Judge Rejects Proposed Class Certification in Remanded TIAA Retirement Plan Case

U.S. District Judge J. Paul Oetken denied a class certification claim by plaintiffs seeking to represent about 8,000 participants in Washington University in St. Louis retirement plans managed by recordkeeper TIAA in a June 27 opinion in U.S. District Court for the Southern District of New York.

Oetken’s decision came after the case was remanded from the U.S. 2nd Circuit Court of Appeals in December 2022, when a three-judge panel overturned the district court’s class certification on the grounds that individual issues raised by the defense may differ from that of the full class of participants.

“The Second Circuit vacated and remanded, instructing the Court to consider whether certain ERISA affirmative defenses raised by TIAA would make class treatment unwarranted because individual issues raised by the defenses predominate over those common to the class,” Oekten wrote. “Following further briefing by the parties and reconsideration of the issues in light of the Second Circuit’s opinion, the Court denies Plaintiff’s motion for class certification.”

Haley et al v. Teachers Insurance and Annuity Association of America was filed in February 2017. The complaint focused on retirement plan loan withdrawals administered by TIAA at the request of plan participants.

The plaintiffs, represented by lead attorneys from Berger Montague PC, alleged that TIAA had earned interest off participants’ collateral as compensation for administrating the loans. They argued those earnings were in violation of Section 406 of the Employee Retirement Income Security Act, which prohibits plan fiduciaries from directly or indirectly engaging in a transaction that presents a conflict of interest.

TIAA countered that the actions were permissible under Section 408(b)(17) of the rule, which allows for a plan to engage in actions that pay no more or less than “adequate consideration” for services.

In March 2018, the district court granted TIAA’s motion to dismiss on four of the five counts in the case, holding that the plaintiffs had not plausibly alleged that TIAA was an ERISA fiduciary, according to the court record. The court allowed one claim to continue with TIAA as a non-fiduciary and permitted leave to amend the complaint. The plaintiff then requested class certification, which was granted by Oetken in November 2020.

On appeal, the 2nd Circuit vacated the class certification ruling and remanded the case, arguing that the district court had not properly considered, under Rule 23(b)(3), that the defense’s claims regarding individual participant issues could not be vetted on a class-wide basis, and therefore a class claim was not warranted.

When the case returned to the district court, TIAA argued that evaluating its defense would require the district court to look into each of the 8,000 participants involved in the complaint, according to the court record. Oetken ultimately agreed, deciding against class action certification.

“Determining the adequacy of consideration for each transaction, concerning a variety of ERISA plans, loans of differing amounts and differing time periods, and localized or regional assessments of prevailing interest rates for similar transactions in space and time … swamp common issues,” Oetken wrote.

ERISA attorneys from Duane Morris, which were not involved with the case, noted in an analysis that ERISA class actions can be difficult to defend against, as the plaintiffs usually argue that plan management affects all the participants in similar ways. The Haley decision, however, will serve as “an exception to the rule.”

“Defendant was able to show that the case was not about a single policy, but about numerous individual actions,” they wrote. “The decision underscores the importance of probing deeply into a putative class members’ allegations to determine whether they meet the rigorous standards of Rule 23.”

Defendants who are accused of violating Section 406, the Duane Morris attorneys wrote, “must carefully consider the defenses provided by Section 408 and raise them in a timely fashion.”

TIAA declined to comment on the ruling. The New York-based firm was represented by Goodwin Proctor LLP.