other citations omitted).
If these prerequisites are met, the Court must then determine if the
putative class is maintainable under Rule 23(b). Rule 23(b)(1) allows a class
action when “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
interests of the other members not parties to the individual adjudications or
would substantially impair or impede their ability to protect their interests.”
Rule 23(b)(3) allows a class action when “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.”
Plaintiffs bear the burden of proof regarding the Rule 23 requirements.
Smith v. Merchants & Farmers Bank, 574 F.2d 982, 983 (8th Cir. 1978). “Rule 23
does not set forth a mere pleading standard. A party seeking class certification
16
must affirmatively demonstrate his compliance with the Rule—that is, he must
be prepared to prove that there are in fact sufficiently numerous parties,
common questions of law or fact, etc.” Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct.
2541, 2551 (2011). The district courts are afforded broad discretion in
determining whether or not to certify a class. Gilbert v. City of Little Rock, Ark.,
722 F.2d 1390, 1399 (8th Cir. 1983).
Plaintiffs seek to certify the following class for each of the three claims
asserted in their TAC:
All persons with retirement accumulations in the ELCA Annuity
Fund or Annuity Bridge Fund as of April 3, 2009 and who received
at least one monthly ELCA annuity payment on or after January 1,
2010.
Excluded from the Class are all ELCA Board of Pensions trustees,
officers and executives, all judicial officers presiding over this action
and the members of his/her immediate family and judicial staff, and
any juror assigned to this action (“Class”).
[Docket No. 159 at 2] This class definition is different than the definition pled in
Plaintiffs’ TAC.
2. Rule 23(a) Requirements
The Court need not address all four Rule 23(a) requirements for class
certification, because Plaintiff clearly does not meet the second requirement—
17
that questions of law or fact are common to the class— or the third
requirement—that the class representatives’ claims or defenses are typical of the
claims or defenses of the class—or the fourth requirement—that the class
representatives will fairly and adequately protect the interests of the class.
a. Commonality
Rule 23(a)(2) requires that in order for a class to be certified “there are
questions of law or fact common to the class.” Fed. R. Civ. P. 23(a)(2). It is not
required “that every question of law or fact be common to every member of the
class” and the rule “may be satisfied, for example, where the question of law
linking the class members is substantially related to the resolution of the
litigation even though the individuals are not identically situated.” Paxton v.
Union Nat’l Bank, 688 F.2d 552, 561 (8th Cir. 1982) (citation omitted). “In most
cases, the commonality requirement is easily satisfied because it ‘requires only
that the course of conduct giving rise to a cause of action affects all class
members, and that at least one of the elements of the cause of action is shared by
all class members.’” Janick v. Cavalry Portfolio Servs., LLC, No. 06-3104
(MJD/AJB), 2007 WL 1994026, at *5 (D. Minn. July 3, 2007). A “sufficient nexus is
established if the claims or defenses for the class and the class representation
18
arise from the same event or pattern or practice and are based on the same legal
theory.” Mathers v. Northshore Mining Co., 217 F.R.D. 474, 485 (D. Minn. 2003).
If the same evidence on an issue can suffice for each class member, then it is a
common question. Blades v. Monsanto Co., 400 F.3d 562, 566 (8th Cir. 2005).
Plaintiffs maintain that they will seek to prove with common evidence on
behalf of all Class Members that the Board made the same promise to make
guaranteed lifetime payments to Class Members that could not be reduced, and
that the Board breached the contract when it cut every Class Member’s annuity
payment with an across-the-board payment reduction in 2010, 2011, and 2012.
Additionally, Plaintiffs argue that commonality is satisfied because the focus for
every Class Member is establishing that a contract existed, determining the
duties owed by the Board under the contract, and on the law and facts regarding
Defendant’s reduction of annuity payments. Plaintiffs also argue that the same
relief is sought for all Class Members.
The Court disagrees with Plaintiffs and finds that they cannot satisfy
commonality. With respect to the breach of contract claim, Plaintiffs seek to
establish that additional documents and communications, in combination with
the Plan documents, form the “contract.” This methodology introduces
19
individualized evidence and individualized inquiries regarding which
documents and communications each Class Member received. These
individualized inquiries cannot be answered by any evidence that is common to
the class.
Additionally, commonality “requires the plaintiff to demonstrate that the
class members have suffered the same injury.” Bennett v. Nucor Corp., 656 F.3d
802, 814 (8th Cir. 2011). The report from Defendant’s expert demonstrates that
most putative class members (those likely to live past 2017) were helped, not
harmed, by the Board’s challenged actions and did not suffer the “same injury”
that Plaintiffs claim to have suffered. (Grenadier Expert Report at ¶¶ 5-8, 40-56.)
Plaintiffs have not rebutted this evidence and therefore, the breach of contract
claim cannot be certified because it cannot be resolved through common proof.
With respect to the breach of fiduciary duty of prudence claim, Plaintiffs
must prove “the existence of a fiduciary duty, breach, causation and damages.”
Hot Stuff Foods, LLC v. Dornbach, 726 F. Supp. 2d 1038, 1043 (D. Minn. 2010).
Plaintiffs rely on their expert report to establish that Defendant breached its
fiduciary duty. For the reasons stated above, the Court has granted Defendant’s
motion to strike Plaintiffs’ expert report and will not consider it when ruling on
20
the motion for class certification. Based on the record before the Court, the
Plaintiffs have not established that there are questions of law or fact that are
common to the class, and the Court declines to certify the class on this claim.
With respect to the breach of fiduciary duty of disclosure claim, Plaintiffs
must also prove “the existence of a fiduciary duty, breach, causation and
damages.” Hot Stuff Foods, LLC, 726 F. Supp. 2d at 1043. The Court finds that
the evidence supporting a non-disclosure claim is not common for the entire
class and therefore Plaintiffs do not satisfy commonality on this claim. See
Luiken et al. v. Domino’s Pizza, LLC, 705 F.3d 370, 376 (8th Cir. 2013). First, any
Class Member’s understanding of the Annuity Fund depends on the specific
communications that each Class Member received, read or heard, and
understood. Second, the Class Members cannot demonstrate reliance with
common evidence because the document that each Class Member relied on
differs for each Class Member. Third, the Class Members will be required to
establish individualized harm. Thus, the class cannot be certified because
Plaintiffs cannot satisfy the commonality element.
b. Typicality
Rule 23(a)(3) requires that in order for a class to be certified, the claims or
21
defenses of the class representative must be typical of the class. Fed. R. Civ. P.
23(a)(3). Typicality is generally met “if the claims or defenses of the
representatives and the members of the class stem from a single event or are
based on the same legal or remedial theory.” Paxton v. Union Nat’l Bank, 688
F.2d 552, 561–62 (8th Cir. 1982) (citations omitted).
Here, Plaintiffs argue that they satisfy the typicality prong because their
three claims “stem from the same facts . . . and the claims are all based on the
same theory.” Kimball v. Frederick J. Hanna & Assoc., P.C., Civil No. 10-130
(MJD/JJG), 2011 WL 3610129, at *4 (D. Minn. Aug. 15, 2011). Plaintiffs claim that
typicality is satisfied because the Board made the same promise (i.e., that
increases to their monthly annuity payment were permanent) to every Class
Member, and that the breach of contract (i.e., across-the-board reductions in
2010, 2011, and 2012) each stem from a set of facts that is common to every Class
Member. Plaintiffs further claim that the Class Members’ annuity payments
were cut by the same percentage amounts and therefore Members were damaged
in a common way. See DeBoer v. Mellon Mortgage Co., 64 F.3d 1171, 1174-75
(8th Cir. 1995) (typicality was satisfied because the Class Members sought the
same relief, even if the amount of damages was different).
22
The Court disagrees with Plaintiffs and finds that they cannot satisfy
typicality. A proposed class fails to satisfy the typicality prong when the legal
theories alleged and relief sought by the class representatives are at odds with
the interests of other class members. Delsing v. Starbucks Coffee Corp., No. 08CV-1154 (PJS/JSM), 2009 WL 3202378, at *3 (D. Minn. Sept. 30, 2009). The
Defendant’s expert report demonstrates that the Board’s adjustment actions
restored the funded status of the Annuity Fund, and that if those actions were
reversed, then the Annuity Fund’s ability to meet its projected future benefits
obligations would also be in “serious jeopardy.” (Grenadier Expert Report at
¶¶ 39-44.) Defendant’s expert report also demonstrates that most putative class
members were helped, not harmed, by the Board’s actions that are now
challenged by Plaintiffs. Plaintiffs have not offered any evidence to rebut
Defendant’s expert report.
The named Plaintiffs’ breach of contract, breach of fiduciary duty of
prudence, and breach of fiduciary duty of disclosure claims are premised on
demands to continue receiving higher payments during the period when the
Annuity Fund was under-funded. This demand, however, demonstrably harms
other members’ interests in preserving the Annuity Fund and lifetime income.
23
This creates irreconcilable class conflicts and makes the named Plaintiffs atypical
of the class members who were helped by the Board’s actions. See Delsing, 2009
WL 3202378, at *3 (denying class certification because “the interests of plaintiffs
are directly opposed to the interests of at least a substantial portion of the
proposed class”). Therefore, the Court concludes that Plaintiffs have not
satisfied their burden of proof with respect to typicality.
c. Adequacy
Rule 23(a)(4) requires that in order for a class to be certified the Court must
determine whether the named representative and her counsel will adequately
represent the interests of the class members. Fed. R. Civ. P. 23(a)(4). The
adequacy requirement is satisfied when the class representative is “part of the
class and possess[es] the same interest and suffer[s] the same injury as the class
members.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 594-95 (1997). The
party moving for class certification has the burden to establish that she will
adequately represent the class. Rattray v. Woodbury Cnty., IA, 614 F.3d 831, 835
(8th Cir. 2010). “The district court must decide whether Rule 23(a)(4) is satisfied
through balancing the convenience of maintaining a class action and the need to
guarantee adequate representation to the class members.” Id. In particular, the
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Court must determine if “the class representatives have common interests with
the members of the class, and [ ] whether the class representatives will
vigorously prosecute the interests of the class through qualified counsel.”
Paxton, 688 F.2d at 562-63. “A failure of the putative class representative to
assure the court that it will vigorously pursue the interests of class members is a
sufficient basis to deny certification.” Rattray, 614 F.3d at 836. The Court must
“evaluate carefully the legitimacy of the named plaintiff’s plea that he is a proper
class representative under Rule 23(a).” In re Milk Prods. Antitrust Litig., 195
F.3d 430, 436 (8th Cir. 1999).
The Court finds that the Plaintiffs are inadequate class representatives for
several reasons. The class representatives are inadequate because there is
undisputed evidence that the class representatives’ theories underlying their
breach of contract, breach of fiduciary duty of prudence and breach of fiduciary
duty of disclosure claims would harm a majority of the class members of their
retirement security by depleting the funds in the Annuity Fund. Thus, the
Plaintiffs are not similarly situated to the other retired ELCA employees who
benefitted from the Defendant’s decisions. The class representatives are also
inadequate to represent a class on a failure to disclose claim because they each
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admitted that they were aware that his annuity payments could go down.
3. Rule 23(b) Requirements
Because Plaintiffs fail to meet the second, third, and fourth prongs of the
Rule 23(a) test, the Court need not analyze the Rule 23(b) requirements.
Plaintiff’s proposed class is inappropriate for class certification.
Accordingly, based upon the files, records, and proceedings herein, IT IS
HEREBY ORDERED:
1. Defendant’s Motion to Strike the Expert Report of Mark Johnson (Dkt.
No. 188-1) [Docket No. 195] is GRANTED.
2. Plaintiffs’ Motion for Class Certification and Appointment of Class
Representatives and Lead and Liaison Counsel [Docket No. 157] is
DENIED.
Dated: March 26, 2013
s/ Michael J. Davis
Michael J. Davis
Chief Judge
United States District Court
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