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BABCOCK v. COMPUTER ASSOCIATES INTERNATIONAL

January 8, 2003

STEVEN BABCOCK, ON BEHALF OF THE COMPUTER MANAGEMENT SCIENCES INC., EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST, AND HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
COMPUTER ASSOCIATES INTERNATIONAL, INC., JERRY DAVIS, ANTHONY V. WEIGHT, WALTER MILLSAP, COMPUTER MANAGEMENT SCIENCES, INC., DONALD C. WHITE AND COMPUTER MANAGEMENT SCIENCES, INC. EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST FULLY AND AS NOMINAL DEFENDANT, DEFENDANTS.



The opinion of the court was delivered by: Arthur D. Spatt, United States District Judge

MEMORANDUM OF DECISION AND ORDER

In this case, the plaintiff Steven Babcock ("Babcock" or the "plaintiff") alleges that the defendants Computer Associates International, Inc. ("Computer Associates"), Jerry Davis ("Davis"), Anthony V. Weight ("Weight"), Walter S. Millsap ("Millsap"), the Computer Management Sciences, Inc. ("Computer Management"), Donald C. White ("White") and the Computer Management Sciences, Inc. Employee Stock Ownership Plan and Trust (the "Plan") (collectively, the "defendants") failed to properly follow the terms of the Plan and breached their fiduciary duties to him, the Plan and other similarly situated individuals in violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq. Presently before the Court are two motions by the plaintiff, one for class certification pursuant to Rule 23 of the Federal Rules of Civil Procedure and another for permission to file a second amended complaint pursuant to Rule 15.

I. BACKGROUND

The facts in this case are detailed in the Court's decision of February 25, 2002, Babcock v. Computer Assoc. Int'l, Inc., 186 F. Supp.2d 253, 254-56 (E.D.N.Y. 2002) and familiarity with that decision is presumed. Only the facts central to these motions are set forth here.

From 1991 to July 1998, the plaintiff worked at Computer Management. During that employment, he participated in the Plan which was designed to allow employees to invest in the company's stock on a tax free basis. The Plan allowed participants to periodically redirect their funds in various alternative investments other than Computer Management stock. However, the defendants did not allow such investments or create any alternative investments for the participants. In addition, the Plan allowed participants to obtain their benefits after they left their employment at Computer Management. However, the defendants have not allowed the plaintiff nor any other ex-employees to obtain their benefits.

In 1998, Computer Associates acquired Computer Management and began operating and administering the Plan. In March 1999, the Plan sold all of its Computer Management Stock. The defendants then invested those proceeds in a money market fund, where it presently remains. The plaintiff claims that ERISA and the Plan required the defendants to invest the proceeds in a diversified portfolio instead of a money market. By not investing in a diversified portfolio, the plaintiff and participants in the Plan earned a lower return on their investment.

The first amended complaint adds two defendants, Millsap, an additional Trustee of the Plan and White, the administrator of the Plan but makes no substantive changes to the original factual allegations. The first amended complaint alleges four claims. The first claim contains three theories of liability under 29 U.S.C. § 1132(a)(1)(B). The first theory is that the defendants failed to provide the plaintiff with his benefits in a timely fashion under Section 5.4 of the Plan. The second theory is that the defendants failed to provide the plaintiff with three separate investment options for his accounts as required under Section 4.9 of the Plan. The third theory is that the defendants failed to provide the plaintiff with at least one investment option for his Investment Account under Section 4.10 of the Plan. The second claim alleges a breach of fiduciary duty under 29 U.S.C. § 1132(a)(3)(B) on the ground that the defendants failed to abide by the fiduciary duties of ERISA. The third claim alleges federal common law breach of contract on the ground that the defendants failed to follow the terms of the Plan. The fourth claim alleges a claim for injunctive relief seeking to require the defendants to operate the Plan in accordance with ERISA and the terms of the Plan.

The plaintiff now moves to certify a plaintiffs' class pursuant to Rule 23 and to file a second amended complaint pursuant to Rule 15. The defendants oppose class certification on one ground: the plaintiff has failed to satisfy the numerosity requirement under Rule 23(a)(1). The defendants do not oppose the motion to file an amended complaint.

II. DISCUSSION

A. The Prerequisites to a Class Action

The plaintiff seeks to be appointed class representative and seeks to certify the following class: "[a]ll persons who are or were participants in the Computer Management Sciences, Inc. Employee Stock Ownership Plan and Trust between January 1, 1998, and the present."

It is well-settled that the movant bears the burden of showing that she satisfies the four prerequisites for a class action set forth in Rule 23(a) of the Federal Rules of Civil Procedure, which provides as follows:

One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Fed.R.Civ.P. 23(a).

In assessing the instant motion, the Court must accept as true the substantive allegations in the complaint and may not conduct even a preliminary inquiry into the merits of the case. See Caridad v. Metro-North Commuter R.R., 191 F.3d 283, 291 (2d Cir. 1999). On the other hand, the Court must rigorously analyze for compliance with the conditions of Rule 23(a). Id. The Court will evaluate the four prerequisites under Rule 23(a) which are often referred to as numerosity, commonality, typicality and adequacy.

1. Numerosity

To show that a class is "so numerous that joinder of all members is impracticable," the movant is not required to prove that joinder is impossible. Fed.R.Civ.P. 23(a); see also Robidoux v. Celani, 987 F.2d 931, 935 (2d Cir. 1993). Also, the movant does not need to show the exact class size or its identity. Robidoux, 987 F.2d at 935. Rather, numerosity hinges on the "examination of the specific facts of each case and imposes no ...


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