McWhorter v. Service Corporation International

September 12, 2024

Nathan Ochsner, Clerk

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

LEISA MCWHORTER, § CIVIL ACTION NO

et al, § 4:22-cv-02256

Plaintiffs, §

§

§

vs. § JUDGE CHARLES ESKRIDGE

§

§

SERVICE §

CORPORATION §

INTERNATIONAL and §

SCI SHARED §

SERVICES LLC, §

Defendants. §

OPINION AND ORDER

ON CLASS CERTIFICATION

This is a class action for breach of fiduciary duty in

violation of the Employee Retirement Income Security Act

of 1974. See Dkt 26 (amended complaint).

The motion for class certification by Plaintiffs

Lakeshier Clark and Anitza Hartshorn is granted in part

and denied in part. Dkt 51. As defined and explained below,

the motion is granted as to the recordkeeping claim and as

to the share class claims regarding the Invesco and Wells

Fargo funds. It is denied as to the share class claims

regarding the Schwab, Vanguard, and State Street funds.

The share class claims regarding the Schwab,

Vanguard, and State Street funds are also dismissed

without prejudice for lack of standing, subject to leave

allowed to Plaintiffs to attempt repleading as to those

funds, if desired and able as explained below.

Subject to that, the following class is certified pursuant

to Rule 23 of the Federal Rules of Civil Procedure:

All persons who were participants in or

beneficiaries of the SCI 401(k) Plan at any

time between July 7, 2016, and the present.

The counsel and law firms of McKay Law LLC, Wenzel

Fenton Cabassa, PA, and the Law Office of Chris R.

Miltenberger are appointed as counsel for the class.

1. Background

The remaining named Plaintiffs in this class action are

Lakeshier Clark and Anitza Hartshorn. They are current

(as to Hartshorn) and former (as to Clark) participants in

a defined contribution 401(k) Plan administered by

Defendants Service Corporation International and SCI

Shared Resources, LLC, who are their former employers.

Dkt 26 at ¶¶8, 17, 38–39; see also Dkt 52-2 at 540–41

(Clark deposition), 580 (Hartshorn deposition). Service

Corporation is the Plan sponsor. Dkt 26 at ¶39. SCI Shared

Resources is the Plan administrator. Id at ¶38.

a. The claims under ERISA

Plaintiffs filed this lawsuit alleging breach of fiduciary

duty in violation of the Employee Retirement Income

Security Act of 1974. Dkt 26 at 1. This involves two claims.

The share class claim alleges that Defendants imprudently

included high-cost share classes in the Plan’s investment

menu when identical low-cost share classes were available.

The recordkeeping fees claim alleges that the Plan paid

excessive compensation to the company that provided

recordkeeping and administrative services to the Plan.

Dkt 51 at 8–10.

The share class claim is simply stated. It stems from

Defendants’ offering mutual funds in the form of “retail”

share classes on the Plan investment menu. Plaintiffs

allege that the retail share classes carried improperly high

fees. Dkt 26 at ¶122–23. They assert that Defendants

breached their fiduciary duty by failing to prudently

monitor the Plan to determine whether, for each fund, it

was invested in the lowest-cost share class available for

that fund and by waiting too long to remove the high-cost

share classes from the fund. Id at ¶¶125, 130.

The share class allegations pertain to five funds, being

(i) Wells Fargo Stable Value Fund C, (ii) Schwab

Government Money Investor Shares, (iii) Vanguard Total

Intl Stock Index Admiral, (iv) Invesco Diversified Dividend

R6 Fund, and (v) State Street U.S. Bond Index Non-

Lending Series Fund Class C. Id at ¶134. But in this

regard, Plaintiffs acknowledge that at least one of the five

funds—the State Street fund—was never actually offered

as an investment option. Dkt 52-2 at 534. Defendants

assert that the Schwab fund wasn’t offered either. Dkt 52

at 10.

The recordkeeping fees claim is more involved. It stems

from Defendants’ hiring of Charles Schwab Bank to hold

the Plan assets and maintain participant accounts. Dkt 26

at ¶¶46, 92. Schwab Retirement Plan Services, Inc, has

been the recordkeeper for the Plan since July 1, 2014—the

entirety of the proposed class period. Id at ¶¶45, 91. The

complaint doesn’t differentiate which allegations apply to

which Schwab entity. But it is alleged that, in exchange for

a fee, the Schwab entities provided a package of services to

the Plan, including recordkeeping and information

management, trust-related work, transaction processing,

participant communications, and consulting services. Id

at ¶85. They also charged fees related to additional a la

carte services. Id at ¶86.

The fee for recordkeeping services was $47 annually

per participant from September 30, 2014, to July 1, 2017,

when it was reduced to $45 per participant. Dkt 52-2

at 216, 246. In 2020, Defendants sought proposals from

other recordkeepers, which led the Schwab entities to agree

to lower their fee from $45 to $39 on July 1, 2020. Dkts 26

at ¶95 & 52-2 at 283, 285. They lowered the fee again to $32

per participant on April 1, 2023. Dkt 52-1 at ¶4.

In addition to the direct compensation derived from

such fees, Plaintiffs assert that the Schwab entities were

paid indirect compensation. One manner of such indirect

compensation was revenue sharing, which tied payments

to the Schwab entities to the value of assets in the fund.

Dkt 26 at ¶101. Another such manner of indirect compen-

sation was an undisclosed amount by way of an agreement

between Defendants and the Schwab entities that any

money Plan participants deposited or withdrew from

individual accounts would pass through a Schwab clearing

account. The Schwab entities were then allowed to retain

all interest earned from the clearing account. Id at ¶120.

Plaintiffs allege that the Plan allowed the Schwab entities

to receive this compensation “without even knowing the

amount of compensation Charles Schwab collects” from

this agreement. Ibid.

According to Plaintiffs’ estimate, the total disclosed

direct and indirect compensation for recordkeeping

altogether amounted to $100 to $150 annually per

participant. Dkt 26 at ¶¶87, 105. These amounts were

charged to all Plan participants, regardless of the funds

into which they invested. Id at ¶¶36, 106. As such, the

recordkeeping claim isn’t limited to any particular funds.

Altogether, as to the recordkeeping fees, Plaintiffs

allege that Defendants breached their fiduciary duty by

failing to control the direct and indirect compensation paid

to the Schwab entities for recordkeeping services, which

was far greater than reasonable and cost the Plan millions

of dollars. Id at ¶¶107–09.

b. Allegations as to named Plaintiffs

No personal details are pleaded as to either named

Plaintiff, apart from minimal work-related information.

Hartshorn began contributing to the Plan in April

2015. Dkt 52-2 at 416. As of the filing of the live complaint

in September 2022, she had invested more than $15,000 in

the Plan. Dkt 26 at ¶32. She invested in three Plan funds

in total, none of which are challenged in the share class

claim. Ibid (specifying T. Rowe Price Retirement 2055

Target Date Fund, NT S&P Index Fund DC–NL Tier 3, and

T. Rowe Price Structured Research Tr-G Fund); see also

Dkt 52-2 at 534–35 (deposition testimony confirming no

investment in five challenged funds). Hartshorn is alleged

to have paid approximately $100 to $150 annually in

recordkeeping charges. Dkt 26 at ¶31. Hartshorn ended

her employment at SCI in February 2022. Dkt 52-2 at 580.

As of November 2023, she still had money invested in the

Plan. Dkt 52 at 12.

Clark began contributing to the Plan in December

2019. Dkt 52-2 at 541. Defendants’ records show that she

invested in only two of the five challenged funds, being the

Invesco and Wells Fargo funds. Dkt 52-2 at 350–51. Clark

is alleged to have paid approximately $100 to $150

annually in recordkeeping charges. Dkt 26 at ¶35. She left

SCI and withdrew from the Plan in July 2021. Dkt 52-2 at

374, 541.

c. Procedural history

This original complaint in this matter was filed in July

2022 on behalf of Clark and Hartshorn, along with two

other named Plaintiffs, Leisa McWhorter and Pichard

Alford. It asserted only the recordkeeping fees claim. Dkt 1.

Defendants moved to dismiss, arguing that Plaintiffs

lacked standing to pursue their claim and, in the

alternative, that Plaintiffs failed to state a claim for breach

of fiduciary duty under Rule 12(b)(6) of the Federal Rules

of Civil Procedure. Dkt 15.

Plaintiffs amended their complaint in September 2022

to add more details related to recordkeeping fees paid to

the Schwab entities and to add the share class claim.

Dkt 26. Defendants answered without renewing their

motion to dismiss. See Dkt 32. It was later stipulated

without explanation that McWhorter and Alford were

dismissed from the lawsuit with prejudice. Dkts 42 & 44.

The amended complaint seeks both prospective and

retrospective relief. Dkt 26 at 38–39. This includes

declaratory judgment that Defendants breached their

fiduciary duties and are liable to the Plan, removal of

fiduciaries and order to enjoin them from future ERISA

violations, surcharge against Defendants for all amounts

involved in improper transactions, and reformation of the

Plan to impose reasonable recordkeeping fees. Ibid.

Pending is the motion by Clark and Hartshorn to

certify the following class:

All persons who were participants in or

beneficiaries of the SCI 401(k) Plan at any

time between July 7, 2016, and the present.

Dkt 51 at 6. Defendants argue that the class shouldn’t be

certified because (i) Clark and Hartshorn lack standing as

named Plaintiffs, and (ii) the Rule 23 requirements aren’t

satisfied. Dkt 52 at 13–15, 21–22.

2. Standing

The United States Constitution vests power in the

federal courts to adjudicate only “Cases” and

“Controversies.” US CONST art III, § 2. The burden is

squarely upon the party asserting a claim in federal court

to establish Article III standing by showing that (i) he or

she has suffered an injury in fact, (ii) the injury is fairly

traceable to the challenged conduct, and (iii) the injury is

likely to be redressed by a favorable decision. Lujan v

Defenders of Wildlife, 504 US 555, 560–61 (1992); Spokeo

Inc v Robins, 578 US 330, 338 (2016), citing FW/PBS, Inc

v Dallas, 493 US 215, 231 (1990). This means that the

plaintiff must clearly allege facts at the pleading stage that

demonstrate each criterion. Spokeo, 578 US at 338,

quoting Warth v Seldin, 422 US 490, 518 (1975).

The Fifth Circuit holds that standing “is an inherent

prerequisite to the class certification inquiry.” Bertulli v

Independent Association of Continental Pilots, 242 F3d

290, 294 (5th Cir 2001). The Supreme Court is likewise

clear that “even named plaintiffs who represent a class

must allege and show that they personally have been

injured, not that injury has been suffered by other,

unidentified members of the class to which they belong and

which they purport to represent.” Lewis v Casey, 518 US

343, 357 (1996) (internal quotations omitted). And further,

class action plaintiffs must “demonstrate standing for each

claim that they press and for each form of relief that they

seek.” TransUnion LLC v Ramirez, 594 US 413, 431 (2021).

“There is no ERISA exception to Article III.” Thole v

U.S. Bank N.A., 590 US 538, 547 (2021). Plaintiffs must

have both a cause of action under ERISA and

constitutional standing. But to be clear, Defendants don’t

dispute that Clark and Hartshorn have statutory standing

because they are authorized to sue on behalf of the Plan

under 29 USC §1132(a)(2). Defendants instead challenge

aspects of the constitutional standing of Clark and

Hartshorn, as named Plaintiffs, to pursue the share class

claim, the recordkeeping claim, and the claims for

prospective injunctive relief.

a. The share class claim

It’s not disputed that Clark has standing to bring

claims regarding the Invesco and Wells Fargo funds. See

Dkt 52 at 14. This isn’t surprising, since she invested in

them. See Antoine v Marsh & McLennan Companies, Inc,

2023 WL 6386005, *6–7 (SDNY) (finding standing in

similar ERISA class action for claims regarding funds in

which named plaintiffs invested); Patterson v Morgan

Stanley, 2019 WL 4934834, *4–5 (SDNY) (same). The

dispute is instead (i) whether Clark has standing to bring

claims regarding the Schwab, Vanguard, and State Street

funds in which she never invested, and (ii) whether

Hartshorn entirely lacks standing for having never

invested in any of the five challenged funds. See Dkt 52

at 13–14.

As recently noted by Judge Brantley Starr, “The Fifth

Circuit has yet to answer the question of whether

participants in a well-defined contribution plan have

standing to challenge funds in which they did not invest.”

Perkins v United Surgical Partners International Inc,

2023 WL 2899539, *3 (ND Tex). And there is conflicting

authority on the question among district courts.

A more permissive approach suggests that plaintiffs

categorically have standing to challenge funds they didn’t

invest in based on the derivative nature of ERISA suits.

For example, in Beach v JPMorgan Chase Bank, the

Southern District of New York certified the class over

objection that plaintiffs lacked standing to challenge funds

in which they didn’t invest. 2019 WL 2428631, *4–5. The

court noted that “plan participants bringing derivative

claims need not show individual harm to establish

standing.” Ibid. That is because, under the ERISA statute,

claims cannot be made for individual relief but instead are

brought in a representative capacity on behalf of the Plan.

Id at *4; see also 29 USC §1132(a)(2) (stating that “civil

action may be brought . . . by a participant [or] beneficiary

. . . for appropriate relief” under ERISA provision imposing

liability for breach of fiduciary duty). And so, the court

reasoned, injury to the Plan suffices for injury to the

plaintiffs for standing purposes. Id at *4, citing Long Island

Head Start Child Development Services, Inc v Economic

Opportunity Commission of Nassau County, Inc, 710 F3d

57, 65 (2d Cir 2013) (finding standing for derivative claims

alleging injury to defined-benefit plan). Another court in

the Southern District of New York similarly held, “Here,

plaintiffs have sued in a representative capacity. . . . The

fact that only some of these alleged losses manifested

themselves in the named plaintiffs’ individual accounts

does not deprive plaintiffs of their standing to seek redress

on behalf of the Plan for the broader injuries the Plan

incurred.” Leber v Citigroup 401(k) Plan Investment

Commission, 323 FRD 145, 156 (SDNY 2017).

Other courts reject this permissive approach and hold

that the derivative nature of ERISA lawsuits doesn’t stand

in for the constitutional standing requirement that

individual plaintiffs must show that they have a concrete,

particularized injury. For example, see Perkins v United

Surgical Partners International, Inc, 2022 WL 824839, *3

(ND Tex); Marshall v Northrop Grumman Corp¸ 2017 WL

2930839, *8 (CD Cal). And so, these courts hold that, to

establish injury sufficient for Article III standing, plaintiffs

generally must show that they invested in the challenged

funds. See Perkins, 2023 WL 2899539 at *4; Locascio v

Fluor Corp, 2023 WL 320000, *3 (ND Tex). Beyond this, if

plaintiffs haven’t invested in the challenged funds, they

can establish standing only by showing that they in some

way suffered a specific injury to their own account

resulting from the inclusion of the challenged fund in the

plan. For example, see Wilcox v Georgetown University,

2019 WL 132281, *8 (DDC), citing LaRue v DeWolff, Boberg

& Associates, Inc, 552 US 248, 256 (2008).

District courts in the Fifth Circuit tend to follow this

latter approach and require a showing of injury not just to

the plan but to individual plaintiffs themselves. For

example, see Perkins, 2022 WL 824839 at *4 (finding

plaintiffs to lack standing to assert claims identical to

share class claims here because they failed “to allege injury

to their own investment accounts or their investment in [ ]

any of the challenged funds”); cf Harmon v Shell Oil Co,

2023 WL 5758889, *5 (SD Tex) (finding plaintiffs had

standing without investing in challenged fund because

plan administrators’ decision to keep that fund in place

forced even those who didn’t invest in it to incur additional

fees). A number of courts in other circuits are in accord. For

example, see In re LinkedIn ERISA Litigation, 2021 WL

5331448, *4 (ND Cal) (collecting cases and noting “district

courts across the country have largely held that ERISA

plaintiffs do not have standing to challenge the offering of

specific funds that they did not allege that they personally

invested in,” while noting that plaintiffs may have

standing if they allege plan-wide mismanagement that

caused injury to their own plan account); Santiago v

University of Miami¸ 2021 WL 1173164, *6–8 (SD Fla)

(mere assertion that plaintiffs were harmed by plan’s

offering of underperforming funds in which they didn’t

invest insufficient to establish standing); Lange v Infinity

Healthcare Physicians, S.C., 2021 WL 3022117, *3

(WD Wis) (allegation of mismanagement of funds

insufficient to establish standing where plaintiff failed to

explain impact on her as to selection of imprudent options

in which she didn’t invest).

Requiring investment by the named plaintiffs in the

challenged funds accords with both Fifth Circuit and

Supreme Court precedent. For example, in an ERISA case

raising a different challenge under a defined-contribution

plan, the Fifth Circuit held, “A plaintiff must demonstrate

standing for himself or herself, not just for others he or she

professes to represent.” Ortiz v American Airlines, 5 F4th

622, 628 (5th Cir 2021), citing Hollingsworth v Perry,

570 US 693, 708 (2013); see also Chavez v Plan Benefit

Services, Inc, 108 F4th 297, 312–14 (5th Cir 2024) (finding

standing to sue on behalf of ERISA class where both named

plaintiffs had invested in challenged trusts). And as noted

at the outset above, the Supreme Court states as a general

proposition, “There is no ERISA exception to Article III.”

Thole, 590 US at 547. Thole addressed defined-benefit

plans (rather than a defined-contribution plan, as here),

but its reasoning holds true. Consistent with Article III, it

determined that “in order to claim the interests of others,

the litigants themselves still must have suffered an injury

in fact . . . .” Ibid (quotation omitted). And it traced this

through to other contexts requiring plaintiffs filing suit on

others’ behalf to show an “independent” injury and

“concrete stake” in the controversy. Ibid, citing Gollust v

Mendell, 501 US 115, 125–26 (1991) (shareholders suing on

behalf of corporation), and Craig v Boren, 429 US 190, 194–

95 (1976) (vendor suing on behalf of customers).

Under this approach, it’s clear that Clark and

Hartshorn lack standing to bring challenges as to funds in

which they didn’t invest. The subject Plan is a defined-

contribution plan, meaning that “each participant has

discretion to direct his or her plan contributions to one or

more investment options in a lineup chosen by the plan’s

fiduciaries. Each participant’s account value fluctuates

with changes in the value of the investment chosen by the

participant.” Perkins, 2022 WL 824839 at *1. Since neither

Clark nor Hartshorn chose to invest in the Schwab,

Vanguard, and State Street funds, any poor performance

or unreasonable expenses in those funds wouldn’t impair

the value of the accounts in which they did invest. See In re

Omnicom ERISA Litigation¸ 2021 WL 3292487, *9 (SDNY)

(finding no standing for plaintiffs to challenge funds in

which they didn’t invest where plaintiffs had control over

how to direct their contributions). Indeed, because they

chose not to invest in the Schwab, Vanguard, and State

Street funds, it would be possible for the Plan to

simultaneously lose value in those funds while their own

accounts gained value. See Taveras v UBS AG, 612 F Appx

27, 29–30 (2d Cir 2015) (finding plaintiffs hadn’t

established injury in fact as to funds in which they didn’t

invest because they directed their own investment choices);

Wilcox ¸ 2019 WL 132281 at *8 (same).

Beyond this, the only injury that Clark and Hartshorn

allege to have resulted from Defendants’ retention of retail

share classes for the five challenged funds is that it

“materially decreased the value of the Plan and, in turn,

Plaintiffs’ . . . retirement savings.” Dkt 26 at ¶148. Such

mere and conclusory assertion of injury to their own

accounts is insufficient, given that the structure of the Plan

itself indicates that they couldn’t suffer individual injury

with respect to funds in which they didn’t invest. See

Perkins, 2022 WL 824839 at *4 (finding conclusory

allegation that defendants’ actions “cost the Plan and its

participants millions of dollars” insufficient to establish

standing where plaintiffs alleged no other “specific

allegations” as to how they “sustained an individualized

and particular injury”). Thus, nothing suggests that either

Clark or Hartshorn has the requisite “concrete stake” in

the claims challenging the Schwab, Vanguard, and State

Street funds. Thole, 590 US at 543.

In sum, as to the share class claim, only Clark has

standing, and then only with respect to the two funds in

which she invested—the Invesco and Wells Fargo funds. As

to the Schwab, Vanguard, and State Street funds in which

neither Clark nor Hartshorn invested, they fail to show

that they suffered the requisite injury-in-fact necessary for

constitutional standing as to challenges to the Plan’s

inclusion of those funds. As such, the class won’t be

certified as to claims with respect to the Schwab,

Vanguard, and State Street funds. And further, since

standing is lacking, claims with respect to those funds will

be dismissed without prejudice.

b. The recordkeeping fees claim

Clark and Hartshorn allege that they each paid

recordkeeping fees and that all Plan participants were

charged recordkeeping fees regardless of how they directed

their investments. See Dkt 26 at ¶¶30, 106.

Defendants don’t appear to dispute that this is

sufficient pleading of standing to pursue the recordkeeping

fee claims. See Dkt 52 at 14. And there is a broad consensus

that standing does exist for plaintiffs to pursue these types

of claims when they paid recordkeeping fees or such fees

were charged to all plan participants, regardless of the

specific investments by participants. For example, see

Harmon, 2023 WL 5758889 at *4; Seidner v Kimberly-

Clark Corp, 2023 WL 2728714 at *2 (ND Tex); Boley v

Universal Health Services, Inc, 36 F4th 124, 131 (3d Cir

2022); In re Sutter Health ERISA Litigation, 2023 WL

1868865, *6 (ED Cal); In re LinkedIn ERISA Litigation,

2021 WL 533144865 at *4; Cassell v Vanderbilt University,

2018 WL 5264640, *3 (MD Tenn).

In short, Clark and Hartshorn have sufficiently

pleaded their standing to pursue the recordkeeping fees

claim.

c. Prospective equitable relief

Only one named plaintiff must have standing to pursue

prospective relief as to each particular claim. See Harmon,

2023 WL 5758889 at *5 (collecting cases). But such

standing depends on a current, live interest in the

prospective relief being sought. As stated by the Ninth

Circuit in DeFazio v Hollister Employee Share Ownership

Trust¸ “The Plan Participants, who have already cashed

out of the Plan, lack Article III standing as to redressability

vis-a-vis their claims for prospective equitable relief.”

612 F Appx 439, 441 (9th Cir 2015); see also Trauernicht v

Genworth Financial Inc, 2023 WL 5961651, *6 (ED Va)

(finding former plan participants lacked standing to bring

claims for prospective relief); Peters v Aetna, Inc, 2023 WL

3829407, *7 (WD NC) (same).

Defendants acknowledge that Hartshorn is still

invested in the Plan and implicitly concede that she has

standing to pursue claims for prospective equitable relief

as to the recordkeeping fees claim. Dkt 52 at 12, 15. But

they argue that Clark doesn’t have standing to pursue any

such relief because she’s no longer invested in the Plan at

all. Ibid. While not explicitly stated, the argument

presumably is that she doesn’t have standing to pursue

prospective equitable relief as to the Invesco and Wells

Fargo funds, into which she previously invested but into

which Hartshorn entirely lacks standing because she never

invested. See id at 15.

This suggestion of limitations on standing to pursue

such prospective relief is correct. As to the recordkeeping

fees claim, standing thus exists to pursue prospective

equitable relief as a class because Hartshorn has standing

and is a current Plan participant. But as to the share class

claim, standing doesn’t exist to pursue any prospective

relief because neither Clark nor Hartshorn can show that

such relief would redress any continuing injury that either

has suffered.

d. Standing as to unnamed class members

Having determined that Clark and Hartshorn have

standing to assert these claims on their own behalf, the

question remains whether they have standing to sue on

behalf of the unnamed class members. The Fifth Circuit

recently noted a circuit split on how courts resolve

disjuncture between the individual harms suffered by

named plaintiffs and the class-wide relief they seek.

Chavez, 108 F4th 297, 307–08 (5th Cir 2024), citing

1 William B. Rubenstein, Newberg and Rubenstein on

Class Actions §2:6 (6th ed). The analysis may proceed by

one of two methods: (i) the class-certification approach,

under which courts first determine whether named

plaintiffs have standing to pursue their own claims, then

approach any disjuncture between injury to named

plaintiffs and unnamed class members as an issue of class

certification under Rule 23; and (ii) the standing approach,

under which courts approach the disjuncture as part of the

initial standing inquiry. Id at 307–09. The Fifth Circuit has

thus far declined to adopt one approach over the other.

Id at 312.

The parties here don’t join issue as to which approach

should be used to assess any disjuncture between injury to

Clark and Hartshorn (as named Plaintiffs) and the class-

wide relief they are seeking. So, to the extent such

disjuncture is asserted in the briefing, it will be addressed

under the class-certification approach in the Rule 23

analysis below. As the Fifth Circuit noted in Chavez, this

is the prominent approach used by district courts in most

circuits, including this one. Id at 308 n 1. Resolution of

issues should also be based on the arguments presented by

the parties. Bean v Great Lakes Insurance SE, 2024 WL

1332008, *2 (SD Tex) (referring to principle of party

presentation). And the class-certification approach aligns

more closely to the briefing of the parties on standing. See

Dkts 52 at 13–15, 20–21 (response brief, separating

analysis of standing of Clark and Hartshorn to pursue

claims from Rule 23 analysis of potential distinctions

between their injury and that to class members) & 53 at 8

(reply).

3. Rule 23 requirements

It is determined above that (i) Clark has standing to

pursue a class action regarding the share class claim as to

the Invesco and Wells Fargo funds, (ii) Clark and

Hartshorn both have standing regarding the recordkeeping

fees claim, and (iii) standing to bring claims for prospective

relief exists only as to the recordkeeping fees claim.

Addressed next is whether Clark and Hartshorn have

demonstrated compliance with the requirements necessary

to pursue these claims on a class-wide basis.

Class actions proceed under Rule 23 of the Federal

Rules of Civil Procedure. “The class action is an exception

to the usual rule that litigation is conducted by and on

behalf of individual named parties only.” Comcast Corp v

Behrend, 569 US 27, 33 (2013) (quotation marks and

citation omitted). “To come within the exception, a party

seeking to maintain a class action must affirmatively

demonstrate his compliance with Rule 23.” Ibid; see also

Madison v Chalmette Refining LLC, 637 F3d 551, 554

(5th Cir 2011).

Rule 23(a) lists four prerequisites to class

certification—numerosity, commonality, typicality, and

adequacy of representation. Meeting these requirements

isn’t alone sufficient. Rule 23(b) instead specifies three

class types and the requirements for each. Clark and

Hartshorn seek to proceed under (b)(1), by which a class

may be certified where inconsistent adjudications with

respect to individual class members would establish

incompatible standards of conduct for the defendant or

would be dispositive of the interests of the other members

not parties to the individual adjudications.

The reviewing court must “rigorously consider” the

Rule 23(a) prerequisites and the requirements specific to

the class type under Rule 23(b). Chavez v Plan Benefit

Services, Inc, 957 F3d 542, 546 (5th Cir 2020). This

requires a court to look beyond the pleadings to

“understand the claims, defenses, relevant facts, and

applicable substantive law.” Flecha v Medicredit, Inc,

946 F3d 762, 766 (5th Cir 2020) (quotation marks and

citation omitted). A court must also consider how any trial

on the merits would be conducted if the class was certified.

Prantil v Arkema Inc, 986 F3d 570, 574 (5th Cir 2021).

a. Rule 23(a)

Plaintiffs assert that this action satisfies all elements

of Rule 23(a). Dkt 51 at 11–16. Defendants only challenge

aspects pertaining to typicality under (a)(3) and adequacy

under (a)(4). See Dkt 52 at 15–19. Even with such

concessions, the Fifth Circuit holds that Rule 23

nonetheless “requires the court to ‘find,’ not merely

assume, the facts favoring class certification.” Unger v

Amedisys Inc, 401 F3d 316, 321 (5th Cir 2005). Each

requirement is thus addressed in turn.

i. Numerosity

Numerosity requires that the plaintiff show that “the

class is so numerous that joinder of all members is

impracticable.” FRCP 23(a)(1). In addition to the sheer

number of purported class members, a court may consider

“the geographical dispersion of the class, the ease with

which class members may be identified, the nature of the

action, and the size of each plaintiff’s claim.” Ibe v Jones,

836 F3d 516, 528 (5th Cir 2016), citing Zeidman v J Ray

McDermott & Co, 651 F2d 1030, 1038 (5th Cir 1981).

Plaintiffs claim that there are more than 23,000

individual Plan participants who will be class members.

Dkt 51 at 17. Joinder of all members is plainly

impracticable.

Numerosity is satisfied.

ii. Commonality

Commonality requires that the plaintiff show that

“there are questions of law or fact common to the class.”

FRCP 23(a)(2). As stated by the Supreme Court in Wal-

Mart Stores, Inc v Dukes, the class members must have a

common contention that is “capable of classwide

resolution—which means that determination of its truth or

falsity will resolve an issue that is central to the validity of

each one of the claims in one stroke.” 564 US 338, 350

(2011); see also Ahmad v Old Republic National Title

Insurance Co, 690 F3d 698, 702 (5th Cir 2012). A common

instance of the defendant’s injurious conduct can establish

commonality “even if the amount of damages differs for

each injured class member.” Prause v TechnipFMC, PLC,

2020 WL 3549686, *3 (SD Tex), citing In re Deepwater

Horizon, 739 F3d 790, 810 (5th Cir 2014).

The Third Circuit observes that the nature of claims for

breach of fiduciary duty under ERISA suggests that

“commonality is quite likely to be satisfied.” In re Schering

Plough Corp ERISA Litigation, 589 F3d 585, 599 n 11

(3d Cir 2009). That’s so here. Questions of law and fact

common to all class members include whether Defendants

breached their fiduciary duties by failing to offer low-cost

share classes in lieu of high-cost share classes and whether

Defendants breached their fiduciary duties by paying

excessive fees to recordkeeping service providers. Common

evidence will answer these common questions.

Commonality is satisfied.

iii. Typicality

Typicality requires that the plaintiff show that “the

claims or defenses of the representative parties are typical

of the claims or defenses of the class.” FRCP 23(a)(3). This

inquiry “focuses on the similarity between the named

plaintiffs’ legal and remedial theories and the theories of

those whom they purport to represent.” Mullen v Treasure

Chest Casino LLC, 186 F3d 620, 625 (5th Cir 1999)

(quotation marks and citation omitted).

The Fifth Circuit holds, “Typicality does not require a

complete identity of claims. Rather, the critical inquiry is

whether the class representative’s claims have the same

essential characteristics of those of the putative class. If

the claims arise from a similar course of conduct and share

the same legal theory, factual differences will not defeat

typicality.” Stirman v Exxon Corp, 280 F3d 554, 562

(5th Cir 2002) (quotation omitted); see also In re Cobalt

International Energy, Inc Securities Litigation, 2017 WL

2608243, *2 (SD Tex).

Defendants argue that typicality isn’t met here because

the characteristics of the funds available and fees charged

to the Plan varied throughout the class period. Dkt 52

at 15–17. For example, as to the share class claim, they

note that Plaintiffs “challenge multiple different funds that

were in the Plan at different times.” See id at 16. And as to

the recordkeeping fees claim, they note that “the putative

members were subject to four different recordkeeping fees

during the putative class period.” Ibid (emphasis and

citation omitted). Defendants also submit evidence that

they requested a proposal from the Schwab entities in 2020

that resulted in lower recordkeeping fees, with

recordkeeping fees charged to participant accounts

declining throughout the proposed class period. See id

at 7–9 (noting that recordkeeping fee started at $47 per

participant from September 30, 2014, until July 1, 2017,

then declined to $45 per participant, further declined to

$39 per participant on July 1, 2020, and last declined to

$32 per participant on April 1, 2023) (record citations

omitted)). Defendants argue that “the different and

declining recordkeeping fees result in the putative class

members having different claims.” Id at 16.

Defendants’ argument as to typicality does suggest

some complexity on any ultimate calculation of Plan losses

and potential amounts that they must make good to the

Plan. But to be clear, Plaintiffs do not seek individualized

damages for the claims of particular class members. The

amended complaint instead requests relief in the form of

“Plan losses,” amounts Defendants must “make good to the

Plan,” and “[s]urcharge against Defendants and in favor of

the Plan.” Dkt 26 at 38. Any award would thus be of a

surcharge in favor of the Plan itself, which would be

allocated thereafter by Defendants according to their

ongoing fiduciary duties. See Dkt 51 at 8 (explaining that

“recovery to an individual participant’s individual account

derives from his or her allocation of the Plan’s recovery”).

Regardless, this argument that varying fund

performance and fees throughout the class period destroys

typicality has been squarely rejected by at least one district

court, which noted under similar circumstances that the

plaintiffs were still seeking redress for “similar grievances

under the same legal and remedial theories.” See Krueger

v Ameriprise Financial, Inc, 304 FRD 559, 573 (D Minn

2014) (certifying class). And while it doesn’t appear that

any other court has directly addressed Defendants’ same

typicality argument, a host of courts have certified classes

with claims similar to the share class and recordkeeping

fee claims here. See Clark v Duke University, 2018 WL

1801946, *5–6 (MD NC) (certifying recordkeeping fee claim

and share class claim); Huang v TriNet HR III, Inc, 2022

WL 13631836 (MD Fla) (same); Cunningham v Cornell

University, 2019 WL 275827, *7, *9 (SDNY) (same);

Garthwait v Eversource Energy Co, 2022 WL 1657469, *11–

12 (D Conn) (same); Moreno v Deutsche Bank Americas

Holding Corp, 2017 WL 3868803, *1–2, *11 (SDNY) (same);

Coppel v SeaWorld Parks & Entertainment, Inc, 2024 WL

3086701, *9, *21–22 (SD Cal) (same); Wildman v American

Century Services, LLC, 2017 WL 6045487, *4–5, *7 (WD

Mo) (same); Harmon, 2023 WL 5758889 at *7–8 (certifying

recordkeeping fee claim); Munro v University of Southern

California, 2019 WL 7842551, *4–6 (CD Cal) (same);

Cassell,, 2018 WL 5264640, *5 (MD Tenn) (same);

Henderson v Emory University, 2018 WL 6332343, *3, *6

(ND Georgia) (same); Ramos v Banner Health, 325 FRD

382, 389–90, 398–399 (D Colo 2018) (same); Sacerdote v

New York University, 2018 WL 840364, *3, *8 (SDNY)

(same); Vellali v Yale University, 333 FRD 10, 17–18

(D Conn 2019) (same); Kanawi v Bechtel Corp, 254 FRD

102, 110, 112 (ND Cal 2008) (same); Pizarro v Home Depot,

Inc, 2020 WL 6939810, *10, *29 (ND Ga) (same); Rodriguez

v Hy-Vee, Inc, 2023 WL 4358705, *1–3 (SD Iowa) (same);

Tracey v MIT, 2018 WL 5114167, *4–5, *7 (D Mass) (same);

Sweda v University of Pennsylvania, 2021 WL 2665722, *3,

*5, *8 (ED Pa) (same); Sweet v Advance Auto Stores Co,

2023 WL 3959779, *4–5 (WD Va) (same); Iannone v

AutoZone, Inc, 2022 WL 5432740, *11–12, *14 (WD Tenn)

(same), report and recommendation adopted, 2022 WL

17485953.

Defendants cite two cases to support their typicality

contention. See Dkt 52 at 15–16. Both are inapposite. In

the first, Beach v JPMorgan Chase Bank, National

Association, the court addressed similar recordkeeping fee

and share class claims with respect to a defined-

contribution plan. 2019 WL 2428631, *1–2 (SDNY). The fee

structure of the plan changed throughout the pertinent

class period. This resulted in plaintiffs paying different

recordkeeping fees at different times, including certain fees

that plaintiffs conceded weren’t excessive or unreasonable.

Id at *7. The court found that this difference in record-

keeping fees over time affected the typicality analysis

because the “common thread” linking the class

representatives with the proposed class members was

“investment in funds with allegedly excessive fees.” Ibid

(quotation marks and citation omitted). And participants

who invested in the funds when the fees were not excessive

didn’t share that same thread. Id at *7. As such, the court

certified the class, while narrowing it to exclude those

participants who invested in the challenged funds only

when the funds had no fees or concededly reasonable fees.

Ibid.

There’s of course a big difference here. In Beach, the

plaintiffs pleaded a benchmark fee below which they

conceded recordkeeping fees were reasonable. Id at *8. To

the contrary, Clark and Hartshorn don’t allege that the

subject fees were at any time reasonable, even with fees

periodically reducing throughout the class period. See

Dkts 52 at 16 & 53 at 8. As such, all members of the

putative class share the common allegation that they each

invested in funds with allegedly excessive fees. See Dkt 26

at ¶28. And this means in turn that Clark and Hartshorn

share the same claim with all putative plaintiffs, being that

they paid excessive fees.

In the other citation, Bell v Pension Commission of

ATH Holding Co, LLC, the court addressed similar

recordkeeping fee claims. 2018 WL 4385025, *4 (SD Ind).

The plan there switched in 2013 from paying its

recordkeeper through revenue sharing to paying through a

flat fee of $42 per participant, which was charged only to

participants with an account balance over $1,000. Beach,

2018 WL 4385025 at *1. Plaintiffs sought to certify a class

that included the fee structures both pre- and post-2013. Id

at *2, *4. The court found that the claims weren’t typical.

Id at *5. But what it took issue with was the fact that there

were different structures of recordkeeping fees at different

times in the class period—not simply that different fees

were charged at different times. Ibid. For example,

participants with higher account balances actually

benefitted from the change to a flat fee in 2013. Id at *4.

And participants whose accounts held less than $1,000

didn’t pay a fee at all after the change. Ibid. The court

declined to certify the recordkeeping fee claim due to this

“inclusion of two different fee structures, in the proposed

class,” which meant that “some members paid less than the

proposed market rate under the revenue sharing

agreement, while some members [paid] less under the

current flat fee.” Id at *5.

But unlike Bell, there’s no structural difference in the

recordkeeping fees assessed throughout the class period

here that would make the claims of Clark and Hartshorn

atypical of the rest of the putative class. Instead, they are

challenging the fact that, throughout the entire class

period, the Plan uniformly charged excessive flat fees to all

participants, while also having an improper revenue-

sharing agreement with its recordkeeper. See Dkt 26

at ¶121. Again, it’s true that the recordkeeping fees

decreased throughout the class period. But Clark and

Hartshorn don’t allege that any participants in the

proposed class benefited to the extent that the fees they

paid were reasonable. Indeed, they don’t concede that the

fees were reasonable at any time in the class period. Their

claims instead involve the common thread that they paid

excessive fees, thus making them typical even under the

approach taken in Bell.

A further look at the claims pursued by Clark and

Hartshorn confirms that they are typical of the class. All

arise from the same course of conduct—their participation

in and Defendants’ alleged mismanagement of the Plan.

This means that proof of Defendants’ alleged misconduct—

offering imprudent retail share classes and charging

excessive fees—will not depend on individual circum-

stances of putative class members. See Henderson, 2018

WL 6332343 at *6. And indeed, other courts find that such

claims “all arise from the same events and course of

conduct.” Munro, 2019 WL 7842551 at *4–6 (finding

typicality satisfied for recordkeeping fee claim and

imprudent investment options claim because conduct of

defendants “were directed to and affected the Plans as a

whole”); see also Vellali, 333 FRD at 17 (finding claims to

arise from same events and course of conduct with respect

to “failures to monitor and control the Plan’s recordkeeping

fees and to monitor the Plan’s investment options on an

ongoing basis and remove imprudent ones”) (internal

quotations and record citation omitted).

The claims of Clark and Hartshorn also involve the

same legal arguments relative to the putative class

members—that Defendants mismanaged the Plan in

violation of ERISA. The legal questions as to each of the

claims will be typical across the class.

As to the share class claim, was the offering of the

Invesco and Wells Fargo funds prudent? The answer to

that question will be the same for any class member who

invested in either of those challenged funds. See Cassell,

2018 WL 5264640 at *5 (recordkeeping fee and offering of

imprudent investment options claims, finding typicality

satisfied because named plaintiffs’ claims were “based

upon the same legal theories concerning alleged breaches

of fiduciary duties”). The only factual difference will be

which class members invested in those funds, which

question will be ascertained at a later stage to determine

the amount of Plan losses, if necessary. See Clark, 2018 WL

1801946 at *5 (recordkeeping fee and share class claims,

finding that “potential for some individual issues that

would, at best, reduce any damages award does not defeat

commonality and typicality under Rule 23(a)”); Moreno,

2017 WL 3868803 at *5 (recordkeeping fee and share class

claims, finding that “differing purchase dates among class

members do not defeat class certification and instead go to

the issue of damages”) (internal citation omitted).

As to the recordkeeping fees claim, was each

recordkeeping fee charged reasonable? The answer to that

question will also be the same for any member of the

putative class who invested in the Plan at that time. The

only factual difference will be when each participant

invested, and that question will be ascertained at the later

stage determining the amount of Plan losses. See Boley,

36 F4th at 134 (excessive fees claim, holding that some

participants may have paid higher fees “relate[s] to degree

of injury and level of recovery”).

In sum, the claims pursued by Clark and Hartshorn

share the same essential characteristics with members of

the putative class and are based on the same course of

conduct and same legal theory. Typicality is thus satisfied.

iv. Adequacy of representation

Adequacy of representation requires the plaintiff to

show that “the representative parties will fairly and

adequately protect the interests of the class.” FRCP

23(a)(4). This explores a number of overlapping aspects—

“the zeal and competence” of lead counsel, the “willingness

and ability” of the class representative to “take an active

role in and control the litigation and to protect the interests

of absentees,” and the “risk of ‘conflicts of interest between

the named plaintiffs and the class they seek to represent.’”

Slade v Progressive Securities Insurance Co, 856 F3d 408,

412 (5th Cir 2017) (cleaned up).

A lesser line of attack by Defendants is that Clark and

Hartshorn are inadequate class representatives because

the potential for intra-class conflict exists. Dkt 52 at 20.

Defendants contend that “class members have different

claims because they were subject to different

recordkeeping fees during the relevant time period.

Likewise, only a subset of the Plan participants invested in

the alleged improper share class funds.” Ibid. This is

simply a variation on the argument addressed above as to

typicality. Variation among recordkeeping fees during the

class period and limited investment in the challenged

funds are issues that go to recompensable losses, but the

substantive legal claims stay the same. Rather than

alleging individual claims among putative plaintiffs that

do or could conflict with each other, Clark and Hartshorn

seek relief on behalf of the Plan for all allegedly excessive

recordkeeping fees and each challenged fund. See Dkts 51

at 21 (noting that they “are pursuing claims on behalf of

the Plan and not individual claims”) & 53 at 7–8 (noting

relief sought on behalf of Plan, being “ERISA’s statutorily

available remedies”); see also Dkt 26 at 38–39 (requesting

relief only as to Plan).

The main line of attack by Defendants is that Clark

and Hartshorn are inadequate class representatives

because they assertedly lack the knowledge necessary to

take an active role in the case. They point, for instance, to

the inability of Clark and Hartshorn to answer specific

questions about the case at deposition. See Dkt 52 at 17–

18. For example, neither was able to state what a share

class is. Id at 17. Clark didn’t personally know whether a

$45 recordkeeping fee was excessive. Id at 18. And

Hartshorn was unable to state what a recordkeeping fee is

and didn’t know what services the Schwab entities

provided in exchange for the recordkeeping fee. Ibid.

Countering this argument are other designations

submitted from their depositions to establish that Clark

and Hartshorn each understand the general legal theory of

their claims and their obligations in pursuing them. For

example, Clark stated that “if what I was invested in was

mismanaged and . . . fees are taken from me that should

not have been taken from me or my fellow cohorts, then I

think that . . . everything should be made right.” Dkt 52-2

at 554. She also knew specifically that she was charged a

recordkeeping fee of $45. Id at 558. And while Hartshorn

didn’t know the specific recordkeeping fee that she was

charged, she believed that “it was more than it should have

been” and was “too high”—especially when compared to her

current employer’s plan, which charged a recordkeeping

fee of $20 to $25 per year. Id at 583, 585. Also submitted

with the motion for class certification are declarations from

each stating that she “understand[s] [her] responsibility to

represent all class members” and “agree[s] to honor” the

duties of a class representative. Dkt 51-1 at 284 (Clark

declaration), 289 (Hartshorn declaration). Each also states

that she cares about the lawsuit, reviews documents sent

by her attorneys, and monitors the progress of the lawsuit.

Ibid. And both express an understanding that each is

pursuing the lawsuit “to recover the Plan’s losses caused

by imprudent investments on the Plan investment menu

and excessive compensation paid to the Plan’s service

providers.” Ibid.

Defendants’ approach presupposes that the pertinent

question is whether financially unsophisticated represen-

tatives such as Clark and Hartshorn could answer hostile

questions as posed by financially sophisticated counsel.

That isn’t the standard. To the contrary, at a general level,

the Supreme Court holds that it’s improper to dismiss a

class action because the named plaintiff in a complex

financial investment case is unable to comprehend the

legal relationships and transactions described in the

complaint. Surowitz v Hilton Hotels Corp, 383 US 363,

370–74 (1966). Instead, named plaintiffs in such cases may

rely on the advice and explanation of attorneys. Id at 372–

73. To hold otherwise would be to “prevent unsophisticated

litigants from ever having their day in court.” Id at 373.

Now, it’s to some extent true, as Defendants argue,

that the Fifth Circuit still requires careful inquiry into the

adequacy analysis under Rule 23(a), and that Surowitz

isn’t some rubber-stamp exercise that washes away the

issue. In Berger v Compaq Computer Corp, for instance, the

Fifth Circuit observed that it “has never read Surowitz so

broadly as to support the proposition that a class

representative who does not understand any of the legal

relationships or comprehend any of the business

transactions described in the complaint nonetheless may

be ‘adequate’ for purposes of class certification.” 257 F3d

475, 482 (5th Cir 2001). On the one hand, the

representatives’ “understanding should not be limited to

derivative knowledge acquired solely from counsel.” Id

at 483 n 18, citing Kelley v Mid-America Racing Stables,

Inc, 139 FRD 405, 409–11 (WD Okla 1990). But on the

other, it simply “must appear that the representative[s]

will vigorously prosecute the interests of the class through

qualified counsel.” Berger, 257 F3d at 482, quoting

Gonzales v Cassidy, 474 F2d 67, 72 (5th Cir 1973). It’s a

matter of degree, bearing in mind the entirety of the record

as to adequacy. At the end of the day, in line with the

holding of Surowitz, class representatives “need not be

legal scholars and are entitled to rely on counsel,” but they

“need to know more than that they were ‘involved in a bad

business deal.’” Berger, 257 F3d at 483, citing Kelley,

139 FRD at 410.

Clark and Hartshorn meet the adequacy standard as

delineated in Berger. Taken together, their declarations

and the whole of their testimony suggest that each will

vigorously prosecute her claims, and that they have at least

some knowledge beyond derivative knowledge acquired

through counsel. To the extent that there may be

(unsurprising) gaps in detailed knowledge about what

funds should have been offered, or what proper fees should

have been, Clark and Hartshorn are without question

entitled to rely on the advice and explanation of counsel.

Surowitz, 383 US at 373; Berger, 257 F2d at 483.

Defendants cite various cases in this circuit where

district courts have found named plaintiffs inadequate

because they lack knowledge about basic facts of the case.

See Dkt 52 at 18–19. Each is factually distinct from the

record at hand.

o In Walker v Alta Colleges, Inc, adequacy wasn’t

established where the named plaintiff stated that

he didn’t speak with his lawyers frequently and

couldn’t recall (among other things) the type of

relief he was seeking, where the case had been

filed, or who were named as defendants. 2010 WL

11200636, *4 (WD Tex). To the contrary here,

Clark and Hartshorn appear to be in regular

communication with their lawyers and are aware

of details about this case. See Dkts 52-2 at 580

& 51-1 at 283–84, 288–89.

o In Mistetsky v Bilek, adequacy wasn’t established

where the named plaintiff didn’t read case

documents, revealed that her attorneys were her

sole source of information, admitted to “lazy”

behavior, and failed to understand “even the

simplest details” of the case. 2010 WL 11583151,

*6–9 (SD Tex). But here, Clark and Hartshorn have

submitted declarations swearing that they review

documents, monitor the progress of the lawsuit,

and commit to “participate in the vigorous

prosecution of this lawsuit on behalf of the class.”

Dkt 51-1 at 284, 289.

o In Byes v Telecheck Recovery Services, Inc,

adequacy wasn’t met where the named plaintiff

was unaware of her duties as proposed class

representative—and had submitted a false

affidavit. 173 FRD 421, 427–28 (ED La 1997). As

already noted, Clark and Hartshorn are aware of

their duties as class representatives and have

submitted credible declarations (in addition to

their deposition testimony). Dkt 51-1 at 283–85,

288–90.

o In Ogden v AmeriCredit Corp, adequacy wasn’t met

where the named plaintiffs’ sole basis for suit was

that “something unfortunate happened to her

401(k) plan” and “bad things occurred,” with one

plaintiff failing to appear at a hearing where she

was to testify. 225 FRD 529, 533–36 (ND Tex 2005).

Here, Clark and Hartshorn are aware of at least

some facts to support their assertions against

Defendants, have a basic understanding about the

nature of their suit, and are actively involved in the

pursuit of their claims. See Dkt 52-2 at 554, 558,

583, 585 & 51-1 at 283–84, 288–89.

In sum, Clark and Hartshorn have demonstrated more

than the limited knowledge of named plaintiffs in those

cases and don’t share the same credibility problems. But

the bigger picture is also important to keep in mind. Were

Defendants’ position correct, then no (or very few) ERISA

class actions would ever go forward for lack of adequate

class representatives, as participants in such plans don’t

need to be experts in ERISA requirements to participate.

Plan administrators would thus largely be insulated from

liability simply for want of an adequate plaintiff, leaving

plan participants who aren’t lawyers or investment experts

unable to redress their injuries. Instead, examples abound

of other courts finding named plaintiffs with somewhat

unsophisticated knowledge of their cases still to be

adequate class representatives in cases alleging similar

recordkeeping fee and share class claims.

For example, the Middle District of North Carolina

observed, “The complex nature of ERISA fiduciary breach

claims often requires investors to rely on their attorneys

and hired experts and such reliance does not make the

plaintiffs inadequate representatives.” Clark, 2018 WL

1801946 at *9 (finding adequacy established as to

recordkeeping fee and share class claims), citing Surowitz,

383 US at 372–73. The Southern District of New York

stated, “It is understandable, and excusable, that

Plaintiffs, who are not lawyers or investment professionals,

may have had difficulty answering questions about [their

ERISA] claims.” Moreno, 2017 WL 3868803 at *7 (finding

adequacy established as to recordkeeping fee and share

class claim). And the Northern District of Georgia noted,

“ERISA itself represents a highly dense regulation, and

claims arising from it are equally complex. That a plaintiff

might not fully understand the facts and legal theories of

this complex ERISA action is understandable.” Henderson,

2018 WL 6332343 at *7 (finding adequacy established as to

recordkeeping fee claim). See also Beach, 2019 WL 2428631

at *8 (finding adequacy established as to recordkeeping

fees and share class claims); Iannone, 2022 WL 5432740

at *12–13 (same); Garthwait, 2022 WL 1657469 at *12–13

(same); Ramos, 325 FRD at 394–96 (finding adequacy

established as to recordkeeping fees claim); Sacerdote,

2018 WL 840364 at *4–5 (same); Vellali, 333 FRD at 17–18

(same); Kanawi, 254 FRD at 110–11 (same); Pizarro, 2020

WL 6939810 at *10–11 (same); Cassell, 2018 WL 5264640

at *5 (same).

The interests of Clark and Hartshorn are aligned with

those of the other putative class members, as all seek relief

for losses to the Plan arising from allegations that

Defendants maintained imprudent share classes in certain

funds and charged excessive recordkeeping fees. They have

also demonstrated a sufficient level of knowledge and

understanding of these claims and the litigation. Adequacy

is thus satisfied.

v. Summary

In sum, the class is numerous, questions of law and fact

are common to the proposed class, the claims of Clark and

Hartshorn are typical of the claims of the putative class,

and they can adequately protect the interests of the

putative class in a representative capacity. All

prerequisites of Rule 23(a) are thus satisfied.

b. Rule 23(b)(1)

Plaintiffs seek to certify the class under Rule 23(b)(1),

which allows a class action satisfying Rule 23(a)

requirements to be maintained if “prosecuting separate

actions by or against individual class members would

create a risk of” either of the following:

(A) inconsistent or varying adjudications

with respect to individual class members

that would establish incompatible

standards of conduct for the party opposing

the class; or

(B) adjudications with respect to individual

class members that, as a practical matter,

would be dispositive of the interests of the

other members not parties to the individual

adjudications or would substantially

impair or impede their ability to protect

their interests . . . .

A respected treatise on class actions states that the

“derivative nature of ERISA [breach of fiduciary duty]

claims” makes them “paradigmatic examples of claims

appropriate for certification as a Rule 23(b)(1) class.”

William B. Rubenstein, 2 Newberg and Rubenstein on

Class Actions § 4:21 (West 6th ed 2023) (internal

quotations and citation omitted); see also Kanawi,

254 FRD at 111: “Most ERISA class action cases are

certified under Rule 23(b)(1).”

Certification under Rule 23(b)(1)(A) or (B) is thus

frequently found to be appropriate for claims like those

asserted here under ERISA. See Harmon, 2023 WL

5758889 at *8–9 (certifying recordkeeping fees claim under

Rule 23(b)(1)(A)); Munro, 2019 WL 7842551 at *10

(certifying recordkeeping fees claim under Rule 23(b)(1)(A)

or, alternatively, (B)); Henderson, 2018 WL 6332343 at *9–

10 (same); Ramos, 325 FRD at 397 (same); Sacerdote,

2018 WL 840364 at *6 (same); Vellali, 333 FRD at 18

(same); Pizarro, 2020 WL 6939810 at *12–15 (same);

Rodriguez, 2023 WL 4358705 at *2–3 (same); Sweda,

2021 WL 2665722 at *4–5 (same); Iannone, 2022 WL

5432740 at *13–14 (same); Clark, 2018 WL 1801946 at *9–

10 (certifying recordkeeping fees claim and share class

claim under Rule 23(b)(1)(A) or, alternatively, (B)); Huang,

2022 WL 13631836 at *10 (same); Cunningham, 2019 WL

275827 at *7–8 (same); Garthwait, 2022 WL 1657469

at *15 (same); Coppel, 2024 WL 3086701 at *19–21;

Wildman, 2017 WL 6045487 at *5–6 (same).

Clark and Hartshorn initially sought certification

under (b)(1)(A), with passing, alternate request under

(b)(1)(B). Dkt 51 at 21–22. But they ultimately limited their

request to only the former. See Dkt 53 at 9 (reply).

Defendants argue that the class shouldn’t be certified as

such because the Fifth Circuit has held that certification

under (b)(1)(A) is inappropriate “when dealing with

monetary compensation because no inconsistency is

created when courts award varying levels of money

damages to different plaintiffs.” Dkt 52 at 21, citing Casa

Orlando Apartments, Ltd v Federal National Mortgage

Association, 624 F3d 185, 197 (5th Cir 2010); see also

Chavez, 108 F4th 297, 314–16 (declining to certify ERISA

class under Rule 23(b)(1)).

That concern isn’t present here. To the extent that

Clark and Hartshorn seek monetary relief, it’s sought only

as to the Plan. Specifically, the relief sought includes

declaration that Defendants breached their fiduciary

duties, removal of fiduciaries, surcharge against

Defendants and in favor of the Plan for all amounts

involved in any improper transactions, reformation of the

Plan to pay only reasonable recordkeeping expenses, and

attorney fees. Dkt 26 at 38–39. As such, in adjudicating

this action, no award of varying levels of money damages

will be made to different class members. As noted above,

any award will be of a surcharge in favor of the Plan itself,

which will then be allocated to individual accounts by

Defendants according to their ongoing fiduciary duties. See

Dkt 51 at 8.

This again places emphasis on the fact that Clark and

Hartshorn seek Plan-wide relief. Because this is so,

allowing various, individual participants to pursue

separate actions could result in conflicting standards for

Defendants in operating the Plan, which would no doubt

prove untenable in practice. Indeed, the Fifth Circuit,

when noting in Langbecker v Electronic Data Systems Corp

that certification of ERISA class action under 23(b)(1) is

likely appropriate for injunctive and plan-wide monetary

relief, observed, “A judgment removing the fiduciaries in

one lawsuit would be inconsistent with a judgment in

another permitting them to stay.” 476 F3d 299, 318

(5th Cir 2007); see also Harmon, 2023 WL 5758889 at *8

(certifying recordkeeping fee claim under 23(b)(1)(A)

because of risk of inconsistent judgments across individual

cases that would result in “conflicting and incompatible

standards of conduct” for plan administrator) (internal

quotations and record citation omitted).

Certification under Rule 23(b)(1)(A) is appropriate.

4. Appointment of class counsel

Clark and Hartshorn are to this point represented by

McKay Law LLC, Wenzel Fenton Cabassa, PA, and the

Law Office of Chris R. Miltenberger. They request

appointment of their counsel as class counsel. Dkt 51 at 22–

23. Defendants make no objection. See Dkt 52.

Under Rule 23(g)(1)(A), the court should consider

counsel’s work investigating claims, experience,

knowledge, and resources. Nothing in the record suggests

that the proposed counsel fail to meet these standards for

appointment as class counsel.

The requested counsel will be appointed.

5. Conclusion

The proposed class action, as limited by the above

rulings, satisfies the Rule 23(a) requirements, and

prosecuting separate actions by individual class members

would create a risk of inconsistent or varying adjudications

that would establish incompatible standards of conduct for

the Defendant Plan administrators. Certification of this

class under Rule 23(b)(1)(A) is thus appropriate.

The motion to certify class is GRANTED IN PART and

DENIED IN PART. Dkt 51.

It is GRANTED as to the recordkeeping claim, as to the

share class claims regarding the Invesco and Wells Fargo

funds, and as to prospective equitable relief with respect to

the recordkeeping claim.

It is DENIED as to the share class claims regarding the

Schwab, Vanguard, and State Street funds and as to the

Invesco and Wells Fargo funds with respect to prospective

equitable relief.

The share class claims regarding the Schwab,

Vanguard, and State Street funds, and the claims for

prospective equitable relief regarding the Wells and

Invesco funds, are DISMISSED WITHOUT PREJUDICE for lack

of standing. Plaintiffs may seek leave to file an amended

complaint to cure the deficiencies noted above, if desired

and believed possible without the need for joinder of parties

or further discovery. Any such leave must be sought within

twenty-one days of entry of this Opinion and Order.

The Court FINDS that Plaintiffs Lakeshier Clark and

Anitza Hartshorn have established each of the necessary

requirements of Rule 23(a) and (b)(1)(A) of the Federal Rules

of Civil Procedure as to the remaining claims.

The following class is thus CERTIFIED pursuant to Rule 23

of the Federal Rules of Civil Procedure:

All persons who were participants in or

beneficiaries of the SCI 401(k) Plan at any

time between July 7, 2016, and the present.

McKay Law LLC, Wenzel Fenton Cabassa, PA, and the

Law Office of Chris R. Miltenberger are APPOINTED as

counsel for the class.

SO ORDERED.

Signed on September 11, 2024, at Houston, Texas.

Che 0 ald

Hon. Charles Eskridg

United States District Judge

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