Carr v. Int'l Game Tech.

CHRISTOPHER CARR, ROXANNE CLAYTON, and BRIAN BENNETT, Plaintiffs,

v.INTERNATIONAL GAME TECHNOLOGY, et al., Defendants.

RANDOLPH K. JORDAN and KIMBERLY J. JORDAN, Plaintiffs,

v.INTERNATIONAL GAME TECHNOLOGY, et al., Defendants.

3:09-cv-00584-ECR-WGC

3:09-cv-00585-ECR-WGC

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

DATED: March 16, 2012.

(Base Case)

Order

(Member Case)

Plaintiffs are former employee participants in Defendant International Game Technology's ("IGT") profit-sharing plan (the "Plan") who have brought a class action suit pursuant to Federal Rule of Civil Procedure ("FRCP") 23 to allege breach of fiduciary duty claims under Section 502(a) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(2). Now pending before theCourt is Plaintiff's Motion for Class Certification and Related Relief (#106).

I. Background

The Plan is a voluntary defined contribution plan whereby participants make contributions to the Plan and direct the Plan to purchase investments with those contributions from options preselected by Defendants, which are then allocated to participants' individual accounts. While the parties disagree as to whether the terms of the Plan mandate that IGT stock be offered as an investment option, the IGT Stock Fund was offered during the relevant period and its performance provides the basis for this suit.

Plaintiffs filed the amended complaint (#36) on March 10, 2010, alleging several breaches of fiduciary duty under ERISA § 502(a)(2). On March 16, 2011, we issued an order (#80) in which we granted in part and denied in part Defendants' motion to dismiss (#40) and denied Defendants' motion for summary judgment (#44) and Defendant IGT Profit Sharing Committee's alternative motion for summary judgment (#46). We dismissed the following claims: failure to avoid conflicts of interest against all Defendants; breach of prudence and loyalty with respect to the imprudent investment of Plan assets against all Defendants; breach of prudence and loyalty with respect to failure to disclose material facts regarding the Plan against Defendants Siciliano and the Director Defendants; co-fiduciary liability against all Defendants under 29 U.S.C. § 1105(a)(1) and (a)(3) and against Defendant Siciliano under § 1105(a)(2).Therefore, only the following claims remain: (i) Plaintiffs' claim that IGT and the Committee breached their fiduciary duties by failing to provide complete and accurate information about the IGT stock to the Plan Participants (the "communications claim"), (ii) Plaintiffs' claim that the Director Defendants breached their duty to monitor the Committee (the "monitoring claim"), and (iii) breach of co-fiduciary duty pursuant to 29 U.S.C. § 1132(a)(2) with respect to (i) and (ii) (the "co-fiduciary claim").

On June 14, 2011, Plaintiffs filed a motion for class certification (#106). Defendants responded (#117) on August 29, 2011, and Plaintiffs replied (#120) on September 23, 2011. Defendants filed supplemental authority (#123) on January 13, 2012, to which Plaintiffs responded (#126) on January 23, 2012.

II. Legal Standard

A motion for class certification involves a two-part analysis. First, the Plan Participants must demonstrate that the proposed class satisfied the requirements of Federal Rule of Civil Procedure 23(a): (1) the members of the proposed class must be so numerous that joinder of all claims would be impracticable; (2) there must be questions of law and fact common to the class; (3) the claims or defenses of the representative parties must be typical of the claims or defenses of absent class members; and (4) the representative parties must fairly and adequately protect the interests of the class. FED. R. CIV. P. 23(a). Second, Plaintiffs must meet the requirements of at least one of the subsections of Rule 23(b). Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9thCir. 2001). The party seeking certification must provide facts sufficient to satisfy the requirements of Rule 23(a) and (b). Doninger v. Pac. Nw. Bell, Inc., 564 F.2d 1304, 1308-09 (9th Cir. 1977). Although the Court has "broad discretion" to certify a class, it must rigorously assess whether the moving party has met its burden. Zinser, 253 F.3d at 1186. The certification of a class is "an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Wal-Mart Stores, Inc. v. Dukes, -- U.S. --, 131 S.Ct. 2541, 2550 (2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979)).

III. Discussion

Plaintiffs seek to certify the following class:

All persons, other than Defendants, who were participants in or beneficiaries of the Plan at any time between November 1, 2007, through and including April 23, 2009, and whose account included investments in IGT Stock.

Plaintiffs argue that they have satisfied the requirements of Rule 23(a) and (b). Defendants argue that Plaintiffs have failed to satisfy the commonality or typicality requirements of Rule 23(a) or show that Plaintiffs are adequate class representatives. Defendants also argue that Plaintiffs have not satisfied the requirements in Rule 23(b).

A. Rule 23(a)

To certify a class, the Court must find that the four prerequisites under Rule 23(a), commonly referred to as "numerosity," "commonality," "typicality," and "adequacy" exist.For the reasons herein, Plaintiffs have not met their burden of demonstrating each prerequisite.

1. Numerosity

Rule 23(a)(1) requires that "joinder of all members is impracticable." Here, the Form 5500 filed by Plaintiffs with the Internal Revenue Service (#106-3) indicates that the Plan had more than 5,000 participants. A class possibly exceeding 5,000 members renders joinder impracticable. Defendants do not dispute numerosity. Accordingly, Rule 23(a)(1) is met.

2. Commonality

The commonality requirement mandates that "there are questions of law or fact common to the class." FED. R. CIV. P. 23(a)(2). "Commonality focuses on the relationship of common facts and legal issues among class members." Kanawi v. Bechtel Corp., 254 F.R.D. 102, 107 (N.D. Cal. 2008). A plaintiff must show that the contended common question of law or fact is "of such a nature that it 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." Dukes, 131 S.Ct. at 2551.

Plaintiffs' communications claim primarily alleges that Defendants IGT and the Committee issued overly optimistic and grossly inflated growth statements, projections, SEC filings, and/or financial reports and minimized the impact of a slowdown in the gaming industry. (Am. Compl. ¶¶ 67, 76, 85-86, 90, 99, 107, 116, 124, 145, 174, 201, 208, 216 (#36).) Defendants contend that to theextent that Plaintiffs allege claims based on a theory of misrepresentation, Plaintiffs' class should not be certified because misrepresentation claims depend on individualized questions of reliance.

To prove an ERISA breach of fiduciary duty based on a misrepresentation, a plaintiff must establish each of the following elements: (1) the status as an ERISA fiduciary acting as a fiduciary; (2) a misrepresentation on the part of the defendant; (3) the materiality of that misrepresentation; and (4) detrimental reliance by the plaintiff on the misrepresentation. Harris v. Amgen, Inc., No. CV 07-5442 PSG (PLAx), 2010 WL 744123, at *13 (C.D. Cal. Mar. 2, 2010) (citing In re Computer Scis. Corp. Erisa Litig., 635 F.Supp.2d 1128, 1140 (C.D. Cal. 2009)) (emphasis in original). For this reason, many courts within the Ninth Circuit have dismissed or granted summary judgment on communication claims brought under ERISA § 502(a)(2) where plaintiffs have failed to establish the detrimental reliance element of a misrepresentation claim. See, e.g., Harris, 2010 WL 744123; In re Computer Sciences, 635 F.Supp.2d 1128; Schulenberg v. Rawlings Co., LLC, No. CVN03-0134-HDM(VPC), 2003 WL 22129230, at *5-6 (D.Nev. Aug. 20, 2003); see also Kenney v. State Street Corp., 754 F.Supp.2d 288 (D. Mass. 2010) (granting defendants' motion for summary judgment on misrepresentation claim brought as a putative class action where named plaintiff testified that he never read the alleged misrepresentations); Pell v. E.I. DuPond De Nemours & Co, Inc., 348 F.Supp.2d 306, 315 (D.Del. 2004)(granting Defendants' motion for summary judgment because plaintiffs could not prove detrimental reliance).

In the context of suing on behalf of a plan pursuant to ERISA § 502(a)(2) for breach of fiduciary duty, "[c]ourts disagree as to whether reliance is a required element of such a claim." Tibble v. Edison Int'l, No. CV 07-5359 SVW (AGRx), 2009 WL 6764541, at *3 (C.D. Cal. June 30, 2009) (citing Jones v. Novastar Fin. Inc., 257 F.R.D. 181, 190 (W.D.Mo. 2009). The Ninth Circuit has yet to address the issue. Id. Courts that find that class certification is not appropriate with regard to claims for breach of fiduciary duty based on a misrepresentation theory have reasoned that the issue of reliance is highly individualized and not suitable for class treatment. Id. (citations omitted); see also George v. Duke Energy Retirement Cash Balance Plan, 259 F.R.D. 225, 240 (D.S.C. 2009) (denying certification of misrepresentation claims because individual reliance issues defeat commonality requirement of Rule 23(a)); In re Merck & Co., Inc. Sec., Derivative, & "ERISA" Litig., MDL No. 1658 (SRC), 2009 WL 331426, at *6 (D.N.J. Feb. 10, 2009) ("The individual character of the communications claims prevents concluding that the allege breach has similarly affected the potential class members. As to the communications claims, the proposed class fails to satisfy the requirements for certification under Rule 23.") (footnote omitted); Tootle v. ARINC, Inc., 222 F.R.D. 88, 98 (D.Md. 2004) (denying certification upon determining that disclosure claim requires individual showings of detrimental reliance); ...