FILED

U.S. COURT OF APPEALS

ELEVENTH CIRCUIT

NOVEMBER 30, 2001

THOMAS K. KAHN

CLERK

*

Honorable Jerome Farris, U.S. Circuit Judge for the Ninth Circuit, sitting by designation.

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________

No. 99-14220

________________________

D. C. Docket No. 97-01823-CV-J-S

CHARLES J. PIAZZA, JR., an individual 

and as a representative for a class of 

persons similarly situated,

Plaintiff-Appellee,

versus

EBSCO INDUSTRIES, INC., 

COOPERS & LYBRAND, LLP, et al.,

Defendants-Appellants.

________________________

Appeals from the United States District Court

for the Northern District of Alabama

_________________________

(November 30, 2001)

Before CARNES, MARCUS and FARRIS*

, Circuit Judges. 

MARCUS, Circuit Judge:
1

Piazza originally named Coopers & Lybrand, LLP, PwC’s predecessor in interest. For

ease of reference, we will refer to both entities as “PwC.”

2

This is an interlocutory appeal from a grant of class certification. Charles

Piazza (“Piazza”), a former employee of EBSCO Industries, Inc. (“EBSCO”), and

a former participant in the EBSCO Savings and Profit Sharing Trust Plan (the

“Plan”), brought this action against EBSCO, certain EBSCO directors, certain

trustees and fiduciaries of the Plan (together, the “EBSCO Defendants”) and

Pricewaterhouse Coopers, LLP (“PwC”),1

 alleging violations of Alabama law and

the Employee Retirement Income Security Act, 29 U.S.C. § 1001-1461 (“ERISA”). 

The district court granted Piazza’s motion for class certification, and, pursuant to

Fed. R. Civ. P. 23(b)(3), certified against all defendants a class of all persons who

are or have been Plan participants or beneficiaries from 1983 through the present. 

PwC and the EBSCO Defendants argue on appeal that the district court abused its

discretion by certifying a class against them. We reverse certification of a class

against PwC, vacate certification of the class against the EBSCO Defendants, and

remand to the district court with instructions.

I.

The facts surrounding this appeal are straightforward. The Plan is funded by

employee contributions and fifteen percent of EBSCO’s annual profits. Among
3

other assets, the Plan also held EBSCO stock, which comprised 30% of the corpus

by 1993. In 1994, the Plan sold the EBSCO stock back to EBSCO, based on a

valuation by PwC. AmSouth Bank, the Plan trustee, hired PwC for this purpose. 

PwC delivered its report on January 31, 1994, and valued the stock at

approximately $17 million. The sale was completed between March and June

1994. 

Piazza was an EBSCO employee and Plan participant from 1988 until 1995. 

He retired in 1995 and withdrew his funds from the Plan in 1996. Piazza first

learned of the 1994 stock sale from another EBSCO employee in November 1995. 

He also learned that some impropriety may have occurred in the valuation of

EBSCO stock for the sale. Upon investigation, Piazza discovered that the EBSCO

Defendants secretly operated competing companies.

Piazza filed suit on July 18, 1997, alleging that the EBSCO Defendants had

undervalued the stock for the 1994 sale and pressured the trustee to undervalue the

stock in prior years. From the outset, Piazza sought to certify a class and proceed

with a class action suit. Piazza initially named only the EBSCO Defendants and

PwC as defendants. He did not seek to join AmSouth until August 1998, near the

close of discovery. The district court granted joinder in February 1999 and

extended the discovery period.
2

Due to a clerical error, the original order stated that the class period began in 1993. A

clarifying order was issued on August 25, 1999.

4

Piazza moved for class certification pursuant to Fed. R. Civ. P. 23(b)(1), (2),

and (3). Defendants vigorously opposed. On July 7, 1999, the district court held a

class certification hearing. At the hearing, Piazza abandoned his earlier claim that

the class should begin in 1959, the year the Plan was established, in favor of 1983,

when the EBSCO Defendants began operating competing companies. On August

13, 1999, the district court issued an order certifying against all defendants a Rule

23(b)(3) class of all persons who were Plan participants or beneficiaries from 1983

through the pendency of the action.2

 

We granted the defendants’ interlocutory motions to appeal class

certification by order of October 27, 1999. See Fed. R. Civ. P. 23(f).

On February 8, 2000, the district court granted AmSouth’s motion for

summary judgment, holding that Piazza’s claims against it were barred by the

statute of limitations. The district court certified this order as a final judgment, and

Piazza did not appeal in the time allotted. On April 3, 2000, we dismissed

AmSouth’s appeal of the class certification as moot.

II.

We review orders granting class certification for abuse of discretion. See
5

Andrews v. American Tel. & Tel. Co., 95 F.3d 1014, 1022 (11th Cir. 1996). 

Whether the named plaintiffs have standing to assert their claims is a legal issue

subject to de novo review. See Wooden v. Board of Regents of Univ. Sys. of

Georgia., 247 F.3d 1262, 1271 n.9 (11th Cir. 2001).

Rule 23(a) sets out four requirements which must be satisfied before a class

can be certified. The Rule states: 

(a) Prerequisites to a Class Action. One or more members of a class

may sue or be sued as representative parties on behalf of all only if (1)

the class is so numerous that joinder of all members is impracticable;

(2) there are questions of law or fact common to the class; (3) the

claims or defenses of the representative parties are typical of the

claims or defenses of the class; and (4) the representative parties will

fairly and adequately protect the interests of the class. 

Id. These four requirements commonly are referred to as “the prerequisites of

numerosity, commonality, typicality, and adequacy of representation,” and they are

designed to limit class claims to those “fairly encompassed” by the named

plaintiffs’ individual claims. General Tel. Co. of S.W. v. Falcon, 457 U.S. 147,

156, 102 S. Ct. 2364, 2370, 72 L. Ed. 2d 740 (1982) (quoting General Tel. Co. of

N.W. v. E.E.O.C., 446 U.S. 318, 330, 100 S. CT.. 1698, 1706, 64 L. Ed. 2d 319

(1980)). Typicality, along with the related requirement of commonality, focuses

on whether a sufficient nexus exists between the legal claims of the named class

representatives and those of individual class members to warrant class certification. 
6

See Washington v. Brown & Williamson Tobacco Corp., 959 F.2d 1566, 1569 n. 8

(11th Cir.1992); see also 7A C. Wright & A. Miller, Federal Practice and

Procedure § 1764 (1986). Traditionally, commonality refers to the group

characteristics of the class as a whole, while typicality refers to the individual

characteristics of the named plaintiff in relation to the class. See Prado-Steiman v.

Bush, 221 F.3d 1266, 1279 (11th Cir. 2000). Typicality also encompasses the

question of the named plaintiff’s standing, for “[w]ithout individual standing to

raise a legal claim, a named representative does not have the requisite typicality to

raise the same claim on behalf of a class.” Id. “Adequacy of representation”

means that the class representative has common interests with unnamed class

members and will vigorously prosecute the interests of the class through qualified

counsel. Andrews, 95 F.3d at 1023. These four requirements “serve as guideposts

for determining whether under the particular circumstances maintenance of a class

action is economical and whether the named plaintiff’s claim and the class claims

are so interrelated that the interests of the class members will be fairly and

adequately protected in their absence.” Prado-Steiman v. Bush, 221 F.3d at 1279

(11th Cir. 2000) (quoting Falcon, 457 U.S. at 157, n.13, 102 S. Ct. at 2370).

In addition to the requirements of Rule 23(a), before a class can be certified,

at least one of the alternative requirements of Rule 23(b) must be satisfied. 
7

Jackson v. Motel 6 Multipurpose, Inc., 130 F.3d 999, 1005 (11th Cir.1997). The

alternative requirements provided by Rule 23(b) are as follows:

(1) the prosecution of separate actions by or against individual

members of the class would create a risk of

(A) inconsistent or varying adjudications with respect to

individual members of the class which would establish

incompatible standards of conduct for the party opposing

the class, or

(B) adjudications with respect to individual members of

the class which would as a practical matter be dispositive

of the interests of the other members not parties to the

adjudications or substantially impair or impede their

ability to protect their interests; or

(2) the party opposing the class has acted or refused to act on grounds

generally applicable to the class, thereby making appropriate final

injunctive relief or corresponding declaratory relief with respect to the

class as a whole; or

(3) the court finds that the questions of law or fact common to the

members of the class predominate over any questions affecting only

individual members, and that a class action is superior to other

available methods for the fair and efficient adjudication of the

controversy. The matters pertinent to the findings include: (A) the

interest of members of the class in individually controlling the

prosecution or defense of separate actions; (B) the extent and nature of

any litigation concerning the controversy already commenced by or

against members of the class; (C) the desirability or undesirability of

concentrating the litigation of the claims in the particular forum; (D)

the difficulties likely to be encountered in the management of a class

action.
8

Fed. R. Civ. P. 23(b)(1)-(3). These alternative requirements “describe[] the

additional elements which in varying situations justify the use of a class action.” 

Fed. R. Civ. P. 23 advisory committee’s note (1966 amend.).

A. PwC

PwC argues that the Rule 23(a) prerequisites were not met here because (1)

commonality was defeated by the fact that plan participants live in thirty-seven

states and therefore the laws of thirty-seven different states would have to be

applied; (2) there is no typicality because Piazza cannot establish the reliance

element necessary to prove each individual class member’s claim; and (3) Piazza

cannot serve as a class representative since he does not have standing because his

claim is barred by the statute of limitations.

Because the question is dispositive in this case, we begin our analysis with

Piazza’s standing to raise the claim against PwC. Without individual standing to

raise a legal claim, a named representative does not have the requisite typicality to

raise the same claim on behalf of a class. See Prado-Steiman, 221 F.3d at 1279. It

is by now clear that a class representative whose claim is time-barred cannot assert

the claim on behalf of the class. See Carter v. West Publ’g Co., 225 F.3d 1258,

1267 (11th Cir. 2000) (reversing class certification because the named plaintiff,

whose claim was time-barred, lacked standing to assert the claim); Great Rivers
9

Coop of S.E. Iowa v. Farmland Indus., Inc., 120 F.3d 893, 899 (8th Cir. 1997)

(“Here, [the class representative] is not and cannot be a class member because his

claim is time barred; consequently, he cannot represent the class.”). If Piazza’s

claim is time-barred, he cannot assert the claim against PwC on behalf of the class,

and it would not be necessary to reach PwC’s other arguments. We turn, then, to

the statute of limitations.

The claim against PwC is a professional negligence-accounting malpractice

claim. Under Alabama law, claims for negligence are subject to a two-year statute

of limitations. See Henson v. Celtic Life Ins. Co., 621 So. 2d 1268, 1274 (Ala.

1993). The statutory period of limitations for negligence actions, found at Ala.

Code § 6-2-38, is two years from the date the injury occurred. Id. It is well settled

under Alabama law that a negligence cause of action accrues when the plaintiff can

first maintain the action, regardless of whether the full amount of damage is

apparent at the time of the first injury. See Booker v. United American Ins. Co.,

700 So. 2d 1333, 1339 (Ala. 1997).

The district court never made a finding as to when the claim against PwC

accrued, but instead simply observed that the claim accrued “sometime after the

delivery of the valuation to the trustees.” The valuation on which the negligence

claim is based was delivered to the Trustee on January 31, 1994, the EBSCO stock
10

was sold on March 10, 1994, and the sale of the stock was completed in June 1994. 

We need not resolve whether Piazza’s cause of action accrued when the valuation

was delivered, when the stock was sold, or when the sale of the stock was complete

because, even if Piazza did not realize any injury until the sale was actually

completed, his cause of action accrued by June 1994 at the latest. Piazza, however,

did not initiate this professional negligence suit against PwC until July 18, 1997. 

Piazza does not dispute that he did not file suit until more than two years after his

cause of action accrued, but he argues that the Alabama “discovery rule” tolls the

statute of limitations. We are not persuaded. 

The Alabama discovery rule tolls the statute of limitations for fraud claims,

but not for negligence claims. See Henson, 621 So. 2d at 1274. Piazza argues that

the discovery rule tolled the statute of limitations in this case because Alabama’s

tort of professional negligence is based on the tort of negligent representation as

described in the Restatement (Second) of Torts § 552, which is a combination of

fraud and negligence. The Alabama Supreme Court adopted Section 552 as the

test for professional negligence in Boykin v. Arthur Andersen & Co., 639 So. 2d

504, 509-10 (Ala. 1994). Section 552 provides:

(1) One who, in the course of his business, profession or employment,

or in any other transaction in which he has a pecuniary interest,

supplies false information for the guidance of others in their business

transactions, is subject to liability for pecuniary loss caused to them
11

by their justifiable reliance upon the information, if he fails to exercise

reasonable care or competence in obtaining or communicating the

information. 

(2) Except as stated in Subsection (3), the liability stated in Subsection

(1) is limited to loss suffered 

(a) by the person or one of a limited group of persons for whose

benefit and guidance he intends to supply the information or knows

that the recipient intends to supply it; and 

(b) through reliance upon it in a transaction that he intends the

information to influence or knows that the recipient so intends or in a

substantially similar transaction. 

(3) The liability of one who is under a public duty to give the

information extends to loss suffered by any of the class of persons for

whose benefit the duty is created, in any of the transactions in which it

is intended to protect them.

Restatement (Second) of Torts §552 (1977). 

On its face, Section 552 is cast in terms of negligence. It imposes liability

for the breach of a duty, arising from a professional relationship, to exercise

reasonable care. Indeed, the Alabama Supreme Court has treated professional

negligence claims based on Section 552 as negligence claims. See Fisher v. Comer

Plantation, Inc., 772 So. 2d 455 (Ala. 2000); Boykin, 639 So. 2d 504. Piazza cites

no case, and we are not aware of any, to support the proposition that the tort of

professional negligence sounds also in fraud. 
12

Moreover, the Alabama Supreme Court has expressly rejected expansive

readings of the discovery rule. In Travis v. Ziter, 681 So. 2d 1348 (Ala. 1996), the

plaintiff sought to toll a statute of limitations on the ground that she had repressed

memories of sexual abuse until they were “triggered” during therapy fifteen years

later. As compelling as the facts were, the Alabama Supreme Court stated that

“this Court will not apply the discovery rule unless it is specifically prescribed by

the Legislature.” 681 So. 2d at 1354; see also Garrett v. Raytheon Co., 368 So. 2d

516, 521 (Ala. 1979) (explaining that “as this Court is committed to the proposition

that the legislature has the Inherent power to establish statutes of limitation, we

have no other alternative than to leave it to the legislature to abrogate this rule and

adopt a more equitable one should it see fit.”). Here, Piazza has not offered any

basis for expansively reading the discovery rule. In the absence of any compelling

argument from Piazza, and considering the language of Section 552 and the

Alabama Supreme Court’s commitment to narrowly reading the discovery rule, we

conclude that the discovery rule does not apply here and that Piazza’s professional

negligence claim is barred by the statute of limitations. Since Piazza’s claim

against PwC is time-barred, we hold that the district court abused its discretion in

finding Piazza to be an adequate class representative. See Carter, 225 F.3d at

1263. Accordingly, we reverse the certification of the class against PwC.
13

B. The EBSCO Defendants

On appeal, the EBSCO Defendants argue that the district court abused its

discretion in certifying the class against them. They argue that Piazza lacks

standing to present some of the class’s claims, that irreconcilable conflicts exist

among the class members, and that it was an abuse of discretion to certify certain

claims pursuant to Rule 23(b)(3), rather than Rule 23(b)(1). We address these

arguments below.

As an initial matter, however, we note that our analysis of the EBSCO

Defendants’ challenges to the class certification order is hampered by the lack of

precision in the class certification order. The district court certified the class “with

respect to the claims against all defendants as such claims are stated in the June 30,

1999 amended complaint.” Although we read this to mean that the district court

intended to certify all of the claims stated in the amended complaint against all of

the defendants, we note that, prior to the class certification order, the district court

had granted PwC’s motion for summary judgment on several state law claims. 

Moreover, when we turn to the amended complaint, it is difficult, if not impossible,

to discern precisely which claims are asserted against the EBSCO Defendants, and

therefore impossible to identify precisely the claims with respect to which the class

was certified. 
3

The EBSCO Defendants argue that most of these claims are inadequately stated in the

complaint or not viable. We take no position on whether these claims are adequately stated or

would survive a motion to dismiss in the district court.

14

In his argument to this court, Piazza identifies three general claims against

the EBSCO Defendants: (1) breach of fiduciary duty by operating competitor

companies which lowered the value of EBSCO stock and diminished the profits

EBSCO placed in the Plan from 1983 to the present; (2) breach of fiduciary duty

through the sale of EBSCO stock from the Plan in 1994 at an unreasonably low

price; and (3) breach of fiduciary duty by artificially lowering the value of the

stock between 1983 and the 1994 sale. Each of these claims is said to arise under

both § 502(a)(2) and § 502(a)(3) of ERISA. Given the lack of precision in the

certification order and incorporated complaint, we will assume that the district

court intended to certify each of these three general claims against the EBSCO

Defendants under § 502(a)(2) and (3).3

 Since we find that it was an abuse of

discretion to certify some of these claims, we vacate the certification of the class

against the EBSCO Defendants and remand to the district court for a precise

statement of the class claims, if any, which it may permit.

1. Lost Profits

The EBSCO Defendants argue that Piazza lacks standing to assert, on behalf

of the class, the claim for breach of fiduciary duty by operating competing
15

companies from 1983 to the present. The heart of this claim is that the EBSCO

Defendants’ operation of competing companies diminished EBSCO’s profits

during that period and, consequently, reduced EBSCO’s profit-sharing

contributions to the Plan. This claim is asserted on behalf of all class members,

and applies to the entire class period. Although the class period runs from 1983 to

the present, Piazza was a Plan participant only from 1988 to 1996. Accordingly,

EBSCO argues that Piazza lacks standing to assert a claim based on the operation

of competing companies from 1983 to 1988 (before he was an EBSCO employee

or Plan participant) or after 1996 (when he withdrew his funds from the Plan). 

While we agree that Piazza lacks standing to assert a claim based on the operation

of competing companies either before or after his participation in the Plan, we do

not believe that this prevents him from acting as a representative of the class of all

Plan participants from 1983 through the pendency of the case.

The EBSCO Defendants argue, and we agree, that Piazza has a breach of

fiduciary duty claim on this ground against the EBSCO Defendants only for the

period when he was a Plan participant. The fiduciary duties which they are alleged

to have breached arise under ERISA. ERISA requires fiduciaries to “discharge

[their] duties with respect to the plan solely in the interest of the participants and

beneficiaries,” ERISA § 404(a), 29 U.S.C. § 1104(a), and requires plan
16

administrators to discharge their fiduciary duties “for the exclusive purpose of . . .

providing benefits to participants and their beneficiaries.” 29 U.S.C. §

1104(a)(1)(A)(i). 

Furthermore, ERISA defines “participant” as

any employee or former employee of an employer, or any member or

former member of an employee organization, who is or may become

eligible to receive a benefit of any type from an employee benefit plan

which covers employees of such employer or members of such

organization, or whose beneficiaries may be able to receive any such

benefit.

29 U.S.C. § 1002(7). ERISA does not include in the definition of “participant” a

future employee. Plainly, the EBSCO Defendants did not owe Piazza a fiduciary

duty before he became an EBSCO employee, and Piazza can have no claim for

breach of that duty before it arose. 

Moreover, under the terms of the Plan, Piazza’s retirement distributions were

determined only by the assets that were in the plan at the time of his retirement. 

Consequently, the fact that EBSCO’s profit sharing contributions after his

retirement may have been smaller than they would have been without the alleged

breach of fiduciary duty cannot have had any effect on him whatsoever. Without

such an effect, there is no “injury in fact” and Piazza lacks standing to raise a claim

for the alleged breaches occurring after his retirement. Lujan v. Defenders of

Wildlife, 504 U.S. 555, 560, 112 S. Ct. 2130, 2136, 119 L. Ed. 2d 351 (1992) (To
17

satisfy the first element of “the irreducible constitutional minimum of standing . . .

the plaintiff must have suffered an ‘injury in fact’--an invasion of a legally

protected interest which is (a) concrete and particularized, and (b) actual or

imminent, not conjectural or hypothetical.”) (citations and quotation marks

omitted).

Piazza therefore only has standing to assert this breach of fiduciary duty

claim for breaches occurring from 1988 to 1996, when he was a Plan participant. 

The EBSCO Defendants argue that, since Piazza does not have standing to raise a

breach of fiduciary duty claim against them for breaches that occurred before or

after his participation in the Plan, he cannot represent a class making these claims

on behalf of some of its members. We disagree.

Even though Piazza only has standing to assert this breach of fiduciary duty

claim for the period of his participation in the Plan, he may still represent the class

if his claim has the requisite typicality. It is beyond dispute that in order to have

the requisite typicality to represent a class, a named plaintiff must have individual

standing to assert the claim. Prado-Steiman, 221 F.3d at 1279. However, there is

no similar requirement that “all putative class members share identical claims.” Id.

at 1279 n.14 (quoting Baby Neal v. Casey, 43 F.3d 48, 54 (3rd Cir. 1994)). In fact,

typicality and commonality “may be satisfied even if some factual differences exist
18

between the claims of the named representatives and the claims of the class at large

. . . [although] we do require that the named representatives’ claims share the same

essential characteristics as the claims of the class at large.” Id. (citations and

quotation marks omitted). In making this determination, we have concluded that

“a strong similarity of legal theories will satisfy the typicality requirement despite

substantial factual differences.” Id.; see also Kornberg v. Carnival Cruise Lines,

Inc., 741 F.2d 1332, 1337 (11th Cir. 1984) (stating that “a sufficient nexus is

established if the claims or defenses of the class and the class representative arise

from the same event or pattern or practice and are based on the same legal theory”).

Although Piazza only has standing to assert this breach of fiduciary duty

claim based on the operation of competing companies while he was a Plan

participant, his claim has “the same essential characteristics as the claims of the

class at large.” Prado-Steiman, 221 F.3d at 1279 n.14. The breach of fiduciary

duty claims of all class members are based on the EBSCO Defendants’ practice of

operating competing companies during the class period, reducing EBSCO’s profits

and, consequently, reducing EBSCO’s profit-sharing contributions to the Plan. 

The class members’ claims therefore arise from precisely the same practice and the

legal issues are identical. Compare Kornberg, 741 F.2d at 1337. Their claims

differ from Piazza’s only in the particular time period in which the operation of
4

Although the EBSCO Defendants do not appear to have presented this argument with

respect to the lost profits claim, the argument and our analysis apply equally to that claim.

19

competing companies caused them injury. Although individual damage

calculations may vary with the periods during which the different class members

were Plan participants and the particular dates on which retired class members

received their retirement distributions, the essential core of their claims does not

vary. Piazza’s claim is therefore altogether typical of the claims possessed by the

class members; the factual differences between their claims and his are no barrier

to allowing him to serve as class representative. Quite simply, this argument

provides no basis for concluding that the district court abused its discretion by

certifying a class against the EBSCO Defendants on this claim.

2. The 1994 Stock Sale

The EBSCO Defendants concede that the requirements of Rule 23(a) are met

with regard to the claim for breach of fiduciary duty on the basis of their

participation in the Plan’s sale of the EBSCO stock at less than its true value. They

argue, however, that the district court abused its discretion in its application of

Rule 23(b) to this claim.4

 We agree.

A class action may be maintained only when it satisfies the numerosity,

commonality, typicality, and adequacy requirements of Rule 23(a) and at least one
20

of the alternative requirements of Rule 23(b). See Jackson, 130 F.3d at 1005. The

district court certified the class against the EBSCO Defendants pursuant to Rule

23(b)(3), which allows certification when common questions of law and fact

predominate and a class action offers a superior method for fair and efficient

adjudication. The EBSCO Defendants argue that the district court abused its

discretion by certifying the class under Rule 23(b)(3) rather than Rule 23(b)(1),

which allows certification when the prosecution of separate actions by individual

class members would create a risk that inconsistent adjudications would establish

incompatible standards of conduct. The subsection under which the class action is

certified is significant to the EBSCO Defendants because Rule 23(c)(2) requires

the court to allow class members an opportunity to opt out of class actions

maintained under Rule 23(b)(3), but no such requirement applies to class actions

maintained under Rule 23(b)(1).

The EBSCO Defendants do not contest the district court’s determination that

common issues predominate, arguing instead that a class action under Rule

23(b)(1) is an available and plainly superior method for the fair and efficient

adjudication of this controversy. The EBSCO Defendants contend that, since

Piazza was not individually injured by the Plan’s 1994 sale of the EBSCO stock,

his only ERISA claim is pursuant to ERISA § 502(a)(2), “for appropriate relief” to
5

Piazza offers no basis for preferring certification of the ERISA § 502(a)(2) claim under

Rule 23(b)(3) to certification under Rule 23(b)(1).

21

the Plan for alleged breaches of fiduciary duty. Since a § 502(a)(2) claim is

brought on behalf of the Plan, any recovery will benefit the Plan and, indirectly,

the members of the class. Allowing individuals to opt out of the class action and

pursue their own suits under ERISA § 502(a)(2), the EBSCO Defendants argue,

would require them to defend against multiple suits, each asserting what is actually

one claim belonging to the Plan. Clearly, the EBSCO Defendants assert, the

requirements of Rule 23(b)(1) are met, since “inconsistent or varying adjudications

with respect to individual members of the class” on this claim would “establish

incompatible standards of conduct” for them. See Rule 23(b)(1)(A). The EBSCO

Defendants conclude, therefore, that the possibility of such prejudice to them, and

the lack of any countervailing benefit5

 to be obtained from certification of the class

under Rule 23(b)(3), renders it an abuse of discretion for the district court to have

certified the class on the ERISA § 502(a)(2) claim under Rule 23(b)(3) rather than

Rule 23(b)(1).

Under these particular circumstances, where the EBSCO Defendants have

identified potential prejudice arising from certification of the ERISA § 502(a)(2)

claim under Rule 23(b)(3), certification under Rule 23(b)(1) is also available, and
6

As we have observed, our analysis in this section applies equally to the lost profits

claim. It therefore would be an abuse of discretion to certify pursuant to Rule 23(b)(3) a class on

a § 502(a)(2) claim for breach of fiduciary duty by operating competing companies and thereby

reducing EBSCO’s profit-sharing contribution to the Plan.

22

Piazza has identified no basis for preferring certification of this claim under Rule

23(b)(3) to certification under Rule 23(b)(1), it was an abuse of discretion to

certify the § 502(a)(2) claim6

 under Rule 23(b)(3). No other court has certified a

Rule 23(b)(3) class for a § 502(a)(2) claim, although such claims have been

allowed to proceed as class actions under subsections (b)(1) and (b)(2). See, e.g.,

Bradford v. AGCO Corp., 187 F.R.D. 600, 605 (W.D. Mo. 1999) (Rule 23(b)(2));

Gruby v. Brady, 838 F. Supp. 820, 828 (S.D.N.Y. 1993) (Rule 23(b)(1)); Specialty

Cabinets & Fixtures, Inc. v. American Equitable Life Ins. Co., 140 F.R.D. 474, 479

(S.D. Ga. 1991) (Rule 23(b)(1)) (“Because individuals may bring class actions to

remedy breaches of fiduciary duty only on behalf of the plan, rather than

themselves, the court cannot allow absent participants or beneficiaries to opt out of
7

We note, however, that, in addition to presenting a basis for relief to the plan under

ERISA § 502(a)(2), Piazza may also have raised the EBSCO Defendants’ participation in the

1994 stock sale as a basis for appropriate individual relief under § 502(a)(3). Separate suits by

individual class members seeking these individual remedies do not appear to threaten the

EBSCO Defendants with the same possibility of conflicting or duplicative recoveries. 

Accordingly, the EBSCO Defendants’ argument against the certification of a Rule 23(b)(3) class

does not apply to claims for individual remedies. Although we believe it was an abuse of

discretion to certify the § 502(a)(2) claims for relief to the plan under Rule 23(b)(3), no similar

abuse of discretion would occur in the certification under that subsection of claims under

§ 502(a)(3) for individual remedies. (We, of course, take no position in this opinion on whether

such a claim, or any other claim raised by Piazza, would survive a motion to dismiss.)

23

this class. The right to recovery, after all, belongs to the plan.”) (citation omitted).7

3. Pre-Sale Undervaluation

The EBSCO Defendants proffer two broad arguments against the district

court’s certification of the claim that they breached their fiduciary duties through

their roles in the alleged undervaluations of the EBSCO stock in the years

preceding the 1994 sale. First, they say that Piazza has no standing to raise this

claim because he suffered no injury in fact from this alleged breach of their

fiduciary duties. Second, they contend that there are irreconcilable conflicts

among the members of the class. Both of these arguments have at their heart the

assertion that any pre-sale undervaluations only harmed those who retired while

that undervaluation was in effect and actually benefitted those who retired later. 

Since we agree with this idea, and that Piazza does not have standing as a

consequence, we need not address the EBSCO Defendants’ conflicts argument to
8

For the 1994 stock sale, AmSouth hired PwC to conduct a valuation of the EBSCO

stock.

24

reach our conclusion that the district court abused its discretion by certifying a

class on this claim.

Each Plan participant’s retirement distribution is calculated as a share of the

value of the assets in the Plan when that participant retires. Up until the sale of the

Plan’s EBSCO stock in 1994, the Plan’s trustee, AmSouth, calculated a value for

the Plan’s EBSCO stock each year and used that value as a basis for determining

the retirement distributions for those who retired during that year.8

 If the Plan’s

EBSCO stock was undervalued when a participant retired, that participant would

receive less than he would have if his retirement distribution had been calculated

based on the true value of the Plan’s assets. Any participant who retired while the

Plan owned EBSCO stock, therefore, would be injured by an undervaluation of the

EBSCO stock at the time of his retirement.

It should be obvious that Plan participants are not injured by any

undervaluation that occurs after they retire, since their retirement distributions are

not affected by the value of the Plan’s assets after they retire. Less obvious,

however, is the fact that Plan participants are actually benefitted by

undervaluations that precede their retirement, so long as the stock remains in the
9

The following simple illustration may clarify this point: Assume that there are ten

participants in the Plan, each having a right to a pro-rata share of the Plan’s assets upon

retirement. Assume also that the Plan holds $100,000 in cash and 1,000 shares of EBSCO stock. 

Suppose also that the EBSCO stock has a true value of $100 per share. The Plan’s assets would

be worth $200,000 ($100,000 in cash and $100,000 in stock) and each participant’s pro rata

share would be $20,000. Thus, if five participants retire, their retirement distributions should

total $100,000. Paying their distributions from the Plan’s liquid assets (the cash) leaves the Plan

with only the 1,000 shares of EBSCO stock (worth $100,000).

If, however, the stock is falsely undervalued, at $500 per share, then the Plan would only

appear to have $150,000 in assets. The five retirees would receive only $15,000 each, rather

than $20,000, and remove only a total of $75,000. Their retirement would leave the plan with

$25,000 in cash and the 1,000 shares of EBSCO stock -- $25,000 more than it would have if the

stock had been properly valued. As this simple illustration demonstrates, later retirees are

benefitted, rather than harmed, by earlier undervaluations because earlier undervaluations leave

later retirees with rights to a share of a larger pool of assets.

25

Plan. This is so since undervaluations reduce the size of the distributions to

participants who retire when the undervaluation is in effect, and therefore leave

more assets in the Plan for later retirees.9

After the stock sale, the Plan no longer held any EBSCO stock, holding in its

place the funds which had been used by EBSCO to purchase the stock (or other

assets that the Plan purchased with those funds). Post-sale retirees, like Piazza,

would have been harmed by the sale of the EBSCO stock at an improperly low

price, because that left the Plan with a less valuable pool of assets than it had

before the sale. They would not, however, have been harmed by any earlier

undervaluations. In fact, pre-sale undervaluations of the EBSCO stock would have

reduced the value of retirement distributions paid to pre-sale retirees, leaving more
10In this way, this breach of fiduciary duty claim differs from the lost profits claim. 

Piazza has standing to raise a claim that the EBSCO Defendants breached their fiduciary duties

by operating competing companies, thereby reducing EBSCO’s profit-sharing contributions to

the Plan while he was a participant. That claim was typical of the lost profit claims possessed by

other members of the class; although the other members’ claims may have covered different

periods, they all suffered the same harm in the same way from the same course of conduct. The

pre-sale valuations, however, were routine matters carried out by the Plan’s trustee, AmSouth. 

They differed in kind from the 1994 stock sale, which was carried out on the basis of a singular

valuation by PwC conducted specifically for the sale. Piazza’s claim based on the sale of the

Plan’s EBSCO stock, allegedly based on an undervaluation produced by PwC, is not typical of

the claims possessed by those who retired prior to the sale and received reduced distributions

because of AmSouth’s alleged undervaluation of the stock owned by the Plan. See PradoSteiman, 221 F.3d at 1279 (“[W]e do require that the named representatives’ claims share ‘the

same essential characteristics as the claims of the class at large.’”).

26

assets in the Plan than if their retirement distributions had been based on the true

value of the Plan’s EBSCO stock, and actually increasing the value of distributions

to later retirees. 

Since Piazza was not injured by the alleged pre-sale undervaluations (which,

if anything, increased his retirement distributions), he lacks standing to raise a

claim based on the pre-sale undervaluation of the EBSCO stock.10 See Lujan, 504

U.S. at 560, 112 S. Ct. at 2136 (As we have noted, to satisfy the first element of

“the irreducible constitutional minimum of standing . . . the plaintiff must have

suffered an ‘injury in fact’--an invasion of a legally protected interest which is (a)

concrete and particularized, and (b) actual or imminent, not conjectural or

hypothetical.”) (citations and quotation marks omitted). It therefore was an abuse

of discretion for the district court to certify a class represented by Piazza against
11Although the EBSCO Defendants do not raise the issue, we are also concerned that the

adequacy requirement may not be met because Piazza’s legal representation may not be

adequate. See Falcon, 475 U.S. at 157 n. 13, 102 S. Ct. at 2370 (adequacy of representation

includes concerns about competency of class counsel). The district court did not expressly

consider whether Piazza’s counsel impacts the adequacy requirement. While we take no position

as to any outcome, we urge the district court to consider, on remand, whether the representation

is adequate.

27

the EBSCO Defendants on the claim that they breached their fiduciary duties by

undervaluing EBSCO stock between 1983 and the 1994 stock sale. PradoSteiman, 221 F.3d at 1279 (“[T]here cannot be adequate typicality between a class

and a named representative unless the named representative has individual standing

to raise the legal claims of the class.”).

III.

In sum, we reverse the certification of the class against PwC. We vacate the

certification of the class against EBSCO and remand for further proceedings

consistent with this opinion.11 As part of the proceedings on remand, the district

court must clarify with particularity which class claims, if any, it intends to certify

against the EBSCO Defendants. 

REVERSED IN PART, VACATED and REMANDED IN PART.