Spano v. the Boeing Co.

Decision Date21 January 2011
Docket Number09–3018.,Nos. 09–3001,s. 09–3001
Citation633 F.3d 574
PartiesGary SPANO, et al., Plaintiffs–Appellees,v.THE BOEING COMPANY, et al., Defendants–Appellants.Pat Beesley, et al., Plaintiffs–Appellees,v.International Paper Company, et al., Defendants–Appellants.
CourtU.S. Court of Appeals — Seventh Circuit

OPINION TEXT STARTS HERE

Jerome J. Schlichter, Attorney, Schlichter, Bogard & Denton, St. Louis, MO, Paul W. Mollica (argued), Attorney, Otten & Golden, Chicago, IL, John T. Murray, Attorney, Seyfarth Shaw, Atlanta, GA, for PlaintiffsAppellees in No. 09–3001.Mark A. Perry (argued), Attorney, Gibson, Dunn & Crutcher, Washington, DC, Thomas E. Wack, Attorney, Bryan Cave, St. Louis, MO, for DefendantsAppellants in No. 09–3001.Jeffrey W. Sarles, Attorney, Mayer Brown LLP, Chicago, IL, Lynn Lincoln Sarko, Attorney, Keller Rohrback, Seattle, WA, Stephen Silverman (argued), Attorney, Department of Labor, Office of the Solicitor, Washington, DC, for Amicus Curiae in Nos. 09–3001, 09–3018.Daniel V. Conlisk, Attorney, Schlichter, Bogard & Denton, St. Louis, MO, Paul W. Mollica (argued), Attorney, Otten & Golden, Chicago, IL, John T. Murray, Attorney, Seyfarth Shaw, Atlanta, GA, for PlaintiffsAppellees in No. 09–3018.Gregory C. Braden (argued), Attorney, Morgan, Lewis & Bockius, Washington, DC, Michael J. Nester, Attorney, Donovan, Rose, Nester, & Szewczyk, Belleville, IL, for DefendantsAppellants in No. 09–3018.Before BAUER, WOOD, and TINDER, Circuit Judges.WOOD, Circuit Judge.

Employer-supported, defined-contribution plans, including those commonly known as 401(k) plans, play a vital role in the retirement planning of millions of Americans. The Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., uses the following definition for such a plan:

The term “individual account plan” or “defined contribution plan” means a pension plan which provides for an individual account for each participant and for benefits based solely upon the amount contributed to the participant's account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant's account.

ERISA § 3(34), 29 U.S.C. § 1002(34). In the cases we have before us, we must decide whether complaints challenging the practices of two such plans were properly certified as class actions.

In Spano, et al. v. The Boeing Company, et al., No. 09–3001, the plaintiffs complain that Boeing breached its fiduciary duties to participants in The Boeing Company Voluntary Investment Plan (the Boeing Plan). Specifically, their brief in this court asserts that the various defendants associated with the Boeing Plan violated those enhanced responsibilities “in three general respects: [1] causing the Plan to pay excessive fees and expenses, both through contract fees and revenue sharing payments from mutual funds included in the Plan; [2] including imprudent investment options in the Plan; and [3] concealing from participants material information regarding Plan fees and expenses and Plan investment options.” Br. for Appellees, No. 09–3001, at 4. Several participants in the Boeing Plan (to whom we refer as the Spano plaintiffs, after lead plaintiff Gary Spano) sued The Boeing Company, the Employee Benefits Plans Committee, Scott M. Buchanan (Director of Benefits Delivery for the Boeing Plan), and the Employee Benefits Investment Committee, individually and as representatives of an alleged class, seeking relief under ERISA §§ 409, 502(a)(2) and (3), 29 U.S.C. §§ 1109, 1132(a)(2) and (3). (We refer to these defendants collectively as “Boeing” unless the context requires otherwise.) After considerable procedural activity had taken place, the district court granted the plaintiffs' motion to certify a class under Federal Rule of Civil Procedure 23(b)(1). Boeing asked this court to accept an appeal from that decision, as we are entitled to do under Rule 23(f). We agreed to do so.

At approximately the same time, a nearly identical lawsuit was proceeding before the same district court judge on behalf of participants in two defined-contribution plans sponsored by the International Paper Company. A group of individual plaintiffs led by Pat Beesley sued International Paper, the International Paper 401(k) Committee, the International Paper Fiduciary Review Committee, and a group of individual defendants who were involved with the operations of the 401(k) plans. (We refer to these defendants collectively as “IP.”) Although International Paper offered two defined-contribution plans, one known informally as the Hourly Plan and the other as the Salaried Plan, everyone agrees that there is no material difference between the two, and so our discussion does not distinguish between them. Like their counterparts in the Boeing litigation, the Beesley plaintiffs accused IP of “causing the Plans to pay excessive fees; maintaining imprudent investment options in the Plans; and miscommunicating to participants about Plan investment options.” Br. for Appellees, No. 09–3018, at 5. The district court, in an order entered on the same day as the one it issued in the Boeing case, certified an identical class under Rule 23(b)(1). IP also filed a request for interlocutory review under Rule 23(f); we granted that request and consolidated the two cases together for disposition.

The class definitions adopted by the district court in each of these cases are the same in all material respects. For convenience, we set forth only the description of the class that was certified in the Boeing litigation:

All persons, excluding the Defendants and/or other individuals who are or may be liable for the conduct described in this Complaint, who are or were participants or beneficiaries of the Plan and who are, were or may have been affected by the conduct set forth in this Complaint, as well as those who will become participants or beneficiaries of the Plan in the future.

(Emphasis in original.) A primary assertion in both Boeing's and IP's appeals is that this class definition fails to meet the standards of Rule 23(c)(1)(B), which requires an order certifying a class to “define the class and the class claims, issues, or defenses....” Fed.R.Civ.P. 23(c)(1)(B). This definition, they argue, is so diffuse as to be no definition at all. In addition, both sets of defendants assert that the district court erred when it concluded that this class met the criteria of Rule 23(a) (in particular, the commonality, typicality, and adequacy requirements—numerosity is conceded), and when it found that this case should be treated as a mandatory class action under Rule 23(b)(1), either because individual treatment risked the establishment of inconsistent standards of conduct for the defendants, Fed.R.Civ.P. 23(b)(1)(A), or because individual cases would, as a practical matter, be dispositive of the claims of nonparties, Fed.R.Civ.P. 23(b)(1)(B).

The submissions of both sides bring to mind the phenomenon of ships passing in the night. The Spano and Beesley plaintiffs insist that they are raising common questions that are perfectly suited for class treatment and accuse Boeing and IP of taking the position that class treatment is never permissible for a defined-contribution plan, since each employee chooses which instruments to include in his or her account and how much to invest. Neither the plaintiffs nor the district court spent much time defending the actual class that the district court certified. The defendants, for their part, protest that they would not dream of taking any such rigid position, but by the time they have finished cutting away at the plaintiffs' assertions, it is hard to see what is left. Both sides have support from amici curiae: the Secretary of Labor and a consortium including the American Association of Retired Persons, the Pension Rights Center, and the National Senior Citizens Law Center support the plaintiffs, while the Chamber of Commerce of the United States supports the defendants.

In order to sort all of this out, we begin with one critical observation: our task is to review only the class certification orders issued by the district court in these two cases. We are not here to review any or all hypothetical orders that the court might have crafted. Our opinion there fore steers away from absolute statements of any kind, either to the effect that all of these cases are inherently class actions, or that none of them is. On that understanding, we examine both the substantive law on which the plaintiffs are relying and Federal Rule of Civil Procedure 23. With that background in place, we turn to the question whether these two orders can stand, or if they must be vacated.

I

As we noted earlier, this suit arises under ERISA, and in particular section 502(a)(2), 29 U.S.C. § 1132(a)(2). The plaintiffs also allude to section 502(a)(3), 29 U.S.C. § 1132(a)(3), however, and so we set forth most of subpart (a) in the interest of providing the necessary context:

(a) Persons empowered to bring a civil action

A civil action may be brought—

(1) by a participant or beneficiary—

(A) for the relief provided for in subsection (c) of this section, or

(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan;

(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 1109 of this title;

(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan; ....

ERISA § 502(a), 29 U.S.C. § 1132(a). Focusing for now on section 502(a)(2), we find a...

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