Fifth Circuit Rejects Lower Court’s Class Certification Decision in ERISA

On Friday, April 29, 2020, a panel of three Fifth Circuit judges vacated a decision by a federal judge in the US District Court for the Western District of Texas to certify a class of all participants and beneficiaries of employee benefit plans offered through Fringe Insurance Benefits, Inc., Plan Benefit Services, Inc. and Fringe Benefit Group (collectively, “FBG”). FBG markets and administers retirement and health benefit plans to a specific subset of nonunion employers that compete for government contracts. The amended complaint alleges that FBG received excessive, undisclosed compensation for its services to the over 1,700 plans in the proposed class, as well as acted in its own self-interest when selecting plan providers and setting the levels of indirect compensation it would receive. The proposed class contains approximately 90,000 individuals. Defendants insist that the class is improper to consider the central issues of the case due to the varied features of each plan involved.

Due to the complexity of the questions concerning the certification of a class of such scale, the Fifth Circuit was unimpressed with the District Court’s failure to perform the requisite rigorous analysis of the requirement of Rule 23 of the Federal Rules of Civil Procedure. The lower court produced a mere five pages of substantive analysis in its decision, which the Fifth Circuit panel deemed “superficial.” Further, the Fifth Circuit considered the District Court’s assessment of both Rule 23(a)’s prerequisites and the Rule 23(b) class type to be “breezy. . . needing more facts and fewer generalizations.” Although plaintiffs had insisted that the court had considered the myriad issues and evidence before it at the hearing on class certification, the Fifth Circuit stated that the rigor requirement would only be satisfied by the analysis contained in the certification order. Crucially, the Fifth Circuit panel expressed no opinion on the merits of the proposed class and placed no limit on the matters the lower court may consider in future proceedings.

The legal team at SFMS has significant experience litigating ERISA matters. If you have any questions regarding this subject or this posting, please contact John Roberts (jroberts@sfmslaw.com) or Alec Berin (aberin@sfmslaw.com). We can also be reached toll-free at (866) 540-5505.

Shepherd, Finkelman, Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, and Pennsylvania. SFMS is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us online.

Author: Jonathan Dilger

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