The opinion of the court was delivered by: Reagan, District Judge
This matter comes before the Court on Plaintiffs' Motion for Class Certification (Doc. 71) and Plaintiffs' Motion to Clarify June 16, 2006 Order (Doc. 142). The motion for clarification is DENIED as moot in light of the Court's statements on the record at the hearing on Plaintiffs' motion for class certification. The motion for class certification is GRANTED in part and DENIED in part. Plaintiffs' request for class certification of their First Claim for Relief as set forth in Plaintiffs' operative Complaint in this cause, see Doc. 117 ¶¶ 77-83, (hereinafter, "Count I") is GRANTED, and Count I is certified as a class action pursuant to Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure. Plaintiffs' request for class certification as to their Second Claim for Relief (hereinafter, "Count II"), see Doc. 117 ¶¶ 84-86, is DENIED.
Plaintiffs Dennis Lively, Willis Harms, and Larry Grab bring this action against Defendants Dynegy, Inc. ("Dynegy"), Illinois Power Company ("IPCO"), Dynegy Midwest Generation, Inc., Dynegy Inc. Benefit Plans Committee ("Dynegy BPC"), Louis Dorey, Robert D. Doty, Marian M. Davenport, Alec G. Dreyer, John Ford, Andrea Lang, Tom Linton, Lisa Q. Metts, Michael Mott, Milton L. Scott, R. Blake Young, Larry Altenbaumer, Nicholas Caruso, Cristin Cracraft, Melessa Fox, and Pryor Lindsey pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 ("ERISA"), on behalf of a proposed class of participants in the "Illinois Power Company Incentive Savings Plan for Employees Covered Under a Collective Bargaining Agreement" ("the Plan"). Plaintiffs allege breach of fiduciary duty pursuant to ERISA § 409(a), 29 U.S.C. § 1109(a), and ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2), and seek to remedy the Plan's losses on its investments in Dynegy stock during the period from February 1, 2000, through the present.
Plaintiffs allege that they are employees of Dynegy and its predecessor entities and participants in the Plan within the meaning of ERISA § 3(7), 29 U.S.C. § 1002(7). See Doc. 117 ¶¶ 6-8. Plaintiffs allege also that the Plan is an individual account plan within the meaning of ERISA § 3(34), 29 U.S.C. § 1002(34), and an employee pension benefit plan and an employee benefit plan for purposes of ERISA § 3(2)(A), 29 U.S.C. § 1002(2)(A). See Doc. 117 ¶¶ 25-26.*fn1
Thus, the Plan is subject to ERISA's requirements regarding fiduciary duties. See Diak v. Dwyer, Costello & Knox, P.C., 33 F.3d 809, 811 (7th Cir. 1994); James v. National Bus. Sys., Inc., 924 F.2d 718, 720 (7th Cir. 1991).
Under ERISA § 404, 29 U.S.C. § 1104, a fiduciary of an employee benefit plan must carry out its responsibilities "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims." 29 U.S.C. § 1104(a)(1)(B). ERISA § 409, 29 U.S.C. § 1109, provides, in pertinent part, "Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach." 29 U.S.C. § 1109(a). Finally, ERISA § 502, 29 U.S.C. § 1132, states, in part, "A civil action may be brought -- (2) by the Secretary [of Labor], or by a participant, beneficiary or fiduciary for appropriate relief under section 1109 of this title." 29 U.S.C. § 1132(a)(2).*fn2
Actions for a fiduciary breach under ERISA §§ 409 and 502(a)(2), 29 U.S.C. §§ 1109, 1132(a)(2), must "be brought in a representative capacity on behalf of the plan as a whole." Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142 n.9 (1985) (finding that an action was proper under ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2), where all of the plaintiffs shared "[a] common interest . . . in the financial integrity of the plan"). See also Steinman v. Hicks, 352 F.3d 1101, 1102 (7th Cir. 2003) (a claim of breach of fiduciary duty for failure to diversify plan assets was properly brought on behalf of a plan); Meade v. Pension Appeals & Review Comm., 966 F.2d 190, 194 (6th Cir. 1992) ("[R]ecovery for a violation of fiduciary duty under 29 U.S.C. § 1109 inures to the benefit of the plan."); Boeckman v. A.G. Edwards, Inc., 461 F. Supp. 2d 801, 807 (S.D. Ill. 2006) (quoting Filipowicz v. American Stores Benefit Plans Comm., 56 F.3d 807, 812 (7th Cir. 1995)) ("Liability for a breach of fiduciary duty runs to the plan and not beneficiaries as individuals."). The Court already has found that this action is properly brought on behalf of the Plan, see Lively v. Dynegy, Inc., 420 F. Supp. 2d 949, 953 (S.D. Ill. 2006), and that decision is the law of the case, from which the Court sees no sound reason to depart. See Trustees of Pension, Welfare, & Vacation Fringe Benefit Funds of IBEW Local 701 v. Pyramid Elec., 223 F.3d 459, 468 n.4 (7th Cir. 2000); Avitia v. Metropolitan Club of Chicago, Inc., 49 F.3d 1219, 1227 (7th Cir. 1995); Dudley v. Putnam Inv. Funds, Civil No. 06-940-GPM, 2007 WL 329129, at *4 (S.D. Ill. Feb. 1, 2007).
Pertinent to this case are the "Illinois Power Company Incentive Savings Plan for Employees Covered Under a Collective Bargaining Agreement (As Amended and Restated Effective January 1, 1991 and as further amended through June 1997)," see Doc. 22, Appendix of Plan Documents in Support of Defendants' Motion to Dismiss ("Appendix"), Tab A, and the "Illinois Power Company Incentive Savings Plan for Employees Covered Under a Collective Bargaining Agreement As Amended and Restated Effective January 1, 2002." See id., Appendix, Tab B. Dynegy is the successor-in-interest to IPCO, which was the administrator and named fiduciary of the Plan until February 2000. See Doc. 22, Appendix, Tab A at ¶ 11.1, ¶ 1.8, ¶ 1.34 and "Adoption of and Amendment to Illinois Power Company Incentive Savings Plan for Employees Covered under a Collective Bargaining Agreement." After the merger of Dynegy and IPCO, Dynegy BPC assumed the role of administrator and named fiduciary of the Plan in July 2000. See Doc. 22, Appendix, Tab B at ¶ 12.1, ¶ 1.1(9); id., Appendix, Tab C. Louis Dorey, Robert D. Doty, Marian M. Davenport, Alec G. Dreyer, John Ford, Andrea Lang, Tom Linton, Lisa Q. Metts, Michael Mott, Milton L. Scott, R. Blake Young, Larry Altenbaumer, Nicholas Caruso, Cristin Cracraft, Melessa Fox, and Pryor Lindsey are current and former members of the Dynegy BPC. See Doc. 117 ¶¶ 13-24. Plaintiffs allege that all Defendants are fiduciaries of the Plan within the meaning of ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A). See Doc. 117 ¶¶ 9-24.
At all times relevant to this case, participants in the Plan, subject to Internal Revenue Service ("IRS") limitations, have been allowed to contribute tax-deferred payroll deductions to the Plan. See Doc. 22, Appendix, Tab A at ¶¶ 3.1-3.6; id., Appendix, Tab B at ¶¶ 3.1-3.2. Seealso Doc. 74 at 3, 5-6. Participants are able under the Plan to designate the manner in which amounts allocated to their accounts will be invested in various investment funds. See Doc. 22, Appendix, Tab A at ¶¶ 14.1-14.6; id., Appendix, Tab B at ¶¶ 5.3-5.4. See also Doc. 74 at 6. Under the Plan, participants are entitled to designate a portion of their accounts for investment in employer stock. See Doc. 22, Appendix, Tab A at ¶ 14.3, ¶ 1.15A, ¶ 1.9; id., Appendix, Tab B at ¶¶ 5.3-5.5, ¶ 1.1(11). See also Doc. 74 at 6, 23, 24.*fn3
The Plan allows Dynegy to make voluntary employer matching contributions as well as employer discretionary contributions and specifies that both shall be in Dynegy common stock valued at the closing price of such stock on the New York Stock Exchange for the last day of the month for which the contribution is made. See Doc. 117 ¶¶ 29-30; Doc. 22, Appendix, Tab B at ¶¶ 3.3-3.4. Before January 1, 2002, Plan participants generally were not permitted to convert any employer discretionary contributions in the form of employer stock to any other investment fund. See Doc. 22, Appendix, Tab A at ¶ 14.4 and "Amendment to Illinois Power Company Incentive Savings Plan for Employees Covered under a Collective Bargaining Agreement" VI(6). Effective January 1, 2002, participants were permitted to convert the investment designation of such employer contributions to other investment funds without limitation. See Doc. 22, Appendix, Tab B at ¶ 6.8(b), ¶ 5.3(b)-(c).
Beginning in 2002, Dynegy suffered a severe financial setback when it announced that it was under investigation by the Securities and Exchange Commission ("SEC") for accounting improprieties that had led to the overvaluation of Dynegy stock. See Doc. 117 ¶ 56. Ultimately, the improprieties at issue forced Dynegy to pay a $3 million fine to the SEC and $5 million civil penalty to the Commodity Futures Trading Commission and to restate the company's earnings repeatedly. See id.¶ 62, ¶ 63, ¶ 65. Plaintiffs allege that the price of Dynegy's stock rose from $16.71 per unit on December 31, 1999, to $54.08 per unit on December 31, 2000, only to fall to $.47 per unit as of December 31, 2002. See id.¶ 36, ¶ 44, ¶ 64. Plaintiffs allege that during this period, Defendants made numerous statements in press releases, SEC filings, and meetings with Plan participants encouraging investment in Dynegy stock. See, e.g., id.¶ 39, ¶ 41, ¶ 43, ¶ 49, ¶ 54, ¶ 55.
Plaintiffs' operative complaint in this cause alleges that Defendants breached their fiduciary duties under ERISA in two ways. Count I of Plaintiffs' operative complaint alleges that Defendants "knew or should have known that the price of Dynegy stock was artificially inflated and that Dynegy stock constituted an imprudent investment for the Plan," Doc. 117 ¶ 69, yet they failed to discontinue Plan investment in Dynegy stock and to discontinue offering the company stock funds as investment alternatives for participants. See id.¶ 79. Count II of Plaintiffs' operative complaint alleges that Defendants' representations concerning Dynegy's performance and certain accounting and reporting improprieties were false and misleading, and Defendants failed to disclose material information regarding these matters. See id.¶¶ 74, 85. Pursuant to ERISA § 409(a), 29 U.S.C. § 1109(a), and ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2), Plaintiffs seek relief including an order compelling Defendants to make good to the Plan all losses resulting from the alleged fiduciary breaches and an order that the Plan's fiduciaries allocate the restored losses to the accounts of Plan participants in proportion to the accounts' losses attributable to the decline in Dynegy's stock price. Pursuant to Rule 23(b)(1) and (b)(2) of the Federal Rules of Civil Procedure, Plaintiffs seek certification of the following class:
All Participants in the Plan for whose individual accounts the Plan held shares of Dynegy stock at any time from February 1, 2000 to the present. Excluded from the Class are the individual defendants, officers and directors of the corporate defendants, members of their immediate families, and the heirs, successors or assigns of any of the foregoing.
Doc. 117 ¶ 75. Having reviewed carefully the submissions of the parties concerning Plaintiffs' request for class certification, and having conducted a hearing on the issue of class certification, the Court now is prepared to rule.
A. Plaintiffs' Motion to Clarify June 16, 2006 Order
By order entered February 15, 2006, the Court held that the allegations of Count II of Plaintiffs' original complaint in this cause sounded in misrepresentation and were not adequately pleaded under Rule 9(b) of the Federal Rules of Civil Procedure. See Lively, 420 F. Supp. 2d at 955.By order entered June 16, 2006, the Court held that amendment of those allegations by Plaintiffs nonetheless failed to cure the lack of particularity under Rule 9(b). At the hearing on Plaintiffs' motion for class certification the Court explained that the June 16 order only dismissed Count II of the operative complaint in this cause to the extent Count II asserts a claim based on affirmative misrepresentations by Defendants, rather than omissions. SeeRogers v. Baxter Int'l, Inc., 417 F. Supp. 2d 974, 984-85 (N.D. Ill. 2006); Howell v. Motorola, Inc., 337 F. Supp. 2d 1079, 1089 (N.D. Ill. 2004); Adamczyk v. Lever Bros. Co., Div. ofConopco,991 F. Supp. 931, 939 (N.D. Ill. 1997). In light of the Court's clarification of the June 16 order at the class certification hearing, Plaintiffs' motion for clarification is moot and therefore will be denied.*fn4
B. Plaintiffs' Motion for Class Certification
1. Standard Governing Class Certification
Rule 23 of the Federal Rules of Civil Procedure sets forth the prerequisites for a class action: (1) a proposed class must be so numerous that joinder of all members is impracticable ("numerosity"); (2) there must be a question of law or fact common to the class ("commonality"); (3) the claims or defenses of the representative parties must be typical of the claims or defenses of the class ("typicality"); and (4) the representative parties must fairly and adequately protect the interests of the class ("adequacy"). See Fed. R. Civ. P. 23(a). In addition to satisfying these four elements, a party seeking class certification must also demonstrate that the action falls within one of the categories enumerated in Rule 23(b). See Fed. R. Civ. P. 23(b)(1), (b)(2), (b)(3). See also Chandler v. Southwest Jeep-Eagle, Inc., 162 F.R.D. 302, 306 (N.D. Ill. 1995); Jefferson v. Security Pac. Fin. Servs., Inc., 161 F.R.D. 63, 67 (N.D. Ill. 1995).
A party seeking class certification bears the burden of proving that each of the requirements under Rule 23 has been met, and a failure by the movant to satisfy any one of the prerequisite elements precludes certification. See General Tel. Co. of S.W. v. Falcon, 457 U.S. 147, 160-61 (1982); Retired Chicago Police Ass'n v. City of Chicago, 7 F.3d 584, 596 (7th Cir. 1993). "The court maintains broad discretion to determine whether a proposed class satisfies the requirements and should err in favor of maintaining class actions." Guillory v. American Tobacco Co., No. 97 C 8641, 2001 WL 290603, at *2 (N.D. Ill. Mar. 20, 2001). See also First Interstate Bank of Nev., N.A. v. Chapman & Cutler, ...