The opinion of the court was delivered by: Gladys Kessler United States District Judge
Plaintiffs William S. Harris, Reginald E. Howard, and Peter M. Thornton, Sr. are former employees of Waste Management Holdings, Inc. ("Old Waste" or "the Company") and participants in the Waste Management Profit Sharing and Savings Plan ("Old Waste Plan" or "Plan"). They bring this action on behalf of the Plan's approximately 30,000 participants under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001, et seq., against Defendants,*fn1 all of whom were fiduciaries of the Old Waste Plan or are fiduciaries of its successor plan, the Waste Management Retirement Savings Plan ("New Waste Plan").*fn2
This matter is presently before the Court on Plaintiffs' Amended Motion for Class Certification. Upon consideration of the Motion, Opposition, Reply, and the entire record herein, and for the reasons set forth below, Plaintiffs' Motion is granted in part, and denied in part.
This action arises from Old Waste's announcement on February 24, 1998 that it was restating several of its financial statements for periods between 1991 and 1997 and that, prior to 1992 and continuing through the first three quarters of 1997, it had materially overstated its reported income by $1.43 billion. That announcement led to the filing of a securities class action in the Northern District of Illinois, which settled on September 17, 1999 ("Illinois Litigation"). Under the terms of the settlement, Old Waste and its agents were released from liability for any claims--including unknown claims--brought by members of the Illinois Settlement Class. In 1999, after Old Waste's January 1, 1999, merger with Waste Services, Inc. to become New Waste, New Waste announced further after-tax charges and adjustments of $1.23 billion. The announcement led to the filing of other securities class action complaints against New Waste and certain of its officers and directors in the Southern District of Texas, which settled on April 29, 2002 ("Texas Litigation"). Both settlements included the Plan and its fiduciaries within the scope of the class.
On April 1, 2002, Plaintiffs filed the instant action in this Court, alleging ten counts of ERISA violations pursuant to ERISA § 502(a)(2), codified as 29 U.S.C. § 1132(a)(2). ERISA § 502(a)(2) provides that a civil action may be brought "by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under [29 U.S.C. § 1109 ("ERISA § 409")]." 29 U.S.C. § 1132(a)(2). Under ERISA § 409(a), fiduciaries found to have breached their fiduciary duties are personally liable "to make good to such plan any losses to the plan resulting from such breach . . . and . . . such other equitable or remedial relief as the court may deem appropriate . . . ." 29 U.S.C. § 1109. Although participants can assert claims on behalf of the entire plan or on behalf of their individual plan accounts, all of Plaintiffs' claims in this case are asserted on behalf of the entire Plan. See LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248, 256, 128 S.Ct. 1020, 1026, 169 L.Ed.2d 847 (2008) (explaining that § 502(a)(2) "does not provide a remedy for individual injuries distinct from plan injuries"); Stanford v. Foamex L.P., 263 F.R.D. 156, 164 (E.D. Pa. 2009).
Plaintiffs' claims were originally divided into three periods. First, Plaintiffs alleged five ERISA violations related to the Plan's purchase of inflated shares of company stock in the first claim period between January 1, 1990 and February 24, 1998 (Counts I-V). Second, Plaintiffs alleged four ERISA violations related to the release of claims by the Plan's fiduciaries in the Illinois securities litigation in the second claim period between July 15, 1999 and December 1, 1999 (Counts VI-IX). Third, Plaintiffs alleged one ERISA violation in the third claim period between February 7, 2002 and July 15, 2002 related to the release of claims by the New Waste Plan's trustee--Defendant State Street Bank and Trust Company--in the Texas securities litigation (Count X). Finally, on December 14, 2009, Plaintiffs were granted leave to file a Substitute Fourth Amended Complaint to add Counts XIII and XIV, which alleged Defendant State Street's violation of ERISA § 406(b)(2) in the Illinois and Texas Litigations.*fn3 Harris v. Koenig, 673 F.Supp.2d 8, 14-15 (D.D.C. 2009) [Dkt. No. 279].
On January 15, 2010, Defendants filed three Motions to Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6):
(1) the Waste Defendants'*fn4 Motion to Dismiss Counts I-V and Counts VII-IX [Dkt. No. 294]; (2) the Individual Waste Management Defendants'*fn5 Motion to Dismiss Counts I-V [Dkt. No. 291]; and (3) Defendant State Street's Motion to Dismiss Counts XIII and XIV [Dkt. No. 292]. On June 10, 2010, the Court denied the Waste Defendants' Motion to Dismiss Counts I-V and VII-IX, and granted in part and denied in part the Individual Waste Defendants' Motion to Dismiss.*fn6 Defendant State Street's Motion to Dismiss was granted with respect to Counts XIII and XIV.
On November 9, 2010, Plaintiffs filed an unopposed Motion for Leave to File a Fifth Amended Complaint [Dkt. No. 403], which was granted. In the Fifth Amended Complaint, Plaintiffs withdrew Count X on the basis that the evidence obtained in discovery was insufficient to prove the claim.
The Fifth Amended Complaint now includes the following claims. In the first claim period, Count I alleges that the Old Waste Investment Committee and any remaining Individual Defendants who are or were members of that Committee breached their fiduciary duties under ERISA § 404 by failing to prudently manage the assets of the Plan; Count II alleges that the Old Waste Administrative Committee and any remaining Individual Defendants who are or were members of that Committee breached their fiduciary duties under ERISA § 404 by failing to provide complete and accurate information to Plan participants and beneficiaries; Count III alleges that Old Waste, the Old Waste Administrative Committee, the Old Waste Investment Committee, and any remaining Individual Defendants who are or were members of those Committees engaged in prohibited exchanges of stock between the Plan and Old Waste in violation of ERISA § 406(a)(1)(A); Count IV alleges that Old Waste, its Board of Directors, and any remaining Individual Defendants on the Old Waste Board breached their fiduciary duties under ERISA § 404 by failing to monitor the fiduciaries of the Plan; and Count V alleges that all Old Waste Fiduciaries breached their fiduciary duties under ERISA §§ 405(a)(2) and (3) by enabling their co-fiduciaries to commit the ERISA violations in Counts I-IV, and by failing to remedy them.
In the second claim period, Count VI alleges that Defendant State Street breached its fiduciary duty under ERISA § 404 by failing to adequately investigate and preserve the claims in Counts I-V in the Illinois Litigation and by causing the claims to be released; Count VII alleges that Old Waste and State Street engaged in prohibited exchanges of choses in action between the New Waste Plan and Old Waste in violation of ERISA § 406(a)(1)(A) by releasing claims in the Illinois Litigation; Count VIII alleges that the New Waste Investment Committee and any remaining Individual Defendants who are or were members of that Committee breached their fiduciary duties under ERISA § 404 by failing to adequately monitor State Street's performance in the Illinois Litigation; and Count IX alleges that State Street, Old Waste, the New Waste Investment Committee, and any remaining Individual Defendants who are or were members of that Committee breached their fiduciary duties under ERISA §§ 405(a)(2) and (a)(3) by enabling their co-fiduciaries to commit the ERISA violations described in Counts VI-VIII, and by failing to remedy them.
On June 30, 2010 Plaintiffs filed their Amended Motion for Class Certification based on the remaining counts in the Fifth Amended Complaint [Dkt. No. 356]. The proposed class representatives are William S. Harris, Reginald E. Howard, and Peter M. Thornton, Sr., all Plan participants who were formerly employed by Old Waste as truck drivers. Plaintiffs request that Ellen M. Doyle and the law firm of Stember Feinstein Doyle Payne & Cordes, L.L.C. and J. Brian McTigue and the law firm of McTigue & Veis, L.L.P. be appointed as Co-lead Counsel, and Gregory Yann Porter of Bailey & Glasser, L.L.P. be appointed as Counsel. On July 30, 2010, the Waste Defendants filed an Opposition to Plaintiffs' Motion, which Defendant James E. Koenig joined [Dkt. Nos. 368 and 393]. Plaintiffs filed their Reply on August 16, 2010 [Dkt. No. 377].
Federal Rule of Civil Procedure 23(a) requires a plaintiff to satisfy the following four requirements before a class can be certified: (1) the class must be so numerous that joinder of all members is impracticable ("numerosity"); (2) there must be questions of law or fact common to the class ("commonality"); (3) the claims or defenses of the representative parties must be typical of the claims or defenses of the class ("typicality"); and (4) the representative parties, and their counsel, must fairly and adequately protect the interests of the class ("adequacy of representation"). See Fed.R.Civ.P. 23(a). In addition, the plaintiff must satisfy one of the three requirements of Rule 23(b).
The plaintiff bears the burden of proof on each element of Rule 23. See Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 614, 117 S.Ct. 2231, 2245, 138 L.Ed.2d 689 (1997); McCarthy v. Kleindienst, 741 F.2d 1406, 1414 n.9 (D.C. Cir. 1984). "In considering a motion for class certification, the Court's inquiry does not extend to an examination of the merits of the case. Instead, the legal standard is whether the evidence presented by plaintiffs establishes a reasonable basis for crediting plaintiffs' assertions." Kifafi v. Hilton Hotel Ret. Plan, 228 F.R.D. 382, 385 (D.D.C. 2005) (citation and internal quotations omitted). A district court exercises broad discretion in deciding whether to permit a case to proceed as a class action. Hartman v. Duffey, 19 F.3d 1459, 1471 (D.C. Cir. 1994) (citing Bermudez v. Dep't of Agric., 490 F.2d 718, 725 (D.C. Cir. 1973)); see also Gulf Oil Co. v. Bernard, 452 U.S. 89, 100, 101 S.Ct. 2193, 2200, 68 L.Ed.2d 693 (1981) (discussing district court's authority to exercise control over a class action).
Plaintiffs seek to certify the following class:
All participants (and their beneficiaries) in the Waste Management Retirement Savings Plan and/or its predecessor plans, including the Waste Management Profit Sharing and Savings Plan, for whose accounts the fiduciaries of the plan acquired the following employer securities of Waste Management, Inc.:
A) pre-corporate-merger common stock (NYSE: WMX) on or after January 1, 1990, through and including July 16, 1998; and/or
B) post-corporate-merger common stock (NYSE: WMI) on or after July 16, 1998, through and including November 9, 1999.*fn7
Pls.' Amd. Mot. for Class Cert. at 1-2.
Defendants raise several arguments against certification of the class of participants for whose accounts the plan fiduciaries acquired pre-corporate-merger common stock. First, Defendants argue that Plaintiffs have not satisfied the commonality, typicality, and adequacy of representation requirements of Rule 23(a). Second, Defendants argue that Plaintiffs have failed to show that one of the three requirements of Rule 23(b) is satisfied.
A. Rule 23(a) Requirements
Defendants do not dispute that the first requirement of Rule 23(a), numerosity, is satisfied. The Plan's Forms 5500 report an estimated class size of 21,000 to 33,000 participants during the relevant period. 5th Amd. Compl. ¶¶ 41-42. The Court agrees that this class is so numerous that "joinder of all members is impracticable" and, consequently, that the class action mechanism serves the interests of judicial economy and efficiency. Fed.R.Civ.P. 23(a)(1); Freeport Partners, L.L.C. v. Allbritton, No. 04-cv-2030, 2006 WL 627140, at *5 (D.D.C. Mar. 13, 2006).
The main argument advanced by Defendants is that the remaining uncertainty surrounding the scope of the Illinois release gives rise to potential conflicts among the putative class members which preclude a finding of the required commonality, typicality, and adequacy of representation. In their January 15, 2010, Motion to Dismiss, the Waste Defendants argued that Plaintiffs cannot simultaneously allege that (1) the ERISA claims in Counts I-V are not subject to the terms of the Illinois Release; and (2) Defendants committed ERISA violations by releasing those same ERISA claims in the Illinois Litigation. This Court rejected that argument in its June 10, 2010, Memorandum Opinion denying the Waste Defendants' Motion to Dismiss, concluding that "Fed. R. Civ. P. 8(d)(3) permits plaintiffs to plead inconsistent claims in support of alternative theories of recovery" and that a fuller record was required to decide whether the release applies to Counts I-V. Harris v. Koenig, No. 02-cv-618, 2010 WL 2560038, at *8 (D.D.C. June 10, 2010) (quoting Fed.R.Civ.P. 8(d)(3) (2009) ("A party may state as many separate claims or defenses as it has, regardless of consistency.")).
In opposition to Plaintiffs' Motion for Class Certification, Defendants now argue that, even if Counts I-V and Counts VI-IX may be brought simultaneously in the Complaint as alternative theories of recovery, the incentives to pursue either the first or the second period claims are not the same for all putative class members. Thus, Defendants argue that Plaintiffs cannot meet their burden to prove commonality, typicality, and adequacy of representation under Rule 23(a).
To meet the commonality requirement of Rule 23(a)(2), Plaintiffs must show that at least one issue, the resolution of which will affect all or a significant number of the putative class members, is common to the entire class. See DL v. Dist. of Columbia, 237 F.R.D. 319, 322 (D.D.C. 2006); In re Vitamins Antitrust Litig., 209 F.R.D. 251, 259 (D.D.C. 2002); Freeport Partners, 2006 WL 627140, at *5. The commonality requirement is a "low bar," and "courts have generally given it a permissive application." In ...