Moreno et al v. Deutsche Bank Americas Holding Corp. et al
OPINION AND ORDER re: 127 MOTION to Certify Class . filed by Rajath Nagaraja, Ramon Moreno, Omkharan Arasarantnam, Baiju Gajjar, Donald O'Halloran, 150 LETTER MOTION for Oral Argument addressed to Judge Lorna G. Schofield from James O. Fleckner dated 5/4/2017. filed by Deutsche Bank Americas Holding Corp. Executive Committee, Robert Dibble, Andrew Threadgold, Richard Ferguson, Deutsche Bank Matched Savings Plan Investment Committee, Joseph Rice, D avid Pearson, Patrick McKenna, James Volkwein, James Gnall, Richard O'Connell, John Arvanitis, Tim Dowling, Louis Jaffe, Deutsche Bank Americas Holding Corp., Scott Simon.For the foregoing reasons, Plaintiffs' motion for class ce rtification is GRANTED. Defendants' request for oral argument is DENIED as moot. The requirements of Rule 23(a) and (b)(1)(B) having been satisfied, it is hereby ORDERED that Plaintiffs are appointed the Class Representatives to sue on behalf of a class of "all participants and beneficiaries of the Deutsche Bank Matched Savings Plan at any time on or after December 21, 2009, whose individual accounts suffered losses as a result of the conduct alleged in Counts One through Four o f the Third Amended Complaint, excluding Defendants, any of their directors, and any officers or employees of Defendants with responsibility for the Plan's investment or administrative function." It is further ordered that Nichols Kaster, PLLP is appointed Class Counsel. The Clerk of Court is respectfully directed to close the motion at Docket Number 127 and 150. (Signed by Judge Lorna G. Schofield on 9/5/2017) (kgo)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
RAMON MORENO, et al.,
DEUTSCHE BANK AMERICAS HOLDING
CORP., et al.,
15 Civ. 9936 (LGS)
OPINION AND ORDER
LORNA G. SCHOFIELD, District Judge:
Plaintiffs1 bring this putative class action, alleging Defendants,2 fiduciaries of the
Deutsche Bank Matched Savings Plan (the “Plan”), mismanaged the Plan in violation of the
Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. Plaintiffs move
to certify a class with respect to their claims asserted on behalf of the Plan. For the following
reasons, the motion is granted.
Familiarity with the procedural history and underlying allegations is assumed. See
Moreno v. Deutsche Bank Americas Holding Corp., No. 15 Civ. 9936, 2016 WL 5957307, at *1–
3 (S.D.N.Y. Oct. 13, 2016).
Plaintiffs are Ramon Moreno; Donald O’Halloran; Omkharan Arasarantnam; Baiju Gajjar; and
Defendants are Deutsche Bank Americas Holding Corp.; the Deutsche Bank Matched Savings
Plan Investment Committee; the Deutsche Bank Americas Holding Corp. Executive Committee;
Richard O’Connell; John Arvanitis; Robert Dibble; Tim Dowling; Richard Ferguson; James
Gnall; Louis Jaffe; Patrick McKenna; David Pearson; Joseph Rice; Scott Simon; Andrew
Threadgold; and James Volkwein.
The Plan is a defined contribution plan, or 401(k) plan, for eligible employees of
Defendant Deutsche Bank Americas Holding Corp. (“DBAHC”) and its affiliates. The Plan
entitles eligible employees to contribute a certain portion of their earnings into individual
investment accounts. Plaintiffs are five current or former participants in the Plan.
From December 2009 through today, the Plan has offered its roughly 22,000 participants
a menu of around 20 to 30 “core investment options.” The Plan has also offered a “mutual fund
window,” i.e., a self-directed brokerage account (“SDBA”), which gives participants access to
thousands of mutual funds, as well as stocks and bonds. Only a small percentage of participants
have invested through the SDBA, which is designed for sophisticated investors.
DBAHC is the Plan sponsor. It manages the Plan through, among others, a Plan
Administrator, Defendant the Deutsche Bank Matched Savings Plan Investment Committee
(“Investment Committee”) and Defendant the Deutsche Bank Americas Holding Corp. Executive
Committee (“Executive Committee”). The Investment Committee3 sets the menu of core
investment options and recommends investment policies to the Executive Committee. The
Executive Committee4 appoints members to the Investment Committee and evaluates its
performance. These Committees are comprised exclusively of DBAHC managers or executives.
The Plan Administrator, who has been Defendant Richard O’Connell since 2011, has the day-today responsibility for the Plan’s operations and administration.
Defendants Arvanitis, Dibble, Dowling, Ferguson, Gnall, Jaffe, McKenna, O’Connell, Pearson,
Rice, Threadgold, Simon and Volkwein are alleged to have served on the Investment Committee
during the pertinent time period.
Defendants Arvanitis, Dibble, Ferguson, Gnall, McKenna and Simon are alleged to have served
on the Executive Committee during the pertinent time period.
Defendants’ Alleged Mismanagement of the Plan
1. Preference for DBAHC-Affiliated Mutual Funds
As of December 2009, the start of the proposed class period, the Plan offered participants
22 core investment options, ten of which were DBAHC-affiliated mutual funds (the “proprietary
funds”). The proprietary funds charge investment management fees and administrative fees that
are paid to DBAHC’s subsidiaries.
The Third Amended Complaint (“Complaint”) alleges that Defendants mismanaged the
Plan by favoring high-cost proprietary funds to benefit Defendants at the expense of participants.
Citing the report prepared by their proposed expert, Dr. Steven Pomerantz, which was filed in
support of this motion, Plaintiffs contend that three of the 10 proprietary funds offered by the
Plan were passive “index” funds that consistently charged higher fees than non-proprietary funds
that tracked the same index. The Plan retained these proprietary index funds until February
2013, even though a third-party investment advisor alerted the Investment Committee of lowerfee alternatives in 2011. Approximately $502 million was invested in the index proprietary
funds when they were removed as investment options. Dr. Pomerantz avers that the average
investment fee for the three proprietary index funds was more than five times the fee charged by
non-proprietary index funds in the same investment style.
For the Plan’s other seven proprietary funds, which were actively managed, Plaintiffs
assert that these funds charged higher fees and performed worse than available alternatives. Dr.
Pomerantz avers that that the amount invested in these seven proprietary funds peaked at $483
million, and the average fee percentage was almost 70% higher than the fees paid by the average
similarly-sized 401(k) plan for similar investments.
Plaintiffs adduce evidence they contend shows the Investment Committee ignored the
Plan’s Investment Policy Statement (“IPS”), which advised that poorly performing investment
options be placed on either a “Special Review List” or “Termination Review List.” As of 2010,
four proprietary funds were on the Special Review List and one was on the Termination Review
List. In 2011, the Investment Committee stopped using the lists in contravention of the IPS until
the IPS was amended in 2016 to remove any reference to the lists. Around the time the
Investment Committee allegedly ceased using the lists to track fund performance, it also stopped
including in its minutes details regarding the performance of specific funds.
2. Failure to Consider Cheaper Share Classes or Mutual Fund Alternatives
Plaintiffs assert that Defendants failed to minimize investment management expenses in
two other ways for proprietary and non-proprietary mutual funds. First, Defendants did not
consider including lower-cost “R6” share classes of the proprietary and non-proprietary mutual
funds when such share classes became available in August 2014 and June 2015, respectively.
The Plan instead retained the institutional share classes, which Plaintiffs contend offer the same
investment product as the R6 share class but charge higher investment management fees.
Second, Defendant failed to consider the use of alternatives to mutual funds, such as separate
accounts and collective investment trusts, which have lower fees but were in the same
3. Failure to Control Recordkeeping Expenses
According to Plaintiffs, Defendants also failed to control recordkeeping expenses. In
2012, at least some Defendants were advised that the “benchmark rate” for such expenses was
$55 per participant. As of February 2013, the Plan paid recordkeeping fees to ADP equal to
approximately $100 per participants.
Plaintiffs’ Class Claims under ERISA
The Complaint alleges four counts under ERISA. Count One asserts that Defendants,
who allegedly are Plan fiduciaries, breached their duties of care and loyalty in selecting,
retaining and monitoring the Plan investments. See 29 U.S.C. § 1104(a)(1). Counts Two and
Three allege prohibited transactions. Count Two alleges that the inclusion of the proprietary
funds caused the Plan to engage in prohibited transactions with parties in interest, which includes
DBAHC’s subsidiaries that received fees for investment services rendered to the proprietary
funds. See id. § 1106(a)(1). Count Three asserts that DBAHC engaged in prohibited selfdealing transactions because it caused the Plan to pay investment management fees and expenses
to DBAHC’s subsidiaries. See id. § 1106(b)(1). Count Four alleges that DBAHC, O’Connell
and the Executive Committee breached their fiduciary duties by failing to monitor the decisionmaking process of the Investment Committee.
Plaintiffs seek class certification for their claims brought on behalf of the Plan under
Federal Rule of Civil Procedure 23 and 29 U.S.C. § 1132(a)(2), which permits participants to
seek relief under 29 U.S.C. § 1109. Section 1109(a) provides that any fiduciary who breaches
ERISA-imposed duties shall “make good to such plan any losses to the plan resulting from each
such breach” and “be subject to such other equitable or remedial relief as the court may deem
appropriate, including removal of such fiduciary.” 29 U.S.C. § 1109(a).
Sections 1109(a) and 1132(a)(2) permit a participant in a defined-contribution plan to
seek “recovery for fiduciary breaches that impair the value of plan assets in [that] participant’s
individual accounts.” LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248, 256 (2008).
Such claims are derivative in nature -- they are not “made for individual relief, but instead are
brought in a representative capacity on behalf of the plan.” L.I. Head Start Child Dev. Servs.,
Inc. v. Econ. Opportunity Comm’n of Nassau Cty., Inc., 710 F.3d 57, 65 (2d Cir. 2013) (internal
quotation marks omitted). Thus any monetary recovery is awarded to the Plan, not the
participants. See LaRue, 552 U.S. at 262 n.* (Thomas, J. concurring) (“[A] participant suing to
recover benefits on behalf of the plan is not entitled to monetary relief payable directly to him;
rather, any recovery must be paid to the plan.”); L.I. Head Start, 710 F.3d at 66 (“[T]he fact that
damages awarded to the Plan may provide plaintiffs with an indirect benefit . . . does not convert
their derivative suit into an action for individual relief.” (internal quotation marks omitted)).
The Complaint requests, among other relief, an order “compelling Defendants to
personally make good to the Plan all losses that the Plan incurred as a result of the breaches of
fiduciary duties and prohibited transactions” alleged in the Complaint. It also seeks equitable
relief, including the “appointment of an independent fiduciary or fiduciaries to run the Plan;
transfer of Plan assets out of imprudent investments into prudent alternatives; and removal of
Plan fiduciaries deemed to have breached their fiduciary duties and/or engaged in prohibited
Plaintiffs move for certification of the following proposed class: “All participants and
beneficiaries of the Deutsche Bank Matched Savings Plan at any time on or after December 21,
2009, excluding Defendants, any of their directors, and any officers or employees of Defendants
with responsibility for the Plan’s investment or administrative function.” Plaintiffs seek
appointment as Class Representatives and Plaintiffs’ counsel be designated Class Counsel.
Under Rule 23(a), plaintiffs may sue as a class only if:
(1) the class is so numerous that joinder of all members is impracticable; (2) there
are questions of law and fact common to the class; (3) the claims or defenses of
the representative parties are typical of those of the class; and (4) the
representative parties will fairly and adequately protect the interests of the class.
A class must also satisfy at least one of the requirements contained in Rule 23(b). Fed. R. Civ. P.
23(b); see Roach v. T.L. Cannon Corp., 778 F.3d 401, 405 (2d Cir. 2015). Here, Plaintiffs seek
certification primarily under Rule 23(b)(1), which permits class certification if 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
(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 substantially impair or impede their ability
to protect their interests.
Fed. R. Civ. P. 23(b)(1).
Rule 23 “‘does not set forth a mere pleading standard.’ Rather, a party must not only ‘be
prepared to prove that there are in fact sufficiently numerous parties, common questions of law
or fact,’ typicality of claims or defenses, and adequacy of representation, as required by Rule
23(a).” Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013) (quoting Wal-Mart Stores, Inc.
v. Dukes, 564 U.S. 338, 350 (2011)). “The party must also satisfy through evidentiary proof at
least one of the provisions of Rule 23(b).” Id. Rule 23 requires a “rigorous analysis” that
“frequently entail[s] overlap with the merits of the plaintiff’s underlying claim.” Roach, 778
F.3d at 407 (quoting Comcast, 133 S. Ct. at 1432). The plaintiff must establish by a
preponderance of the evidence that each of Rule 23’s requirements is met. In re Vivendi, S.A.
Sec. Litig., 838 F.3d 223, 264 (2d Cir. 2016).
The Requirements of Rule 23(a)
The parties do not dispute numerosity. “Rule 23(a)(1) does not mandate that joinder of
all parties be impossible -- only that the difficulty or inconvenience of joining all members of the
class make use of the class action appropriate.” Cent. States Se. & Sw. Areas Health and
Welfare Fund v. Merck-Medco Managed Care, L.L.C., 504 F.3d 229, 244–45 (2d Cir. 2007). In
the Second Circuit, “numerosity is presumed where a putative class has forty or more members.”
Shahriar v. Smith & Wollensky Rest. Grp., 659 F.3d 234, 252 (2d Cir. 2011). The Plan has
around 22,000 participants and 10,000 former participants. The numerosity requirement is
Plaintiffs have shown commonality. Commonality is satisfied where “there are questions
of law or fact common to the class.” Fed. R. Civ. P. 23(a)(2). “A question of law or fact is
common to the class if the question is ‘capable of classwide resolution -- which means that its
truth or falsity will resolve an issue that is central to the validity of each one of the claims in one
stroke.’” Johnson v. Nextel Comms. Inc., 780 F.3d 128, 137 (2d Cir. 2015) (some internal
quotation marks, citations and alterations omitted) (quoting Wal-Mart, 564 U.S.at 350). “Where
the same conduct or practice by the same defendant gives rise to the same kind of claims from all
class members, there is a common question.” Id. “Typically, the question of defendants’
liability for ERISA violations is common to all class members because a breach of fiduciary duty
affects all participants and beneficiaries.” In re J.P. Morgan Stable Value Fund ERISA Litig.,
No. 12 Civ. 2548, 2017 WL 1273963, at *7 (S.D.N.Y. Mar. 31, 2017) (internal quotation marks
Plaintiffs raise numerous questions that are capable of classwide resolution, such as
whether each Defendant was a fiduciary; whether Defendants’ process for assembling and
monitoring the Plan’s menu of investment options, including the proprietary funds, was tainted
by a conflict of interest or imprudence and whether Defendants acted imprudently by failing to
control recordkeeping expenses. Resolution of these questions will “generate common answers
apt to drive the resolution” of Defendants’ liability. Wal-Mart, 564 U.S. at 350 (emphasis
omitted). Indeed, numerous courts have found commonality where plaintiffs challenge a 401(k)
plan’s retention of investment products, including proprietary funds, alleging excessive fees.
See, e.g., Spano v. The Boeing Co., 633 F.3d 574, 586 (7th Cir. 2011); Urakhchin v. Allianz Asset
Mgmt. of Am., L.P., No. 15 Civ. 1614, 2017 WL 2655678, at *4 (C.D. Cal. June 15, 2017);
Krueger v. Ameriprise Fin., Inc., 304 F.R.D. 559, 572 (D. Minn. 2014).
Defendants argue that Plaintiffs cannot show commonality because none of the alleged
breaches affected all class members. They note, for instance, that 12,000 class members never
invested in a single proprietary fund at any point during the relevant period. Commonality,
however, “does not mean that all issues must be identical as to each [class] member.”
Goldemberg v. Johnson & Johnson Consumer Companies, Inc., 317 F.R.D. 374, 400 (S.D.N.Y.
2016) (internal quotation marks omitted). These distinctions among class members may affect
the calculation of damages but do not defeat class certification when the underlying harm derives
from the same common contention -- that the investment lineup made available to all participants
violated ERISA. Id. If Plaintiffs’ theories depend on distinct proof or legal questions common
to some class members, subclasses may be created for purposes of case management. See Fed.
R. Civ. P 23(d); William B. Rubenstein, Newberg on Class Actions § 7:32 (5th ed., June 2017
update) (“Newberg on Class Actions”) (noting that Rule 23(d) “authorize[s] a class action court
to create subclasses for management purposes” and “expedite resolution of the case by
segregating a distinct legal issue that is common to some members of the existing class” (internal
quotation marks and alterations omitted)).
Defendants also argue that resolving this case involves a massive series of individualized
analyses that turn on when and in which funds each participant invested. This argument
misapprehends Plaintiffs’ claims, which are brought on behalf of the Plan. Liability is
determined based on Defendants’ not Plaintiffs’ decisions. See Spano, 633 F.3d at 585 (“By
focusing exclusively on the final step of the defined-contribution plan -- that is, the participant’s
decisions with respect to the allocation of his or her funds -- [defendants’ argument] ignores the
fact that fund participants operate against a common background.”). Whether a certain
proprietary fund was imprudently retained or whether the recordkeeping expenses were
excessive will be resolved with respect to the Plan as a whole. Damages may be determined in
the aggregate as they are based on the total amount of Plan assets allocated to certain investments
and the duration of those investments.
Defendants similarly contend that “intra-class conflicts” defeat commonality because,
depending on the timing of their investments, “some class members had gains during some
periods.” This argument, cast here as an argument about conflicts over the propriety of an
investment, has been repeatedly rejected as an objection to class certification when described as
a conflict over the preferred damages period, or as an objection to the adequacy of
representation. See, e.g., In re J.P. Morgan, 2017 WL 1273963, at *10 (“[C]ourts in this district
have found that issues related to differing preferred damages periods do not preclude
certification.”) (collecting cases); In re Symbol Tech., Inc. Sec. Litig., No. 05 Civ. 3923, 2015
WL 3915477, at *7 (E.D.N.Y. June 25, 2015) (rejecting argument that different purchase dates
“could potentially motivate different class members to argue that the securities were relatively
more or less inflated at different time periods”) (internal quotation marks omitted). Regardless
of how characterized, differing purchase dates among class members do not defeat class
certification and instead go to the issue of damages. See In re Symbol Tech, 2015 WL 3915477,
at *8. (“[P]utative intra-class conflicts relating to the time at which particular class members
purchased their securities . . . relate to damages and do not warrant denial of class certification.”)
(internal quotation marks omitted). Where, as here, class members state the same claims based
on the same misconduct, there are sufficient common questions to satisfy Rule 23(a)(2).
Defendants also argue that commonality is not satisfied because this case raises two
affirmative defenses -- the execution of releases and the statute of limitations -- that must be
litigated on a participant-by-participant basis. “Courts in this circuit have certified classes
notwithstanding the purported defects Defendants identify” with respect to ERISA releases and
statute of limitations. In re J.P. Morgan, 2017 WL 1273963, at *10. Defendants’ argument is
As to the releases, Defendants note that Plaintiff Moreno signed a severance agreement
that includes an express release of his ERISA claims. Defendants do not adduce any evidence as
to how many other class members, if any, signed the releases or whether the releases’ language
vary such that they require individualized determinations. Nor do Defendants cite any legal
authority to suggest the release precludes Plaintiff Moreno or any class member from
participating in this derivative suit under § 1132(a)(2), an issue the Court need not address on
this motion. See, e.g., In re Polaroid ERISA Litig., 240 F.R.D. 65, 75 (S.D.N.Y. 2006)
(“[N]umerous courts have held that under ERISA, individuals do not have the authority to
release a defined contribution plan’s right to recover for breaches of fiduciary duty.”).
Defendants’ reference to Plaintiff Moreno’s release, without more, does not defeat class
certification or justify the creation of a subclass.
As to the statute of limitations defense, Defendants note that, although the proposed class
period begins six years before the filing of the initial complaint, ERISA provides for a three-year
rather than six-year limitations period when a participant had “actual knowledge” of a purported
breach. See 29 U.S.C. § 1113; see Janese v. Fay, 692 F.3d 221, 227–28 (2d Cir. 2012) (ERISA
provides “alternative limitations periods” that “depend[ ] on the underlying factual
circumstances”). In support of their position that the statute of limitations defense would require
individualized determinations, they point to Plaintiff Nagaraja’s testimony that he started to have
concerns about excessive fees around 2008 or 2009.
On this record, the statute of limitations defense does not defeat class certification or
require narrowing the proposed class period. Under ERISA, a plaintiff’s “actual knowledge” of
a breach or violation that triggers the three-year period requires the plaintiff to know “all
material facts necessary to understand” that a breach has occurred. Caputo v. Pfizer, Inc., 267
F.3d 181, 193 (2d Cir. 2001). “It is not enough that plaintiffs had notice that something was
awry.” Id. (alterations and internal quotation marks omitted). Plaintiffs here challenge the
process by which Defendants selected and monitored the Plan’s investment options, which
includes their alleged disregard of advice that certain funds had excessive fees. The record on
this motion does not show that any named Plaintiff or class member had -- or even could have -“actual knowledge” of that process. Accordingly, the statute of limitations is not an issue that
impedes class certification here. See, e.g., Osberg v. Foot Locker, Inc., No. 07 Civ. 1358, 2014
WL 5796686, at *5–6 (S.D.N.Y. Sept. 24, 2014) (rejecting argument that individual questions
with regard to “actual knowledge” defeated class certification); cf. Fish v. GreatBanc Tr. Co.,
749 F.3d 671, 686–87 (7th Cir. 2014) (“[I]f the fiduciary made an imprudent investment, actual
knowledge of the breach would usually require some knowledge of how the fiduciary selected
the investment.”) (internal quotation marks omitted). Officers or employees with responsibility
for the Plan’s investment or administrative function, who might be privy to the Investment
Committee’s decision making process, are expressly excluded from the proposed class.
Plaintiffs have shown typicality. Typicality is intended to “ensure that maintenance of a
class action is economical and [that] the named plaintiff’s claim and the class claims are so
interrelated that the interests of the class members will be fairly and adequately protected in their
absence.” Marisol A. v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997) (internal quotations marks
omitted). The requirement is met where “each class member’s claim arises from the same course
of events and each class member makes similar legal arguments to prove the defendant’s
liability.” In re Flag Telecom Holdings, Ltd. Sec. Litig., 574 F.3d 29, 35 (2d Cir. 2009); accord
In re Virtus Inv. Partners, Inc. Sec. Litig., No. 15 Civ. 1249, 2017 WL 2062985, at *3 (S.D.N.Y.
May 15, 2017).
Plaintiffs are five current or former participants in the Plan who held investments in the
Plan at any time on or after December 21, 2009. Their claims arise from the same course of
events -- their participation in the Plan. They make similar legal arguments to prove liability -that Defendants mismanaged the Plan in violation of ERISA and continue to do so today. Each
Plaintiff has done one or more of the following: (1) invested in at least one proprietary mutual
fund; (2) participated in the Plan during the time period when the recordkeeping fees were
allegedly excessive; and (3) invested in a proprietary or non-proprietary fund for which cheaper
alternatives were allegedly available. This is sufficient to show typicality.
4. Adequacy of Representation
Plaintiffs have demonstrated adequacy. Rule 23(a)(4) requires that “the representative
parties will fairly and adequately protect the interests of the class,” and “raises concerns about
the competency of class counsel and conflicts of interest.” Wal-Mart, 564 U.S. at 345, 349 n.5.
To determine whether a named plaintiff will be adequate, courts consider whether “(1) plaintiff’s
interests are antagonistic to the interest of other members of the class and (2) plaintiff’s attorneys
are qualified, experienced and able to conduct the litigation.” Baffa v. Donaldson, Lufkin &
Jenrette Sec. Corp., 222 F.3d 52, 60 (2d Cir. 2000); accord Caufield v. Colgate-Palmolive Co.,
No. 16 Civ. 4170, 2017 WL 3206339, at *5 (S.D.N.Y. July 27, 2017). Here, Plaintiffs and the
putative class members share an interest in remedying any alleged mismanagement of the Plan in
violation of ERISA. Plaintiffs do not appear to have interests antagonistic to other class
members, and Plaintiffs’ counsel is qualified to conduct this litigation, as discussed more fully
Defendants’ argument that Plaintiffs are not adequate class representatives because they
do not understand the case and defer to their lawyers is unpersuasive. The claims here involve
technical financial decisions affecting billions of dollars in assets and Plan fiduciaries’
compliance with the requirements of ERISA. It is understandable, and excusable, that Plaintiffs,
who are not lawyers or investment professionals, may have had difficulty answering questions
about the claims. See New Jersey Carpenters Health Fund v. Royal Bank of Scotland Grp., PLC,
No. 08 Civ. 5310, 2016 WL 7409840, at *5 (S.D.N.Y. Nov. 4, 2016) (“[I]t is well settled that a
proposed representative’s lack of knowledge is rarely disqualifying.”). Each Plaintiff has filed a
declaration attesting that they have reviewed the allegations of the Complaint, are aware that the
suit concerns allegations that Defendants’ investment offerings were improper and testified to a
similar effect at their depositions. Cf. Baffa, 222 F.3d at 61 (“[C]lass representative status may
properly be denied where the class representatives have so little knowledge of and involvement
in the class action that they would be unable or unwilling to protect the interests of the class
against the possibly competing interests of the attorneys.”). Further, as discussed above,
Defendants’ assertion that Plaintiffs Moreno and Nagaraja may be subject to affirmative defenses
does not render them inadequate representatives as the record fails to show that these defenses
“threaten to become the focus of the litigation.” Id. at 59-60. The adequacy requirement is
Class Certification under Rule 23(b)(1)
The proposed class is certified under Rule 23(b)(1)(B). Rule 23(b)(1)(B) applies where
“prosecuting separate actions by or against individual class members would create a risk of . . .
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
substantially impair or impede their ability to protect their interests.” One “classic example” of
such a case is one that charges “‘a breach of trust by an . . . fiduciary similarly affecting the
members of a large class’ of beneficiaries, requiring an accounting or similar procedure ‘to
restore the subject of the trust.’” Ortiz v. Fibreboard Corp., 527 U.S. 815, 834 (1999) (quoting
Advisory Committee’s Notes on Fed. R. Civ. P. 23)). “[T]he structure of ERISA favors the
principles enumerated under Rule 23(b)(1)(B), since the statute creates a ‘shared’ set of rights
among the plan participants by imposing duties on the fiduciaries relative to the plan, and it even
structures relief in terms of the plan and its accounts, rather than directly for the individual
participants.” Douglin v. GreatBanc Tr. Co., 115 F. Supp. 3d 404, 412 (S.D.N.Y. 2015). “Most
ERISA class action cases are certified under Rule 23(b)(1).” Caufield, 2017 WL 3206339, at *6.
Here, Plaintiffs challenge the investment lineup that the Plan offered to all participants,
and the recordkeeping fees imposed on the Plan. Because Defendants’ alleged conduct was
uniform with respect to each participant, adjudicating Plaintiffs’ claims, as a practical matter,
would dispose of the interests of the other participants or substantially impair or impede their
ability to protect their interests. See Urakhchin, 2017 WL 2655678, at *8 (“If this [ERISA]
claim [alleging defendants managed a 401(k) plan’s assets for their own benefit] were brought by
an individual Plan participant, any judgment on Defendants’ liability would necessarily affect the
determination of any claim for monetary relief for this same conduct brought by other Plan
participants in any concurrent or future actions.”). Plaintiffs’ action is akin to the “classic”
example contemplated by the Supreme Court in Ortiz: Plaintiffs allege Defendants’ conduct
affected members of a class of thousands similarly as each were exposed to the same investment
options and seek to restore losses to the Plan’s assets, which are comprised of the individual
accounts that allegedly paid excessive fees. Ortiz, 527 U.S. at 834. In addition to money
damages, Plaintiffs also seek removal of Defendants as fiduciaries and other equitable relief.
Such relief, if ordered, would as a practical matter dispose of the interests of non-party
participants. See id.; Krueger, 304 F.R.D. at 578.
Defendants object to class certification under Rule 23(b)(1) as improper in the wake of
the Supreme Court’s decisions in LaRue and Wal-Mart. Although courts are split over whether
Rule 23(b)(1)(B) remains an appropriate class vehicle for fiduciary-breach claims under ERISA,
a majority have held that it is. Compare, e.g., Urakhchin, 2017 WL 2655678, at *8 (certifying
class under Rule 23(b)(1)(B); Krueger, 304 F.R.D. at 559 (same); In re Northrop Grumman
Corp. ERISA Litig., 06 Civ. 6213, 2011 WL 3505264, at *17 (C.D. Cal. Mar. 29, 2011) (“A
majority of courts addressing the propriety of certifying an ERISA class under § 502(a)(2)
following LaRue . . . have continued to find Rule 23(b)(1)(B) certification appropriate.”); with In
re J.P. Morgan, 2017 WL 1273963, at *13 (denying class certification under Rule 23(b)(1)(B));
Carr v. Int’l Game Tech., No. 09 Civ. 584, 2012 WL 909437, at *7 (D. Nev. Mar. 16, 2012)
(holding LaRue precludes class certification under Rule 23(b)(1)(B)). Several courts in this
Circuit have certified a class of plan participants alleging ERISA claims under Rule 23(b)(1)(B)
without questioning the subsection’s continuing applicability. See, e.g., Kindle v. Dejana, 315
F.R.D. 7, 12 (E.D.N.Y. 2016); Douglin, 115 F. Supp. 3d at 412; In re Beacon Assocs. Litig., 282
F.R.D. 315, 342 (S.D.N.Y. 2012). For the following reasons, the Court finds that neither LaRue
nor Wal-Mart precludes a class under Rule 23(B)(1)(b).
Defendants argue that, because the Supreme Court in LaRue held that § 1132(a)(2) allows
a participant to assert a claim based on “fiduciary breaches that impair the value of plan assets in
a participant’s individual account,” 552 U.S. at 256, resolution of named Plaintiffs’ claims would
not foreclose a fiduciary-breach action filed by an absent class member. Defendants
misapprehend Plaintiff’s theory of liability. Plaintiffs do not assert harms based on Defendants’
misconduct that is specific to his or her individual account. Cf. id. 552 U.S. at 251 (addressing
ERISA participant’s allegation that “he directed [his employer] to make certain changes to the
investments in his individual account [in a defined-contribution plan], but [the employer] never
carried out these directions”). Rather, named Plaintiffs -- whose collective participation in the
Plan covers the entire class period -- challenge Defendants’ process for selecting and retaining
the investment options presented to all Plan participants. Adjudicating their claims challenging
Defendants’ management of the Plan as a whole “would necessarily affect the resolution of any
concurrent or future actions by other Plan participants.” Urakhchin, 2017 WL 2655678, at *8.
As to Wal-Mart, Defendants contend that a Rule 23(b)(1)(B) class is unavailable given
Wal-Mart’s observation “that individualized monetary claims belong in Rule 23(b)(3),” and the
opinion’s language about the due-process concerns with respect to notice and the opportunity to
opt out. 564 U.S. at 362. Defendants’ reliance on Wal-Mart -- which held that Rule 23(b)(2)
does not permit the combination of “individualized awards of monetary damages” and classwide
relief -- is misplaced. Id. at 361. In contrast to the claims in Wal-Mart, Plaintiffs’ class claims
under Rule 23(b)(1) are derivative in nature, not individualized. See id. at 360–61. Any
monetary relief will be paid to the Plan, see L.I. Head Start, 710 F.3d at 65, and the Plan
fiduciaries would be responsible for allocating the recovery among participants, see In re
Northrop Grumman, 2011 WL 3505264, at *11 (noting the plan fiduciaries are responsible for
allocating recovery among the participants); Tussey v. ABB, Inc., No. 06 Civ. 4305, 2007 WL
4289694, at *5 (W.D. Mo. Dec. 3, 2007) (same). “[T]he fact that damages awarded to the Plan
may provide plaintiffs with an indirect benefit,” such as compensation for any losses, “does not
convert their derivative suit into an action for individual relief.” L.I. Head Start, 710 F.3d at 65
(internal quotation marks omitted); see also Newberg on Class Actions § 4:24 (“[E]ven applying
Wal-Mart strictly, money damages that flow to the entire class ought to remain available under
Rule 23(b)(1) as Wal-Mart suggests that they might be under Rule 23(b)(2); this would enable
(b)(1) certification in, for example, ERISA cases in which monetary relief flows to the fund itself
not to any individual litigant directly.”)
Quoting Wal-Mart, Defendants also assert that certification under Rule 23(b)(1) “is
appropriate only where ‘individual adjudications would be impossible or unworkable.’” See 564
U.S. at 361. They further assert that adjudicating Plan participants’ individual claims would be
neither impossible nor unworkable because LaRue allows each participant to bring an action for
losses to his or her “individual account.” LaRue, 552 U.S. at 256. Defendants misconstrue WalMart. Rule 23(b)(1) requires neither impossibility nor unworkability. Rather, as Wal-Mart
explained, they are “traditional justifications for class treatment” under this subsection. 564 U.S.
at 361; cf. In re Petrobras Sec., 862 F.3d 250, 266 (2d Cir. 2017) (explaining that “language
[that] conveyed the purpose underlying the operative requirements” did not also “create an
independent element”). Certification under Rule 23(b)(1)(B) is appropriate because, as noted,
Plaintiffs have met the requirements as set forth in the text of the Rule.
Defendants also argue that Rule 23(b)(1)(B) is appropriate only if there is a so-called
limited fund, which occurs when the value of the aggregated claims exceeds the fund available to
satisfy them. See Ortiz, 527 U.S. at 838. Defendants point to no binding precedent that holds
Rule 23(b)(1)(B) is so narrow. Rather, “[c]ourts regularly certify 23(b)(1)(B) class actions in
non-limited fund situations, particularly in ERISA cases alleging breach of a fiduciary duty,”
Newberg on Class Actions § 4:20, including those within this Circuit after LaRue and Wal-Mart.
See, e.g., Dejana, 315 F.R.D. at 10; Douglin, 115 F. Supp. 3d at 412; but see In re J.P. Morgan,
2017 WL 1273963, at 13.
The class is certified under Rule 23(b)(1)(B). Accordingly, the Court does not address
the parties’ arguments regarding Rule 23(b)(1)(A) or Rule 23(b)(3).
Defendants challenge the scope of the class on the ground that Plaintiffs lack standing to
represent the class with respect to funds in which they did not invest. This argument is incorrect.
Under the doctrine of class standing, Plaintiffs may assert claims on behalf of all class members.
“[I]n a putative class action, a plaintiff has class standing if he plausibly alleges (1) that
he personally has suffered some actual . . . injury as a result of the putatively illegal conduct of
the defendant, and (2) that such conduct implicates the same set of concerns as the conduct
alleged to have caused injury to other members of the putative class by the same defendants.”
NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145, 162 (2d Cir. 2012)
(internal quotation marks and citations omitted). “When this standard is satisfied, the named
plaintiff’s litigation incentives are sufficiently aligned with those of the absent class members
that the named plaintiff may properly assert claims on their behalf.” Ret. Bd. of the Policemen’s
Annuity & Ben. Fund of the City of Chicago v. Bank of N.Y. Mellon, 775 F.3d 154, 161 (2d Cir.
2014)). The “same set of concerns” are implicated and the named plaintiff has class standing
where the claims of absent class members and the named plaintiff require similar inquiries and
proof. NECA, 693 F.3d at 162; see Ret. Bd., 775 F.3d at 161 (noting that the named plaintiff in
NECA had class standing “largely because the proof contemplated for all of the claims would be
sufficiently similar”); accord Dezelan v. Voya Ret. Ins. & Annuity Co., No. 16 Civ. 1251, 2017
WL 2909714, at *7 (D. Conn. July 6, 2017).
Here, Plaintiffs allege that Defendants’ process for managing the Plan caused them actual
injury. They were charged excessive fees and were offered an unlawful menu of investments,
assembled for the benefit of Defendants. Plaintiffs further allege that the putative class members
suffered similar harm -- paying excessive fees, or being offered an unlawful lineup of investment
options set by Defendants. Because the alleged harms are premised on the process Defendants
used to manage the Plan, the claims involve similar inquiries and proof, and thus implicate the
same set of concerns. See Caufield, 2017 WL 3206339, at *7. Plaintiffs have class standing to
pursue the claims on behalf of the absent class members, including those who invested in
proprietary or non-proprietary funds offered by the Plan in which none of them invested. See
NECA, 693 F.3d at 162 (holding that named plaintiff had class standing to sue on behalf of
absent class members whose investments, though different, were backed by loans from the same
originators and included nearly identical misrepresentations in separate offering documents as
the named plaintiff’s investments).
Defendants argue that Plaintiffs’ proposed class cannot be certified because some class
members lack Article III standing. Defendants assert that class members who did not invest in
any of the challenged proprietary or non-proprietary funds or who did not pay recordkeeping fees
to ADP lack standing because they did not suffer an injury-in-fact. “No class may be certified
that contains members lacking Article III standing.” Denney v. Deutsche Bank AG, 443 F.3d
253, 263 (2d Cir. 2006). “Thus, while individual passive members of a putative class are not
required ‘to submit evidence of personal standing,’ the class ‘must . . . be defined in such a way
that anyone within it would have standing.’” Royal Park Investments SA/NV v. Deutsche Bank
Nat’l Tr. Co., No. 14 Civ. 4394, 2017 WL 1331288, at *10 (S.D.N.Y. Apr. 4, 2017) (quoting
Denney, 443 F.3d at 263).
In light of these concerns, the class definition is amended to: “all participants and
beneficiaries of the Deutsche Bank Matched Savings Plan at any time on or after December 21,
2009, whose individual accounts suffered losses as a result of the conduct alleged in Counts One
through Four of the Third Amended Complaint, excluding Defendants, any of their directors, and
any officers or employees of Defendants with responsibility for the Plan’s investment or
administrative function.” See Krueger, 304 F.R.D. at 579 (amending class definition in definedcontribution ERISA case to refer “to participants and beneficiaries ‘who were injured by’ the
alleged wrongful conduct . . . [to] address Defendants’ concerns regarding class members’
standing”). This definition is sufficient at this stage of the litigation.
Appointment of Class Counsel
Plaintiffs’ counsel, Nichols Kaster, PLLP, is appointed to serve as Class Counsel. When
appointing class counsel, a court must consider:
(i) the work counsel has done in identifying or investigating potential claims in
the action; (ii) counsel’s experience in handling class actions, other complex
litigation, and the types of claims asserted in the action; (iii) counsel’s knowledge
of the applicable law; and (iv) the resources that counsel will commit to
representing the class.
Fed. R. Civ. P. 23(g)(1)(A). Plaintiffs’ counsel are experienced litigators who serve as class
counsel in ERISA actions involving defined-contribution plans, see, e.g., Urakhchin v. Allianz
Asset Mgmt. of Am., L.P., 15 Civ. 1614, ECF No. 113 (C.D. Cal. June 21, 2017); Brotherston v.
Putnman Inves., LLC, No. 15 Civ. 13825, ECF No. 88 (D. Mass. Dec. 13, 2016), and serve or
served as counsel of record in other actions alleging breach of fiduciary duty claims under
ERISA, see, e.g., Beach v. JPMorgan Chase Bank, 17 Civ. 563 (S.D.N.Y.); Andrus v. N.Y. Life
Ins. Co., 16 Civ. 5698 (S.D.N.Y.). Plaintiffs’ counsel, who have been counsel of record from the
start of the case, have committed significant resources to the case, including drafting the
pleadings, responding to a motion to dismiss and engaging in extensive discovery. They also
attest that they will devote the resources necessary to prosecute this case to a conclusion and are
not aware of any conflict of interest that would impede their ability to represent the class
members. See Fed. R. Civ. P. 23(g)(4). The appointment of the Nichols Kaster as Class Counsel
For the foregoing reasons, Plaintiffs’ motion for class certification is GRANTED.
Defendants’ request for oral argument is DENIED as moot.
The requirements of Rule 23(a) and (b)(1)(B) having been satisfied, it is hereby
ORDERED that Plaintiffs are appointed the Class Representatives to sue on behalf of a class of
“all participants and beneficiaries of the Deutsche Bank Matched Savings Plan at any time on or
after December 21, 2009, whose individual accounts suffered losses as a result of the conduct
alleged in Counts One through Four of the Third Amended Complaint, excluding Defendants,
any of their directors, and any officers or employees of Defendants with responsibility for the
Plan’s investment or administrative function.” It is further ordered that Nichols Kaster, PLLP is
appointed Class Counsel.
The Clerk of Court is respectfully directed to close the motion at Docket Number 127 and
Dated: September 5, 2017
New York, New York
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