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Brieger v. Tellabs

September 19, 2007


The opinion of the court was delivered by: Matthew F. Kennelly, District Judge


Plaintiffs Don Brieger, Robert Becker, Alan Burstin, Paula Mitchell, and Harry Schultz are current and former participants in the Tellabs Profit Sharing and Savings Plan (the Plan). They filed this putative class action lawsuit for breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1109 & 1132. Plaintiffs allege that defendants, who are claimed to be fiduciaries of the Plan, breached their fiduciary obligations by permitting investments in Tellabs securities when it was imprudent to do so and by disseminating misleading information to Plan participants about the prudence of investing in Tellabs securities.*fn1 Plaintiffs seek to represent a class of individuals who participated in the Plan between December 11, 2000 and July 1, 2003.

Plaintiffs have moved for class certification pursuant to Federal Rule of Civil Procedure 23. For the following reasons, the Court grants plaintiffs' motion.


The Court presumes familiarity with the facts of the case, see Brieger v. Tellabs, Inc., 473 F. Supp. 2d 878 (N.D. Ill. 2007), and summarizes those facts that are relevant to the class certification motion.

Tellabs Operations, Inc. sponsors the Tellabs Profit Sharing and Savings Plan and the Tellabs Retirement Program (collectively, the "Plan") as part of the Tellabs Advantage Program. These plans are governed by ERISA. Tellabs sponsors these plans and has been a named Plan administrator from 1999 to the present. Plaintiffs allege various breaches of fiduciary duty by Tellabs and other individual defendants comprising four groups of Plan fiduciaries: the director defendants, the administrative committee defendants, the investment committee defendants, and the individual officer defendants (collectively, "defendants"). The investment committee and the administrative committee were named fiduciaries of the Plan. The Tellabs board of directors was responsible for selecting and monitoring the members of the investment and administrative committees. The director defendants were responsible for the management and administration of the Plan, the disposition of its assets and determination of the amount of discretionary contributions in addition to Tellabs's basic match contribution to the Plan. They were also responsible for selecting, monitoring, and removing members of the administrative committee and the investment committee.

The administrative committee was the Plan administrator and a named fiduciary of the Plan. Pursuant to the Plan, the administrative committee had "final and binding discretionary authority to control and manage the operation and administration of the Plan." Second Amended Complaint (Complaint) ¶ 92. The investment committee was a named fiduciary of the Plan and had full discretionary authority to manage and control Plan assets and establish and implement an investment policy consistent with Plan objectives. Among other duties, it was responsible for monitoring the diversification of investments of the Trust Fund (which is composed of assets of the Tellabs Company Stock Investment Fund), evaluating the propriety of investments, ensuring compliance with ERISA regarding the acquisition or holding of Tellabs stock, and eliminating and adding investment funds to the Plan. Tellabs is the Plan's sponsor and had overall responsibility for the Plan.

The Plan is a defined contribution individual account retirement plan open to all Tellabs employees who were participants in Tellabs's previous retirement plan prior to 1999 or are at least twenty-one years old, employed with Tellabs for at least nine months, and complete 1,000 hours of service. Eligible employees of Tellabs and its subsidiaries may participate in the Plan by making pre-tax contributions to one or more of twelve different investment options, with varying levels of risk and potential return. Throughout the class period, Tellabs made matching contributions to the Plan, matching up to three percent of a participant's eligible compensation for the year. Under the Plan, participants can choose how to invest matching contributions among the Plan's investment options, including, but not limited to, the Tellabs Stock Fund.

As indicated earlier, plaintiffs' proposed class period runs from December 11, 2000 until July 1, 2003. In their complaint, plaintiffs allege that defendants violated their fiduciary duties to the Plan, plaintiffs, and all participants of the Plan during the class period. Plaintiffs seek relief on behalf of the Plan for losses caused by defendants' alleged fiduciary misconduct in managing and administering the Plan pursuant to sections 409 and 502(a)(2) of ERISA, 29 U.S.C. §§ 1109 & 1132(a)(2). Plaintiffs allege that defendants permitted the Plan to invest in Tellabs stock when they knew or should have known Tellabs stock was an imprudent investment for retirement savings due to material undisclosed information relating to, among other things: production delays, poor test performance, declining demand, purchase order falsification, and other problems relating to certain key product lines, and company-wide restructuring activities and inventory write-offs. The Plan held substantial interests in the common stock of Tellabs.

Plaintiffs either participated in, or were beneficiaries of, the Tellabs Plan. As a result of workforce reductions, Tellabs terminated plaintiffs' employment. Plaintiffs qualified for severance benefits under the Plan. Tellabs gave plaintiffs, as well as other employees subject to the workforce reduction, the option of maintaining their accounts with the Plan. Brieger, Becker, Burstin, and Schultz elected to take full distribution of their Plan accounts in a lump sum upon leaving Tellabs's employ. In the second amended complaint, plaintiffs added Paula Mitchell as a representative plaintiff. Mitchell is a former Tellabs employee who opted to maintain her account with the Plan rather than take a lump sum distribution upon leaving Tellabs's employ.


Federal Rule of Civil Procedure 23 authorizes a court to certify a class action if the party seeking class certification meets all of the requirements of Rule 23(a) and one of the requirements of Rule 23(b). See Retired Chicago Police Ass'n v. City of Chicago, 7 F.3d 584, 598 (7th Cir. 1993). Under Rule 23(a)(1)-(4), plaintiffs bear the burden of proving that the proposed class is so numerous that joinder of all members is impracticable; there are common questions of law or fact; the representatives' claims are typical of those of the class; and the representatives fairly and adequately protect the interests of the class. FED. R. CIV. P. 23(a); see Carnegie v. Household Int'l, Inc., 376 F.3d 656, 663-64 (7th Cir. 2004).

Once plaintiffs have satisfied the requirements of Rule 23(a), they must meet one of the requirements listed in Rule 23(b). See Williams v. Chartwell Fin. Servs., Ltd., 204 F.3d 748, 760 (7th Cir. 2001). In this case, plaintiffs contend that they meet the requirements of Rule 23(b)(1)(A) and (B). First, they claim that prosecution of multiple individual actions by class members would create the risk of inconsistent or different adjudications with respect to the individual members of the class. See FED. R. CIV. P. 23(b)(1)(A). Further, because plaintiffs bring their claims on behalf of the Plan, they contend that resolution of their claims would be dispositive of the interests of other participants or impede their ability to protect their interests. See FED. R. CIV. P. 23(b)(1)(B). Plaintiffs also contend that their proposed class meets the requirements of Rule 23(b)(2) because defendants have refused to act on grounds generally applicable to the class, and thus plaintiffs seek declaratory and injunctive relief on behalf of the Plan.

In deciding motions for class certification, the Court "should make whatever factual and legal inquiries are necessary under Rule 23." Szabo v. Bridgeport Mach., Inc., 249 F.3d 672, 676 (7th Cir. 2001).

1. Rule 23(a) Requirements

a. Numerosity

Rule 23(a)(1) requires that a class be so "numerous that joinder of all its members is impracticable." FED. R. CIV. P. 23(a)(1). Defendants do not raise any argument with respect to numerosity and have therefore forfeited any objection to plaintiffs' satisfaction of this requirement. See Volovsek v. Wisc. Dep't of Agr. Trade & Consumer Prot., 344 F.3d 680, 689 n.6 (7th Cir. 2003) (absence of legal argument forfeits consideration of claim). Plaintiffs contend that thousands of Tellabs employees were participants and beneficiaries of the Plan. Specifically, based on Tellabs's ERISA documents, plaintiffs argue that the putative class could comprise as many as 6,690 class members. The Court finds that the proposed class meets the numerosity requirement of Rule 23(a)(1).

b. Commonality

Rule 23(a)(2) requires that there be questions of law or fact common to the class. The Seventh Circuit has held that "'[a] common nucleus of operative fact is usually enough to satisfy the commonality requirement of Rule 23(a)(2).'" Keele v. Wexler, 149 F.3d 589, 594 (7th Cir. 1998) (quoting Rosario v. Livaditis, 963 F.2d 1013, 1018 (7th Cir. 1992)). A common set of operative facts is usually present when defendants are claimed to have engaged in "standardized conduct toward the members of the proposed class." Id.

Defendants do not challenge plaintiffs' satisfaction of Rule 23(a)(2)'s commonality requirement directly. Rather, they address commonality as a requirement intertwined with typicality. Though commonality and typicality are closely related, the tests are distinct. Retired Chicago Police Ass'n, 7 F.3d at 596-97. Plaintiffs contend that members of the proposed class have a common question at the heart of their case: whether defendants violated their fiduciary obligations under ERISA sections 409 and 502(a)(2) by imprudently managing and investing Plan funds. Though there is some factual variation among the class members, these variations will not defeat commonality under Rule 23(a)(2) so long as there is at least one question of law or fact common to the class. See Rosario, 963 F.2d at 1017.

The Court finds that defendants' actions and decisions pertaining to the Plan amount to a common course of conduct vis-à-vis the putative class. Defendants managed and controlled the Plan assets and directed the Plan's investment options. Plaintiffs claim that through this management and control, defendants continued to invest the Plan's assets in Tellabs stock when they knew or should have known that it was imprudent to do so. Further, because plaintiffs' claims derive from defendants' actions (or inactions) with respect to the Plan, plaintiffs have demonstrated that their claims involve a common nucleus of operative fact. See Keele, 149 F.3d at 594. The Court holds that the putative class meets Rule 23(a)(2)'s commonality requirement. See Rosario, 963 F.2d at 1017-18.

c. Typicality

Under Rule 23(a)(3), the Court must determine whether the "claims or defenses of the representative parties are typical of the claims or defenses of the class." FED. R. CIV. P. 23(a)(3).

A "'plaintiff's claim is typical if it arises from the same event or practice or course of conduct that gives rise to the claims of other class members and his or her claims are based on the same legal theory.'" Keele, 149 F.3d at 595 (quoting De La Fuente v. Stokely-Van Camp, Inc., 713 F.2d 225, 232 (7th Cir. 1983)). Courts have cautioned, however, that "[t]ypical does not mean identical, and the typicality requirement is liberally construed." Gaspar v. Linvatec Corp., 167 F.R.D. 51, 57 (N.D. Ill. 1996) (citing Scholes v. Stone, McGuire & Benjamin, 143 F.R.D. 181, 185 (N.D. Ill. 1992)). In deciding whether a plaintiff has met the typicality requirement, courts focus on the conduct of the defendant and ...

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