Opinion ID: 75658
Heading Depth: 3
Heading Rank: 2

Heading: The 1994 Stock Sale

Text: 43 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. 44 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 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). 45 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 the Plan for alleged breaches of fiduciary duty. Since a §a502(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 benefit 5 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). 46 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 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) claim 6 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 this class. The right to recovery, after all, belongs to the plan.) (citation omitted). 7