Cunningham v. Cornell University
1:16-cv-06525
S.D.N.Y.Jan 22, 2019Background
- Plaintiffs are current/former Cornell employees who sued on behalf of participants in two Cornell defined-contribution plans (Retirement Plan and TDA Plan), alleging ERISA breaches for imprudent management and excessive fees.
- Plans are "jumbo" (each > $1 billion); recordkeepers are TIAA-CREF and Fidelity; Cornell, a committee chaired by Mary Opperman, and CAPTRUST are named fiduciary defendants.
- Plaintiffs allege defendants failed to control recordkeeping fees, solicit flat per-participant bids, consider a single recordkeeper, retained high-fee / underperforming funds (notably CREF Stock and TIAA Real Estate), and failed to monitor Committee appointees.
- Plaintiffs seek class certification for all participants/beneficiaries from Aug 17, 2010–Aug 17, 2016 (excluding fiduciaries/defendants).
- Court previously denied in part defendants’ motion to dismiss; here it grants class certification and appoints Schlichter Bogard & Denton LLP as class counsel.
- Court certifies class under Rule 23(b)(1) (and need not reach (b)(3)), rejects standing and individualized statute-of-limitations arguments as defeating certification, and directs class notice submission.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to assert plan-wide, derivative ERISA claims | Named plaintiffs have individualized losses and may sue derivatively for injuries to the plans; need not have invested in every fund | Defendants say plaintiffs lack standing for funds they never invested in | Court: plaintiffs have standing via derivative injury and class-standing doctrine; investments in some funds suffice to implicate same concerns for others |
| Rule 23(a) commonality/typicality | Claims arise from common process failures (fee negotiation, fund selection/monitoring) affecting all participants | CAPTRUST: individualized issues (e.g., statute of limitations, fund-by-fund inquiries) defeat commonality/typicality | Court: common questions predominate; process-based claims meet commonality and typicality; potential individual defenses do not bar certification |
| Statute of limitations (ERISA §1113) | Class members may share common issues about actual knowledge; named plaintiffs lack disqualifying actual knowledge | CAPTRUST: many class members may have actual knowledge earlier, requiring individualized inquiry; Mr. Lance knew long ago | Court: actual-knowledge defense is individualized but does not defeat certification; Mr. Lance's alleged suspicions do not trigger limitations period as a matter of law; class period need not be narrowed now |
| Rule 23(b)(1) suitability (vs. (b)(3)) | Remedies and fiduciary duties operate plan-wide; adjudications for some members would bind/control others; risk of inconsistent standards warrants (b)(1) certification | CAPTRUST: hundreds of funds require individualized fund-level inquiries making class treatment inappropriate | Court: (b)(1) certification appropriate because fiduciary duties and plan remedies affect all participants; logistical complexity alone does not preclude (b)(1) class |
| Appointment of class counsel and disclosure/damages issue | Plaintiffs' counsel experienced in ERISA class actions; Rule 26 disclosures identified many share-class damages | Defendants seek sanctions / argue plaintiffs forfeited damages for some funds by insufficient Rule 26 disclosures | Court: appoints Schlichter Bogard & Denton LLP; disclosure/damages contentions do not defeat certification and sanctions argument not resolved in certification response |
Key Cases Cited
- L.I. Head Start v. Econ. Opportunity Comm’n of Nassau Cty., 710 F.3d 57 (2d Cir. 2013) (derivative standing: plaintiffs may assert injuries to plan sufficient for constitutional standing)
- Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568 U.S. 455 (2013) (courts may consider merits only to the extent relevant to Rule 23 prerequisites)
- Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (Rule 23 requirements and commonality standard)
- LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248 (2008) (defined-contribution plans provide individual-account recovery theory under ERISA)
- NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (2d Cir. 2012) (class-standing test for securities/financial claims implicating same concerns)
- Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999) (Rule 23(b)(1) and risks of inconsistent adjudications)
- Pension Benefit Guar. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705 (2d Cir. 2013) (prudence inquiry and fiduciary process defects)
- Braden v. Wal-Mart Stores, Inc., 588 F.3d 585 (8th Cir. 2009) (permitting claims about unpurchased investments in ERISA class contexts)