Garthwait v. Eversource Energy Co.

1

KIMBERLY GARTHWAIT ET AL Plaintiffs, v. EVERSOURCE ENERGY COMPANY, ET AL., Defendants,

CIVIL No. 3:20-CV-00902(JCH)

United States District Court, D. Connecticut

May 25, 2022

RULING ON MOTION TO CERTIFY CLASS (DOC. NO 78)

Janet C. Hall, United States District Judge

INDEX

I. INTRODUCTION ............................................................................................... 2

II. BACKGROUND ................................................................................................ 3

A. Factual Background ...................................................................................... 3

B. Procedural Background ................................................................................ 5

III. LEGAL STANDARD ........................................................................................ 6

A. Standing ....................................................................................................... 6

B. Rule 23 ......................................................................................................... 7

IV. DISCUSSION .................................................................................................. 8

A. Standing ....................................................................................................... 8

1. Prospective Relief ..................................................................................... 9

2. Funds in Which Plaintiffs Did Not Invest .................................................. 13

B. Rule 23(a) ................................................................................................... 19

1. Numerosity .............................................................................................. 20

2. Commonality ........................................................................................... 20

3. Typicality ................................................................................................. 23

4. Adequacy ................................................................................................ 26

C. Rule 23(b)(1) .............................................................................................. 32

D. Rule 23(g) ................................................................................................... 34

E. Modifications to the Class Definition ........................................................... 35

V. CONCLUSION ............................................................................................... 37

I. INTRODUCTION

Plaintiffs, who have participated in the Eversource 401(k) Plan (“the Plan”), bring this putative class action against Eversource Energy Company (“Eversource”) and other defendants under section 1132(a)(2) of the Employee Retirement Income Security Act of 1974 (“ERISA”), section 1001 of title 29, et seq., of the U.S. Code. Four named plaintiffs seek to represent the putative class: Kimberly Garthwait (“Garthwait”), ^[1] Cumal T. Gray (“Gray”), Kristine T. Torrance (“Torrance”) and Michael J. Hushion (“Hushion”), former Eversource employees and former Plan participants. They bring their claims against the following defendants: Eversource; Eversource's Board of Directors (“the Board”); the Eversource Plan Administration Committee (“Administrative Committee”); the Eversource Investment Management Committee (“Investment Oversight Committee”); and Christine M. Carmody, Robert J. DeAngelo, Richard J. Morrison, and Michael P. Synan, Gregory B. Butler, Christine M. Carmody, James J. Judge, Philip J. Lembo, Thomas J. May, David R. McHale, and John M. Moriera, who were members of the Board, the Administrative Committee, or the Investment Oversight Committee.

Now before the court is the plaintiffs' Motion for Class Certification (Doc. No. 78), in which they propose the following class:

All participants and beneficiaries in the Plan at any time on or after June 30, 2014 to the present (the “Class Period” or “Relevant Time Period”), including any beneficiary of a deceased person who was a participant in the Plan at any time during the Class Period.

Mot. for Class Cert at 1. The plaintiffs seek an order certifying their proposed class under Federal Rule of Civil Procedure 23(b)(1), naming Garthwait, Gray, Torrance, and Hushion as class representatives, and designating Miller Shah, LLP and Capozzi Adler, PC as class counsel. Id. For the reasons discussed below, the plaintiffs' Motion is granted in part and denied in part.

II. BACKGROUND

A. Factual Background

Most of the factual background relevant to this matter is detailed in the court's October 12, 2021 Amended Ruling on the plaintiffs' Motion to Dismiss. See Am. Ruling on Mot. to Dismiss at 2-7 (Doc. No. 107). However, after the court's Ruling, the plaintiffs filed a Second Amended Complaint adding new allegations regarding their specific investments and elaborating upon the claims in their First Amended Complaint. See Second Am. Compl. (Doc. No. 110). Thus, the court provides a short overview of the relevant facts here.

The four named plaintiffs are former Eversource employees who were previously enrolled in the Plan, a defined contribution 401(k) retirement plan with over 11, 000 Participants. Second Am. Compl. at ¶¶ 2-4, 9-12; Pls.' Reply at 2-3 (Doc. No. 93). In their Amended Complaint, the plaintiffs bring claims for breach of fiduciary duty, failure to monitor, and knowing breach of trust, seeking declaratory, injunctive, equitable, legal, or remedial relief pursuant to section 502 of ERISA. See Second Am. Compl. at pp. 6061.

In support of their claims, the plaintiffs allege, first, that the defendants breached their fiduciary duties to the Plan by charging excessive recordkeeping and administrative fees. See Second Am. Compl. at ¶¶ 52-72. Second, they claim that the defendants breached their duties by investing in and retaining a suite of actively managed target date funds known as the Fidelity Freedom Funds (the “Freedom Funds”) rather than their less risky, less expensive, passively managed counterparts, the Freedom Index Funds, id. at ¶¶ 73-96. Third, they allege the defendants invested in and retained imprudent investment options. Id. at ¶ 97. Specifically, plaintiffs allege that the defendants imprudently invested in: (a) the underperforming Morgan Stanley Institutional Fund Emerging Markets Portfolio I, id. at ¶¶ 98-103; (b) the Frank Russell Small Cap Collective Trust, id. at ¶¶ 104-09; and (c) the Morgan Stanley Institutional Fund Small Company Growth Portfolio I. Id. at ¶¶ 110-14. Finally, the plaintiffs allege the defendants failed to monitor the excessive fees and expense ratios for twelve of the Plan's investment options, including: (a) seven of the Freedom Funds; (b) Fidelity Low-Priced Stock K; (c) Lord Abbett Developing Growth I; (d) Fidelity Growth Company K; (e) Fidelity International Discovery K; and (f) Morgan Stanley Emerging Markets Institutional Fund. Id. at ¶¶ 115-116. In failing to monitor the costs of the Plan's investment options, the plaintiffs allege, the defendants also imprudently retained the Fidelity Growth Company K fund rather than its cheaper collective trust counterpart and neglected to utilize the least expensive share class for the Lord Abbett Developing Growth I fund. Id. at ¶¶ 117-121.

In total, the plaintiffs challenge 14 of the Plan's 19 investment offerings.^[2]Between the four named plaintiffs, each has invested through the Plan in at least one of the challenged funds or suites of funds.^[3] Garthwait invested in the Fidelity Freedom 2030 Fund, one of the Freedom Funds. Id. at ¶ 9; Garthwait Decl. at ¶ 5. Gray invested in the Fidelity Freedom 2040 Fund through December 2015, when he transferred the balance into the Fidelity Freedom 2050 Fund. Id. at ¶ 10. Torrance invested in the Fidelity Freedom 2030 Fund. Id. at ¶ 11. Finally, Hushion invested in the Fidelity Freedom 2030 Fund, the Morgan Stanley Institutional Fund Emerging Markets Portfolio, the Frank Russell Small Cap Fund, the Morgan Stanley Institutional Fund Small Company Growth Portfolio, the Lord Abbett Developing Growth Fund, the Fidelity Growth Company Fund, the Fidelity Low-Priced Stock Fund, and the Fidelity International Discovery Fund. Id. at ¶ 12.

B. Procedural Background

The plaintiffs filed their original Complaint on June 30, 2020, see Compl. (Doc. No. 1), followed by their First Amended Complaint on September 22, 2020. See Am. Compl. (Doc No. 26). Subsequently, the defendants filed a Motion to Dismiss the First Amended Complaint (Doc. No. 52), which the court granted in part. See Am. Ruling on Mot. to Dismiss (Doc. No. 107). In its Ruling, the court dismissed without prejudice the plaintiffs' claims related to the selection, retention, and mismanagement of specific funds as well as the excessive fees or expense ratios generated by particular investment options and share classes. See id. at 24-25. The court determined that the plaintiffs lacked standing to bring these claims because the Amended Complaint failed to specify whether any of the named plaintiffs invested in any of the allegedly mismanaged or overpriced funds. Id. at 9-17. The court denied the Motion to Dismiss with respect to the plaintiffs' claims that the defendants charged excessive recordkeeping fees, because such fees affect every participant in the Plan no matter which investments she holds. See id. at 21, 24. Following the court's Ruling and grant of leave to amend, on October 18, 2021, the plaintiffs filed their Second Amended Complaint detailing their investments. See Second. Am. Compl. (Doc. No. 110). In response, on March 15, 2022, the defendants filed a Motion for Summary Judgment that is pending. See Mot. for Summary J. (Doc. No. 120).

The...