Harris v. Koenig , 271 F.R.D. 383 ( 2010 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
WILLIAM S. HARRIS, et al., )
)
Plaintiffs, )
)
v. ) Civil Action No. 02-618 (GK)
)
JAMES E. KOENIG, et. al., )
)
Defendants. )
______________________________)
MEMORANDUM OPINION
Plaintiffs William S. Harris, Reginald E. Howard, and Peter M.
Thornton, Sr. are former employees of Waste Management Holdings,
Inc. (“Old Waste” or “the Company”) and participants in the Waste
Management Profit Sharing and Savings Plan (“Old Waste Plan” or
“Plan”). They bring this action on behalf of the Plan’s
approximately 30,000 participants under the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001, et seq.,
against Defendants,1 all of whom were fiduciaries of the Old Waste
1
Defendants include the “Old Waste Fiduciaries,” which are
Old Waste (the Plan’s sponsor), the Waste Management, Inc. Profit
Sharing and Savings Plan Investment Committee (“Old Waste
Investment Committee”), the Waste Management, Inc. Profit Sharing
and Savings Plan Administrative Committee (“Old Waste
Administrative Committee”), the individual Trustee Members of the
Committees, the Old Waste Board of Directors and its individual
members, and fifteen unidentified fiduciaries; and the “New Waste
Fiduciaries,” which are the Waste Management Retirement Savings
Plan (“New Waste Plan”), the Investment Committee of the Waste
Management Retirement Savings Plan (“New Waste Investment
Committee”) and its individual Trustee Members, the State Street
Bank and Trust Company (“State Street”), and fifteen unidentified
fiduciaries.
Plan or are fiduciaries of its successor plan, the Waste Management
Retirement Savings Plan (“New Waste Plan”).2
This matter is presently before the Court on Plaintiffs’
Amended Motion for Class Certification. Upon consideration of the
Motion, Opposition, Reply, and the entire record herein, and for
the reasons set forth below, Plaintiffs’ Motion is granted in part,
and denied in part.
I. Background
This action arises from Old Waste’s announcement on February
24, 1998 that it was restating several of its financial statements
for periods between 1991 and 1997 and that, prior to 1992 and
continuing through the first three quarters of 1997, it had
materially overstated its reported income by $1.43 billion. That
announcement led to the filing of a securities class action in the
Northern District of Illinois, which settled on September 17, 1999
(“Illinois Litigation”). Under the terms of the settlement, Old
Waste and its agents were released from liability for any claims--
including unknown claims--brought by members of the Illinois
Settlement Class. In 1999, after Old Waste’s January 1, 1999,
merger with Waste Services, Inc. to become New Waste, New Waste
announced further after-tax charges and adjustments of $1.23
2
On January 16, 1998, Old Waste and Waste Services, Inc.,
merged to become New Waste. On January 1, 1999, the Old Waste Plan
was merged with the USA Waste Services, Inc. Employee’s Savings
Plan to become the Waste Management Retirement Savings Plan (“New
Waste Plan”).
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billion. The announcement led to the filing of other securities
class action complaints against New Waste and certain of its
officers and directors in the Southern District of Texas, which
settled on April 29, 2002 (“Texas Litigation”). Both settlements
included the Plan and its fiduciaries within the scope of the
class.
On April 1, 2002, Plaintiffs filed the instant action in this
Court, alleging ten counts of ERISA violations pursuant to ERISA §
502(a)(2), codified as 29 U.S.C. § 1132(a)(2). ERISA § 502(a)(2)
provides that a civil action may be brought “by the Secretary, or
by a participant, beneficiary or fiduciary for appropriate relief
under [29 U.S.C. § 1109 (“ERISA § 409”)].” 29 U.S.C. § 1132(a)(2).
Under ERISA § 409(a), fiduciaries found to have breached their
fiduciary duties are personally liable “to make good to such plan
any losses to the plan resulting from such breach . . . and . . .
such other equitable or remedial relief as the court may deem
appropriate . . . .” 29 U.S.C. § 1109. Although participants can
assert claims on behalf of the entire plan or on behalf of their
individual plan accounts, all of Plaintiffs’ claims in this case
are asserted on behalf of the entire Plan. See LaRue v. DeWolff,
Boberg & Assocs., Inc., 552 U.S. 248, 256, 128 S.Ct. 1020, 1026,
169 L.Ed.2d 847 (2008) (explaining that § 502(a)(2) “does not
provide a remedy for individual injuries distinct from plan
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injuries”); Stanford v. Foamex L.P., 263 F.R.D. 156, 164 (E.D. Pa.
2009).
Plaintiffs’ claims were originally divided into three periods.
First, Plaintiffs alleged five ERISA violations related to the
Plan’s purchase of inflated shares of company stock in the first
claim period between January 1, 1990 and February 24, 1998 (Counts
I-V). Second, Plaintiffs alleged four ERISA violations related to
the release of claims by the Plan’s fiduciaries in the Illinois
securities litigation in the second claim period between July 15,
1999 and December 1, 1999 (Counts VI-IX). Third, Plaintiffs alleged
one ERISA violation in the third claim period between February 7,
2002 and July 15, 2002 related to the release of claims by the New
Waste Plan’s trustee--Defendant State Street Bank and Trust
Company--in the Texas securities litigation (Count X). Finally, on
December 14, 2009, Plaintiffs were granted leave to file a
Substitute Fourth Amended Complaint to add Counts XIII and XIV,
which alleged Defendant State Street’s violation of ERISA
§ 406(b)(2) in the Illinois and Texas Litigations.3 Harris v.
Koenig, 673 F.Supp.2d 8, 14-15 (D.D.C. 2009) [Dkt. No. 279].
On January 15, 2010, Defendants filed three Motions to Dismiss
pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6):
3
The Court denied Plaintiffs leave to add Counts XI and
XII, which alleged additional ERISA violations in the third claim
period, because of Plaintiffs’ undue delay in bringing the claims.
673 F.Supp.2d at 13-14.
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(1) the Waste Defendants’4 Motion to Dismiss Counts I-V and Counts
VII-IX [Dkt. No. 294]; (2) the Individual Waste Management
Defendants’5 Motion to Dismiss Counts I-V [Dkt. No. 291]; and (3)
Defendant State Street’s Motion to Dismiss Counts XIII and XIV
[Dkt. No. 292]. On June 10, 2010, the Court denied the Waste
Defendants’ Motion to Dismiss Counts I-V and VII-IX, and granted in
part and denied in part the Individual Waste Defendants’ Motion to
Dismiss.6 Defendant State Street’s Motion to Dismiss was granted
with respect to Counts XIII and XIV.
On November 9, 2010, Plaintiffs filed an unopposed Motion for
Leave to File a Fifth Amended Complaint [Dkt. No. 403], which was
granted. In the Fifth Amended Complaint, Plaintiffs withdrew Count
X on the basis that the evidence obtained in discovery was
insufficient to prove the claim.
4
These Defendants include Old Waste, the Old Waste
Investment Committee, the Old Waste Administrative Committee, and
the New Waste Investment Committee.
5
These Defendants include the individuals on Old Waste’s
Board of Directors, the Old Waste Investment Committee, the Old
Waste Administrative Committee, the New Waste Investment Committee,
and the executives who administered the Old Waste Plan.
6
Counts I-V were dismissed against Defendants H. Jesse
Arnelle, J. Steven Bergerson, Dean L. Buntrock, Jerry E. Dempsey,
Dr. James Edwards, Donald F. Flynn, Herbert A. Getz, Roderick M.
Hills, Joseph M. Holsten, Peter H. Huizenga, William P. Hulligan,
Edward C. Kalebich, John J. Machota, Robert S. Miller, Peer
Pedersen, James R. Peterson, John C. Pope, and Phillip B. Rooney.
In addition, Defendants Howard H. Baker, Jr., Dr. Pastora San Juan
Cafferty, Thomas R. Frank, Patricia McCann, Paul M. Montrone, D.P.
Payne, and Steven G. Rothmeier were dismissed from the action.
-5-
The Fifth Amended Complaint now includes the following claims.
In the first claim period, Count I alleges that the Old Waste
Investment Committee and any remaining Individual Defendants who
are or were members of that Committee breached their fiduciary
duties under ERISA § 404 by failing to prudently manage the assets
of the Plan; Count II alleges that the Old Waste Administrative
Committee and any remaining Individual Defendants who are or were
members of that Committee breached their fiduciary duties under
ERISA § 404 by failing to provide complete and accurate information
to Plan participants and beneficiaries; Count III alleges that Old
Waste, the Old Waste Administrative Committee, the Old Waste
Investment Committee, and any remaining Individual Defendants who
are or were members of those Committees engaged in prohibited
exchanges of stock between the Plan and Old Waste in violation of
ERISA § 406(a)(1)(A); Count IV alleges that Old Waste, its Board of
Directors, and any remaining Individual Defendants on the Old Waste
Board breached their fiduciary duties under ERISA § 404 by failing
to monitor the fiduciaries of the Plan; and Count V alleges that
all Old Waste Fiduciaries breached their fiduciary duties under
ERISA §§ 405(a)(2) and (3) by enabling their co-fiduciaries to
commit the ERISA violations in Counts I-IV, and by failing to
remedy them.
In the second claim period, Count VI alleges that Defendant
State Street breached its fiduciary duty under ERISA § 404 by
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failing to adequately investigate and preserve the claims in Counts
I-V in the Illinois Litigation and by causing the claims to be
released; Count VII alleges that Old Waste and State Street engaged
in prohibited exchanges of choses in action between the New Waste
Plan and Old Waste in violation of ERISA § 406(a)(1)(A) by
releasing claims in the Illinois Litigation; Count VIII alleges
that the New Waste Investment Committee and any remaining
Individual Defendants who are or were members of that Committee
breached their fiduciary duties under ERISA § 404 by failing to
adequately monitor State Street’s performance in the Illinois
Litigation; and Count IX alleges that State Street, Old Waste, the
New Waste Investment Committee, and any remaining Individual
Defendants who are or were members of that Committee breached their
fiduciary duties under ERISA §§ 405(a)(2) and (a)(3) by enabling
their co-fiduciaries to commit the ERISA violations described in
Counts VI-VIII, and by failing to remedy them.
On June 30, 2010 Plaintiffs filed their Amended Motion for
Class Certification based on the remaining counts in the Fifth
Amended Complaint [Dkt. No. 356]. The proposed class
representatives are William S. Harris, Reginald E. Howard, and
Peter M. Thornton, Sr., all Plan participants who were formerly
employed by Old Waste as truck drivers. Plaintiffs request that
Ellen M. Doyle and the law firm of Stember Feinstein Doyle Payne &
Cordes, L.L.C. and J. Brian McTigue and the law firm of McTigue &
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Veis, L.L.P. be appointed as Co-lead Counsel, and Gregory Yann
Porter of Bailey & Glasser, L.L.P. be appointed as Counsel. On July
30, 2010, the Waste Defendants filed an Opposition to Plaintiffs’
Motion, which Defendant James E. Koenig joined [Dkt. Nos. 368 and
393]. Plaintiffs filed their Reply on August 16, 2010 [Dkt. No.
377].
II. Standard of Review
Federal Rule of Civil Procedure 23(a) requires a plaintiff to
satisfy the following four requirements before a class can be
certified: (1) the class must be so numerous that joinder of all
members is impracticable (“numerosity”); (2) there must be
questions of law or fact common to the class (“commonality”); (3)
the claims or defenses of the representative parties must be
typical of the claims or defenses of the class (“typicality”); and
(4) the representative parties, and their counsel, must fairly and
adequately protect the interests of the class (“adequacy of
representation”). See Fed.R.Civ.P. 23(a). In addition, the
plaintiff must satisfy one of the three requirements of Rule 23(b).
The plaintiff bears the burden of proof on each element of
Rule 23. See Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 614, 117
S.Ct. 2231, 2245, 138 L.Ed.2d 689 (1997); McCarthy v. Kleindienst,
741 F.2d 1406, 1414 n.9 (D.C. Cir. 1984). “In considering a motion
for class certification, the Court’s inquiry does not extend to an
examination of the merits of the case. Instead, the legal standard
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is whether the evidence presented by plaintiffs establishes a
reasonable basis for crediting plaintiffs’ assertions.” Kifafi v.
Hilton Hotel Ret. Plan, 228 F.R.D. 382, 385 (D.D.C. 2005) (citation
and internal quotations omitted). A district court exercises broad
discretion in deciding whether to permit a case to proceed as a
class action. Hartman v. Duffey, 19 F.3d 1459, 1471 (D.C. Cir.
1994) (citing Bermudez v. Dep’t of Agric., 490 F.2d 718, 725 (D.C.
Cir. 1973)); see also Gulf Oil Co. v. Bernard, 452 U.S. 89, 100,
101 S.Ct. 2193, 2200, 68 L.Ed.2d 693 (1981) (discussing district
court’s authority to exercise control over a class action).
III. Analysis
Plaintiffs seek to certify the following class:
All participants (and their beneficiaries) in
the Waste Management Retirement Savings Plan
and/or its predecessor plans, including the
Waste Management Profit Sharing and Savings
Plan, for whose accounts the fiduciaries of
the plan acquired the following employer
securities of Waste Management, Inc.:
A) pre-corporate-merger common stock
(NYSE: WMX) on or after January 1, 1990,
through and including July 16, 1998;
and/or
B) post-corporate-merger common stock
(NYSE: WMI) on or after July 16, 1998,
through and including November 9, 1999.7
7
Only Count X was brought on behalf of those participants
for whose accounts the plan fiduciaries acquired post-corporate-
merger common stock. Pls.’ Proposed Order on Mot. for Class Cert.
[Dkt. No. 356-2 ¶ 8]. However, Plaintiffs have since withdrawn
Count X. Consequently, Plaintiffs have not carried their burden of
proof with respect to this portion of the class, and certification
-9-
Pls.’ Amd. Mot. for Class Cert. at 1-2.
Defendants raise several arguments against certification of
the class of participants for whose accounts the plan fiduciaries
acquired pre-corporate-merger common stock. First, Defendants argue
that Plaintiffs have not satisfied the commonality, typicality, and
adequacy of representation requirements of Rule 23(a). Second,
Defendants argue that Plaintiffs have failed to show that one of
the three requirements of Rule 23(b) is satisfied.
A. Rule 23(a) Requirements
Defendants do not dispute that the first requirement of Rule
23(a), numerosity, is satisfied. The Plan’s Forms 5500 report an
estimated class size of 21,000 to 33,000 participants during the
relevant period. 5th Amd. Compl. ¶¶ 41-42. The Court agrees that
this class is so numerous that “joinder of all members is
impracticable” and, consequently, that the class action mechanism
serves the interests of judicial economy and efficiency.
Fed.R.Civ.P. 23(a)(1); Freeport Partners, L.L.C. v. Allbritton, No.
04-cv-2030, 2006 WL 627140, at *5 (D.D.C. Mar. 13, 2006).
The main argument advanced by Defendants is that the remaining
uncertainty surrounding the scope of the Illinois release gives
rise to potential conflicts among the putative class members which
preclude a finding of the required commonality, typicality, and
adequacy of representation. In their January 15, 2010, Motion to
of this portion of the class is denied.
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Dismiss, the Waste Defendants argued that Plaintiffs cannot
simultaneously allege that (1) the ERISA claims in Counts I-V are
not subject to the terms of the Illinois Release; and (2)
Defendants committed ERISA violations by releasing those same ERISA
claims in the Illinois Litigation. This Court rejected that
argument in its June 10, 2010, Memorandum Opinion denying the Waste
Defendants’ Motion to Dismiss, concluding that “Fed. R. Civ. P.
8(d)(3) permits plaintiffs to plead inconsistent claims in support
of alternative theories of recovery” and that a fuller record was
required to decide whether the release applies to Counts I-V.
Harris v. Koenig, No. 02-cv-618, 2010 WL 2560038, at *8 (D.D.C.
June 10, 2010) (quoting Fed.R.Civ.P. 8(d)(3) (2009) (“A party may
state as many separate claims or defenses as it has, regardless of
consistency.”)).
In opposition to Plaintiffs’ Motion for Class Certification,
Defendants now argue that, even if Counts I-V and Counts VI-IX may
be brought simultaneously in the Complaint as alternative theories
of recovery, the incentives to pursue either the first or the
second period claims are not the same for all putative class
members. Thus, Defendants argue that Plaintiffs cannot meet their
burden to prove commonality, typicality, and adequacy of
representation under Rule 23(a).
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1. Commonality
To meet the commonality requirement of Rule 23(a)(2),
Plaintiffs must show that at least one issue, the resolution of
which will affect all or a significant number of the putative class
members, is common to the entire class. See DL v. Dist. of
Columbia, 237 F.R.D. 319, 322 (D.D.C. 2006); In re Vitamins
Antitrust Litig., 209 F.R.D. 251, 259 (D.D.C. 2002); Freeport
Partners, 2006 WL 627140, at *5. The commonality requirement is a
“low bar,” and “courts have generally given it a permissive
application.” In re New Motor Vehicles Canadian Export Antitrust
Litig., 522 F.3d 6, 19 (1st Cir. 2008) (citation and internal
quotations omitted).
Plaintiffs argue that several questions of law and fact
concerning the alleged actions and omissions of the Plan
fiduciaries are common to the entire class of Plan participants.
Pls.’ Mot. at 18-21. Specifically, Plaintiffs point to “the
identity of the Plan fiduciaries during the relevant periods, their
responsibilities and duties with respect to investing in Company
Stock, the treatment of the Plan’s claims in the settlement of the
Illinois and Texas Securities, whether the Plan and the class
members’ accounts suffered losses as a result of the fiduciary
breaches claimed, and other matters.” Pls.’ Mot. at 18-19; see also
5th Amd. Compl. ¶ 273.
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Defendants respond that the inconsistent legal theories
advanced by Plaintiffs in Counts I-V and Counts VI-IX defeat
commonality. Because this Court has deferred ruling on the scope of
the Illinois release until the record is more fully developed,
uncertainty remains as to which, if any, putative class members
will be able to pursue Counts I-V and which, if any, will be
limited to pursuing Counts VI-IX if it is found that their claims
under Counts I-V were released. In short, according to Defendants,
“there remains substantial uncertainty about which putative class
members will be able to pursue which of Plaintiffs’ conflicting
theories of recovery.” Defs.’ Opp’n at 13. Thus, Defendants argue,
because Counts I-V and Counts VI-IX raise no common questions,
there would be no common questions among those class members
limited to pursuing Counts I-V and those class members limited to
pursuing Counts VI-IX.
First, this argument is purely speculative; there is no
evidence in the record to suggest that the putative class will be
split along these lines. In fact, at this early stage, the scope of
the Illinois release is at least one question of law--and it is a
crucial question--which is common to the entire putative class.
Second, assuming arguendo that the effect of the Illinois
release is to split the putative class into two groups, the Court
does not agree that Counts I-V and Counts VI-IX raise no common
questions. While the first and second claim periods differ as to
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legal and factual issues, the value of the released ERISA claims in
Counts I-V, which depends in part on the merits of those claims, is
relevant to Counts VI-IX. See Defs.’ Opp’n at 2 (“[T]o prevail on
the Second Period claims, Plaintiffs must show that the Illinois
Judgment released the Plan’s First Period claims for inadequate
consideration . . . .”) (emphasis added). Certain issues related to
the merits of Counts I-V are relevant to the value of those claims,
and are therefore common to the entire class. See Trief v. Dun &
Bradstreet Corp., 144 F.R.D. 193, 198 (S.D.N.Y. 1992) (“Commonality
does not mandate that all class members make identical claims and
arguments, only that common issues of fact or law affect all class
members.”).
For these reasons, the Court concludes that the existing
uncertainty regarding the scope and effect of the Illinois Release
does not defeat commonality. Consequently, Plaintiffs have met
their burden to demonstrate that there are common issues of law and
fact which affect the entire class.
2. Typicality
Rule 23(a) next requires a showing of typicality, or that “the
claims or defenses of the representative parties are typical of the
claims or defenses of the class.” Fed.R.Civ.P. 23(a)(3). Typicality
requires that the named plaintiffs have the same motivation as
absent class members to ensure fair and effective representation.
Typicality is shown if each class member’s claim arises from the
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same course of events that led to the claims of the representative
parties and each class member makes similar legal arguments to
prove the defendant’s liability. Baby Neal for and by Kanter v.
Casey, 43 F.3d 48, 58 (D.C. Cir. 1994); see also Freeport Partners,
2006 WL 627140, at *6. The commonality and typicality requirements
of Rule 23(a) tend to merge, since both look to whether each class
member’s claims, including the claims of the representative
parties, arise from the same course of events. Gen. Tel. Co. of Sw.
v. Falcon, 457 U.S. 147, 157 n.13, 102 S.Ct. 2364, 2370 n.13, 72
L.Ed.2d 740 (1982).
The claims brought in the Fifth Amended Complaint are all
based on alleged actions or omissions which were directed at the
Plan. In fact, Counts I-IX are all brought under ERISA § 502(a)(2),
which permits plan participants to bring counts on behalf of the
plan to recover plan injuries, not individual injuries. See LaRue,
552 U.S. 248, 256, 128 S.Ct. 1020, 1026. Thus, Plaintiffs’ claims
in Counts I-IX, as well as the legal arguments in support of the
claims, are typical, if not identical, to the claims and arguments
of the other Plan participants who are putative class members.
Defendants argue, however, that the specter of a conflict
among class members regarding the proper scope of the Illinois
release defeats Plaintiffs’ arguments in support of typicality.
Defendants argue that there is a conflict among the putative class
members because some Plan participants may wish to limit the scope
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of the Illinois release, whereas others may wish to argue it does
not apply at all or even that it applies to the entire first claim
period.8
First, as noted above, this scenario is purely speculative;
there is no evidence in the record to suggest that a certain number
of putative class members have an incentive to limit the scope of
the release, and that a different group of putative class members
have an incentive to interpret it broadly. Such “speculative
suggestion of potential conflict is insufficient to defeat class
certification.” Aliotta v. Gruenberg, 237 F.R.D. 4, 12 (D.D.C.
2006) (quoting Rodolico v. Unisys Corp., 199 F.R.D. 468, 477
(E.D.N.Y. 2001)); see also Cummings v. Connell, 316 F.3d 886, 896
(9th Cir. 2003).
Second, in the event that such a conflict does arise, the
Court has discretion to consider creating sub-classes. See
Fed.R.Civ.P. 23(c)(5) (permitting a class action to be divided into
8
At times, Defendants suggest that, once the scope of the
Illinois release is decided, conflicts would persist among class
members who are limited to Counts I-V and class members who are
limited to Counts VI-IX. The Court sees no reason why this would be
the case. There is no discernible conflict presented by a class
containing both (1) members whose ERISA claims in Counts I-V were
released and who pursue Counts VI-IX on the ground that the release
itself constituted ERISA violations, and (2) members whose ERISA
claims in Counts I-V were not released and who continue to pursue
Counts I-V. The only potential conflict conceivable at this stage
is between those putative class members who might have an incentive
to limit the scope of the Illinois release and other putative class
members who might have an incentive to interpret the release
broadly. However, as explained, the Court deems this conflict
speculative.
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subclasses which are treated as a class); In re Ins. Brokerage
Antitrust Litig., 579 F.3d 241, 271-72 (3d Cir. 2009) (discussing
district court’s discretion to divide the class into subclasses in
order to prevent conflicts of interest). The Court therefore
concludes that Plaintiffs have met their burden to prove
typicality.
3. Adequacy of Representation
Finally, Rule 23(a)(4) requires that “the representative
parties will fairly and adequately protect the interests of the
class.” Fed.R.Civ.P. 23(a)(4). Like the typicality inquiry, this
requirement seeks to uncover conflicts of interest between the
named parties and the putative class. See Amchem, 521 U.S. at 625-
26, 117 S.Ct. at 2250-51. “Two criteria for determining the
adequacy of representation are generally recognized: (1) the named
representative must not have antagonistic or conflicting interests
with the unnamed members of the class, and (2) the representative
must appear able to vigorously prosecute the interests of the class
through qualified counsel.” Twelve John Does v. Dist. of Columbia,
117 F.3d 571, 575 (D.C. Cir. 1997) (citation and internal
quotations omitted). In addition, the adequacy of representation
prong requires that the class representatives have a commitment to,
knowledge of, and interest in the litigation, although they need
not have expert knowledge of all aspects of the case. Only a “total
lack of interest and unfamiliarity with [the] suit would be
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sufficient grounds to deny plaintiffs’ motion [to certify class].”
In re Newbridge Networks Sec. Litig., 926 F.Supp. 1163, 1177
(D.D.C. 1996) (citation and internal quotations omitted).
Plaintiffs’ proposed representative parties include William S.
Harris, Reginald E. Howard, and Peter M. Thornton. These Plaintiffs
had Plan accounts which were invested in company stock during the
period from January 1, 1990 to November 2, 1994 and throughout the
Illinois Class Period (from November 2, 1994 to July 15, 1998).
Pls.’ Reply at 8. Specifically, Harris was a participant in the Old
Waste and New Waste Plans and had invested in the Waste Management
Stock Fund from September 30, 1992 until the filing of the present
Motion; Howard was a participant in the Old Waste Plan who had
invested in the Waste Management Stock Fund from at least January
1, 1992 through February 1, 1999; and Thornton was a participant in
the Old Waste Plan who had invested in the Waste Management Stock
Fund and the ESOP Fund from at least January 1, 1992 through
February 1, 1999. 5th Amd. Compl. ¶¶ 17-19; Decl. of Ellen M. Doyle
in Support of Pls.’ Reply in Support of Amd. Mot. for Class
Certification (Ex. A to Pls.’ Mot. at ¶¶ 5-13); Pls.’ Mot. at 7.
First, Defendants argue that the named Plaintiffs cannot
adequately represent the class because of the potentially
conflicting interests with the unnamed members of the class arising
out of the Illinois release. As discussed above, the Court rejects
this argument on the basis that it is speculative and, in the event
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any conflict arises, there are procedural mechanisms for protecting
all class members.
Second, Defendants argue that the proposed class
representatives are inadequate because they know too little about
the litigation. Defendants point to a number of instances where
Harris, Howard, and Thornton admitted at their depositions to
ignorance of certain details of the case, including the details of
the Illinois and Texas Litigations, the precise composition of the
class, the outcome of Defendants’ Motions to Dismiss, and even the
contents of the Complaint. Defs.’ Opp’n at 20-22.
However, in complex actions such as this, the named
representatives are entitled to rely on counsel to conduct the
litigation, and are not required to be intimately familiar with the
details of the case. In re Avon Secs. Litig., No. 91-cv-2287, 1998
WL 834366, at *9 (S.D.N.Y. Nov. 30, 1998) (in complex case, “the
qualifications of class counsel are generally more important in
determining adequacy than those of the class representatives”).9
In addition, Plaintiffs cite to portions of the named
representatives’ depositions which indicate that they regularly
consult with class counsel and review all legal documents which are
forwarded to them. Pls.’ Reply at 16-17. The statements cited in
9
It should be remembered that all three Plaintiffs were
employed as truck drivers. It would be absurd to expect them to
understand the intricacies of ERISA and the securities laws, which
sometimes elude even experienced counsel.
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Plaintiffs’ Reply brief also indicate that Harris, Howard, and
Thornton share a strong and genuine interest in litigating the suit
in order to rectify the alleged injury done to Plan participants.
Id. Consequently, the Court concludes that Harris, Howard, and
Thornton are adequate class representatives.
Finally, Defendants failed to oppose Plaintiffs’ proposed
class counsel, so their adequacy may be treated as conceded. D.D.C.
Local Rule 7(b); Fox v. Am. Airlines, Inc., Civ. No. 02-2069, 2003
WL 21854800, at *2 (D.D.C. Aug. 5, 2003), aff’d, Fox v. Am.
Airlines, Inc., 389 F.3d 1291 (D.C. Cir. 2004). Plaintiffs have
therefore met their burden to prove the adequacy of both the class
representatives and class counsel.
B. Rule 23(b) Requirements
In addition to meeting the requirements of numerosity,
commonality, typicality, and adequacy of representation in Rule
23(a), Plaintiffs must show that one of the requirements of Rule
23(b) is met. Plaintiffs seek certification of the class under
Rules 23(b)(1) and/or (b)(2). Rule 23(b)(1) permits certification
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 the interests of the
other members not parties to the individual
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adjudications or would substantially impair or
impede their ability to protect their
interests.
Fed.R.Civ.P. 23(b)(1).
Rule 23(b)(2) permits certification when “the party opposing
the class has acted or refused to act on grounds that apply
generally to the class, so that final injunctive relief or
corresponding declaratory relief is appropriate respecting the
class as a whole.” Fed.R.Civ.P. 23(b)(2).
1. Rule 23(b)(1)
Both Rules 23(b)(1)(A) and 23(b)(1)(B) are designed to prevent
prejudice to the parties resulting from multiple suits involving
the same subject matter by certifying a mandatory class. Rule
23(b)(1)(A) seeks to prevent prejudice to the party opposing the
class, while Rule 23(b)(1)(B) seeks to prevent prejudice to other
class members who did not participate in the litigation. Because
breach of fiduciary duty claims under ERISA § 502(a)(2) are often,
as they are here, shared by all Plan participants, the danger of
such prejudice is great. Thus, such claims are “paradigmatic
examples of claims appropriate for certification as a Rule 23(b)(1)
class.” In Re Schering Plough Corp. ERISA Litig., 589 F.3d 585, 604
(3d Cir. 2009); see also In re Marsh ERISA Litig., 265 F.R.D. 128,
142 (S.D.N.Y. 2010).
Defendants argue, however, that neither Rule 23(b)(1)(A) nor
Rule 23(b)(1)(B) applies because there are individual factual
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questions relating to each putative class member’s claims which
eliminate any risk of inconsistent or varying adjudications or
adjudications which would be dispositive of the interests of other
class members. In other words, Defendants argue that the
uncertainty surrounding the Illinois release requires
individualized consideration of the class members’ claims and, as
a result, mandatory certification under Rule 23(b)(1) would be
unwarranted.
The Court disagrees. In the Illinois Litigation, Defendants
released the ERISA claims of the Plan, not the ERISA claims of the
individual participants. Thus, the scope of the release is a single
question of law which does not implicate facts applicable to
specific individuals, and is appropriate for treatment on a class-
wide basis. Cf. In re Polaroid ERISA Litig., 240 F.R.D. 65, 75-76
(S.D.N.Y. 2006). Defendants’ argument is therefore rejected, and
the Court turns to consideration of Defendants’ other arguments
against Rule 23(b)(1) certification.
a. Rule 23(b)(1)(A)
Defendants first oppose class certification under Rule
23(b)(1)(A) because “there is little, if any risk, of individual
suits by unnamed class members if the class is not certified.”
Defs.’ Opp’n at 24. In support of this argument, Defendants point
to the fact that, to date, no one apart from the three named
representatives have filed suit. Id. However, as Plaintiffs
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respond, there is no reason for other class members to have filed
suit at this point given that this class action is pending.
Second, Defendants argue that the threat of incompatible
standards of conduct is rarely present in suits for monetary
damages, and thus certification under Rule 23(b)(1)(A) is
inappropriate. Plaintiffs seek an order that Defendants restore to
the New Waste Plan all losses occasioned by their breaches of
fiduciary duties and “appropriate relief to enjoin the acts and
practices of the Defendants alleged herein,” as well as “such other
equitable and legal relief as the Court deems just.” 5th Amd.
Compl., Prayer for Relief. It is true, as Defendants argue, that
the relief sought by Plaintiffs is primarily monetary.
Although there is some precedent that ERISA § 502(a)(2) suits
seeking primarily monetary relief are not appropriate for
certification under Rule 23(b)(1)(A), most courts that have
recently ruled on the issue have rejected that conclusion. Compare
In re First Am. Corp. ERISA Litig., 258 F.R.D. 610, 621-22 (C.D.
Cal. 2009) (concluding, on the basis of definitive Ninth Circuit
precedent, that an ERISA § 502(a)(2) suit brought primarily for
monetary damages was not appropriate for Rule 23(b)(1)(A)
certification); and Hochstadt v. Boston Sci. Corp., 708 F.Supp.2d
95, 104 n.11 (D. Mass. 2010) (concluding the same in a footnote);
with Hans v. Tharaldson, No. 3:05-cv-115, 2010 WL 1856267, at *10
(D.N.D. May 7, 2010) (concluding that Rule 23(b)(1)(A)
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certification is appropriate for § 502(a)(2) claim for monetary
relief); Stanford, 263 F.R.D. at 173 (same); Jones v. NovaStar
Fin., Inc., 257 F.R.D. 181, 193-94 (W.D. Mo. 2009) (same); Kanawi
v. Bechtel Corp., 254 F.R.D. 102, 111 (N.D. Cal. 2008) (same); In
re Nortel Networks Corp. ERISA Litig., No. 3:03-md-01537, 2009 WL
3294827, at *15-16 (M.D. Tenn. Sept. 2, 2009) (same); In re Merck
& Co. Inc. Secs., Derivative & ERISA Litig., Nos. 05-cv-1151, 05-
cv-2369, 2009 WL 331426, at *11 (D.N.J. Feb. 10, 2009) (same);
Abbott v. Lockheed Martin Corp., No. 06-cv-701, 2009 WL 969713, at
*9 (S.D. Ill. Apr. 3, 2009) (same).
Those courts which have found certification under Rule
23(b)(1)(A) inappropriate have done so on the basis of Ninth and
Eleventh Circuit precedent concluding that suits primarily for
monetary damages pose no risk of incompatible standards of conduct.
See Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1193
(9th Cir. 2001); Babineau v. Fed Express Corp., 576 F.3d 1183, 1195
(11th Cir. 2009) Significantly, neither Zinser nor Babineau
addressed whether their holdings should apply in the ERISA §
502(a)(2) context. Moreover, these cases involved, respectively,
product liability and breach of contract claims in which each class
member had individual claims against the defendants, and therefore
class certification would pose individual liability issues. Here,
in contrast, the claims are brought on behalf of the entire Plan,
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of which the putative class members are participants, and rulings
on liability will apply to all members of the class.
As the court in Stanford, 263 F.R.D. at 173 (citations and
internal quotations omitted), explained in language that is
applicable to this case:
The issue is not whether plaintiff seeks
primarily monetary damages; rather, the focus
of a Rule 23(b)(1)(A) analysis is on whether
separate actions could lead to adjudications
that establish incompatible standards of
conduct for the party opposing the class. . .
. [T]he court is concerned with the effect of
inconsistent orders with respect to individual
Plan accounts. When raising a plan-wide claim,
a plaintiff is pursing a claim on behalf of
the entire plan, which necessarily includes
discrete accounts within the plan.
Accordingly, if a court entertaining an
individual account claim [pursuant to LaRue,
552 U.S. 248, 128 S.Ct. 1020] were to reach a
different conclusion from a court entertaining
a plan-wide claim, the fiduciaries would be
left with incompatible orders concerning the
same account. . . . Such competing orders lead
to incompatible standards of conduct for the
defendants.
In addition, although Plaintiffs primarily seek monetary
damages in this case, it is not clear why what Defendants term
their “perfunctory” requests to enjoin the acts and practices of
the Defendants could not result in incompatible standards of
conduct if a separate action resulted in a contrary ruling. Defs.’
Opp’n at 27; see In re Merck & Co., Inc., 2009 WL 331426, at *11
(stating that Rule 23(b)(1)(A) “does not require that the varying
adjudications would establish incompatible standards as the
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exclusive or even primary remedy” but only that “varying
adjudications would establish incompatible standards”). For
example, this Court could enter a ruling to restore Plan assets,
remove Plan fiduciaries, or reform Plan investigative practices and
monitoring practices that would directly contradict another Court’s
ruling on the very same issues. In that event, Defendants would be
faced with incompatible standards of conduct with respect to their
duties and obligations toward the Plan.
For these reasons, the Court concludes that there is a risk of
“inconsistent or varying adjudications with respect to individual
class members that would establish incompatible standards of
conduct for the party opposing the class” in this case. Thus,
certification under Rule 23(b)(1)(A) is appropriate.
b. Rule 23(b)(1)(B)
As noted above, Rule 23(b)(1)(B) focuses not on the danger to
defendants of inconsistent rulings, but on the risk that separate
actions might dispose of the interests or rights of other class
members. Historically, § 502(a)(2) actions brought on behalf of the
entire plan have been considered especially appropriate for Rule
23(b)(1)(B) certification. See Ortiz v. Fibreboard Corp., 527 U.S.
815, 833-34, 119 S.Ct. 2295, 2308-09, 144 L.Ed.2d 715 (1999). The
Advisory Committee Notes to the 1966 Amendment of Rule 23(b)(1)(B)
state that certification is especially appropriate in cases
charging breach of trust by a fiduciary to a large class of
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beneficiaries. In addition, Congress’s intent was that ERISA
“actions for breach of fiduciary duty be brought in a
representative capacity on behalf of the plan as a whole.” See
Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142 n.9, 105
S.Ct. 3085, 3090 n.9, 87 L.Ed.2d 96 (1985).
Defendants argue, however, that the Supreme Court’s decision
in LaRue, 552 U.S. 248, eliminated the risk that individual class
members’ rights or interests would be disposed of by § 502(a)(2)
actions. The plaintiff in LaRue sought to bring a § 502(a)(2) claim
against his plan’s fiduciaries for their failure to make certain
changes he requested to his individual account, which diminished
the value of his interest in the plan. The Supreme Court held that,
“although § 502(a)(2) does not provide a remedy for individual
injuries distinct from plan injuries, that provision does authorize
recovery for fiduciary breaches that impair the value of plan
assets in a participant’s individual account.” Id. at 256.
Defendants contend that this holding--that a participant in a
defined contribution plan can bring an individual suit for breach
of fiduciary duty, in addition to the possibility of bringing a
suit on behalf of the entire plan--means that the putative class
members can protect their own interests by bringing individual
suits, whatever the disposition of this litigation may be, making
certification under Rule 23(b)(1)(B) inappropriate. There is some
precedent supporting this interpretation. See In re First Am. Corp.
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ERISA Litig., 258 F.R.D. at 622; In re Computer Sciences Corp.
ERISA Litig., No. 08-cv-2398, 2008 WL 7527874, at *3 (C.D. Cal.
Sept. 2, 2008).
However, most courts deciding class certification motions for
§ 502(a)(2) actions post-LaRue have continued to find Rule
23(b)(1)(B) certification appropriate. See George v. Kraft, No. 08-
C-3799, 2010 WL 3386, at *402 (N.D. Ill. Aug. 25, 2010); In re
Marsh ERISA Litig., 265 F.R.D. at 144; Stanford, 263 F.R.D. at 173-
74; Hochstadt, 708 F.Supp.2d at *104 n.12; Kanawi, 254 F.R.D. at
109; NovaStar Fin., Inc., 257 F.R.D. at 190; Hans v. Tharaldson,
2010 WL 1856267, at *9-10.
In Stanford, the court acknowledged the appeal of Defendants’
argument, but concluded that Rule 23(b)(1)(B) certification was
still appropriate post-LaRue:
[B]ecause Stanford challenges behavior of
defendants that allegedly injured the entire
Fund, Stanford’s claims would be identical to
any individual account claim that another
putative class member may raise. Indeed, . . .
a participant’s individual account is still a
part of the Plan, and, therefore, an
adjudication as to the Plan will likewise
impact a participant’s individual accounts.
Thus, the availability of an individual
account claim under § 502(a)(2) does not
alleviate the concerns cited by the numerous
courts that have certified ERISA class actions
pursuant to Rule 23(b)(1)(B) in situations
where claims on behalf of the Plan are
identical to those on behalf of an individual
account.
263 F.R.D. at 174.
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Defendants argue that the reasoning in Stanford is
inapplicable because “the claims of each of the class
representatives are potentially very different from those available
to the other class representatives and to absent members of the
putative class.” Defs.’ Opp’n at 31 n.19. As has been discussed,
the Court is not convinced that the uncertainty surrounding the
scope of the Illinois release will result in “very different”
claims for some putative class members. At most, the effect of the
release would be to create two groups of putative class members:
those whose claims in Counts I-V were released, and those whose
claims were not released. Thus, adjudication of the named
representatives’ claims as to the Plan would impact the individual
accounts of those participants who are similarly situated.
Thus, the Court concludes that LaRue did not eliminate the
risk that the putative class members’ interests and rights in this
action will be disposed of if separate litigation on the same
subject matter is permitted. Consequently, certification of a
mandatory class under Rule 23(b)(1)(B) is appropriate.
2. Rule 23(b)(2)
Finally, as noted above, a class may be certified under Rule
23(b)(2) if “the party opposing the class has acted or refused to
act on grounds that apply generally to the class, so that final
injunctive relief or corresponding declaratory relief is
appropriate respecting the class as a whole.” Fed.R.Civ.P.
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23(b)(2). Thus, Rule 23(b)(2) certification is appropriate for a
class seeking primarily equitable relief for a common injury, not
a class seeking substantial monetary damages. In re Veneman, 309
F.3d 789, 792 (D.C. Cir. 2002); see also Fed.R.Civ.P. 23(b)(2),
adv. comm. n. (certification under Rule 23(b)(2) “does not extend
to cases in which the appropriate final relief relates exclusively
or predominately to money damages”).
While Plaintiffs are seeking injunctive and declaratory relief
in this action, their primary goal is, as discussed earlier, to
obtain monetary damages for class members. Thus, the Court
concludes that certification under Rule 23(b)(2) is inappropriate.
C. Rule 23(g)
Finally, a court that certifies a class must appoint class
counsel under Rule 23(g). Plaintiffs request that Ellen M. Doyle
and the law firm of Stember Feinstein Doyle Payne & Cordes, L.L.C.
and J. Brian McTigue and the law firm of McTigue & Veis, L.L.P. be
appointed as Co-lead Counsel, and Gregory Yann Porter of Bailey &
Glasser, L.L.P. be appointed as Counsel. Proposed class counsel
have extensive experience litigating ERISA class actions, and have
demonstrated their commitment to the prosecution of this action.
Pls.’ Mot. at 26; Attn’y Biographies (Ex. Q to Dkt. No. 249). In
addition, Defendants do not oppose certification of Plaintiffs’
proposed class counsel. See Defs.’ Opp’n. Consequently, the Court
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appoints Plaintiffs’ requested counsel as class counsel in this
case.
CONCLUSION
For the reasons set forth herein, the Court concludes that
Plaintiffs have carried their burden to meet the requirements under
Rules 23(a), 23(b)(1)(A), 23(b)(1)(B) for certification of the
class defined as follows:
All participants (and their beneficiaries) in
the Waste Management Retirement Savings Plan
and/or its predecessor plans, including the
Waste Management Profit Sharing and Savings
Plan, for whose accounts the fiduciaries of
the plan acquired the following employer
securities of Waste Management, Inc.:
A) pre-corporate-merger common stock
(NYSE: WMX) on or after January 1,
1990, through and including July 16,
1998.
Plaintiffs have failed to meet their burden, however, to
certify the class of participants (and their beneficiaries) for
whose accounts the fiduciaries of the plan acquired “B) post-
corporate-merger common stock (NYSE: WMI) on or after July 16,
1998, through and including November 9, 1999.” In addition,
Plaintiffs have failed to meet their burden to prove that
certification under Federal Rule of Civil Procedure 23(b)(2) is
appropriate. Consequently, Plaintiffs’ Amended Motion for Class
Certification [Dkt. No. 356] is granted in part, and denied in
part.
The Court certifies the following common questions of fact and
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law for Counts I-IX of the Fifth Amended Complaint:10
• Whether the fiduciaries caused the Plan to acquire shares
of company stock at inflated prices, and whether this
constituted a breach of fiduciary duty under ERISA;
• Whether findings made in other litigation against
Defendant James E. Koenig may be used affirmatively for
purposes of collateral estoppel in this action;
• Whether the representation of the Plan and its
participants by State Street in the Illinois Litigation
was adequate and loyal;
• Whether State Street’s investigation into the claims of
the Plan prior to its agreement to release the claims was
adequate;
• Whether the representation of the Plan and its
participants by the lead plaintiffs in the Illinois
Litigation was adequate when they did not have or assert
ERISA claims;
• Whether additional claims for a recovery under ERISA
could have been but were not made for the Plan during the
Illinois Litigation;
• Whether additional claims for a recovery under ERISA had
any value and, if so, what additional value the ERISA
claims provided;
• Whether any claims for additional recoveries under ERISA
were within the scope of the Illinois Litigation
settlement release;
• Whether the release in the Illinois Litigation settlement
may be enforced against the Plan and its participants;
• Whether State Street caused the Plan to engage in a
prohibited transaction in the settlement of its claims in
the Illinois Litigation;
• Whether Defendants Koenig and Tobeckson acted to conceal
their breaches of fiduciary duty, thereby subjecting the
10
This list is not intended as a final or definitive list
of the common questions of fact or law in this case.
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Plaintiffs’ claims to ERISA’s six-year statute of
limitations; and
• Whether Plaintiffs and Class members were injured by the
Old Waste Plan Investment Committee Defendants’ alleged
failure to conduct an adequate fiduciary review to
determine whether it was prudent to continue to acquire
Company Stock.
In addition, the Court appoints Harris, Howard, and Thornton
as class representatives. Ellen M. Doyle and the law firm of
Stember Feinstein Doyle Payne & Cordes, L.L.C. and J. Brian McTigue
and the law firm of McTigue & Veis, L.L.P. are appointed as Co-lead
Counsel, and Gregory Yann Porter of Bailey & Glasser, L.L.P. is
appointed as Counsel.11 An Order will accompany this Memorandum
Opinion.
/s/
November 12, 2010 Gladys Kessler
United States District Judge
Copies to: attorneys on record via ECF
11
No objection was made as to their appointment.
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