BOWERS et al v. BB&T CORPORATION et al

Filing 223

MEMORANDUM OPINION AND ORDER signed by JUDGE CATHERINE C. EAGLES on 08/28/2017, that the plaintiffs' motion for class certification, Doc. 146 , is GRANTED. (Garland, Leah)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
ROBERT SIMS, et al.,
Plaintiffs,
v.
BB&T CORPORATION, et al.,
Defendants.

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1:15-CV-732
1:15-CV-841

MEMORANDUM OPINION AND ORDER
Catherine C. Eagles, District Judge.
In this ERISA action, the plaintiffs contend that the defendants breached their
fiduciary duties to the plan in connection with fees and investment options. They seek
certification of a class made up of current and former participants of the plan. The
plaintiffs have met the standards set for class certification set forth in Rule 23(a) and Rule
23(b)(1)(A). Therefore, the Court will grant the motion for class certification.
BACKGROUND
The Employee Retirement Income Security Act (“ERISA”) imposes fiduciary
duties “on those responsible for the administration of employee benefit plans and the
investment and disposal of plan assets.” Tatum v. RJR Pension Inv. Comm., 761 F.3d
346, 355 (4th Cir. 2014). A fiduciary who breaches the duties imposed by ERISA is
personally liable for any losses to the plan resulting from the breach. 29 U.S.C. §
1109(a). ERISA authorizes any plan participant to bring an action on behalf of the plan

for a breach of fiduciary duty, including the right to seek associated monetary and
injunctive relief. 29 U.S.C. §§ 1109(a), 1132(a)(2).
The plaintiffs are current or former participants in the BB&T Corporation 401(k)
Savings Plan. Doc. 88 at ¶¶ 11-22; Doc. 99 at ¶¶ 11-22. The plaintiffs assert that the
defendants breached their fiduciary duties to the Plan by causing the Plan to incur
excessive administrative and investment fees, providing imprudent investment fund
options, failing to appropriately monitor Plan fiduciaries, and engaging in prohibited
transactions. Doc. 88. The plaintiffs seek equitable and injunctive relief and ask that the
defendants “make good to the Plan all losses to the Plan resulting from each breach of
fiduciary duties or prohibited transaction.” Doc. 88 at p. 85.
The plaintiffs now move to certify the following class of plaintiffs under Federal
Rule of Civil Procedure 23:
All current and former participants and beneficiaries of the [Plan] from
January 1, 2007 through the date of judgment, who were injured by the
conduct alleged in the Second Amended Complaint, excluding the
Defendants.
Doc. 146 at 1. They ask the Court to appoint Schlicter, Bogard & Denton as lead class
counsel and Nichols Kaster as an additional counsel for the class under Federal Rule of
Civil Procedure 23(g). Id. at 2.
ANALYSIS
“The class action is an exception to the usual rule that litigation is conducted by
and on behalf of the individual named parties only.” Comcast Corp. v. Behrend, 133 S.
Ct. 1426, 1432 (2013) (internal citations omitted). To show that a case falls within the
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exception, the plaintiff “must affirmatively demonstrate his compliance” with Federal
Rule of Civil Procedure 23. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011);
see also Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 318 (4th Cir. 2006)
(“[D]istrict courts must conduct a rigorous analysis to ensure compliance with Rule 23.”
(quotation omitted)).
As threshold matters, the putative class representatives must show that they are
members of the proposed class, see Fed. R. Civ. P. 23(a) (“One or more members of a
class may sue . . . as representative parties on behalf of all members . . . .”), and must
establish that the members of the proposed class are “readily identifiable” or
“ascertainab[le].” EQT Prod. Co. v. Adair, 764 F.3d 347, 358 (4th Cir. 2014) (quotations
omitted). The plaintiff must then establish that the case satisfies all four requirements of
Rule 23(a) and fits into at least one of the three subsections of Rule 23(b). Comcast, 133
S. Ct. at 1432; Bussey v. Macon Cty. Greyhound Park, Inc., 562 F. App’x 782, 787-88
(11th Cir. 2014) (per curiam).
Here, the issues in dispute are whether there are common questions of law or fact;
whether the claims of the representative plaintiffs are typical; and whether the
representative plaintiffs will adequately protect the interests of the class. Doc. 192 at 15.
The defendants also challenge appointment of two, as opposed to one, counsel for the
class. Id. at 37-38.1

As an initial matter, the defendants assert that the plaintiffs’ motion for class certification
should be denied as unsupported because it relies solely on the complaint and does not provide
other evidence. Doc. 192 at 7, 18-19. First, the plaintiffs submitted a number of affidavits in
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I.

Undisputed Issues

The parties do not dispute that the plaintiffs are members of the proposed class and
that other members of the proposed class can be readily identified through Plan records.
See, e.g., Doc. 192 at 6 (relying on “Plan data” to identify potential range of the class
members). The plaintiffs’ proposed class includes anywhere from 30,000 to 67,000
individuals, Doc. 99 at ¶ 10; Doc. 192-1 at ¶ 16, which “is so numerous that joinder of all
members is impracticable.” Fed. R. Civ. P. 23(a)(1); see Cent. Wesleyan Coll. v. W.R.
Grace & Co., 6 F.3d 177, 183 (4th Cir. 1993) (noting district court’s finding “that some
480 potential class members would easily satisfy the numerosity requirement”). Thus it
is undisputed that the named plaintiffs are members of the proposed class and that the
proposed class is ascertainable and meets the numerosity requirements of Rule 23(a)(1),
and the Court so finds.
There is also no dispute that the proposed class meets the requirements of Rule
23(b)(1)(A): separate actions by individual class members would create a risk of
inconsistent and varying adjudications. The defendants acknowledge that if all
requirements of Rule 23(a) are met, the case should move forward as a Rule 23(b)(1)
class action. Doc. 192 at 15. The Court agrees and finds that the plaintiffs have met the
requirements of Rule 23(b)(1) because of the risk of varying adjudications. See Doc. 147
at 25-26 (setting forth in detail the risks of varying adjudications).

support of the motion. See Docs. 147-1 to 147-14. Second, because the basic facts that support
class certification are not in dispute, no additional evidence is necessary to support class
certification. See Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 160 (1982).
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II.

Commonality

To satisfy the commonality requirements, there must be “questions of law or fact
common to the class.” Fed. R. Civ. P. 23(a)(2). Commonality “does not require that all,
or even most issues be common” and “even a single common question will do.” Dukes,
564 U.S., at 359; Cent. Wesleyan Coll. v. W.R. Grace & Co., 143 F.R.D. 628, 636,
(D.S.C. 1992), aff’d, 6 F.3d 177 (4th Cir. 1993).
This case presents numerous questions common to the class, including whether the
defendants are fiduciaries to the Plan, the scope of the defendants’ fiduciary duties,
whether a breach or breaches of fiduciary duties occurred, whether the defendants
engaged in prohibited transactions, whether the Plan suffered losses, and how to calculate
the Plan’s losses. See Doc. 88. Cumulatively, and likely independently, these common
issues are sufficient to meet the Rule 23(a)(2) requirements, and the Court so finds. See
Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 428 (4th Cir. 2003); Spano v. Boeing
Co., 633 F.3d 574, 585-86 (7th Cir. 2011).
The defendants argue that commonality is defeated here because of intra-class
conflicts, specifically that the actions alleged in Counts I and IV of the complaint would
have harmed or benefitted the Plan participants depending on an the participant’s
investment strategy. See Doc. 192-1 at ¶¶ 12-13.2 This does not create a conflict.

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The defendants also argue that typicality is defeated for this reason. Doc. 192 at 24-26.
Whether the issue is addressed under commonality or typicality does not affect the outcome
because these circumstances do not create an intra-class conflict. See infra pp. 5-8.
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“For a conflict of interest to prevent plaintiffs from meeting the requirement of
Rule 23(a), that conflict ‘must be fundamental.’” Gunnells, 348 F.3d at 430-31
(quotation omitted). The defendants have not demonstrated that varying investment
strategies among Plan participants create an intra-class conflict, especially a fundamental
conflict. The class as proposed requires that the actions alleged in the complaint injure a
Plan participant. At most, the defendants claim that certain of the proposed class
members were not injured, but benefitted from, investment in the alleged imprudent
funds. See Doc. 192-1 at ¶ 12(a). The class would include these Plan participants only if
they were injured by the other breaches alleged in the complaint.
The defendants claim that the participants who benefitted by investing in the
alleged imprudent funds will be “harmed” if the plaintiffs prevail on these allegations,
Doc. 192 at 20-21, and that this creates a conflict. They have not, however, provided any
explanation of how a class member could possibly be harmed if damages were recovered
on behalf of the Plan, and the Court does not see how this creates a conflict. There is no
requirement that Plan participants forfeit investment gains acquired as a result of a breach
of fiduciary duty, and the defendants have cited no case for the proposition that a class
member who profited from investing in a particular fund would be forced to pay money
back to the Plan if the Plan’s inclusion of that fund violated the Plan’s fiduciary duties.
The defendants’ reliance on the Langbecker case for the proposition that “class
certification [is] inappropriate” if some “class members made money on challenged
investment while others lost money” is misguided, if not misleading. Doc. 192 at 19
(citing Langbecker v. Elec. Data Sys. Corp., 476 F.3d 299, 315-16 (5th Cir. 2007)). The
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Fifth Circuit did not say that class certification was inappropriate. Rather, it remanded to
reconsider whether the multiple specifically-identified intra-class conflicts prevented
certification. Langbecker, 476 F.3d at 315-16. These conflicts had “implications not
only for dividing the pie at recovery but also for discovery and preparation for trial,” and
for “proving the allegations of fiduciary imprudence.” Id. Here, the alleged “conflicts”
arise in connection with only a subset of the causes of action and nothing indicates that a
Plan participant’s individual investment choices will affect the theories of liability,
evidence, or other aspects of case strategy. Speculative intra-class conflicts do not defeat
commonality because “the relevant ultimate determination will be the extent to which the
Plans were damaged, not any given individuals.” Shanehchian v. Macy’s, Inc., No. 1:07CV-00828, 2011 WL 883659, at *8 (S.D. Ohio May 19, 2011); see also Krueger v.
Ameriprise Fin., Inc., 304 F.R.D. 559, 573-75 (D. Minn. 2014) (rejecting intra-class
conflicts based on individual investment choices).
The defendants also argue that the lack of an established methodology for
determining individual class members’ injuries defeats commonality. See Doc. 192 at pp.
21-24. This argument misunderstands the nature of the suit. The plaintiffs have filed suit
on the Plan’s behalf alleging that the defendants’ conduct harmed the Plan as a whole and
seeking recovery on the Plan’s behalf; they assert no claims based on individual losses.
See Doc. 88 at ¶ 2. The common issues identified above, see supra p. 5, do not require
individualized proof such that commonality is defeated. “[I]individual issues of loss
causation do not predominate, indeed are not relevant, unless and until it becomes
necessary to allocate any Plan recovery to participants.” DiFelice v. U.S. Airways, Inc.,
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235 F.R.D. 70, 78 (E.D. Va. 2006); see also Krueger, 304 F.R.D. at 575. “[A]ny
recovery of lost benefits will go to the Plan and will be held, allocated, and ultimately
distributed in accordance with the requirements of the Plan and ERISA.” Tatum v. R.J.
Reynolds Tobacco Co., 254 F.R.D. 59, 66 (M.D.N.C. 2008) (quotation omitted). Should
the plaintiffs prevail and in the unlikely event that conflicts develop between and among
class members, the Court can take appropriate steps at that time to protect class members.
See In re Suntrust Banks, Inc. ERISA Litig., No. 1:08-CV-03384-RWS, 2016 WL
4377131, at *6 (N.D. Ga. Aug. 17, 2016).
III.

Typicality

To satisfy the typicality requirement, the claims of the named plaintiffs must be
typical of the claims of the class. Fed. R. Civ. P. 23(a)(3). “The typicality requirement is
met where the claims asserted by the named plaintiffs arise from the same course of
conduct and are based on the same legal theories as the claims of the unnamed class
members.” Tatum, 254 F.R.D. at 65 (quotation omitted).
In this case, each named plaintiff’s claim and each class member’s claim is based
on the same events and legal theory—a breach of fiduciary duty stemming from the
defendants’ alleged disloyal and imprudent process for selecting, administering, and
monitoring the Plan’s investments. See Doc. 88. The same is true of the remedial
theory—enforcement of the defendants’ obligations under section 1109(a) through
section 1132(a)(2)—which is identical for the named plaintiffs and the class members.
See Doc. 88. Therefore, the typicality requirements of Rule 23(a)(3) are satisfied.

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The defendants contend that the named plaintiffs’ claims are not typical of the
class because they have not invested in all of the funds alleged to be imprudent in the
complaint. See Doc. 192-1 at ¶¶ 14, 31. The defendants rely on the Seventh Circuit’s
Spano decision, which stated that for typicality to be satisfied “it seems that a class
representative in a defined-contribution case would at a minimum need to have invested
in the same funds as the class members.” Spano, 633 F.3d at 586. The Fourth Circuit,
however, “do[es] not … require that members of the class have identical factual and legal
claims in all respects.” Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d 331,
344 (4th Cir. 1998). Rather, the key question in determining typicality is whether “the
interests of the class members will be fairly and adequately protected in their absence.”
Id. at 337 (citing Falcon, 457 U.S. at 157 n.13).
Here the plaintiffs’ theories of liability rest on the defendants’ flawed process for
selecting, administering, and monitoring all of the Plan investments, not just a few
specific funds. See Doc. 88 at ¶¶ 46-47, 137, 146, 166. These unified theories of liability
ensure that the named plaintiffs have “essentially the same incentive to litigate …
because the establishment of the named plaintiffs’ claims necessarily establishes those of
other class members.” Plumbers’ Union Local No. 12 Pension Fund v. Nomura Asset
Acceptance Corp., 632 F.3d 762, 770 (1st Cir. 2011) (evaluating adequacy of
representation in standing analysis). When the theories of liability are the same, a
plaintiff may represent the class even if he or she did not hold all of the contested funds
or investments or did not enter into all of the contested agreements. See, e.g., id. at 769
(noting, in a Securities Act case, that “[i]n a properly certified class action, the named
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plaintiffs regularly litigate not only their own claims but also claims of other class
members based on transactions in which the named plaintiffs played no part.”);
Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d Cir. 1985); Krueger, 304 F.R.D. at 573.3
IV.

Adequate Representation

Rule 23(a)(4) requires that class representatives “fairly and adequately protect the
interests of the class.” Fed. R. Civ. P. 23(a)(4). It “serves to uncover conflicts of interest
between named parties and the class they seek to represent,” as well as “competency and
conflicts of class counsel.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625 & n.20
(1997).
As discussed above, there are no conflicts among the class members’ interests.
See supra pp. 5-8. The plaintiffs have declared that they will fairly and adequately
represent the interests of the class, Docs. 147-1 to 147-12, and have shown commitment
to the case by providing deposition testimony. See Docs. 192-3 to 192-12. The Court
also has reviewed qualifications of proposed class counsel and finds that they meet the
requirements of Rule 23(g), see Docs. 147-1, 147-2, which the defendants do not contest.
Doc. 192 at 38. For these reasons, the Court finds the requirements of Rule 23(a)(4) are
satisfied.

Many courts also have found that named plaintiffs have standing to pursue claims “that
sweep[] beyond [their] own injury” without being concerned that class certification would be
affected. Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 593 (8th Cir. 2009); see also
Urakhchin v. Allianz Asset Mgmt. of Am., L.P., No. SACV 15-614-JLS, 2016 WL 4507117, at *4
(C.D. Cal. Aug. 5, 2016); Glass Dimensions, Inc. v. State St. Bank & Trust Co., 285 F.R.D. 169,
175 (D. Mass. 2012).
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The defendants claim that all of the named plaintiffs are inadequate class
representatives because they lack “knowledge of facts of th[e] case outside what their
attorneys have told them.” Doc. 192 at 27. The Court does not consider this a barrier to
class certification. “It is hornbook law, … that in a complex lawsuit, such as one in
which the defendant’s liability can be established only after a great deal of investigation
and discovery by counsel against a background of legal knowledge, the representative
need not have extensive knowledge of the facts of the case in order to be an adequate
representative.” Gunnells, 348 F.3d at 430 (quotation omitted). The complex nature of
ERISA fiduciary breach claims requires investors to rely on their attorneys and hired
experts, and such reliance does not make the plaintiffs inadequate representatives. See
Surowitz v. Hilton Hotels Corp., 383 U.S. 363, 372-73 (1966). For this same reason, an
investor’s lack of concerns about the Plan before being contacted by a lawyer does not
make the investor an inadequate representative.
The defendants also identify three named plaintiffs who have paid limited
attention to case filings, including their own interrogatories. See, e.g., Doc. 194-8 at
133:9-134:23. The identified behaviors are relevant to adequate representation and do
raise concerns. However, the remaining plaintiffs for which no such behaviors have been
identified ensure that the named plaintiffs as a whole will adequately represent the class.
V.

Appointment of Class Counsel

The defendants have requested that only one firm be appointed class counsel to
prevent duplication of effort, general inefficiencies, and waste of resources. Doc. 192 at
37-38. Both Schlichter, Bogard & Denton and Nichols Kaster have invested in
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identifying and investigating the claims at issue, and both have the relevant experience
and knowledge. See Fed. R. Civ. P. 23(g)(1)(A); Docs. 147-1, 147-2. The defendants
have not identified any specific duplication of effort, general inefficiencies, or waste of
resources that have occurred since the cases, now combined, were filed in the fall of
2015.
Moreover, this is a complicated case that will no doubt require the work of a
significant number of attorneys, and there is no reason to think that class counsel will not
cooperate with each other in efficiently dividing up the work to be done. Considering the
complex nature of the case, both counsels’ qualifications and historic involvement, the
lack of identified inefficiencies, and the amount of work this case has required and will
require, the Court finds that the plaintiffs’ interests would be “fairly and adequately”
represented by appointment of both Schlichter, Bogard & Denton and Nichols Kaster as
class counsel. Fed. R. Civ. P. 23(g)(1)(B).
CONCLUSION
The plaintiffs are members of the proposed class; the proposed class is numerous
but ascertainable; many common questions of law and fact have been identified; the
named plaintiffs’ claims are typical of the class claims; and the named plaintiffs and
proposed class counsel are capable of adequately representing class interests. The minor
differences that the defendants identified between the named plaintiffs and proposed
class, and within the proposed class, are not material to the plaintiffs’ theories of liability.
The plaintiffs have met the standards set for class certification set forth in Rule 23(a) and
Rule 23(b)(1)(A). Therefore, the Court will grant the motion for class certification.
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It is ORDERED that the plaintiffs’ motion for class certification, Doc. 146, is
GRANTED.
This the 28th day of August, 2017.

__________________________________
UNITED STATES DISTRICT JUDGE

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