differences between the representative and class claims. Courts also issued conflicting decisions on the enforceability of mandatory arbitration and class action waiver provisions with respect to ERISA claims. These decisions were heavily slanted toward denying motions to compel arbitration and enforce class action waiver provisions despite the spate of recent Supreme Court decisions upholding the enforceability of such provisions in employment and other contexts. ERISA class action litigation remains an active area with significant financial upside for the plaintiffs’ bar and high defense and settlement costs for defendants. Absent clarifying guidance from the Supreme Court on a number of contested issues in the space, it is likely to remain so. II. Significant Rulings In ERISA Class Actions In 2023, the plaintiffs’ bar was successful in obtaining class certification 82% of the time, with 42 of 51 total motions being granted by the courts.
The significant ERISA decisions in 2023 can be grouped in several categories, including: (i) rulings on motions to dismiss class action claims; (ii) rulings granting class certification over standing and related challenges; (iii) rulings granting class certification over challenges to disqualify class members due to individual waivers of suit; and (iv) other class certification decisions, and (v) motions to compel arbitration and enforce class action waivers. 1. Rulings On Motions To Dismiss ERISA Class Action Claims For Failure To State A Claim In 2023, federal courts frequently addressed motions to dismiss ERISA class action complaints for failure to state a viable claim under Rule 12(b)(6). Although these rulings do not directly address class certification, they are central to both sides’ litigation strategy and, as a practical matter, can be outcome-determinative. A loss for the defendant at this stage will open the door to extensive and costly discovery. Capitalizing on that prospect, the plaintiffs’ bar often may seek to settle the matter quickly for less than the defendants’ costs to defend the class action. Claims concerning breaches of the fiduciary duties of
prudence and loyalty represent the largest category of ERISA class actions. These claims generally allege one or more theories, such that defendants chose poor investments, they retained underperforming actively-managed funds, they charged excessive recordkeeping fees, or they inappropriately invested in retail shares when cheaper institutional shares were available. Plaintiffs who raise such claims face a conundrum. One the one hand, courts have consistently held that, to survive a Rule 12(b)(6) motion, it is not enough to merely point out that a plan has underperformed relative to the market or to rely on unadorned cost comparisons. Rather, because breach of the duty of prudence claims focus on the existence of a deficient process and not just the end result, the plaintiffs must point to some defect in the process by which the defendants selected or managed investments or plan service providers. On the other hand, without the benefit of discovery, plaintiffs rarely have access to
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© Duane Morris LLP 2024
Duane Morris ERISA Class Action Review – 2024
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