Duane Morris ERISA Class Action Review – 2024

ERISA Class Actions I. Executive Summary

The surge of class action litigation filed under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001 et seq ., over the last several years persisted in 2023, with class action litigators in the plaintiffs’ bar continuing to focus on challenges ERISA fiduciaries’ management of 401(k) and other retirement plans. Plaintiffs continue to assert that ERISA fiduciaries breached their fiduciary duties of prudence and loyalty by, among other things, offering expensive or underperforming investment options and charging participants excessive recordkeeping and administrative fees. Hundreds fee and expense class actions have been filed since 2020, driven by a number of familiar plaintiffs’ class action law firms alongside some new entrants into the space. Class certification remains challenging to defeat outright in these and other ERISA cases given the nature of the claims, which typically assert that discrete types of alleged plan mismanagement led to common injuries affecting large numbers of plan participants in similar ways. Indeed, courts often reject challenges to standing and compliance with the requirements of Rules 23(a) and (b), concluding that factual differences in the type of benefits or investments at issue are merits or damages issues less relevant to certification than allegations that the defendants’ conduct produced similar, broad-based injuries. Nonetheless, defendants pour significant resources into attacking these cases in their infancy. Both sides know that early dismissal may be the defendants’ best hope of avoiding the burden and expense of the protracted discovery that will come before and after class certification, which is often viewed as a foregone conclusion in ERISA litigation. In fact, this dynamic is central the strategy of the plaintiffs’ bar in many of these cases. If the plaintiffs can overcome initial challenges, they can then leverage the prospect of substantial defense costs to obtain an early seven-figure settlement that still costs less than defending the case through summary judgment and trial. To defeat these claims, many defendants argue that putative class action complaints fail to state plausible claims under Rule 12(b)(6). Specifically, defendants often contend that that plaintiffs simply label any plan ’ s failure to select cheaper or better performing investment options as a purported breach of fiduciary duty, but do so without alleging anything to support a plausible inference that the fiduciaries’ decision- making process was flawed. For their part, the plaintiffs’ bar argues that their lack of access to confidential information about the relevant fiduciary processes unfairly handicaps their ability to offer the more detailed allegations that the defendants demand. Historically, the results of these disputes have been mixed. As discussed in this Chapter, while litigators on both sides of the aisle anticipated that the U.S. Supreme Court ’ s decision in Hughes, et al. v. Northwestern University, 142 S.Ct. 737 (2022), would clarify the pleading standards in these cases, it ultimately failed to do so, though courts in succeeding cases have generally focused their evaluations of the plausibility of plaintiffs’ claims on the sufficiency of the comparators they have provided. Without additional guidance from the Supreme Court, these and other battles and strategies continue to play out in courts across the country, which issued a number of significant rulings in ERISA class actions in 2023. Beyond challenges to the sufficiency of plaintiffs’ allegations, the plaintiffs’ class action bar continued to have success fending off defense challenges to standing in motions to dismiss under Rule 12(b)(1) and the satisfaction of Rule 23(a) ’ s commonality, typicality, and adequacy requirements based on factual

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