Much has happened since 2018, when this ERISA lawsuit was the subject of much coverage, so the time may be ripe for a bit of recap and another look at some of the pros and cons of gigantic class action lawsuits, like Pizarro.
The history of Pizarro, so far
The Complaint originally named 5 defendants:
- The Home Depot;
- the plan’s investment committee;
- the plan’s administrative committee; and
- two financial advisors – Financial Engines Advisors, LLC and Alight Financial Advisors, LLC.
- breach of the duties of loyalty and prudence through the mismanagement of investment options;
- breach of the same duties by the selection of two financial advisors who appear to have been engaged in a kick-back scheme;
- engaging in transactions that were improperly influenced due to an interested individual’s role or financial interest in the transaction (prohibited transactions); and
- failure to monitor those to whom fiduciary responsibilities were delegated.
The latest decision permits the ERISA lawsuit to go forward against the remaining 3 defendants on the basis that and the participants has enough in common to move ahead as a group.
Class action certification of Pizarro plaintiffs
In general, under Rule 23(b) of the Federal Rules of Civil Procedure, a federal court will grant a group of plaintiffs the right to bring a class action lawsuit only if:
- the class is so numerous that joinder of all members is impracticable;
- there are questions of law or fact common to the class;
- the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
- the representative parties will fairly and adequately protect the interests of the class.
One subgroup of participants alleged that the poor investment options offered indicated a breach of fiduciary duty. The other two subgroups of participants complained of the excessive fees charged by Financial Engines Advisors LLC and Alight Financial Advisors LLC. Nonetheless, the District Court found that the plaintiffs' claims were straightforward excessive fee claims, of the sort routinely certified.
Does size matter?
This returns the court watcher to the issue most notable about this ERISA lawsuit, which is the huge number of individuals in the class. Does the fact that more than 300,000 participants may be affected matter?
No, according to the letter of the law. But in reality, the answer is yes, of course, because the size of either a potential judgment or the settlement required to avoid one could be record-shattering. This leads to thorny policy questions about the use of class action lawsuits.
Many sides to the same question
From the judicial perspective, class action lawsuits have some advantages of efficiency. They permit speedier and more economical discovery and pretrial proceedings than many individual lawsuits would. Treating a group of plaintiffs as a class also prevents inconsistent decisions that could be a basis for further appeals.
From the plaintiffs’ point of view, class action lawsuits can seem like the only effective remedy when the dollar amount in dispute is small – less than the cost of individual litigation. The threat of a large jury award or expensive settlement may also seem like the most powerful tool in an area of the law where the regulatory structure lax or the enforcement of existing law or regulations is undependable.
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Employer advocates generally (though not universally) oppose what they see as the growth of class action lawsuits. The language can get heated with accusations of “blackmail settlements.” Nonetheless, class action lawsuits are a tool in the plaintiffs’ tool box, and it appears that that tool will be available to plan participants in the massive Home Depot ERISA lawsuit about to unfold.