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FISHER v. J.P. MORGAN CHASE & CO.

August 25, 2005.

ISADORE FISHER, JANNA M. WOOTEN, KELLI M. BUNN, TAMMY T. SOILEAU and AMY K. HARVEY, on Behalf of Themselves and a Class of Persons Similarly Situated, and on Behalf of the JP Morgan Chase 401(k) Savings Plan, Plaintiffs,
v.
J.P. MORGAN CHASE & CO., J.P. MORGAN INVESTMENT SERVICES, THE PLAN INVESTMENT MANAGEMENT COMMITTEE, THE BENEFITS FIDUCIARY COMMITTEE, INA R. DREW, DINA DUBLON, PATRICK L. EDSPARR, JOHN J. FARRELL, PETER H. KOPP, MARIA ELENA LAGOMASINO, BLYTHE S. MASTER, EDWARD L. McGANN, MARC J. SHAPIRO, JOHN C. WILMOT, RICHARD DONALDSON JR., WILLIAM B. HARRISON, MARC J. SHAPIRO, HANS W. BECHERER, RILEY P. BECHTEL, FRANK A. BENNACK, JR., LAWRENCE A. BOSSIDY, M. ANTHONY BURNS, H. LAURANCE FULLER, ELLEN V. FUTTER, WILLIAM H. GRAY, III, WILLIAM B. HARRISON, JR., HELENE L. KAPLAN, LEE R. RAYMOND, JOHN R. STAFFORD, LLOYD D. WARD and JOHN DOES 1-30, Defendants.



The opinion of the court was delivered by: SIDNEY STEIN, District Judge

OPINION & ORDER

Plaintiffs Isadore Fisher, Janna M. Wooten, Kelli M. Bunn, Tammy T. Soileau and Amy K. Harvey have brought this action for alleged breaches of fiduciary duty in violation of section 409(a) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1109(a). Plaintiffs, who are present and former participants in JP Morgan Chase & Co.'s 401(k) Savings Plan (the "Plan"), contend that defendants are fiduciaries with respect to the Plan who have breached their fiduciary duties in connection with the investment of Plan funds in JP Morgan Chase & Co. ("JPM Chase") stock. Plaintiffs have now moved for certification of the proposed class of Plan participants whose personal accounts included units of funds that held shares of common stock of JPM Chase. To the extent plaintiffs' claims are purportedly brought pursuant to the right of action contained in ERISA section 502(a)(2), 29 U.S.C. § 1132(a)(2), plaintiffs lack standing, because they are asserting claims for damages to individuals on behalf of a subset of Plan participants. Insofar as plaintiffs bring their claims pursuant to the right of action contained in ERISA section 502(a)(3), 29 U.S.C. § 1132(a)(3), they have failed to satisfy their burden to establish compliance with the requirements of Fed.R.Civ.P. 23. Accordingly, plaintiffs' motion for class certification is denied.

I. The Proposed Class

  Individual participants in the Plan maintained personal accounts and chose from among a menu of investment options, including the JP Morgan Chase Stock Fund, which in turn made investments in the common stock of JPM Chase. (Id. ¶¶ 35-37). Defendants allegedly violated their fiduciary duties to those Plan participants whose personal accounts contained units of the JP Morgan Chase Stock Fund. Accordingly, plaintiffs seek to certify a class comprised of the following members:
All current and former participants and beneficiaries of the JP Morgan Chase 401(k) Saving Plan ("Plan") for whose individual accounts the Plan held shares of common stock of the Chase Manhattan Corporation ("Chase") and/or JP Morgan Chase & Co. ("JPMC" or the "Company") (such shares of common stock being held in the form of units of the J.P. Morgan Stock Fund and/or the JP Morgan Chase Stock Fund) at any time from April 1, 1999 to and including January 2, 2003. Excluded from the Class are Defendants herein, officers and directors of Defendant JPMC, members of their immediate families, and the heirs, successors or assigns of any of the foregoing.
(Pls.' Supplemental Submission in Supp. of Mot. for Class Cert. at 8). II. Legal Standard for Certification

  When considering a motion for class certification, a court should not address whether the plaintiffs have "stated a cause of action or will prevail on the merits, but whether the requirements of [Federal] Rule [of Civil Procedure] 23 are met." Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178, 94 S. Ct. 2140, 40 L. Ed. 2d 732 (1974) (citation and quotation marks omitted). The burden is on the proponents of the class to establish compliance with Rule 23. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614, 117 S. Ct. 2231, 138 L. Ed. 2d 689 (1997); Caridad v. Metro-North Commuter R.R., 191 F.3d 283, 291 (2d Cir. 1999). "Although the determination of whether to certify a class is not an occasion for an examination of the merits of the case, a court must conduct a `rigorous analysis' to decide if the plaintiffs have met their burden of establishing the prerequisites for certification under Rule 23." Spann v. AOL Time Warner, Inc., 219 F.R.D. 307, 315 (S.D.N.Y. 2003) (quoting In re Visa Check/Master Money, 280 F.3d 124, 135 (2d Cir. 2001) (citation omitted), and Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176, 180 (2d Cir. 1990)).

  Fed.R.Civ.P. 23 provides a two-tiered process for determining whether certification of a proposed class is appropriate. First, the Court must examine whether the four threshold requirements of Fed.R.Civ.P. 23(a) have been met. To achieve certification, the proponents of the class must show that: "(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). The proponents must also demonstrate that the action fits into one of the categories set forth in Fed.R.Civ.P. 23(b). Before determining whether a proposed class satisfies the requirements of Fed.R.Civ.P. 23, the Court must be satisfied that plaintiffs possess standing to assert their claims, since the Court cannot certify a proposed class if the proposed representatives lack standing to sue. See O'Shea v. Littleton, 414 U.S. 488, 494, 94 S. Ct. 669, 38 L.Ed.2d 674 (1974); Murray v. U.S. Bank Trust Nat'l Ass'n, 365 F.3d 1284, 1289 n. 7 (11th Cir. 2004); Piazza v. Ebsco Indus., Inc., 273 F.3d 1341, 1351 (11th Cir. 2001); Carter v. West Publ'g Co., 225 F.3d 1258, 1267 (11th Cir. 2000); Fallick v. Nationwide Mutual Ins. Co., 162 F.3d 410, 423 (6th Cir. 1998); Selby v. Principal Mut. Life Ins. Co., 197 F.R.D. 48, 56 (S.D.N.Y. 2000); In re Bank of Boston Corp. Sec. Litig., 762 F. Supp. 1525, 1531 (D. Mass 1991); The Canadian St. Regis Band of Mohawk Indians v. The State of N.Y., 573 F. Supp. 1530, 1533 (N.D.N.Y. 1983).

  There are generally two aspects to standing, constitutional standing pursuant to Article III of the Constitution and prudential standing, which involves "`judicially self-imposed limits on the exercise of federal jurisdiction. . . .'" Lerner v. Fleet Bank, N.A., 318 F.3d 113, 126 (2d Cir. 2003) (quoting Allen v. Wright, 468 U.S. 737, 751, 104 S. Ct. 3315, 82 L. Ed. 2d 556 (1984)); see also Warth v. Seldin, 422 U.S. 490, 500, 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1975). "Prudential considerations include `the general prohibitions on a litigant's raising another person's legal rights, the rule barring adjudication of generalized grievances more appropriately addressed in the representative branches, and the requirement that a plaintiff's complaint fall within the zone of interests protected by the law invoked.'" Lerner, 318 F.3d at 126 (quoting Allen, 468 U.S. at 751). Included among prudential considerations is the principle of statutory standing. Id.

  Just as the requirement of constitutional standing imposes a jurisdictional prerequisite to suit, id. at 126-27, so too prudential standing considerations are generally treated as jurisdictional. Id. at 127; see also Thompson v. County of Franklin, 15 F.3d 245, 248 (2d Cir. 1994). The U.S. Court of Appeals for the Second Circuit has held that an exception to that general rule exists "if merits issues are so intertwined with the standing issue that any distinction becomes `exceedingly artificial'" Lerner, 318 F.3d at 127-28 (quoting Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 97 n. 2, 118 S. Ct. 1003, 140 L. Ed. 2d 210 (1998)). Plaintiffs have not argued that that exception applies here. The statutory standing question addressed below is sufficiently distinct from questions relating to the merits of plaintiffs' causes of action that the Court may properly adhere to the general rule that prudential standing considerations constrict the Court's power to entertain certain actions. The Court has therefore treated plaintiffs' establishment of statutory standing as a jurisdictional prerequisite to the perpetuation of this action. See id. at 127.

  III. Plaintiffs' Claims

  Plaintiffs have brought three breach of fiduciary duty claims — one for imprudent investment, one for misrepresentation or omission and one for improper supervision of other fiduciaries. Plaintiffs assert these claims pursuant to two distinct statutory provisions. The first is contained in ERISA section 502(a)(2), 29 U.S.C. § 1132(a)(2), and allows a participant to bring an action for appropriate relief pursuant to ERISA section 409(a), 29 U.S.C. § 1109(a), which provides that "[a]ny person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries . . . shall be personally liable to make good to such plan any losses to the plan resulting from such breach. . . ." In other words, the right of action contained in section 502(a)(2) permits an individual participant to sue a plan fiduciary for breach of fiduciary duty on behalf of the relevant plan itself for losses the plan has suffered. See Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 144, 105 S. Ct. 3085, 87 L. Ed. 2d 96 (1985) (explaining that "the entire text of § 409 persuades us that Congress did not intend that section to authorize any relief except for the plan itself.") Section 502(a)(2) does not provide individual plan participants a personal right of recovery. See id.

  The second statutory provision pursuant to which plaintiffs bring their claims is ERISA section 502(a)(3). That section does create a personal right to sue, but only for an injunction against a violation of ERISA or the terms of the plan, on the one hand, or for "other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of [ERISA] or the terms of the plan[,]" on the other. 29 U.S.C. § 1132(a)(3). Section 502(a)(3) does not refer to section 409, and it is therefore not limited to circumstances in which claims are brought on behalf of the relevant plan itself. See Milofsky v. Am. Airlines, Inc., 404 F.3d 338, 346 (5th Cir. 2005). Section 502(a)(3) may only be invoked, however, to bring suit for traditional equitable remedies See Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S. Ct. 708, 151 L. Ed. 2d 635 (2002).

  Plaintiffs' motion to certify the proposed class is addressed below first to the extent their claims are purportedly brought on behalf of the Plan pursuant to ERISA section 502(a)(2) and second to the extent their claims are brought in their personal capacities pursuant to ERISA section 502(a)(3).

  IV. Claims Brought Pursuant to ERISA Section 502(a)(2)

  As discussed above, ERISA section 502(a)(2) does not provide for the recovery of damages to individuals. Rather, participants in a plan possess standing to sue pursuant to section 502(a)(2) only insofar as they assert a cause of action on behalf of the plan itself. See Russell, 473 U.S. at 144. Here, defendants urge that plaintiffs lack standing to bring their claims on behalf of the Plan, because plaintiffs are a subset of Plan participants — i.e, those who included units of the JP Morgan Chase Stock Fund in their Plan investments — who seek recovery for individualized injuries. Plaintiffs do not dispute that they seek damages to individuals, but they insist that section 502(a)(2) is available to them nonetheless, because the ...


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