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Bell v. Pension Committee of ATH Holding Co., LLC

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

January 24, 2019

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,
v.
PENSION COMMITTEE OF ATH HOLDING COMPANY, LLC, ATH HOLDING COMPANY, LLC, and BOARD OF DIRECTORS OF ATH HOLDING COMPANY, LLC, Defendants. VANGUARD GROUP, INC., Interested Party.

          ENTRY ON PARTIES' MOTIONS TO MODIFY THE CLASS CERTIFICATION ORDER

          TANYA WALTON PRATT, JUDGE

         This matter is before the Court on opposing motions to modify the class certified by this Court in its September 14, 2018 Entry on Pending Motions. (Filing No. 215 at 23.) Plaintiffs Mary Bell (“Bell”), Janice Grider, Cindy Prokish, John Hoffman (“Hoffman”), and Pamela Leinonen (“Leinonen”) (collectively, “Plaintiffs”) filed Plaintiffs' Motion To Partially Reconsider Or Modify Class Certification Order (Filing No. 230), and 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 (collectively, “Defendants”) filed a Motion to Amend Order Certifying Money Market Fund Class. (Filing No. 232.) In its September 14, 2018 Entry (the “September 14th Order”), the Court granted Plaintiffs' motion to certify one of its proposed classes-the Money Market Fund Class-but denied their motion to certify the other proposed class-the Administrative Fee and Investment Management Fee Class. (Filing No. 215.) Plaintiffs seek to modify the class definition they earlier asserted (seeFiling No. 117) in hopes that the Court will certify both classes under the new definition. (Filing No. 231.) Defendants ask the Court to amend the September 14th Order and vacate its certification of the Money Market Fund Class because none of the named Plaintiffs adequately represent the class. (Filing No. 233.)

         For the reasons set forth below, Plaintiffs' Motion to Partially Reconsider or Modify Class Certification Order is granted and Defendants' Motion to Amend Order Certifying Money Market Fund Class is denied.

         I. BACKGROUND

         The facts of this case are set forth in detail in the September 14th, Order and for the most part are repeated in this Entry. Defendants are fiduciaries of the Anthem 401(k) Plan (“the Plan”).[1]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, and 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 of Directors of ATH and serve as the Plan's administrator and they are responsible 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: Tier 1, the Target Date Funds; 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 Group, Inc. (“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 of over $1, 000.00. (Filing No. 38-4 at 6.)

         In the operative Second Amended Complaint, Plaintiffs allege that Defendants breached their fiduciary duties by causing Plaintiffs' retirement plan to pay excessive investment and management fees to Vanguard, and also invested in an imprudent money market fund, resulting in tens of millions of dollars of Plan losses. (SeeFiling No. 87 at 82-85.) Plaintiffs summarize their allegations against Defendants as follows: (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 initially sought 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. The Court certified the Money Market Fund Class but denied Plaintiffs' motion to certify the Administrative Fee and Investment Management Fee Class because that class failed to satisfy Federal Rule of Civil Procedure 23(a)'s typicality requirement. (Filing No. 215.)

         Plaintiffs now seek certification of the following subclasses to the Administrative Fee and Investment Management Fee Class:

Flat Fee Subclass All participants and beneficiaries of the Anthem 401(k) Plan (formerly the WellPoint 401(k) Retirement Savings Plan) who had an account balance greater than $1, 000.00 at any time from July 22, 2013 through the date of judgment, excluding the Defendants.
Revenue Sharing Subclass All participants and beneficiaries of the Anthem 401(k) Plan (formerly the WellPoint 401(k) Retirement Savings Plan) whose accounts held one or more investments that made revenue sharing payments to The Vanguard Group at any time from December 29, 2009 through July 21, 2013, excluding the Defendants.
Or, alternatively:
All participants and beneficiaries of the Anthem 401(k) Plan (formerly the WellPoint 401(k) Retirement Savings Plan) who had a reduction in the value of their account balance at a rate of more than $30.00 per year due to revenue sharing payments to The Vanguard Group at any time ...

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