The opinion of the court was delivered by: Denise Cote, District Judge
This Document Relates to: ALL ACTIONS
Plaintiffs have moved for certification of a class in this action brought pursuant to Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001 et seq. ("ERISA"). The class definition includes five plans of WorldCom, Inc. ("WorldCom") and companies acquired by WorldCom. Defendant Merrill Lynch Trust Company FSB ("Merrill Lynch") contends that the class definition is overbroad and should be restricted to include only participants and beneficiaries in each of the plans from the time that the plans were merged into the WorldCom 401(k) plan.*fn1 For the same reasons, Merrill Lynch contends that the three class representatives fail to meet the typicality and adequacy requirements of Rule 23, Fed. R. Civ. P. ("Rule 23"). As explained below, the motion for certification is granted.
On June 25, 2002, WorldCom announced a massive restatement of its financial statements. On July 21, it filed for bankruptcy. The first ERISA class action had been in this district on June 21. The Judicial Panel on Multi-District Litigation has transferred all ERISA actions arising from the WorldCom collapse to this Court. The WorldCom ERISA actions were consolidated on September 18, and are referred to as the ERISA Litigation. The civil litigation arising under securities laws is also assigned to this Court and is referred to as the Securities Litigation. The pretrial proceedings in both sets of litigation have been coordinated.
The first consolidated ERISA complaint was filed on December 20. On June 17, 2003, the motions to dismiss lodged against that complaint were granted in part. In re WorldCom, Inc. ERISA Litig., 263 F. Supp. 2d 745 (S.D.N.Y. 2003) (the "Opinion"). Familiarity with the Opinion is assumed; its discussion of the allegations in this action are incorporated. The plaintiffs filed a third amended consolidated class action complaint ("Complaint") on September 12. The Complaint brings three claims for relief pursuant to ERISA § 502(a)(2) and (a)(3) for alleged breaches of fiduciary duty. The Complaint asserts that Merrill Lynch, the Officer Defendants,*fn2 the Employee Defendants,*fn3 Bert C. Roberts and Gordon S. Macklin breached the duty of prudence as required by ERISA § 404(a) by continuing to offer WorldCom stock as an investment alternative within the WorldCom ERISA plan when they knew or should have known that such an investment was imprudent; that Ebbers, Sullivan, and the WorldCom Directors Defendants*fn4 failed to monitor as required by ERISA § 404(a) the fiduciary performance by ERISA plan fiduciaries appointed by those directors; and that WorldCom, Merill Lynch, the Officer Defendants, and the Employee Defendants failed to provide ERISA plan participants with complete and accurate information regarding WorldCom stock. Merrill Lynch is therefore a defendant in the first and third claims.
The proposed class definition refers to the WorldCom 401(k) Salary Savings Plan (the "Plan") and 401(k) plans from four identified predecessor companies that were merged into WorldCom beginning in 2000 -- MCI Communications Corporation ESOP and 401(k) Plan ("MCI Plan"), the IDB Communications Group, Inc. 401(k) Savings and Retirement Plan, the Western Union International, In. 401(k) Plan for Collectively Bargained Employees, and the SkyTel Communications, Inc. Section 401(k) Employee Retirement Plan (collectively, "Predecessor Plans"). It reads as follows:
All participants and beneficiaries in the WorldCom 401(k) Salary Savings Plan (the "Plan") and its predecessor plans, including but not limited to, the MCI Communications Corporation ESOP and 401(k) Plan, the IDB Communications Group, Inc. 401(k) Savings and Retirement Plan, the Western Union International, Inc. 401(k) Plan for Collectively Bargained Employees, and the SkyTel Communications, Inc. Section 401(k) Employee Retirement Plan, for whose individual accounts the Plan held shares of WorldCom stock at any time from September 14, 1998 to the present.
The plaintiffs seek certification pursuant to Rule 23(b)(1) and (2).
Two of the three named plaintiffs, Gail M. Grenier and John T. Alexander, were at all relevant times members of the Plan. The third, Stephen Vivien, was at all relevant times a member of the Plan or the MCI Plan. On September 14, 1998, the first date of the proposed class period, MCI merged with WorldCom. Just over two years later, on November 1, 2000, the MCI Plan and the Plan were merged. While Merrill Lynch was the directed trustee of the Plan, it was not the directed trustee of the MCI Plan prior to November 1, 2000. Merrill Lynch operated as the directed trustee of the Plan beginning on October 10, 1994 through the relevant class period.
At the time each of the predecessor companies merged into WorldCom, WorldCom became the ERISA sponsor for each of the Predecessor Plans, the Predecessor Plans held WorldCom stock, and one or more of the individual defendants became ERISA fiduciaries for the Predecessor Plans. For instance, from September 1998 until the merger into the Plan, the company stock offered by the MCI Plan was WorldCom stock, WorldCom was the sponsor of the plan, and an individual defendant WorldCom employee was the identified plan adminstrator for the MCI Plan.
Merrill Lynch does not oppose class certification of the ERISA Litigation, but objects to the class definition. It contends that the definition should be modified to add that participants or beneficiaries in the Predecessor Plans are members of the class "only from and after the date that said plans were merged into the" Plan. It argues that without such a modification the class does not share common questions of law or fact and that the named plaintiffs' claims are not typical.
The standards for class certification are set forth in the Opinion issued in connection with the motion for certification of a class in the Securities Litigation, and the discussion of those standards is incorporated herein. In re ...