ERISA — class actions

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United States Court of Appeals For the Seventh Circuit

Civil

ERISA — class actions

An action for breach of fiduciary duty under Section 502(a)(2) of the ERISA may be maintained as a class action when a defined-contribution retirement savings plan is at issue.

“The appropriateness of class treatment in a Section 502(a)(2) case (as in other class actions) depends on the claims for which certification is sought. Here, the specifics of the SVF claim make it unlikely that the sorts of conflicts that concerned us in Spano will arise. Plaintiffs emphasize that a Section 502(a)(2) action seeks only to make the fiduciary refund to the Plan any losses caused by the breach. 29 U.S.C. § 1109(a) (‘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 … .’). There appears to be no risk that any SVF investor who benefited from Lockheed’s imprudent management would have her Plan assets reduced as a result of this lawsuit. Moreover, unlike many imprudent management claims—in which the allegation is that fraud or undue risk inflated the value of a fund and then caused it to crash, see, e.g., In re Schering Plough Corp. ERISA Litig., 589 F.3d 585, 592 (3d Cir. 2009)—Plaintiffs’ allegation is that the SVF was so low-risk that its growth was insufficient for a retirement asset. A very low-risk fund is by nature not subject to the wide swings in value that would enable some investors to reap a windfall from a fund’s mismanagement. Finally, the fact that the SVF underperformed relative to the Hueler Index for all but a very brief portion of the class period reinforces the intuition that few, if any, SVF investors profited from Lockheed’s conduct. Should any of these statements turn out to be wrong, the district court can make further adjustments to the class definition later.”

Reversed and Remanded.

12-3736 Abbott v. Lockheed Martin Corp.

Appeal from the United States District Court for the Southern District of Illinois, Reagan, J., Wood, J.