ORDER RE MOTION TO CERTIFY CLASS AND FOR REVIEW OF MAGISTRATE JUDGE’S MINUTE ORDER
Plaintiffs Denise Rogers (“Rogers”), Jennifer Easton (“Easton”), and David Hillert (“Hillert”) (collectively, the “Plan Partici
I. Background
The Plan Participants are participants in or beneficiaries of the First American 401(k) retirement savings plan (the “Plan”), which is an “employee pension benefit plan” within the meaning of the Employee Retirement Income Security Act (“ERISA”). The Plan is a defined contribution plan, in which participants have individual accounts and select their investment fund from a variety of available options.
The Plan Participants’ consolidated complaint rests on the theory that the First American Defendants breached their fiduciary duties under ERISA by failing to prudently and loyally manage the Plan’s investment in the First American common stock fund (the “Fund”) by, inter alia, (1) continuing to offer the Fund as a Plan investment option when it was imprudent to do so; (2) maintaining the Plan’s preexisting heavy investment in the Fund when First American stock was no longer a prudent investment; and (3) investing the Plan’s assets in the Fund when First American stock was not a prudent investment.
The Plan Participants primarily seek relief under ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2), which permits a plan participant to bring an action under ERISA § 409, 29 U.S.C. § 1109. Section 409 provides that a plan fiduciary who breaches his duty shall be personally liable to “make good to such plan any losses to the plan resulting from each such breach....” 29 U.S.C. § 1109(a).
In Massachusetts Mutual Life Insurance Co. v. Russell,
This ERISA action is alleging breach of fiduciary duties that affected all participants in the Plan, rather than a single individual account. The Plan Participants move to certify the following class: “All persons who were participants in or beneficiaries of the ... Plan, at any time between April 1, 2006 and the present (the ‘Class Period’) and whose Plan accounts included investments in First American stock.”
The Plan Participants have also sought merits-based discovery for this ERISA action. On October 7, 2008, they propounded sixty-seven production requests. The Magistrate Judge’s Minute Order partly granted their motion on March 25, 2009. First American now challenges twelve of these requests.
II. Motion to Certify Class
A. Legal Standard
A motion for class certification involves a two-part analysis. First, the Plan Participants must demonstrate that the proposed class satisfies the requirements of Rule 23(a): (1) the members of the proposed class must be so numerous that joinder of all claims would be impracticable; (2) there must be questions of law and fact common to the class; (3) the claims or defenses of the representative parties must be typical of the claims or defenses of absent class members; and (4) the representative parties must fairly and adequately protect the interests of the class. Fed.R.Civ.P. 23(a).
Second, the Plan Participants must meet the requirements of at least one of the subsections of Rule 23(b). Here, the Plan Participants contend that they qualify under Rule 23(b)(1), which allows for certification if prosecuting separate actions by individual class members would create a risk of inconsistent or varying adjudications and establish incompatible standards for defendants, or when a judgment in one suit would be dispos-itive of the interests of the other class members who were not parties to the suit. Fed. R.Civ.P. 23(b)(1).
The Plan Participants must offer facts sufficient to satisfy the requirements of Rule 23(a) and (b). Doninger v. Pac. Nw. Bell, Inc.,
In Falcon, the Supreme Court reiterated the well-recognized precept that “ ‘the class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiffs cause of action.’ ” Falcon,
B. Discussion
The Court takes up the threshold issue of standing before turning to the requirements under Rule 23.
1. Standing
The First American Defendants initially oppose class certification because the Plan Participants lack Article III standing, as they cannot show a loss traceable to the First American Defendants. Without standing, the First American Defendants assert, the Plan Participants cannot serve as class representatives.
To prove standing, the Plan Participants must show (1) an injury in fact; (2) a causal connection between the injury and the actions complained of; and (3) redressability. Lujan v. Defenders of Wildlife,
Although the Plan Participants bear the burden of establishing their standing, “ ‘[a]t the pleading stage, general factual allegations of injury resulting from the defendant’s conduct may suffice.’ ” Skaff v. Meridien N. Am. Beverly Hills, LLC, 506 F.3d
In resolving a prior motion to strike the First American Defendants’ expert report, the Court has already noted that the First American Defendants’ standing arguments are based on a securities analysis inapplicable to the ERISA context. (Docket No. 148, at 5.) Under the proper ERISA framework, the Plan Participants clearly allege both loss and causation. See Vaughn v. Bay Envtl. Mgmt., Inc.,
The Plan Participants allege loss to the extent that they allege that the First American Defendants knew or should have known that First American stock was “artificially inflated,” and thus an imprudent investment, because to pay the artificially inflated price would “inevitably result in significant losses to the Plan.” (Comply 10, 174, 191.) The Plan Participants allege causation to the extent they allege that, “[h]ad Defendants properly discharged their fiduciary duties, including the provision of full and accurate disclosure of material facts concerning First American stock and divesting the Plan from Company Stock offered by the Plan when such investment became imprudent, the Plan would have avoided losses suffered as a result of imprudent investment in the Fund, as opposed to the returns they would have achieved with alternative prudent investments offered in the Plan.” (Id. ¶ 223; see also id. ¶¶ 222, 224-26.)
Accordingly, at this stage of litigation, the Plan Participants have standing to serve as class representatives.
2. Rule 23(a) Requirements
The proposed class satisfies all four of the Rule 23(a) requirements, i.e., numerosity, commonality, typicality, and adequacy of representation.
i. Numerosity
Rule 23(a)(1) requires that the class be “so numerous that joinder of all members is impracticable.” Fed.R.Civ.P. 23(a)(1). Here, the Plan had approximately 37,000 participants, a significant number of whom invested in the Fund. The First American Defendants do not contest that numerosity is satisfied.
ii. Commonality
Rule 23(a)(2) requires that questions of law or fact be common to the class. This requirement is permissively construed. Hanlon v. Chrysler Corp.,
“[T]ypicality and commonality are similar and tend to merge.” Dukes v. Wal-Mart, Inc.,
• Whether the First American Defendants are fiduciaries of the Plan;
• Whether the First American Defendants breached their fiduciary obligations to the Plan and its participants by failing to prudently and loyally manage the Plan’s assets when they knew or should have known that First American stock was not a prudent investment for the Plan;
• Whether the First American Defendants breached their fiduciary duties by failing to ensure that monitored fiduciaries had access to complete and accurate information concerning First American’s financial problems that they knew or should have known rendered First American stock an imprudent investment;
• Whether the First American Defendants breached their fiduciary duties by failing to avoid conflicts of interest;
• Whether the First American Defendants breached their fiduciary duties by failing to provide complete and accurate information to Plan participants regarding investment in First American stock and First American’s business improprieties; and
• Whether, as a result of the First American Defendants’ fiduciary breaches, the Plan and its participants and their beneficiaries suffered losses.
These common questions of law and fact are sufficient to satisfy the permissive requirements of Rule 23(a). The First American Defendants do not contest that commonality is satisfied.
iii. Typicality
In examining typicality, the Court considers “whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.” Hanon v. Dataproducts Corp.,
Here, the First American Defendants contend that there is no typicality because the Court will need to analyze whether each putative class member in fact exercised “independent control,” as defined by ERISA § 404(c), over their participant-directed transactions. The Court disagrees.
Section 404(e) is an affirmative defense that must be proven, and is not an appropriate basis to deny class certification. See Kanawi v. Bechtel Corp.,
the Court fails to see why the defense would be unique to [the Plan Participants’] claims and would not instead apply to the claims of all of the members of the proposed class, given that it is clearly [the First American] Defendants’ position in this case that they bear no responsibility for the Plan losses at issue here in light of the control Plan participants exercised over the investment of their accounts in [First American] stock.
No. 05-CV-00063-MJR,
*619 the [Langbecker] court reversed certification because the district court had failed to give any consideration to the ‘safe harbor’ defense. The Langbecker court did not find that § 404(c) issues actually precluded certifieation[;] it just remanded to the district court to determine, in the first instance, whether the defense would ‘undermine the feasibility of class action treatment.’
To the extent the First American Defendants allege that the § 404(c) defense “will almost certainly become a focus of the litigation,” this possibility does not preclude class certification. (Opp’n Br. 17.) At a minimum, “whether the Plan falls under § 404(c) is subject to disagreement between the parties, and that issue is not properly before the Court on a motion for class certification.” Lively,
The discussion above outlining the common questions of law and fact also applies to the typicality inquiry here. See Dukes,
Accordingly, the typicality requirement is satisfied.
iv. Adequacy of Representation
Rule 23(a)(4) requires that the class representatives must “fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a)(4). In determining adequacy of class representation, the Court considers (1) whether any conflicts of interest exist between the named plaintiffs and the class members, Amchem Prods., Inc. v. Windsor,
As to the first consideration, the First American Defendants contend that the Plan Participants cannot fairly and adequately protect the interests of the class due to “insurmountable intra-class conflicts.” (Opp’n Br. 14.) Because it relies heavily on the stricken Kleidon Declaration,
The First American Defendants also contend that the Plan Participants are inadequate class representatives because they lack familiarity with the basic elements of this ERISA action and appear to have “abdicated all responsibility in the litigation to their counsel.” (Opp’n Br. 18.) There is
As to the second consideration, the First American Defendants do not dispute that the Plan Participants “have retained qualified, experienced attorneys with broad-based, multi-jurisdictional experience in complex class action litigation, especially in the context of breach of fiduciary duty cases under ERISA.” (Mot.Br.10.) The Court finds that counsel will adequately protect the interests of the class.
Accordingly, the adequacy requirement is satisfied.
3. Rule 23(b)
Most ERISA class action cases are certified under Rule 23(b)(1). See, e.g., Kanawi,
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 adjudications or would substantially impair or impede their ability to protect their interests.
Fed.R.Civ.P. 23(b)(1). “Rule 23(b)(1)(A) considers possible prejudice to a defendant,
The First American Defendants’ reliance on LaRue is unavailing on this point. As this Court has previously indicated,
the Supreme Court in LaRue did not hold that participants in a defined contribution plan cannot bring suit on behalf of the plan. To the contrary, the Court reaffirmed that “ § 502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries,” but that this provision nonetheless “authorize[s] recovery for fiduciary breaches that impair the value of plan assets in a participant’s individual account.” Thus, far from precluding the Plan Participants from bringing this action on behalf of the plan, the LaRue Court merely rejected the position that only a plan, and not an individual, could be an aggrieved party under § 502(a)(2).
(Docket No. 148, at 7, citation omitted.) This reading of LaRue is shared by a number of other courts. See, e.g., Kanawi
Significantly, the Plan Participants do not seek recovery on their own behalf, but on behalf of the Plan.
However, the Court finds that controlling Ninth Circuit authority precludes class certification under Rule 23(b)(1)(A) to the extent that the Plan Participants primarily seek monetary relief. Both in their opposition and in their supplemental briefing, the First American Defendants cite Zinser v. Accufix Research Institute, Inc.,
Here, the Plan Participants primarily seek monetary damages; damages to the Plan, and demands that the First American Defendants make the Plan whole, are the primary focus of this action. (Compl., Prayer for Relief.) As such, Zinser is controlling and is not meaningfully distinguishable from this case.
Accordingly, given the Ninth Circuit’s holding in Zinser,
In the alternative, the Plan Participants move to certify the class under Rule 23(b)(1)(B). Class actions are permitted under Rule 23(b)(1)(B) if separate actions “inescapably will alter the substance of the rights of others having similar claims.” McDonnell,
Accordingly, certification is not appropriate under Rule 23(b)(1), and the Court must deny the Plan Participants’ motion for class certification.
III. Motion for Review of Magistrate Judge’s Minute Order
The Court now turns to the First American Defendants’ motion to reverse portions of the Magistrate Judge’s Minute Order.
A. Legal Standard
A magistrate judge’s findings on non-dispositive discovery matters can be modified or set aside if it is found to be “clearly erroneous” or “contrary to law.” 28 U.S.C. § 636(b)(1)(A); Fed.R.Civ.P. 72(a); L.R. 72-2.1; Bhan v. NME Hosps., Inc.,
B. Discussion
The First American Defendants move to reverse portions of the Minute Order that compel them to produce documents responsive to twelve requests for production. Because the Court is not firmly convinced that the Magistrate has committed error, much less clear error contrary to law, the motion is denied, with one exception set forth below.
1. Requests Nos. ¡¡7-19, 52-59
First American challenges Request Nos. 47-49 and 52-59 on several grounds.
Request No. 47 seeks “[a]ll documents produced to any governmental authority by any Defendant as part of any criminal, civil, or regulatory investigation of First American’s real estate appraisal or title insurance businesses.” (Req. for Prod. No. 47.) Request Nos. 48 and 49 seeks all documents produced by First American in two separate securities cases. (Req. for Prod. Nos. 48 & 49.) Request Nos. 52-59 seeks all documents, without limitation, turned over to the United States, as well as New York, Michigan, Washington, California, Minnesota, and Florida in connection with enumerated investigations. (Req. for Prod. Nos. 52-59.)
The Court is convinced that the rationale for these requests is legally sound, but has some concern about the practical scope of the requested production.
The First American Defendants first contend that these requests are overbroad and duplicative of Request No. 42, which asks for all documents prepared by or sent to or from the fiduciary defendants concerning investigations into First American’s title insurance or appraisal businesses. The Court disagrees. Request No. 42 requests documents pertaining to the First American Defendants’ knowledge, whereas the challenged requests seek documents pertaining to what the First American Defendants should have known through a reasonably diligent investigation. As the First American Defendants effectively concede, documents turned over to entities investigating First American’s appraisal and title insurance business would not necessarily have been sent to individual Plan fiduciaries. (Mot.Br.9.)
The First American Defendants next contend that these requests seek documents that have no nexus to fiduciary conduct and, therefore, would not lead to relevant evidence. The Court once again disagrees. The rationale for the challenged requests appears in the Joint Stipulation:
Plaintiffs must be afforded a meaningful opportunity to review Defendants’ conduct, including the conduct relating to and stemming from First American’s title insurance business practices and those of its subsidiary, eAppraiselt. This evidence is relevant under Rule 26(b)(1), as it would demonstrate that Defendant-fiduciaries knew or should have known that [First American] stock was an imprudent investment, and yet, continued to offer [First American] stock as [an] investment option in the Plan in violation of their fiduciary duties.
(Joint Stip., Baker Deck, Ex. B at 49, emphasis supplied.) Notwithstanding this fact, the First American Defendants assert that relevance in this case is limited to discovering what the fiduciaries knew, because the Plan Participants’ only theory of relevance is “what knowledge, if any, the fiduciaries possessed regarding the alleged unlawful business practices.” (Mot.Br.6, 7-8.) As indicated by the Joint Stipulation above, this is factually incorrect. Moreover, as a matter of law, fiduciaries can be liable for breach of their fiduciary duties even if they did not know of First American’s malfeasance, so long as they could have known about it had they acted “with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character with like aims.” 29 U.S.C. § 1104(a)(1)(B); accord In re Syncor ERISA Litig.,
Accordingly, even if Plan fiduciaries did not review documents produced in investigations, those documents may perhaps establish corporate mismanagement and malfea-
The First American Defendants further contend that, at minimum, these requests must be limited to the relevant time period. The Minute Order compels the First American Defendants to produce documents relating to governmental investigations dating back to April 11, 2001, five years prior to the beginning of the proposed Class Period. The Plan Participants do not directly address this point in their opposition. They do, however, include a reference to Rogers v. Baxter, No. 04-cv-6476, slip op. at 2 (N.D.Ill. Feb. 9, 2007), attached as Exhibit A to the Kindall Declaration. In pertinent part, the Rogers court noted as follows:
Plaintiff alleges that Defendants violated ERISA by imprudently offering Baxter common stock as an investment option in Baxter’s retirement plan from January 1, 2001 to the present. Baxter’s growth and earnings forecasts for 2003, as investigated by the SEC, fall within this time period and are proper subjects of discovery under Rule 26.
Id. Far from justifying the production of documents antedating the inception of the Class Period by five years, the Rogers opinion suggests that production should be cab-ined to the relevant Class Period. Coupled with the fact that the Plan Participants’ own production request only asked for documents from January 1, 2006 to the present, and the faet that the consolidated complaint alleges that First American stock became imprudent no earlier than April 11, 2006, the Court is left with the firm conviction that a mistake has been committed in this respect.
Accordingly, the Court limits the relevant time period to documents from April 11, 2006 to the present.
Finally, the First American Defendants contend that Request No. 47, in particular, is unduly burdensome because it would require First American to make inquiries of its subsidiaries. Because “parties objecting to a magistrate judge’s order may not present affidavits containing evidence not presented below,” Paramount Pictures Corp. v. Replay TV, No. CV 01-9358 FMC (Ex),
However, the Court finds that the scope of discovery is too far reaching given
Accordingly, the Plan Participants are directed to limit Request No. 47 to twenty-five agencies of their choice, in addition to any agency specified by name in another request. The Plan Participants may apply for additional production of other agencies upon a showing that there is a reasonable likelihood that production will lead to non-duplicative discoverable materials.
2. Request No. 61
The First American Defendants contend that Request No. 61 is overbroad and should be narrowed through additional “meet and confer.” Request No. 61 calls for the names and last known contact information of every eAppraiselT employee during the Class Period. (Req. for Prod. No. 61.)
The First American Defendants analogize this request to the one denied in Prouty v. National Railroad Passenger Corp.,
However, at oral argument, the parties stipulated to narrow the scope of Request No. 61 to employees who serve an appraisal function, and employees who oversee those serving such a function. This request is thus limited along these lines.
Accordingly, because the Court is not firmly convinced that the Magistrate Judge has committed a clear error contrary to law, save in one respect related to the date of documents, the Minute Order is affirmed. The Court also declines to stay this action pending resolution of a summary judgment motion the First American Defendants have yet to file.
TV. Conclusion
For the foregoing reasons, the Court DENIES the Plan Participants’ motion for class certification. The First American Defendants’ motion to reverse the Minute Order is GRANTED IN PART AND DENIED IN PART, as set forth above.
IT IS SO ORDERED.
. The Plan Participants initially moved to certify a class broader than the one alleged in the complaint. (Compare Compl. V 48, with Mot. Br. 1 ("All participants in or beneficiaries of the Plan, at any time between April 11, 2006 and the present [the ‘Class Period'], whose Plan accounts included investments in shares of First American Corporation common stock and/or a fund invested in First American common stock.”).) After oral argument, the Plan Participants subsequently agreed to narrow "the scope of the proposed Class to be consistent with that ... in the Consolidated Complaint,” as set forth above. (Supp’l Mot. Br. 1 n. 1.)
. See discussion infra Section III.B.
. Cf. Safe Air for Everyone v. Meyer,
. In part, the Kleidon Declaration is based on the flawed premise that the Plan Participants “have conflicting interests concerning the date on which to allege the [First American] stock fund became an imprudent investment option for the Plan,” essentially because each "would have an incentive to choose the date when his or her subsequent losses were greatest." (Kleidon Decl. ¶ 80.) As noted in a previous order (Docket No. 148), courts have roundly rejected this premise for class certification purposes, as in In re Aquila ERISA Litig.:
While it may be true that each Plan participant who invested in the Company Stock Fund has an ‘optimal prudence date,' this fact alone does not defeat [Plaintiff's] typicality. This is so because, it is also true that the Plan has a single 'optimal imprudence date,' and as this lawsuit is brought on behalf of the Plan, individual participants’ 'optimal imprudence dates' are irrelevant.
. Compare Moeller v. Taco Bell Corp.,
. At oral argument, the First American Defendants contended that, at a minimum, the second claim for misrepresentation could not be certified under Rule 23(a) and (b). But the law of this circuit is distinguishable from the First American Defendants’ cited cases. Compare Barker v. Am. Mobil Power Corp.,
. Compare Reply Br. 16 ("Plaintiffs are litigating whether Defendants are liable to the Plan for breaches of their fiduciary duties. Proof sufficient to establish liability will not vary at all from class member to class member.”) (emphases omitted), with Alvidres,
. Indeed, the Ninth Circuit has recently held that even a former plan participant could bring suit. Harris v. Amgen, Inc.,
. Although certification for a Rule 23(b)(1) class "may be appropriate even when monetary damages are involved,” Molski v. Gleich,
. The Court’s ruling moots the First American Defendants’ contention at oral argument that they could defeat a Rule 23(b)(1)(A) class by simply waiving the protection against unconnected rulings. The Court is not persuaded by this view. "Although some courts interpret Rule 23(b)(1)(A) as protecting defendants only, clearly all litigants as well as the courts benefit from consistency in the adjudication of claims of individual class members." Ingles v. City of New York, No. 01 Civ. 8279(DC),
. The First American Defendants belatedly apprise this Court of In re Computer Sciences Corp. ERISA Litigation, No. 08-02398 (C.D.Cal. Sept.2, 2008), as a supplemental authority against class certification here. (Docket No. 170, Ex. A.) Even so, the Court finds the analysis in Computer Sciences persuasive here.
. In the reply brief, the First American Defendants contend that Plan fiduciaries have a duty to investigate only when there is a "red flag” of misconduct. (Reply Br. 4, citing Pugh v. Tribune Co.,
. The First American Defendants contend that some courts allow parties objecting to a magistrate judge’s nondispositive ruling to supplement the record. (Reply Br. 5, citing Empire Gas Corp. v. Am. Bakeries Co.,
. In the reply brief, the First American Defendants further concede that the Magistrate Judge "did not have the benefit of certain facts that demonstrate the extent of the burden that Request No. 47 would impose on First American.” (Reply Br. 5.)
. To be sure, a corporation should not be insulated from discov.ery simply because, without more, it is large and has chosen a decentralized
. Any valid privacy concern can be dealt with by way of protective order.