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Bell v. Pension Committee of Ath Holding Company, LLC

United States District Court, S.D. Indiana, Indianapolis Division

September 14, 2018

MARY BELL, JANICE GRIDER, CINDY PROKISH individually and as representatives of a class of similarly situated persons of the Anthem 401k Plan formerly the WellPoint 401k Retirement Savings Plan, JOHN HOFFMAN, and PAMELA LEINONEN, Plaintiffs,



         This matter is before the Court on a Motion for Class Certification filed by Plaintiffs Mary Bell (“Bell”), Janice Grider (“Grider”), Cindy Prokish (“Prokish”), John Hoffman (“Hoffman”), and Pamela Leinonen (“Leinonen”) (collectively, “Plaintiffs”). (Filing No. 117.) Defendants are fiduciaries of the Anthem 401(k) Plan (“the Plan”)[1]. Plaintiffs allege that Defendants Pension Committee of ATH Holding Company, LLC (“the Pension Committee”), ATH Holding Company, LLC (“ATH”), and Board of Directors of ATH Holding Company, LLC, (“the Board”) (collectively, “Defendants”) breached their fiduciary duties by causing Plaintiffs' retirement plan to pay excessive investment and management fees to Vanguard Group, Inc. (“Vanguard”), and also invested in an imprudent money market fund, resulting in tens of millions of dollars of Plan losses. Plaintiffs seek to represent two classes for the alleged breaches of fiduciary duty: 1) the Administrative and Investment Management Fee Class and 2) the Money Market Fund Class.

         Also before the Court is Defendants' Motion for Leave to File a Supplemental Brief in Support of Their Opposition to Plaintiffs' Motion for Class Certification, (Filing No. 189) and Plaintiffs' Motion for Leave to Respond to Defendants' Proposed Supplemental Brief, (Filing No. 201). These two motions are granted. For the reasons set forth below, Plaintiffs Motion to Certify the Investment and Management Class is denied, and Plaintiffs' Motion to Certify the Money Market Class is granted.

         I. BACKGROUND

         The Plan is a defined contribution plan within the meaning of the Employee Retirement Income Security Act of 1974 (“ERISA”). See 29 U.S.C. § 1002(34). The Plan is sponsored by ATH and, as of December 31, 2014, is one of the largest 401(k) plans in the United States, with over $5.1 billion in total assets. It provides retirement income for employees of ATH and any direct or indirect subsidiary of the company that has been offered the Plan. The retirement benefits are limited to the value of an employee's account, which depends upon employee and employer contributions, as well as investment options' fees and expenses. Plaintiffs are current and former participants of the Plan. The Pension Committee is appointed by the Board, and serves as the Plan's administrator which entails responsibility for the control, management, and administration of the Plan's investment options.

         Defendants select and determine the available investment options offered in the Plan. (Filing No. 87 at 7.) These decisions are made at the Plan level, therefore the available options and the associated expenses are the same for all Plan participants. The Plan offers three tiers of investment options: 1) Tier 1, the Target Date Funds; (2) Tier 2, the Core Funds; and Tier 3, the Vanguard Brokerage Option. (Filing No. 123 at 10.) The Plan's investment options vary based on risk and return profiles. Vanguard is the Plan's recordkeeper, and the Plan pays Vanguard investment management fees which are deducted from participants' accounts on a pro rata basis, based on each fund's “expense ratio”-a percentage of a fund's assets charged for “expenses that reduce the rate of return of the investment option.” (Filing No. 38-3 at 6.) Until 2013, Defendants compensated Vanguard for its administrative services (primarily recordkeeping) through revenue sharing payments from the Plan's mutual funds, paid through a portion of the Plan's mutual funds expense ratios. (Filing No. 87 at 30.) Effective July 22, 2013, Defendants charged a flat annual recordkeeping fee of $42.00 to each participant's account with a balance over $1, 000.00. (Filing No. 38-4 at 6.)

         On March 23, 2017, this Court denied in part and granted in part Defendants' Motion to Dismiss. (Filing No. 80 at 2.) The Court dismissed Plaintiffs' claim regarding the Vanguard Prime Money Market Fund (the “Money Market Fund”) without prejudice. Plaintiffs then filed the operative Second Amended Complaint, which provides additional facts supporting the Money Market Fund claim. (See Filing No. 87 at 82-85.) Plaintiffs summarize their allegations against Defendants, contained in the Second Amended Complaint as the following: 1) Defendants provided investment options charging unreasonable management fees compared to available superior institutional investment products; 2) Defendants failed to monitor and control the excessive administrative expenses paid to Vanguard; 3) Defendants provided the Money Market Fund as the Plan's sole capital preservation option even though it did not provide any meaningful retirement benefits; and 4) Defendants failed to prudently and regularly monitor the Money Market Fund. (Filing No. 118 at 4-5.) Plaintiffs seek certification of the following classes:

Administrative Fee and Investment Management Fee Class All participants and beneficiaries of the Anthem 401(k) Plan (formerly the WellPoint 401(k) Retirement Savings Plan) from December 29, 2009 through the date of judgment, excluding the Defendants.
Money Market Fund Class All participants and beneficiaries of the Anthem 401(k) Plan (formerly the WellPoint 401(k) Retirement Savings Plan) who, from December 29, 2009 through the date of judgment, excluding the Defendants, invested in the Vanguard Money Market Fund.

Id. at 5.


         To certify a plaintiff class under Federal Rule of Civil Procedure 23, the Plaintiffs must first satisfy all four elements of Rule 23(a) by demonstrating that: (1) the class is too numerous to join all members; (2) there are questions of law or fact common to the class; (3) the claims or defenses of representative parties are typical of those of the class members; and (4) the representative parties will fairly and adequately represent the class. As the Seventh Circuit has noted, plaintiffs must satisfy the trial court, “after a rigorous analysis, ” that the prerequisites of Rule 23(a) have been satisfied. Davis v. Hutchins, 321 F.3d 641, 649 (7th Cir. 2003) (quoting General Tel. Co. of S.W. v. Falcon, 457 U.S. 147, 160-61 (1982)). If these requirements are met, plaintiffs must also satisfy at least one subsection of Rule 23(b).

Rule 23(b)(1) provides for a non-opt-out class action where individual actions could ‘establish incompatible standards of conduct for the party opposing the class' or ‘as a practical matter, would be dispositive of the interests of the other members of the class' or [] ‘would be dispositive of the interests of the other members not parties to the individual adjudications.'

Spano v. Boeing Co., 294 F.R.D. 114, 119 (S.D. Ill. 2013) (quoting Fed.R.Civ.P. 23(b)(1)). Rule 23(b)(3) applies if the court finds “that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed R. Civ. P. 23(b)(3).

         The parties seeking class certification bear the burden of proof in establishing each of the requirements under Rule 23. Susman v. Lincoln Am. Corp., 561 F.2d 86, 90 (7th Cir. 1977). The failure to satisfy any one of these elements precludes certification. Retired Chi. Police Ass'n v. City of Chi., 7 F.3d 584, 596 (7th Cir. 1993). In deciding whether to certify a class, the court is not required to accept the allegations in the complaint as true. The court should make any factual and legal inquiries needed to ensure that the requirements for class certification are satisfied, even if the underlying considerations overlap with the merits of the case. Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 676 (7th Cir. 2001); In re Bromine Antitrust Litigation, 203 F.R.D. 403, 407 (S.D. Ind. 2001). In evaluating class certification, the court must take into consideration the substantive elements of plaintiff's cause of action, inquire into the proof necessary for the various elements, and envision the form that trial on the issues would take. Cima v. WellPoint Health Networks, Inc., 250 F.R.D. 374, 377 (S.D. Ill. 2008).

         Throughout this analysis, the court bears in mind that a principal purpose of class certification is to save the resources of both the courts and the parties by permitting an issue potentially affecting every class member to be litigated in an economical manner. See Falcon, 457 U.S. at 155. In doing so, Rule 23 gives the district courts “broad discretion to determine whether certification of a class-action lawsuit is appropriate.” Arreola v. Godinez, 546 F.3d 788, 794 (7th Cir. 2008) (internal quotation omitted). That said, “similarities of claims and situations must be demonstrated rather than assumed.” Szabo, 249 F.3d at 677. “The propriety of class treatment thus will turn on the circumstances of each case.” Spano v. The Boeing Co., 633 F.3d 574, 582 (7th Cir. 2011).


         As referenced earlier, Plaintiffs seek to certify an Administrative Fee and Investment Management Fee Class (the “Fee Class”) and a Money Market Fund Class (“Money Market Fund Class”). The Court will discuss the proposed classes in turn.

         A. Fee Class

         The Fee Class is defined as: “All participants and beneficiaries of the Anthem 401(k) Plan (formerly the WellPoint 401(k) Retirement Savings Plan) from December 29, 2009 through the date of judgment, excluding the Defendants.” (Filing No. 118 at 5.) Defendants contend that Plaintiffs cannot satisfy all of the requirements of Rule 23(a). Specifically, relying on the Seventh Circuit's Spano decision, Defendants argue that Plaintiffs cannot show the third and fourth requirements: typicality and adequacy. (Filing No. 123 at 18.) Plaintiffs respond that “the class is properly defined to include all Plan participants, because all participants contributed to the fees.” (Filing No. 136 at 2).


         Rule 23(a)(1) provides that the class must be so “numerous that joinder of all the members is impracticable.” Fed.R.Civ.P. 23(a)(1). “Generally, where the membership of the proposed class is at least 40, joinder is impracticable and the numerosity requirement is met.” Gentry v. Floyd Cty.,313 F.R.D. 72, 77 (S.D. Ind. 2016), on reconsideration in part, No. 4:14-CV-00054-RLY-TAB, 2016 WL 4088748 (S.D. Ind. July 25, 2016) (citation omitted). Plaintiffs represent that the Fee Class includes all ...

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