Plaintiffs With Variable Claims in ERISA Lawsuit Denied Class Certification
On November 15, 2011, the U.S. District Court for the North District of Illinois issued an opinion denying class certification to certain employees of Motorola, Inc. in the ERISA lawsuit captioned Joe M. Groussman, et al. v. Motorola, Inc., et al., No. 10 C 911 (N.D. Ill.). This advisory outlines the plaintiffs’ allegations and details the Court’s findings.
The plaintiffs alleged in their complaint that the company offered Motorola stock as an investment option in its 401(k) plan after it became imprudent to do so because of production and sale problems that caused the company's stock price to drop. The plaintiffs sought to certify a class consisting of all persons who were participants in, or beneficiaries of, the plan at any time between July 1, 2007 and December 31, 2008, and whose accounts included investments in Motorola stock.
In the opinion, Judge Samuel Der-Yeghiayan separately addressed each element of Federal Rule of Civil Procedure 23(a) – numerosity, commonality, typicality, and adequate representation – and determined that plaintiffs failed to satisfy the commonality, typicality, and adequate representation requirements.
Relying heavily on the recent Supreme Court decision Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), and undertaking the required “rigorous analysis,” Judge Der-Yeghiayan held that the commonality requirement was not met because the plaintiffs had not shown that members of the proposed class had suffered the same injury or that key common issues of fact or law were capable of resolution in a class action. The Court rejected plaintiffs’ assertion that, to satisfy the commonality requirement, a plaintiff need only show a common nucleus of operative facts among the claims of the proposed class members.
According to the Court, “Plaintiffs’ argument that the commonality requirement is met simply because all proposed class members were participants in the Plan and had invested in Motorola stock is the type of loose factual connections among class members that does not suffice under Dukes.” The Court further observed: “Defendants have shown that depending on the individualized investment strategies of proposed class members, each class member will have suffered damages in a different manner. The Defendants have in fact shown that some individuals that fall within the scope of the proposed class could actually have gained funds based on the investments in Motorola stock.” Accordingly, the assessment of damages for each proposed class member would require an individualized analysis.
With respect to the typicality requirement, the Court was swayed by defendants’ argument that each proposed class member would want to argue that it became imprudent to invest in Motorola stock on a certain date, and that chosen date would vary depending on the class member’s unique trading pattern and investment strategy. According to the Court, “[i]t is not enough for the typicality requirement that Plaintiffs will present the same legal theories as the proposed class members.”
The Court also determined that plaintiffs failed to identify the specific alleged misrepresentations and misleading statements that class members and plaintiffs relied upon, and they failed to show that they and the proposed class members were deceived in a uniform fashion. Indeed, according to the Court, “Defendants have shown that among just Plaintiffs, there is a difference as to what each Plaintiff understood at any given time, and that plaintiffs did not rely upon the same information or statements in making their investment decisions.”
A similar analysis governed the Court’s holding with respect to the adequate representation requirement. In particular, the Court reasoned that no one plaintiff could fairly and adequately represent the class because each plaintiff and proposed class member would want to tailor the liability and damages arguments in order to maximize the recovery.