Boley v. Universal Health Servs., Inc.

• Decision Date: 01 June 2022
• Docket Number: 21-2014
• Parties: Mary K. BOLEY; Kandie Sutter; Phyllis Johnson, Individually and as representatives of a class of similarly situated persons, on behalf of the Universal Health Services, Inc. Retirement Savings Plan v. UNIVERSAL HEALTH SERVICES, INC. ; Universal Inc.; The UHS Retirement Plans Investment Committee; Does 1-10, Whose Names Are Currently Unknown Universal Health Services, Inc. and Health Universal Health Services, Inc. Retirement Plans Investment Committee, Appellants
• Court: U.S. Court of Appeals — Third Circuit

36 F.4th 124

Mary K. BOLEY; Kandie Sutter; Phyllis Johnson, Individually and as representatives of a class of similarly situated persons, on behalf of the Universal Health Services, Inc. Retirement Savings Plan

v. UNIVERSAL HEALTH SERVICES, INC. ; Universal Inc.; The UHS Retirement Plans Investment Committee; Does 1-10, Whose Names Are Currently UnknownUniversal Health Services, Inc. and Health Universal Health Services, Inc. Retirement Plans Investment Committee, Appellants

No. 21-2014

United States Court of Appeals, Third Circuit.

Argued: February 11, 2022

Filed: June 1, 2022

Deborah S. Davidson, Morgan Lewis & Bockius, 110 North Wacker Drive, Suite 2800, Chicago, IL 60606, Michael E. Kenneally [ARGUED], Morgan Lewis & Bockius, 1111 Pennsylvania Avenue, N.W., Suite 800 North, Washington, DC 20004, Matthew D. Klayman, Brian T. Ortelere, Morgan Lewis & Bockius, 1701 Market Street, Philadelphia, PA 19103, Sean K. McMahan, Morgan Lewis & Bockius, 1717 Main Street, Suite 3200, Dallas, TX 75201, Counsel for Appellants

John M. Masslon, II, Washington Legal Foundation, 2009 Massachusetts Avenue, N.W., Washington, DC 20036, Counsel for Amicus Appellant

Alec Berin, James C. Shah, Miller Shah, 1845 Walnut Street, Suite 806, Philadelphia, PA 19103, James E. Miller [ARGUED], Miller Shah, 65 Main Street, Chester, CT 06412, Mark K. Gyandoh, Gabrielle P. Kelerchian, Capozzi Adler, 312 Old Lancaster Road, Merion Station, PA 19066, Donald R. Reavey, Capozzi Adler, 2933 North Front Street, Harrisburg, PA 17110, Counsel for Appellees

Before: GREENAWAY, JR., SCIRICA and COWEN¹ , Circuit Judges.

OPINION OF THE COURT

SCIRICA, Circuit Judge In this interlocutory appeal, fiduciaries of a retirement plan appeal the District Court's certification of a class of participants who allege the fiduciaries breached their duty under the Employee Retirement Income Security Act of 1974 ("ERISA"). At issue in this case is whether the typicality requirement of Federal Rule of Civil Procedure 23(a) is satisfied when the class representatives did not invest in each of a defined contribution retirement plan's available investment options.

We will affirm. Because the class representatives allege actions or a course of conduct by ERISA fiduciaries that affected multiple funds in the same way, their claims are typical of those of the class.

I. FACTS AND PROCEDURAL HISTORY

Universal Health Services, Inc. sponsors the Universal Health Services, Inc., Retirement Savings Plan (the "Plan"), a defined contribution retirement plan,² in which qualified employees can participate and invest a portion of their paycheck in selected investment options. The Plan's investment options and administrative arrangements are chosen and ratified by the UHS Retirement Plans Investment Committee (the "Committee"). The Committee is appointed and overseen by Universal. Both Universal and the Committee serve as the Plan's fiduciaries and administrators (collectively, "Universal").

Since 2014, the Plan's available investment options consisted of thirty-seven funds, including mutual funds and a collective investment trust. As with most investment funds, the Plan funds charge participants annual management fees. The Plan also charges participants an annual recordkeeping and administrative fee. Each year, every investor in the Plan would pay the annual recordkeeping and administrative fee, plus the additional fees associated with whichever investment fund or funds in which he or she chose to invest.

Among the investment options is the Fidelity Freedom Fund suite, consisting of thirteen target date funds. Target date funds are managed funds that shift in investment strategy as a target retirement year approaches. The Fidelity Freedom Fund suite was designated as the Plan's Qualified Default Investment Alternative, meaning Universal would automatically invest Plan participants' money in one of the thirteen Fidelity Freedom Funds if no other investment selection was made.

The class representatives are three current and former participants in the Plan (the "Named Plaintiffs"). Between them, the Named Plaintiffs invested in seven of the Plan's thirty-seven investment options. They were also charged the Plan's annual fee for recordkeeping and administrative services.

The Named Plaintiffs, on behalf of themselves and all other Plan participants, sued Universal under 29 U.S.C. § 1132(a)(2)³ and 29 U.S.C. § 1109.⁴ The Named Plaintiffs allege Universal breached its fiduciary duty by including the Fidelity Freedom Fund suite in the plan, charging excessive recordkeeping and administrative fees, and employing a flawed process for selecting and monitoring the Plan's investment options, resulting in the selection of expensive investment options instead of readily-available lower-cost alternatives. The Named Plaintiffs also allege certain Universal defendants breached their fiduciary duty by failing to monitor the Committee appointed to manage the Plan.

Universal moved for partial dismissal of the Named Plaintiffs' claims, contending the Named Plaintiffs lacked constitutional standing to pursue claims relating to funds in which they did not personally invest. The District Court denied Universal's motion, holding the Named Plaintiffs had standing to pursue all their claims because they alleged concrete injuries resulting from Universal's Plan-wide misconduct. Boley v. Universal Health Servs., Inc. , 498 F. Supp. 3d 715, 719 (E.D. Pa. 2020). Accordingly, the Named Plaintiffs were permitted to bring their claims as alleged, because "claims relating to allegedly imprudent decision-making processes injure all plan participants." Id. at 723.

The Named Plaintiffs then moved to certify a class under Rule 23(b)(1), comprising all current and former Plan participants (the "Class"). In opposition, Universal argued that because the Named Plaintiffs did not invest in thirty of the Plan's funds, they lack standing to bring claims relating to these funds, making these claims atypical to those of the Class. Universal also argued the Named Plaintiffs' claims were atypical because the Named Plaintiffs lacked incentive to demonstrate reasonable alternatives to the thirty funds in which they did not invest.⁵

The District Court rejected Universal's argument and certified a class composed of all participants in the Plan from June 5, 2014, to the present.⁶ Boley v. Universal Health Servs., Inc. , 337 F.R.D. 626 (E.D. Pa. 2021). It emphasized "[t]he focus of the Participants' claims is on [Universal's] conduct as to all Plan participants rather than about the individual investment choices made by Participants and putative Class members." Id. at 636. Referencing its earlier decision denying Universal's partial motion to dismiss for lack of standing, the District Court reiterated its view that the Named Plaintiffs challenged Universal's Plan-wide conduct. For this reason, the District Court held the Named Plaintiffs' claims were typical of claims regarding the funds in which the Named Plaintiffs did not invest. Universal petitioned for leave to appeal the class certification decision on an interlocutory basis under Fed. R. Civ. P. 23(f). We granted Universal's petition for an interlocutory appeal.

II. JURISDICTION

The District Court had statutory federal-question jurisdiction over this ERISA lawsuit under 28 U.S.C. § 1331. We have jurisdiction over this interlocutory appeal of a class certification decision under 28 U.S.C. § 1292(e). See also Fed. R. Civ. P. 23(f).

Universal does not challenge our statutory jurisdiction over this suit but, as part of its typicality argument, challenges the Named Plaintiffs' standing under Article III. Specifically, for purposes of this appeal, Universal characterizes the Named Plaintiffs' lack of standing as destroying typicality. But a lack of standing would present a more fundamental problem for the Named Plaintiffs because a lack of standing necessitates dismissal of claims, whether brought in a class action or in any other kind of suit. Because "our continuing obligation to assure that we have jurisdiction requires that we raise the issue of standing sua sponte," Wayne Land & Mineral Grp. v. Del. River Basin Comm'n , 959 F.3d 569, 574 (3d Cir. 2020) (cleaned up) (quoting Seneca Res. Corp. v. Twp. of Highland , 863 F.3d 245, 252 (3d Cir. 2017) ), we will address the Named Plaintiffs' standing directly, as a question of jurisdiction.⁷

To establish standing, a plaintiff must show "(i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief." TransUnion LLC v. Ramirez , ––– U.S. ––––, 141 S. Ct. 2190, 2203, 210 L.Ed.2d 568 (2021) (citing Lujan v. Defs. of Wildlife , 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ). "[S]tanding is not dispensed in gross," and "a plaintiff must demonstrate standing for each claim he seeks to press and for each form of relief that is sought." Town of Chester v. Laroe Ests., Inc. , ––– U.S. ––––, 137 S. Ct. 1645, 1650, 198 L.Ed.2d 64 (2017) (citation omitted). Review of a party's standing to sue is de novo. Free Speech Coal., Inc. v. Att'y Gen. , 974 F.3d 408, 419 (3d Cir. 2020).

To determine whether the Named Plaintiffs have standing, we first look to the Complaint. Count I claims a breach of fiduciary duty and Count II claims a failure to monitor fiduciaries. For Count I, the Named Plaintiffs allege three specific breaches of fiduciary duty: first, Universal's alleged imprudence in offering the excessively expensive Fidelity Freedom Fund suite to Plan participants; second, Universal's alleged failure to monitor and reduce the excessively high recordkeeping and administrative fees for the Plan; and third, Universal's alleged lack of a "prudent investment evaluation process," App. 59, ¶47, which resulted in the Plan offering a menu of excessively expensive investments.

Taking these claims out of...