18th Annual Workplace Class Action Report - 2022 Edition

350 Annual Workplace Class Action Litigation Report: 2022 Edition judgment. Prior to trial the District Court had granted in part and denied in part NYU’s motion to dismiss Counts I, II, IV, VI, and VII in their entirety and Counts III and V in part. The District Court dismissed all claims alleging that NYU breached its duty of loyalty under § 404(a)(1)(A); that NYU engaged in prohibited transactions under § 404(a)(1)(A), (C), and (D); and that NYU failed to monitor the investments. The only claims that survived dismissal were the imprudence claims in Count III and one of the imprudence claims in Count V. On appeal Plaintiffs challenged the District Court’s dismissal of Plaintiffs’ allegation in Count V that the Plans’ fiduciary breached its duty of prudence by offering retail-class shares of certain mutual funds rather than lower-cost institutional-class shares of the same fund. Plaintiffs argued that their allegations were sufficient to generate a plausible inference of imprudence, and that the District Court misconstrued precedent in finding otherwise. NYU disagreed on the merits, but it argued principally that, even if dismissal was an error, the claim should not be reinstated because the District Court’s later findings at trial rendered the dismissal harmless. The Second Circuit held that Plaintiffs’ share-class claim was adequately pled and based upon the record on appeal, it determined that the dismissal of this claim was not harmless. The Second Circuit concluded that Plaintiffs had plausibly alleged that by offering the retail shares rather than institutional shares fiduciary NYU breached its duty of prudence. As such, the Second Circuit determined that this claim should have been, and now must be, litigated on the merits. The Second Circuit also rejected NYU’s claim that the error was harmless because it could not be sure what would have happened at trial had the share-class claim not been dismissed. Additionally, the Second Circuit agreed with Plaintiffs that the District Court erred when it denied their motion to amend the complaint to add the Committee members as named Defendants. Because the District Court applied the wrong legal standard, Rule 16(b)(4)’s "good cause" standard as opposed to the less stringent standard under Rule 15(a)(2), the Second Circuit vacated the District Court’s denial of leave to amend and remanded for reconsideration under the correct legal standard. Accordingly, the Second Circuit affirmed in part, and vacated in part the District Court’s judgment. Wilcox, et al. v. Georgetown University, 2021 U.S. App. LEXIS 3507 (D.C. Cir. Feb. 9, 2021). Plaintiffs, a group of participants in Defendant’s retirement plans for Georgetown University faculty and staff, filed a class action alleging that Defendant breached its fiduciary duty in violation of the ERISA. In their complaint, Plaintiffs claimed that Defendant’s retirement plans paid excessive fees for recordkeeping services and pursued investments that consistently underperformed their benchmarks. Id. at *2. Defendant filed a motion to dismiss on the basis that Plaintiffs lacked Article III standing and failed to state a claim by offering no factual support in connection with their excessive recordkeeping fees claim. The District Court granted Defendant’s motion without prejudice. However, the electronic docket entry for the order stated “See Order for details. This case is closed.” Id. at *4. Approximately one month later, Plaintiffs moved for leave to amend their complaint, but the District Court denied the motion on the grounds that its prior dismissal order entered a final judgment in the case. Plaintiffs appealed the denial of their motion for leave to file an amended complaint, and the D.C. Circuit vacated the District Court’s order. The D.C. Circuit noted that, since the District Court’s dismissal order was plainly without prejudice, its findings depended on “whether there are other indicia in the record that the[District Court had withdrawn from the case as a whole such that a Rule 15(a) amendment would not be available.” Id. at *11. After reviewing relevant case law on this topic, the D.C. Circuit concluded that sufficient indicia of finality were not present here. The D.C. Circuit explained that the District Court’s order and memorandum did not state that amendment would be futile, nor did either state that the ruling was final or that the action was dismissed. As to the text on the docket entry, the D.C. Circuit gave this point minimal weight because docket entries cannot alter the substance of a case. Additionally, the D.C. Circuit found that jurisdictional precedent “does not embrace the notion that a statement in a docket entry can alone make a non-final order final.” Id. at *14. Defendant contended that the District Court’s memorandum in connection with its dismissal order made it clear that the District Court rejected the entire premise of Plaintiffs’ lawsuit. However, the D.C. Circuit reasoned that the District Court’s comments “highlighted the absence of particular facts that would have supported” Plaintiffs’ theory, and that was “the sort of problem that could potentially be cured by an amended complaint.” Id. at *15- 16. Consequently, the D.C. Circuit vacated the District Court’s denial of Plaintiffs’ motion for leave to amend and remanded for the District Court to consider whether to grant leave for Plaintiffs to file an amended complaint. (xiii) Fiduciary Duty Issues In ERISA Class Actions Bafford, et al. v. Northrop Grumman Corp., 994 F.3d 1020 (9th Cir. 2021). Plaintiffs, a group of participants in Defendant’s employee pension plan, filed a class action alleging breach of fiduciary duty under the ERISA