SANTOMENNO et al v. TRANSAMERICA LIFE INSURANCE COMPANY et al, No. 2:2012cv02782 - Document 170 (C.D. Cal. 2013)
Court Description: ORDER DENYING DEFENDANTS MOTION TO STRIKE CLASS ALLEGATIONS 143 by Judge Dean D. Pregerson (lc). Modified on 5/21/2013 .(lc).
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SANTOMENNO et al v. TRANSAMERICA LIFE INSURANCE COMPANY et al Doc. 170 1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 JACLYN SANTOMENNO; KAREN POLEY; BARBARA POLEY, 12 Plaintiffs, 13 v. 14 15 16 TRANSAMERICA LIFE INSURANCE COMPANY; TRANSAMERICA INVESTMENT MANAGEMENT, LLC; TRANSAMERICA ASSET MANAGEMENT INC., 17 Defendants. 18 ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 12-02782 DDP (MANx) ORDER DENYING DEFENDANTS’ MOTION TO STRIKE CLASS ALLEGATIONS [Dkt. No. 143] 19 20 Before the court is Defendants Transamerica Life Insurance 21 Company (“TLIC”), Transamerica Investment Management, LLC, and 22 Transamerica Asset Management Inc.’s Motion to Strike Class 23 Allegations in Part. 24 the court adopts the following order. 25 I. Background Having considered the parties’ submissions, 26 The background of this case is explained in detail in the 27 court’s Order of February 19, 2013, Granting in Part and Denying in 28 Part Defendants’ Motions to Dismiss. (Dkt. No. 137.) In that Dockets.Justia.com 1 Motion, Defendants argued that TLIC is not a fiduciary with respect 2 to the terms of its own compensation because those terms were 3 negotiated by a named fiduciary prior to TLIC assuming a fiduciary 4 duty. 5 claim for TLIC’s fiduciary duty to Plaintiffs with respect to the 6 fees they charge in their 401(k) plan product. 7 II. 8 9 This court disagreed and found that Plaintiffs had stated a Legal Standard Under Rule 23, “[a]t an early practicable time after a person sues or is sued as a class representative, the court must determine 10 by order whether to certify the action as a class action.” 11 Civ. P. 23(c)(1)(A). 12 may issue orders that . . . require that the pleadings be amended 13 to eliminate allegations about representation of absent persons and 14 that the action proceed accordingly.” 15 III. Defendants’ Claims 16 Fed. R. In conducting a Rule 23 action, “the court Fed. R. Civ. P. 23(d)(1)(D). Defendants move to strike the class allegations “with respect 17 to plans in which Plaintiffs themselves have not participated.” 18 (Mot. at 18.) 19 excludes from the litigation the named fiduciaries of the employee 20 benefit plans in which putative class members are participants. 21 Defendants maintain that this is improper for a number of reasons. 22 They argue that the class definition improperly First, Defendants argue that excluding the named fiduciaries 23 undermines ERISA’s structure of fiduciary responsibility because it 24 denies those named fiduciaries a voice in the litigation, despite 25 the named fiduciaries’ roles in selecting TLIC as a service 26 provider and managing their respective ERISA plans. 27 this exclusion, TLIC argues, the named fiduciaries will be unable 28 to fulfill their duty to protect the plans from harmful costs of 2 As a result of 1 litigation and from the loss of their service plans that would 2 result from the litigation’s success. 3 Second, Defendants argue that only the named fiduciaries have 4 the authority to settle or release claims on behalf of plans, and 5 that the relief Plaintiffs seek - which Defendants understand as 6 disgorgement of all or some of the fees they have charged plans - 7 would necessarily require TLIC to terminate its service contracts 8 with the plans, thus requiring the named fiduciaries to obtain 9 replacement service providers. 10 Third, Defendants argue that the only way a multi-plan class 11 would be appropriate is if the named fiduciaries were the class 12 representatives, because those named fiduciaries retained TLIC as a 13 service provider and are responsible for monitoring TLIC’s ongoing 14 performance and fees. 15 Finally, Defendants argue that Plaintiffs are not adequate 16 representatives for a class that comprises participants in other 17 employee benefit plans because they have no connection to those 18 plans and would be in effect usurping the role of the named 19 fiduciaries. 20 IV. Discussion 21 Defendants seek to limit the class to participants in the 22 employee benefit plans in which the named plaintiffs are also 23 participants. 24 limiting the class can the plans’ named fiduciaries participate 25 fully in the litigation, and their full participation is required 26 to protect the plans’ interests both during and after the 27 litigation. Defendants’ logic appears to be that only by 28 3 1 The court notes, first, that while every employee benefit plan 2 has one or more “named fiduciaries” who are named in the plan 3 instrument and who have certain responsibilities with respect to 4 the plan, 29 U.S.C. § 1102, all parties who have fiduciary duty to 5 the plan are subject to liability for breach of such duty. 6 29 U.S.C. § 1109 (“Any person who is a fiduciary with respect to a 7 plan who breaches any of the responsibilities, obligations, or 8 duties imposed upon fiduciaries . . . shall be personally liable to 9 make good to such plan any losses to the plan resulting from each 10 such breach, and to restore to such plan any profits of such 11 fiduciary which have been made through use of assets of the plan by 12 the fiduciary, and shall be subject to such other equitable or 13 remedial relief as the court may deem appropriate, including 14 removal of such fiduciary.”). 15 The court has already determined that Plaintiffs have stated a 16 claim for TLIC’s fiduciary duty to them with respect to their fees. 17 This means that Plaintiffs may hold TLIC accountable for the 18 reasonableness of their fees, among other things. 19 acknowledging or disavowing this duty, Defendants propose a litany 20 of reasons why Plaintiffs’ claims must nonetheless pass through the 21 named fiduciaries. 22 employee benefit plans, Plaintiffs do not have the responsibility 23 to consider the interest of the plan but only their interest in 24 pursuing the litigation. 25 problems for the ERISA structure because a successful outcome of 26 the litigation is likely to involve modifications to or termination 27 of numerous employee benefit plans, which would have adverse Without either They argue that as individual participants in Defendants argue that this causes 28 4 1 implications for all plan participants, even if it also involved a 2 payout of damages to Plaintiffs. Assuming arguendo that Defendants have breached their 3 4 fiduciary duty to Plaintiffs and that Plaintiffs are entitled to 5 damages, the issue of such a breach is distinct from the issue of 6 whether the employee benefit plan provisions will need to be 7 modified. 8 would feel it is appropriate to modify the plan provisions. 9 decision is independent of whether Plaintiffs are entitled to 10 Presumably if Plaintiffs are successful, Defendants That damages for past alleged conduct. Defendants make the apocalyptic argument that they will by 11 12 choice or necessity cease providing any services to employee 13 benefit plans if they are obligated to return or reduce their fees. 14 This sidesteps the issue of Defendants’ alleged breach of fiduciary 15 duty. 16 This matter is at an early stage in the proceedings. 17 no opinion on whether any fees charged were excessive and does not 18 presume it to be the case. 19 reasonable fees. 20 Defendants’ Motions to Dismiss at 13 (February 19, 2013)(“TLIC is 21 entitled to reasonable fees and profits for the services that it 22 provides to the plans, but as a fiduciary TLIC is accountable for 23 the reasonableness of those fees.”).) 24 reasonable; Plaintiffs have the burden of proof on that issue. 25 the determination of reasonableness is separate from the subsequent 26 question of how the plans would be modified if a breach were to be 27 found. Plaintiffs have alleged that TLIC charges excessive fees. The court has Defendants are entitled to charge (Order Granting in Part and Denying in Part 28 5 Defendants’ fees may well be But 1 Defendants’ arguments do not directly challenge the 2 suitability of Plaintiffs’ claims for class treatment. Defendants 3 appear to argue that the named fiduciaries are necessary parties to 4 the action and, indeed, are the only proper parties to bring such 5 an action because only they may make all plan decisions and only 6 they can settle and release any claims of the plan. 7 point out, this argument is not specific to the class context; to 8 the extent that it is valid, it should apply as much to the 9 individual Plaintiffs as to the putative class. As Plaintiffs Defendants’ 10 argument thus appears to be less a challenge to class allegations 11 and more another 12(b)(6)-type challenge to Plaintiffs’ ability to 12 bring their claims at all. 13 motion to strike class allegations. 14 Hence, it bears little weight in a At this stage of the litigation, the court sees no need to 15 amend class allegations by limiting the class to participants in 16 those benefit plans in which Plaintiffs have participated. 17 Plaintiffs have stated a claim for TLIC’s fiduciary responsibility 18 to them and to the potential class members. 19 fiduciary, Plaintiffs may bring an action against TLIC for breach 20 of fiduciary duty. 21 putative class fails to meet the Rule 23 requirements as a matter 22 of law, or that the issues in the case cannot be handled with 23 common proof. 24 district court found that individualized issues would predominate 25 and on that ground denied certification before Plaintiffs had filed 26 a motion to certify. 27 in contrast, Defendants’ concerns pertain more to the consequences 28 of such litigation and how remedies might be handled. If TLIC is a Defendants have not demonstrated that the In Vinole v. Countrywide Home Loans, Inc., the 571 F.3d 935, 946-47 (9th Cir. 2009). 6 These Here, 1 concerns do not go to the question of whether Plaintiffs’ claims 2 that TLIC’s fees are excessive are susceptible to class treatment. 3 Defendants will have the opportunity to make factual arguments 4 against certification at a later stage in the litigation. The 5 court has already considered Defendants’ arguments regarding their 6 fiduciary duty to Plaintiffs in the Motion to Dismiss. 7 declines now to find that despite Defendants’ potential fiduciary 8 duty to benefit plan participants, only a plan’s named fiduciaries 9 are in a position to challenge TLIC’s fees as potentially The court 10 excessive. To the extent that these issues arise and are developed 11 through facts and then presented in opposition to a class 12 certification motion, the court will address them at that time. 13 14 IT IS SO ORDERED. 15 16 17 Dated: May 21, 2013 18 DEAN D. PREGERSON 19 United States District Judge 20 21 22 23 24 25 26 27 28 7
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