Chavez v. Plan Benefit ServicesChavez v. Plan Benefit Services
Before WIENER, STEWART, and ENGELHARDT, Circuit Judges.
Carl E. STEWART, Circuit Judge:
Heriberto Chavez, Evangelina Escarcega (representing her son, Jose Escarcega), and Jorge Moreno (collectively “Plaintiffs“) seek to represent a class in a lawsuit against Plan Benefit Services, Fringe Insurance Benefits, and Fringe Benefit Group (collectively “FBG“) for the alleged mismanagement of funds that Plaintiffs contributed to benefit plans through their employers. Because Plaintiffs have standing to sue and the district court did not abuse its discretion in the Rule 23 certification analysis, we AFFIRM.
I. Background
A. FBG‘s Alleged Mismanagement of the CERT & CPT Trusts
FBG helps employers design and administer employee benefit programs that offer retirement and health and welfare benefits to their employees. In accordance with FBG‘s plan, employers disburse benefits to their employees through two trusts: (1) the Contractors and Employee Retirement Trust (“CERT“), which covers retiremеnt plans; and (2) the Contractors Plan Trust (“CPT“), which covers health and welfare benefits. Each employer signs either a separate retainer agreement or an adoption agreement as part of their enrollment in a plan. FBG serves as “Master Plan Sponsor” and “Recordkeeper” for both CERT and CPT.
The contracts that FBG enters with employers also include a “Master Trust Agreement” granting FBG greater control over the CERT and CPT trusts. For example, the Master Trust Agreement allows FBG to determine the fees deducted from CERT and allows it to direct “banks and other entities holding Trust funds to pay those fees, including to FBG itself.” As to CPT specifically, the Master Trust Agreement authorizes FBG to “calculate and deduct its own fees from employer contributions before remitting premium payments to the carriers.”
FBG markets CERT and CPT to non-union employers seeking to compete for government contracts. To qualify for the contracts, employers must pay their employees prevailing wages—that is, the wages and benefits paid to the majority of similarly situated laborers in the area at the time. In assisting employers with offering benefits under the prevailing wage
Plaintiffs were employees of the Training, Rehabilitation & Development Institute, Inc. (“TRDI“). TRDI contracted with FBG for various services. It was required to provide wage and fringe benefits to its employees in an amount calculated by the applicable prevailing wage determination. It provided retirement plans under CERT and health and welfare plans under CPT. The agreement governing CERT, CPT, and TRDI allotted various “powers and responsibilities” to FBG. For example, FBG had the power to: (1) enter contracts imposing fees and other charges on the trusts and the plans; (2) instruct any insurance company with respect to investment or disbursement of investment funds on behalf of the Trustee; (3) require the Trustee to make disbursements for FBG‘s own fees in any amount that it directed; and (4) appoint and remove the Trustee.
Chavez participated in CPT, meaning that TRDI paid monthly contributions to CPT on his behalf, from which FBG deducted fees. TRDI contributed a certain amount of money to a fringe benefit account in Chavez‘s name for every hour that he worked, in accordance with federal and state laws. This fringe benefit account was used to help pay Chavez‘s premiums incurred through his enrollment in health and welfare plans provided by TRDI. TRDI also paid a premium of $570.58 a month into CPT for these benefits to cover his insurance. At least ten percent of the premium amount was paid to FBG. These fees were taken from Chavez‘s individual health and welfare account. He contends that the “account was depleted more than it otherwise would have been if the fees had been reasonable.” He also avers that the unreasonable fees are wholly responsible for “no amount ever [being] contributed [to his] retirement account.”
Escarcega and Moreno participated in both CERT and CPT. Like Chavez, TRDI made contributions to the fringe benefit accounts based on the number of hours that Escarcega and Moreno worked. Under each plan, FBG‘s fees for plan administration services were subtracted from their individual accounts. They allege that FBG “deducted fees totaling more than 10% of these payments for their own compensation before remitting the remainder to” their medical insurance providers. Escarcega was also enrolled in a “limited medical plan” with Standard Security Life (“SSL“) through CPT. He claims that “FBG deducted compensation for itself . . . for ancillary insurance premiums and fees of more than 17% of these payments, remitting the remaining amount as premiums to SSL.”
B. Procedural History
In July 2017, Plaintiffs sued FBG for mismanaging their employee benefit plans by collecting excessive fees in violation of the Employee Retirement Income Security Act (“ERISA“). See
Thereafter, Plaintiffs filed a motion for class certification. They sought to represent a class of “all participants in and beneficiaries of employee benefit plans that provide benefits through CERT and CPT, . . . from six years before the filing of this action [July 6, 2011] until the time of trial.” The district court encountered a question of first impression: whether Plaintiffs had standing to sue FBG on behalf of unnamed class members from different contribution plans. It requested additional briefing on the issue and ultimately ruled that Plaintiffs had constitutional and statutory standing to sue FBG in a class-action context. On constitutional standing, the district court explained that Plaintiffs had demonstrated injury in fact, traceability, and redressability. Notably, it held that the class context was appropriate because “both the named and unnamed plaintiffs . . . are participants ‘of plans that provide employee benefits through CPT or CERT.‘” It concluded that commonality was sufficient to allow class certification at this stage.
As for statutory standing, the district court relied on a Sixth Circuit case, Fallick v. Nationwide Mutual Insurance Company, to hold that Plaintiffs’ only burden at this stage was assuring the court of their own standing to sue FBG. 162 F.3d 410, 424 (6th Cir. 1998). Specifically, it cited Fallick for the proposition that “the standing-related provisions of ERISA were not intended to limit a claimant‘s right to proceed under Rule 23 on behalf of all individuals affected by the [fiduciary‘s] challenged conduct, regardless of the representative‘s lack of participation in all the ERISA governed plans involved.” Id. at 410;
FBG appealed, and a panel of this court vacated and remanded, holding that the district court failed to engage in the “rigorous analysis” necessary for certifying a class action under
Upon consideration, the district court certified the following two classes:
(1) All participants and beneficiaries of plans that provide employee benefits through CPT—other than [FBG‘s] officers, directors, or relatives—from July 6, 2011, until trial; and
(2) All participants and beneficiaries of plans that provide employee benefits through CERT—other than (a) participants and beneficiaries of custom plans, and (b) [FBG‘s] officers, directors, оr relatives—from August 31, 2014, until trial.
FBG then filed the instant appeal, urging this court to determine that Plaintiffs lack standing to represent the class and reverse the district court‘s decision that Rules
II. Standard of Review
“Standing is a question of law that we review de novo.” N. Cypress Med. Ctr. Operating Co., Ltd. v. Cigna Healthcare, 781 F.3d 182, 191 (5th Cir. 2015) (citation and emphasis omitted). We review “all facts expressly or impliedly found by the district court” for clear error. Rivera v. Wyeth-Ayerst Labs., 283 F.3d 315, 319 (5th Cir. 2002).
We review class certification decisions for abuse of discretion. See Allison v. Citgo Petroleum Corp., 151 F.3d 402, 408 (5th Cir. 1998) (citation omitted). “Implicit in this deferential standard is a recognition of the essentially factual basis of the certification inquiry and of the district court‘s inherent power to manage and control pending litigation.” Id. (citation omitted). “We review de novo, however, whether the district court applied the correct legal standards in determining whether to certify the class.” Flecha v. Medicredit, Inc., 946 F.3d 762, 766 (5th Cir. 2020) (emphasis, quotations, and citations omitted).
III. Discussion
Preliminarily, we address FBG‘s characterization of Plaintiffs’ theory on appeal. FBG asserts that Plaintiffs have insisted that their lawsuit is only, or at least primarily, about excessive fees that they and the unnamed class members were subjected to by FBG. But that depiction of Plaintiffs’ theory fails to capture the entire breadth of their argument.
Plaintiffs have always sought to make this case about FBG‘s general practices in upholding their duties as fiduciaries of the CERT and CPT trusts. Indeed, their complaint focuses on the “Master Trust Agreement” and “Adoption Agreement” as the mechanisms through which FBG was able to charge the excessive fees to the various employees that participated in their plans. Furthermore, they have always sought to bring this action on behalf of members of the trust, not just employees who were allegedly charged excessive fees. As Plaintiffs explain, the harm not only derives from FBG‘s charging of excessive fees but also from the financial harm that FBG allegedly caused to the CERT and CPT trusts.
We disagree with FBG that this case is only about the payment of excessive fees. The more apt characterization is detailed in Plaintiffs’ complaint, which explains that this case is also about FBG‘s alleged mismanagement of the trusts that they compel each employee to pay into through contracts with their employers. Likewise, the class that the district court eventually certified further reflects this understanding of Plaintiffs’ theory. With that said, we press on to FBG‘s standing argument.
A. Standing
FBG asserts that the district court erroneously determined that Plaintiffs had standing to challenge fees that they were never subjected to, in plans that they never participated in, relating to services that they never received, from employers for whom they never worked. It avers that the district court skipped these justiciability
In response, Plaintiffs insist that the district court simply recognized that FBG‘s concerns were best addressed during the
Federal courts have a continuing obligation to address jurisdictional defects. See Lewis v. Hunt, 492 F.3d 565, 568 (5th Cir. 2007). Constitutional standing is one such consideration. The doctrine requires a plaintiff to demonstrate “(1) that he or she suffered an injury in fact that is concrete, particularized, and actual or imminent, (2) that the injury was caused by the defendant, and (3) that the injury would likely be redressed by the requested judicial relief.” Thole v. U.S. Bank N.A., 140 S. Ct. 1615, 1618 (2020) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–561 (1992)).
The concreteness and particularity of Plaintiffs’ injuries are especially relevant in this cаse. The Supreme Court has explained that a concrete injury is one that is “real, and not abstract.” Spokeo, Inc. v. Robins, 578 U.S. 330, 340 (2016) (quotations omitted) (explaining that for an injury to be concrete, it “must actually exist“). And for an injury to be particularized, it must “affect the plaintiff in a personal and individual way.” Id. at 339 (quotations and citation omitted).
“The party invoking federal jurisdiction bears the burden of establishing these elements.” Lujan, 504 U.S. at 561. Plaintiffs carry this burden throughout the litigation proceedings. See id. (“Since [standing is not a] mere pleading requirement[] but rather an indispensable part of the plaintiff‘s case, each element must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation.“).
The Supreme Court has repeatedly explained that “Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not.” TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2208 (2021) (citing Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. 442, 466 (2016) (Roberts, C.J., concurring)). The Court has also cautioned us against dispensing standing “in gross” in a class-action context—instead instructing us to ensure that plaintiffs “demonstrate standing for each claim that they press and for each form of relief that they seek[.]” Id. (citation omitted).
FBG raises important questions about the order and depth in which this court grapples with constitutional standing and the
Newberg on Class Actions explains that appellate courts have resolved the disjuncture issue using two methods: (1) Some courts, “having determined that the class representative has standing to pursue her own claims, move on from the standing inquiry and approach the disjuncture as an issue of class certification“; or (2) Other courts “simply find that the class representative lacks standing to pursue the class members’ claims because she did not suffer their injuries[.]” Id. For the purposes of our analysis herein, the first approach will be referred to as the class certification approach, while the latter is the standing approach.
While the Supreme Court has yet to declare which approach is correct, its standing jurisprudence provides guidance as we weigh the potential options. We examine each respective approach and conclude that, in this case, we may proceed to
1. The Class Certification Approach
The Supreme Court first grappled with the disjuncture issue in Sosna v. Iowa, 419 U.S. 393 (1975). There, a wife brought a class action suit challenging the constitutionality of an Iowa state law that required individuals seeking a divorce to have been a resident of the state for at least one year preceding the filing of the divorce petition. Id. In upholding the constitutionality of Iowa‘s law, the Court stated that a “named plaintiff in a class action must show that the threat of injury . . . is ‘real and immediate,’ not ‘conjectural’ or ‘hypothetical.‘” Id. at 403. It continued that the named plaintiff “must be a member of the class which he or she seeks to represent at the time the class action is certified by the district court.” Id.
The Sosna court reasoned that its “conclusion [did] not automatically establish that appellant [was] entitled to litigate the interests of the сlass she [sought] to represent.” Id. But it explained that “the focus of examination” nonetheless shifted “from the elements of justiciability to the ability of the named representative to ‘fairly and adequately protect the interests of the class.‘” Id. (quoting
The Supreme Court later applied the same reasoning from Sosna in General Telephone Company of Southwest v. Falcon, 457 U.S. 147, 157-60 (1982). There, the named plaintiff, a Mexican-American employee, was passed over for a promotion and brought a class-action suit against his employer for alleged discrimination in both the hiring and promoting of minority employees. Id. at 150. While the Court acknowledged that the named plaintiff established standing to represent a class comprised of other minorities passed over for promotions, it declined to allow him to represent persons that were never hired because of an allegedly discriminatory application process. Id. at 157–60. Notably, the Court came to its conclusion in the
At the circuit-court level, the class certification approach was followed by the Sixth Circuit in Fallick and has gained
proceeds to consider whether the
2. The Standing Approach
Less than a decade after Sosna, the Supreme Court encountered the disjuncture issue again in Blum v. Yaretsky, a Medicaid case involving a Fourteenth Amendment challenge to certain nursing homes’ unilateral decisions to transfer patients to facilities with lesser or higher levels of care than the patients already had without any administrative hearings for their desires to be heard. 457 U.S. 991 (1982). The Court‘s analysis primarily focused on standing, as it explained that:
It is not enough that the conduct of which the plaintiff complains will injure someone. The complaining party must also show that he is within the class of persons who will be concretely affected. Nor does a plaintiff who has been subject to injurious conduct of one kind possess by virtue of that injury the necessary stake in litigating conduct of another kind, although similar, to which he has not been subject.
Id. at 999 (emphasis in original) (citing Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 166-67 (1972)). In concluding that the plaintiffs lacked stаnding, the Court explained that “the conditions under which such transfers [to higher levels of care] occur are sufficiently different from those [that] respondents do have standing to challenge that any judicial assessment of their procedural adequacy would be wholly
Fourteen years later, the Supreme Court grappled with the standing approach again in Lewis v. Casey, 518 U.S. 343, 346 (1996). There, the Court considered a class action brought by a group of Arizona inmates alleging a denial of their right of access to the courts. Id. The named plaintiff claimed that he was denied access to the courts due to his illiteracy and further averred that the prison refused to provide him with any services to assist him. Id. at 356. While the Court agreed that the named plaintiff likely had standing to sue, it declined to еxtend standing to others who were denied access to the courts for reasons other than illiteracy. Id. at 358 (refusing to provide standing to enter the class to “non-English speakers,” “prisoners in lockdown,” and the “inmate population at large“).
The Lewis court supported its cabining of the named plaintiff‘s standing by explaining that the “actual-injury requirement would hardly serve [its] purpose . . . if once a plaintiff demonstrated harm from one particular inadequacy in government administration, the court were authorized to remedy all inadequacies in that administration.” Id. at 357 (emphasis in original). It continued that “[t]he remedy must of course be limited to the inadequacy that produced the injury in fact that the plaintiff has established . . . This is no less true with respect to class actions than with respect to other suits.” Id. Put simply, the Court refused to allow a plaintiff whose injury stemmed from his illiteracy represent those that had suffered the same injury for an entirely different, unrelated reason. Id.
Finally, the Supreme Court‘s decision in Gratz v. Bollinger marked a further development in the standing approach. See 539 U.S. 244 (2003). That landmark case involved a сlass-action challenge to the University of Michigan‘s (“UM“) race-based affirmative action policies in its admissions process. Id. at 252. The named plaintiff in that case sought admittance to UM by transferring from another university. Id. Given the Court‘s decision in Lewis, one might think that any class that he represented would be limited to other transfer students that alleged to have been harmed by UM‘s race-based admissions policies. 518 U.S. at 357. The Court, however, allowed him to not only sue on behalf of transfer students but also prospective freshmen that alleged the same kind of harm. Gratz, 539 U.S. at 244. In rejecting the respondent‘s challenge to the plaintiff‘s standing at the certification stage, the Court distinguished Gratz from Blum, holding that UM‘s “use of race in undergraduate transfer admissions does not implicate a significantly different set of concerns than does its use of race in undergraduate freshman admissions.” Id. at 265 (emphasis added).2
Several tests have emerged from the Supreme Court‘s decision in Lewis, offering varied levels of strictness to the standing inquiry in the class context. The broadest interpretation comes from the Ninth
Not every circuit, however, views Lewis and its progeny so liberally. The Second Circuit, for example, takes a stricter approach and has developed a two-part test for class standing. See, e.g., Barrows v. Becerra, 24 F.4th 116,
129 (2d Cir. 2022). Its test requires a named plaintiff to plausibly allege “(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.” Id. (internal quotations, citation, and footnote omitted). It has explained that when this test “is satisfied, the named plaintiff‘s litigation incentives are sufficiently aligned with those of the absent class members[, such] 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).
Notably, the Eleventh Circuit takes an approach akin to the Second Circuit. See Fox v. Ritz-Carlton Hotel Co., LLC, 977 F.3d 1039, 1046 (11th Cir. 2020) (“First, the class representative must satisfy the individual standing prerequisites of the case or controversy requirement. Second, the class representative must also be part of the class and possess the same interest and suffer the same injury as the class members.“) (internal quotation marks and citations omitted). In Fox, the Eleventh Circuit considered a putative class action against a restaurant owner under the Florida Deceptive аnd Unfair Trade Practice Act3 for his alleged failure to provide adequate notice that there was an automatic gratuity or service charge added to each customer‘s check. See id. at 1039.
While the Eleventh Circuit reversed and remanded due to the plaintiff‘s failure to exhaust administrative remedies, it made clear that he had “class representative standing.” Id. at 1047. Specifically, the court explained that the district court “conflate[d] the requirements of individual
standing with those for a class representative.” Id. It continued that “class standing does not necessarily require that the class representative suffer injury at the same place and on the same day as the class members. Rather, [standing] requires that the named plaintiff and class members have the same interest and suffer the same injury.” Id. (internal citation and quotation omitted).
B. Angell
Relevantly, a panel of this court recently grappled with the disjuncture issue. Angell v. Geico Advantage Ins. Co., 67 F.4th 727 (5th Cir. 2023). There, a group of plaintiffs (the “Angell Plaintiffs“) sought “to represent a class of insureds claiming that GEICO failed tо fully compensate them for the total loss of their vehicles under their respective insurance policies.” Id. at 731. Geico challenged the Angell Plaintiffs’ standing, arguing that while
In rejecting Geico‘s argument, we recognized that “[t]here has yet to be a bright line drawn between the issues of standing and class certification.” Id. (citing Gratz, 539 U.S. at 236 n.15). Rather than attempting to draw that line, the panel analyzed the Angell Plaintiffs’ standing under both the “more intensive standing approach” and “the more forgiving class certification approach.” Id. at 734 (internal quotations and citation omitted).
The Angell court held that the Angell Plaintiffs had standing to represent the class under the standing approach because their injuries and interests were “sufficiently aligned with those of the class.” Id. at 734-35 (examining whether the Angell Plaintiffs possessed “sufficiеntly analogous” injuries as the class they sought to represent). The court likewise held in their favor under the class certification approach because Geico already had conceded that the Angell Plaintiffs established standing, and that was all that this more forgiving approach required. Id. at 734. With both tests satisfied, the panel conducted the
While the Angell court‘s application of the two competing approaches has no dispositive effect on the ultimate result in this case, it still provides a useful analytical framework as we endeavor to grapple with an identical issue in the instant case. Just as the panel did in Angell, we decline to adopt either the class certification or standing approach because we have determined that Plaintiffs have standing under both theories. 67 F.4th at 734–36.
C. Neither Approach Bars Plaintiffs from Rule 23 Consideration
1. The Class Certification Approach
The class certification approach provides a direct route to the
Here, Plaintiffs have established their standing to sue FBG. First, they have demonstrated injury in fact by alleging that FBG abused its authority under the Master Trust Agreement by hiring itself to perform services paid with funds from the CERT and CPT trusts, effectively devaluing the trusts and retirement benefits that Plaintiffs otherwise would have accrued with their employer. Second, they have established that their injury is traceable to FBG‘s conduct by providing evidence of FBG‘s direct control over the CERT and CPT trusts and the underlying contractual agreement with their employer. Finally, their injury is redressable in this court by awarding monetary damages or other relief.4 Any further
2. The Standing Approach
The standing approach offers three different avenues for evaluating Plaintiffs’ Article III standing: (1) the Lewis test, requiring us to consider whether Plaintiffs’ harm is so unique that it warrants an isolated remedy that would be inappropriate if extended to other class members, see 518 U.S. at 358; (2) the Gratz test, which requires us to evaluate if Plaintiffs’ injury implicates “a significantly different set of concerns” from the other potential class members, see 539 U.S. at 265; or (3) the Second or Eleventh Circuit tests for class representative standing, which are hybrid versions of the Lewis and Gratz tests. See supra. We address each in turn.
a. Lewis
Under Lewis, we analyze whether Plaintiffs alleged a harm that is unique to them, such that it would be unsuitable to permit other nonrelated harms in the same lawsuit. On this record, they have not alleged a narrow injury. Plaintiffs claim that FBG “impos[ed] sky-high administrative costs, . . . enrich[ing] [itself] at the expense of the Trusts’ participating employee benefit plans and the employees who receive their retirement and healthcare benefits through those plans.” FBG does not contend that the
other class members seek or require a different remedy, nor does it assert that the injury is unique to Plaintiffs. Instead, it merely insists that because Plaintiffs had different plans and employers, they lack standing to challenge the same general practices that each member of the class was subjected to. This theory is unsupported by Lewis.
b. Gratz
The Gratz test is also in Plaintiffs’ favor. Simply put, Plaintiffs’ claim that FBG mismanaged the trust to their detriment “does not implicate a significantly different set of concerns than does” FBG‘s mismanagement of the trust fоr the unnamed class members. 539 U.S. at 265. That there is an abundance of employers and plans does nothing to shift the calculus of that conclusion either. Ultimately, Plaintiffs have undeniably suffered the same kind of loss as the unnamed class members because of FBG‘s alleged misconduct. Id. Put another way, the set of concerns here are identical between Plaintiffs and the unnamed class members: the return of trust funds that each plaintiff would otherwise have been entitled to if FBG had not violated ERISA. Furthermore, at no stage in this litigation, has FBG argued that there are different concerns across the class.
c. The Second & Eleventh Circuit Tests
Under the Second Circuit‘s test, we examine whether Plaintiffs have established “(1) that [they] personally [] 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 thе same defendants.” Barrows, 24 F.4th at 129. The first prong is a traditional standing analysis, which we have already completed in Plaintiffs’ favor. See supra Part III.C.2.a. And the second prong is nothing
set of concerns” as Plaintiffs’ injury. Barrows, 24 F.4th at 129. As we have already explained, Plaintiffs’ claim and FBG‘s conduct wholly implicate the same concerns with respect to each member of the class that Plaintiffs seek to represent. See supra Part III.C.2.b.
The Eleventh Circuit‘s method yields the same result. That test requires us to consider whether Plaintiffs “and [the other] class members have the same interest and suffer[ed] the same injury.” Fox, 977 F.3d at 1047. Plaintiffs and the other class members undoubtedly have the same interest: the return of trust funds or any other vindication of their financial harm. The two also share the same injury: FBG‘s mismanagement of trust funds and charging of excessive fees deprived them of some portion of the benefits that they were entitled to. Again, that these injuries were the result of different agreements with different employers does not alter that the harm occurred directly from FBG‘s misconduct pertaining to the trusts that it required participation in through the incorporation of certain provisions in each contract.
Despite FBG‘s arguments to the contrary, there is no support for a conclusion that Plaintiffs lack constitutional standing to pursue this claim on behalf of other similarly situated plaintiffs allegedly harmed by FBG‘s mismanagement of the CERT and CPT trusts, charging of excessive fees placed into those trusts, and self-dealing in violation of ERISA.
Having analyzed Plaintiffs’ standing under each possible methodology in the Supreme Court and Fifth Circuit‘s jurisprudence, we are satisfied that they have established their standing to sue FBG under Article III. Whether the district court appropriately determined that they are proper class representatives now depends on whether Plaintiffs satisfy the
D. Rule 23 Analysis
The district court conducted a thorough analysis of Rules
1. Rule 23(b)(1)(B)
The district court first determined that Plaintiffs had met their burden to certify a
one party from collecting damages at the expense of other parties and protects later parties from being bound by the judgment of a case in which their interests were not adequately represented. See id. (preventing separate actions where there is 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 would substantially impair or impede their ability to рrotect their interests“).
FBG asserts that the “district court‘s analysis completely fails to account for the central fact that this proposed class involves vastly different plans and fees.” It continues that the district court relied on inapposite caselaw that is too dissimilar from the present circumstances to provide a legal foundation for the certification of this class. It also contends that the district court incorrectly assumed that an accounting for Plaintiffs’ claim would be dispositive in any way for any other plan members. Its arguments are unpersuasive.
We begin with FBG‘s contention that the “record demonstrates the variety of fees and plans in play.” That proposition, as the district court recognized, is demonstrably untrue. The district court went to great lengths in analyzing the alleged uniqueness of each agreement with every employer involved with FBG and the CERT and CPT trusts.8 For example, the district court observed that for CERT, FBG‘s “fees are either uniform or amenable to a pricing grid . . . [in that] all plans are charged the same amount of indirect compensation regardless of employers’ choices.” Furthermore, “direct compensation” was also “uniform or amenable to a pricing grid.” Indeed, the boilerplate-like pricing methodology was even explored during
depositions, where FBG‘s Vice President, Jennifer Carol Pagano, testified that the fees FBG charged were unaffected by the different arrangements that the company made with employers.
Ultimately, the district court, in its discretion, weighed the differences and similarities among the plans—a task only possible because of the limited fluctuations in the terms of contracts—and determined that they were sufficiently similar such that deciding Plaintiffs’ case as an individual action would have unwanted or impermissible effects on similarly situated employees that contributed to the CERT and CPT trusts through different employеrs. Moreover, it recognized that “prosecuting separate actions could substantially impair the putative class members’ ability to protect their interests because Plaintiffs are alleging two claims central to all class members.” Namely, whether FBG is or is not a fiduciary, and, if so, whether it breached their duties in that role.
FBG also urges us to reverse the district court because its class-certification analysis considered the precedential effect that its ruling would have on unnamed class members. Specifically, FBG argues that “[i]t is settled that the possibility that an action will have either [precedential] or stare decisis effect on later cases is not sufficient to satisfy
Aside from considering potential stare decisis issues, the district court weighed numerous other factors in certifying the class under
Furthermore, FBG ignores an important aspect of Plaintiffs’ relief in its attempt to make this case purely about damages and the varied amounts each class member may be owed. A key part of their requested relief sounds in equity, in that they seek a declaration that FBG must stop conduct causing future harm to the trusts and depriving the class of future benefits. This type of relief undoubtedly involves the entire class—or any other members of the CERT and CPT trusts—and plays an important role in the calculus of
Finally, a large part of the monetary relief that Plaintiffs seek stems from their desire to disgorge FBG of ill-gotten profits, thus restoring assets to the CERT and CPT trusts. That is yet another factor favoring the district court‘s dеcision to certify under
Because we conclude that the district court did not abuse its discretion, we uphold its certification of Plaintiffs’ class-action claim under
2. Rule 23(b)(3)
The district court also held that
Class certification under
We have further clarified that the predominance analysis “entails identifying the substantive issues that will control the outcome, assessing which issues will predominate, and then determining whether the issues are common to the class, a process that ultimately prevents the class from degenerating into a series of individual trials.” Bell Atl. Corp. v. AT&T Corp., 339 F.3d 294, 302 (5th Cir. 2003) (quotation marks and citation omitted). Moreover, “[t]he predominance requirement of
FBG contends that the district court abused its discretion by certifying the class under
a. FBG‘s Role as Fiduciary
First, we examine the district court‘s conclusion that this case will not devolve into a series of mini-trials on FBG‘s status as a fiduciary. The district court first examined that all the claims and defenses in the class involved “concepts of duty, breach, causation, and loss.” See In re Enron Corp. Secs., Derivative & ERISA Litig., 284 F. Supp. 2d 511, 579 (S.D. Tex. 2003). It explained that whether FBG owed a duty to Plaintiffs was a common question across the class. Moreover, it observed that whether that duty was breached was a similarly common question that was significant and likely dispositive over the entire class‘s claims.
In response, FBG maintains that those common questions fail to predominate the individualized inquiry into each plan that will necessarily follow. It cites Teets for the proposition that “Plaintiffs must establish that [FBG was the] functional fiduciar[y] as to each challenged action in relation to each plan.” The district court disagreed, and so do we. Besides the fact that it was not bound by the Tenth Circuit‘s decision in Teets, the district court went a different direction than that court because it aptly recognized that trying
For example, each plaintiff would certainly produce that plaintiff‘s own contract, which expressly makes FBG a fiduciary by incorporating the Master Trust Agreement. The predominant question from the production of the Master Trust Agreements is whether it operates as Plaintiffs assert. That question‘s commonality unequivocally dominates any potential individualized inquiries that could arise thereafter.10 The district court did not abuse its discretion.
b. FBG‘s Due Process Rights
FBG also argues that the district court‘s decision to consider Plaintiffs’ statistical evidence interferes with its constitutional right to due process by robbing it of its right “to defend against the alleged excessiveness of every fee paid by every plan in every gеographic area on an individualized basis.” But the nonbinding authority it cites for this right contradicts its assertions. See Mullins v. Direct Digital, LLC, 795 F.3d 654, 670–71 (7th Cir. 2015) (rejecting a violation of a defendant‘s due process rights where there is “a common method for showing individual damages,” such as “a simple formula [that] could be applied to each class member‘s employment records” because “that would be sufficient for the predominance and superiority requirements to be met“) (quoting Newberg on Class Actions § 12:2)).
The Seventh Circuit‘s understanding of due process in Mullins aligns with the Supreme Court‘s jurisprudence on damage calculations through formulae and statistical modeling in the class context. See Comcast Corp. v. Behrend, 569 U.S. 27, 35–37 (2013) (permitting consideration of a model to determine a liability if it “measure[s] only those damages attributable to [the class‘s] theory“); see also Tyson Foods, 577 U.S. at 454–55. In short, the district court did not violate this precedent by acknowledging Plaintiffs’ plan to establish FBG‘s liability using an arithmetic, formulaic method. So, FBG‘s due process rights are sufficiently protected, and thе “[d]ifferences in the amount of damages . . . among class members are no bar to class certification.”
Because Plaintiffs have standing and certification is appropriate under
IV. Conclusion
For the foregoing reasons, we AFFIRM.
Carl E. STEWART
CIRCUIT JUDGE