The opinion of the court was delivered by: Herndon, Chief Judge
I. Introduction and Background
Pending before the Court is Plaintiffs' motion for class certification (Doc. 24). Defendants oppose the motion. Based on the pleadings, applicable case law, the Court grants the motion.
Plaintiffs Gary Spano, John Bunk and James White, Jr., bring this action against Defendants, The Boeing Company ("Boeing"), Employee Benefits Plans Committee, Scott M. Buchanan and Employee Benefits Investment Committee pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § § 1001 - 1461 ("ERISA"), on behalf of The Boeing Company Voluntary Investment Plan ("the Plan"). Plaintiffs allege breach of fiduciary duty pursuant to ERISA § 409, 29 U.S.C. § 1109, ERISA §§ 502(a)(2), (3), 29 U.S.C. § § 1132(a)(2), (3) and seek to remedy the Plan's losses and to obtain injunctive and other equitable relief for the Plan from Defendants. Plaintiffs claim that the breaches occurred on a plan-wide basis, and were the result of decisions made at the Plan, rather than the individual level, affecting all of the participants and beneficiaries in the Boeing-sponsored 401(k) plan. Plaintiffs' Second Amended Complaint contains two counts: Count I -breach of fiduciary duty pursuant to ERISA 502(a)(2) and Count II - other remedies for breach of fiduciary duty pursuant to ERISA 502(a)(3) (Doc. 186).
On November 22, 2006, Plaintiffs moved for class certification (Doc. 24). Specifically, Plaintiffs seek to certify the following class:
All persons, excluding the Defendants and/or other individuals who are or may be liable for the conduct described in this Complaint, who are or were participants or beneficiaries of the Plan and who are, were or may have been affected by the conduct set forth in this Complaint, as well as those who will become participants or beneficiaries of the Plan in the future.
Defendants filed their opposition to class certification on April 9, 2007 (Doc. 61) and Plaintiffs filed their reply on May 3, 2007 (Doc. 68). On June 15th and 28th, 2007, Plaintiffs filed supplements to the class certification motion (Docs. 73 & 74, respectively). Thereafter, on September 28, 2007, the Court sua sponte stayed the proceedings with respect to the motion for class certification pending the outcome of an appeal of an Order granting class certification entered by District Judge Michael J. Reagan in similar ERISA breach of fiduciary case, Lively v. Dynegy, Inc., 2007 WL 685861 (S.D. Ill. March 2, 2007) (Doc. 76). On April 3, 2008, the Court lifted the stay regarding the class certification proceedings as the Livelycase settled prior to the Seventh Circuit issuing a decision (Doc. 142). On April 15, 2008, the Court granted Defendants leave to file a supplement to class certification and Defendants filed their brief on April 15, 2008 (Docs. 152 & 155, respectively). On April 21, 2008, the Court allowed Plaintiffs leave to file a reply to Defendants' supplement and Plaintiffs filed their reply on April 25, 2008 (Docs. 161 & 165, respectively). Subsequently, Plaintiffs filed a notice of supplemental authority in support of class certification on June 20, 2008 (Doc. 174).
In the meantime, Plaintiffs filed a motion for leave to file a Second Amended Complaint (Doc. 150). On August 22, 2008, Magistrate Judge Wilkerson granted Plaintiffs' motion for leave (Doc. 185). On August 25, 2008, Plaintiffs filed their Second Amended Complaint (Doc. 186) to which Defendants filed an Answer and a motion to dismiss or for summary judgment based on statute of limitations (Docs. 188 & 189, respectively).*fn1 As the motion for class certification is ripe, the Court turns to address the motion.
Defendant Boeing offers a 401(k) plan to its employees known as The Boeing Voluntary Investment Plan. Participants contribute varying percentages of their before-tax (and in some cases, after tax) earnings to the Plan. Boeing matches these contributions in varying percentages. Boeing makes use of a Master Trust to hold the assets of the Plan. The Plan shares the services of record-keepers, investment managers, consultants, and other service providers directly and/or through the Master Trust.
ERISA sets forth the duties that an employer (or its delegates) owe to its 401(k) plan participants. Section 403(c), 29 U.S.C. § 1103(c), requires that the plan's assets be used "solely for the exclusive purposes of providing benefits to participants" and for "defraying reasonable expenses of administering the plan." ERISA mandates that plan fiduciaries -- such as the plan sponsor and administrator, as well as others acting in a fiduciary capacity -- must discharge their fiduciary duties "solely in the interest of the participants and beneficiaries." 29 U.S.C. § 1104(a)(1). Plan sponsors, administrators and other fiduciaries must act "within the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of administering the plan." Id. They must discharge these duties "with care, skill, prudence, and diligence" that a "prudent man" acting in a similar capacity would use under similar circumstances. 29 U.S.C. § 1104(a)(1)(b). The fiduciaries owe these duties to all participants in 401(k) plans.
In their Second Amended Complaint, Plaintiffs allege, inter alia, that Defendants breached their fiduciary duties by causing or allowing unreasonable fees and expenses to be charged against the assets of the Plan and by failing to ensure that the Plan's assets were used solely for the exclusive purposes of providing benefits to participants. Plaintiffs allege that these excessive fees were imposed on the Plan through a combination of both "Hard Dollar" payments and hidden "Revenue Sharing" transfers. Plaintiffs further allege that Defendants breached their core fiduciary obligations by causing the Boeing Stock Fund ("BSF") to incur unnecessary fees and to hold excess cash; again impairing the value of, and return on, the Plan's assets.
The Second Amended Complaint also alleges that Defendants further violated their fiduciary duties by failing to disclose and/or concealing material information regarding Plan fees and expenses. Plaintiffs also allege that Defendants selected and retained mutual funds as Plan investment options until 2006- which not only charged excessive investment management expenses - but were also the vehicle Defendants used to funnel excessive Plan recordkeeping and administrative fees to State Street/CitiStreet via their undisclosed revenue sharing program.
III. Class Certification Standard
Rule 23 of the Federal Rules of Civil Procedure sets for 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 criteria, 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).
A party seeking class certification bears the burden of proving that each of the requirements under Rule 23 have 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). A court has broad discretion to determine whether a proposed class meets the Rule 23 certification requirements. Trotter v. Klincar, 748 F.2d 1177, 1184 (7th Cir. 1984). In making this determination, Rule 23 should be construed liberally to support its policy of favoring the maintenance of class actions. See King v. Kansas City S. Indus., Inc., 519 F.2d 20, 25-36 (7th Cir. 1975). As a general principle, a court is not allowed to engage in analysis of the merits to determine whether the case should be maintained as a class. Retired Police Ass'n, 7 F.3d at 596 (7th Cir. 1993). However, a district court must make a preliminary review into the merits of the case if some of the considerations under Rule 23 overlap the merits. Szabo v. Bridgeport Machs., Inc., 249 F.3d 672 (7th Cir.), cert. denied, 122 S.Ct. 348 (2001); see also ...