As a result of rulings on motions to dismiss within a day of each other (May 10 and 11, 2017, respectively), Emory University and Duke University must continue to defend claims challenging aspects of their Section 403(b) retirement plans in plaintiffs’ proposed class actions: Henderson v. Emory Univ., N.D. Ga., No. 1:16-cv-02920-CAP; and Clark v. Duke Univ., M.D.N.C., No. 1:16-cv-01044.  As we have previously reported, these cases are two out of a series of twelve proposed class actions filed against the retirement plans of 12 prominent American universities, challenging various aspects of plan management, including excessive fees and fiduciary prudence.

In granting in part and denying in part the Emory defendants’ motion to dismiss, Judge Charles Parnell found that the plaintiffs could move forward with a claim that choosing retail-class shares (with higher expense ratios) over institutional-class shares is imprudent.  The plaintiffs allege that Emory could have but did not use its bargaining power to negotiate lower cost fees, and that no reasonable fiduciary would “choose or be complacent with being provided retail-class shares over institutional-class shares.”  (Order, Doc. 61, p. 7, Henderson v. Emory Univ., N.D. Ga., No. 1:16-cv-02920-CAP (May 10, 2017)).

A novel theory proceeding in both the Duke and Emory cases is the claim that the defendants were imprudent to hire multiple record keepers, where consolidating services with one record keeper could have resulted in lower fees for participants.

Plaintiffs in both cases also raised the novel theory that the defendants acted imprudently by offering too many investment options—111 at Emory, and more than 400 at Duke. Judge Catherine Eagles, who issued the ruling in the Duke case, allowed this claim to go forward.  In contrast, Judge Charles Parnell disagreed with the Emory plaintiffs.  In his ruling, he reasoned that “[h]aving too many options does not hurt the Plans’ participants, but instead provides them opportunities to choose the investments that they prefer.”  (Order, Doc. 61, p. 7, Henderson v. Emory Univ., N.D. Ga., No. 1:16-cv-02920-CAP (May 10, 2017)).

In Duke, the court dismissed as time-barred plaintiffs’ claims that Duke imprudently “locked” itself into offering TIAA-CREF products and recordkeeping, because the actual act of “locking” into the arrangement with TIAA-CREF occurred more than six years before the complaint was filed.  Judge Eagles disagreed with the plaintiffs’ argument that their claim is based on Duke “maintaining” the arrangement with TIAA-CREF, as though the failure to monitor and remove CREF stock from the plan were a continuing violation.

In contrast, the “locked in” claim is moving forward in Emory.  Emory made the same arguments that the “locked in” claim is time-barred; however, Judge Parnell was persuaded by plaintiffs’ argument that they challenge not just the initial arrangement, but the maintenance of the arrangement and failure to monitor and remove CREF stock within the six years preceding the complaint.  However, the Emory plaintiffs may only recover damages resulting from being “locked in” to TIAA-CREF that occurred within six years before the filing of the complaint.

We’ll continue to post updates as decisions in the other University cases are handed down. In the meantime, if you have any questions about these cases or issues, please contact René Thorne (thorner@jacksonlewis.com), one of the firm’s senior ERISA class action litigators.

ALERT: Senate confirms Acosta as Secretary of Labor

Today the U.S. Senate approved Alexander Acosta as Secretary of the U.S. Department of Labor by a vote of 60-38.  Click here to read more background information on Acosta.  Acosta’s nomination was previously approved by the U.S. Senate Health, Education, Labor and Pensions Committee by a 12-11 party line vote in March.

Chief among the issues awaiting Acosta is what position the DOL will take with respect to the new overtime rule announced by the Obama administration in 2016, which more than doubled the minimum salary threshold for the FLSA’s white collar exemptions to $47,476 annually.  After a District Court in Texas issued a nationwide injunction in December blocking the rule from taking effect, the case was appealed.  The U.S. Court of Appeals for the Fifth Circuit recently granted the government’s request for additional time to file its final reply brief.   Stay tuned.



ALERT: Senate confirms Neil Gorsuch to the Supreme Court

Today, after a three-day hearing, the Senate confirmed Neil Gorsuch to the Supreme Court.  Gorsuch was approved by a 54 to 45 vote after a rule change that allowed him to be confirmed with a simple majority.  To see Jackson Lewis’ detailed analysis of Neil Gorsuch, click here.  Gorsuch is expected to be sworn in within the next week, potentially as soon as Monday, and will replace the late Justice Antonin Scalia.  Senate Judiciary Chairman Chuck Grassley stated of Gorsuch, “This brilliant, honest, humble man is a judge’s judge and he will make a superb Justice.” 


Judge Decertifies Class Based on Plaintiffs’ Differing Accounts of Their Responsibilities

Those who follow developments in wage and hour class actions know that challenges to the exempt status of assistant managers are quite common. Such cases often hinge on a detailed analysis of the actual job duties performed—with the plaintiffs claiming that the entire class performed little or no managerial work and the employer claiming that management was the primary duty of the position.  A recent decision from a federal court in New York involving this issue is likely to have a significant impact on similar cases going forward.

On March 29, 2017, a District Judge in the Southern District of New York rejected a motion for Rule 23 certification and decertified an FLSA collective based largely on the plaintiffs’ own varying accounts of their management responsibilities.  Scott v. Chipotle Mexican Grill, Inc. (a copy of the decision is available here) was brought by seven current and former Chipotle “apprentices” from six different states (along with 516 opt-in plaintiffs).  The apprentice role is akin to that of an assistant manager.  Plaintiffs occupied that position while being groomed for the position of general manger. As expected, plaintiffs alleged that they performed little to no managerial work and were improperly classified as exempt.  Chipotle argued that the apprentices were exempt under the executive exemption, the administrative exemption, or both.

Chipotle had one job description for the apprentice position at issue, which applied nationwide. Discovery also revealed that Chipotle had previously conducted an internal audit of the apprentice position and concluded that it was properly classified as exempt and should be nationwide because apprentices at all locations had the “same responsibilities.”

Deposition testimony elicited from both the named plaintiffs and several of the opt-ins suggested that, in practice, responsibilities were not so uniform. Generally speaking, apprentices at stores with higher sales volumes had greater managerial responsibilities, whereas some apprentices at lower volume locations indicated otherwise.  For example, some plaintiffs testified that they had almost no say in hiring decisions, while others testified that they routinely made hiring recommendations that were ultimately followed.

Despite finding that the requirements for Rule 23(a) certification were met, the court emphasized that because plaintiffs’ sought certification under Rule 23(b)(3) they also had to establish predominance and superiority. The court found that both of those elements were lacking.

The court emphasized the “disparate accounts from [a]pprentices” when addressing both elements and appeared to find the testimony of one opt-in plaintiff who had worked as an apprentice at two different locations especially persuasive. She testified that at one location she worked under a general manager who “limited her leadership responsibilities.”  In the other location, however, there was no general manager and she “made all the decisions for the restaurant.”  This testimony, which the court deemed indicative of disparities in responsibilities depending on location, led the court to conclude that individualized inquiries would be necessary to determine whether each apprentice was exempt—or, in other words, that individual issues would inevitably predominate.

The court also emphasized that the various state law claims asserted by plaintiffs were not identical. Two of the states involved (Colorado and Washington) had strict percentage limitations governing how much time an employee can spend on non-exempt work while still qualifying for an exemption—and even those limitations were different.  The court denied the plaintiffs’ motion for class certification.

But the court did not stop there. For many of the same reasons, the case was also deemed unfit for resolution as a collective action under the FLSA—and the court granted Chipotle’s motion to decertify the 516-person collective.  Any other decision, the court observed, “would reduce Section 216(b)’s requirement that plaintiffs be ‘similarly situated’ to a mere requirement that plaintiffs share an employer, a job title, and a professed entitlement to additional wages.”

Class certification or decertification is typically the most critical juncture in the case. The Chipotle decision is a significant arrow in the quiver of employers defending class and collective actions involving a diverse set of workers whose responsibilities differ appreciably.


On Monday, the Supreme Court heard oral argument in the consolidated “church plan” cases, Advocate Health Care Network v. Stapleton, St. Peter’s Healthcare System v. Kaplan, and Dignity Health v. Rollins.  As an initial matter, unless the Senate confirms Neil Gorsuch in the very near future, the case will be decided by an eight-Justice court.  While it’s impossible to say for sure how Justices will vote, there may be cause for optimism for the Defendants (against whom the lower courts ruled in all three cases).

At first, Justices Sotomayor and Kagan both seemed hostile to the Defendants’ view of the construction of the church-plan exemption.  But this view seemed to change during the Plaintiffs’ presentation.  Justice Sotomayor commented to Plaintiffs’ counsel “I’m torn,” and – saying that ERISA’s church-plan provision “could be read either way” – asked counsel how to “break the tie.”  Both Sotomayor and Kagan also appeared to struggle with the idea that Plaintiffs’ reading would likely exclude some of the organizations that the 1980 amendments to the church plan exemption were intended to encompass.

Justices Alito and Kennedy seemed to focus on church-plan sponsors’ long-standing reliance on the IRS/PBGC interpretations of the exemption.  Defendants’ counsel noted that their liability for penalties alone could exceed $66 billion.  Justice Alito seized on Plaintiffs’ counsel suggestion that the church-plan cases were “primarily about forward-looking relief” (as opposed to penalties), going so far as to ask counsel to disavow seeking penalties in light of Defendants’ reliance on IRS letters.

Justice Kennedy also seemed concerned that hundreds of plans had sought and obtained the blessing of the IRS and/or PBGC, and could still face liability 30 years later.  Chief Justice Roberts appeared to align with this view, asking Plaintiffs’ counsel why those agencies took a view opposite to Plaintiffs’ interpretation.

Not surprisingly, Justice Ginsberg seemed to be squarely in Plaintiffs’ camp, and dismissed other Justices’ concerns by noting that the lower courts could fashion a remedy that takes Defendants’ good faith into account.

Justice Breyer took a pragmatic approach – he asked several hypotheticals, pressing Plaintiffs’ counsel to say whether a plan would be a church plan in each scenario.  This line of questioning seemed to highlight for Justice Sotomayor that Plaintiffs’ reading would deny church-plan status to many of the plans that lobbied for the 1980 amendments.

As usual, Justice Thomas was silent throughout.

In short, although any prediction would be speculative, the Justices’ questions suggest that Alito and Kennedy would take the defense view, based on the reliance concerns, likely joined by Roberts.  And it’s probably safe to assume Justice Thomas would side with these Justices.

Justices Sotomayor and Kagan could go either way, but if they adopt the Defendants’ view of the statute, it will probably be based on their concerns that the Plaintiffs’ reading ignores the purpose of the 1980 amendments (i.e., exempting plans maintained by church-affiliated groups).  If the conservative wing of the Court holds together, then the addition of either Sotomayor or Kagan would yield a victory.

However, if the usual ideological split prevails, a 4-4 tie would leave the adverse rulings intact.


Courts continue to be split over the availability of disgorgement and “accounting for profits” in ERISA class actions involving in-house investment plans. On March 3, 2017, in Brotherston v. Putnam Investments, LLC, No. 1:15-cv-13825-WGY (D. Mass. March 3, 2017), the court declined to resolve the dispute at the summary judgment stage, allowing the certified class of employees to move forward with their claim that the company should be forced to disgorge profits earned from defendant’s in-house 401k plan.  Previously, the court denied defendant’s motion to dismiss this claim.

This decision is in contrast to recent decisions in other courts. In Urakhchin v. Allianz Asset Management of America LP, 2016 U.S. Dist. LEXIS 104244 (C.D. Cal. Aug. 5, 2016), plaintiffs brought claims against fiduciary and non-fiduciary defendants involved in the plan under Section 502(a)(3) 29 U.S.C. §1132(a)(3). The court granted the non-fiduciary defendant’s motion to dismiss plaintiffs’ disgorgement claim, finding that the plaintiffs failed to allege that any of the money sought to be disgorged could be traced to particular funds in those defendants’ possession.

Relying in part on the Urakchin decision, the court in Moreno v. Deutsche Bank Americas Holding Corp., 2016 U.S. Dist. LEXIS 142601 (S.D.N.Y. Oct. 13, 2016), likewise held that plaintiffs could not state a claim for disgorgement and accounting of funds against the defendants, which included both fiduciary defendants and defendants whom the court determined Plaintiff had not sufficiently pled as fiduciaries.  The Moreno plaintiffs asserted that they were only seeking “an accounting of profits” under 29 U.S.C. section 1132(a)(3) and that therefore the traceability requirement did not apply.  The court held, however, that because the complaint failed to limit the request for equitable relief to an accounting, and the plaintiffs did not allege facts to meet the traceability requirement, the claim should be dismissed.

More recently, in Wildman v. American Century Services, LLC, 2017 U.S. Dist. LEXIS 31700 (W.D. Mo. Feb. 27, 2017), the court held that plaintiffs had sufficiently met the traceability requirement by alleging that the payments in question were “traceable to specific transactions that have been taken on specific dates.”  The court noted that the complaint alleged that the non-fiduciary defendant employer, American Century, had actual or constructive knowledge of the circumstances that rendered the transactions unlawful.  Accordingly, the plaintiffs were allowed to proceed with their disgorgement claim against both fiduciary and non-fiduciary defendants.

The upshot is that in some of these cases, the reason for the dismissal appears to turn on fiduciary status. In the Urakhchin and Moreno cases, the claims were asserted by non-fiduciary parties alone.  As the Urakhchin court explained, accounting and disgorgement claims are claims for equitable relief, but claims seeking these remedies against non-fiduciary parties are generally considered legal (i.e., not equitable) claims.  As a result, the court required tracing.

On the other hand, in both the Wildman and Putnam cases, the disgorgement claims were asserted against fiduciary and non-fiduciary parties (in Putnam, Plaintiff argued that all defendants were fiduciaries, but the employer/plan sponsor defendant and its CEO are disputing that claim in their pending motion for summary judgment), but the courts do not appear to have drawn distinctions based on fiduciary status.

Class Action as Defense: Fifth Circuit Rules Pending Class Action Subsumes Class Member’s Duplicative Individual Claim

Employers facing multiple litigations can take solace in the fact that, sometimes, too much of a bad thing can be helpful.  In Ruiz v. Brennan, 16-11061, the Fifth Circuit held that a pending administrative class action subsumed a plaintiff’s attempts to file an arguably duplicative individual claim in a separate action.  As a result, the second litigation was dismissed without prejudice.

Administrative Class Action

The United States Postal Service faced an administrative class action in McConnell v. Potter, which asserted class-wide claims of disability discrimination related to the National Reassessment Program (“NRP”), a program designed to regulate procedures for issuing workplace assignments to postal workers injured on the job.  In McConnell, the EEOC certified an administrative class of “all permanent rehabilitation employees and limited duty employees… who have been subjected to the NRP from May 5, 2006 to the present.”

Ruiz Litigation

While McConnell was pending, Plaintiff Ruiz (who has congenital hearing impairment) filed an individual administrative complaint with the EEOC claiming disability discrimination in connection with the Postal Service’s decision that it could not identify a modified job she could perform due to a work-related disability (carpal tunnel syndrome).

The Postal Service argued Ruiz’s individual claim was subsumed in the pending McConnell case.  The EEOC agreed.  Undeterred, Ruiz filed a federal court complaint.  Ultimately, the district court dismissed her claim, finding that she failed to exhaust her administrative remedies because the EEOC never addressed the merits of her claim, which was subsumed by McConnell.

Fifth Circuit Affirms Dismissal

On appeal, Ruiz argued that she filed two distinct disability claims: (1) she was removed improperly from her modified duty position; and (2) the modified duty position was retracted due to the employer’s failure to accommodate her congenital hearing impairment (as opposed to her on-the-job carpal tunnel injury).

In affirming the district court’s dismissal, the Fifth Circuit reasoned Ruiz’s individual claims were subsumed by McConnell inasmuch as she only received the modified duty position as part of the NRP due to her work-related injury, not because of her congenital hearing disability.  Accordingly, she did not exhaust her administrative remedies, which was grounds for dismissal.


Ruiz is an important reminder for employers to evaluate existing class claims to determine if they provide a basis to seek dismissal of subsequently filed, arguably related individual claims.

How Does the Supreme Court’s Remand of the Transgender Discrimination Case Impact Wage-and-Hour Class Actions?

On March 6, 2017, the Supreme Court, in a one-sentence summary disposition, remanded the case of Gloucester County Sch. Bd. v. G.G. to the U.S. Court of Appeals for the Fourth Circuit “for further consideration in light of the guidance document issued by the Department of Education and Department of Justice on February 22, 2017.”  For those unfamiliar with Gloucester County, the case involves a public school’s obligations to a transgender student under Title IX and, in particular, whether Title IX’s prohibition against sex discrimination requires a school to treat transgender students consistent with their gender identity when providing sex-separated facilities, such as toilets, locker rooms, and showers.

So what does this have to do with wage-and-hour class actions?  As it turns out, in Gloucester County, the Supreme Court was poised to consider the scope, and perhaps the continuing viability, of the Auer doctrine, which frequently comes into play in wage-and-hour litigation.  Under the Auer doctrine, courts generally will enforce an agency’s interpretation of its own regulations unless that interpretation is “plainly erroneous or inconsistent with the regulation.”  In wage-and-hour class actions, this often results in cases being decided based on guidance issued by the Department of Labor through opinion letters, its Field Operations Handbook, and other sources.

This deference to the Department of Labor can be frustrating for employers and attorneys practicing wage-and-hour law because the guidance issued by the Department of Labor often changes with each new Presidential administration.  For example, an entire industry can decide to classify a group of employees as exempt from the FLSA’s overtime requirements based on an opinion letter from the Department of Labor only to learn years later that the Department has withdrawn the opinion letter after the start of a new administration.  If courts are obligated under Auer to defer to these shifting interpretations issued by the Department of Labor, it can create a great deal of uncertainty for employers seeking to comply with the FLSA and for parties litigating wage-and-hour class actions.

In the long term, eliminating or narrowing the Auer doctrine could provide more consistency for employers and litigants.  With the remand of Gloucester County, that is unlikely to happen in the near future.  In the short term, however, the continuing viability of the Auer doctrine may benefit employers who are hopeful that the Department of Labor, under the Trump administration, will take a more employer-friendly view of certain regulations.  For now, the Department of Labor remains free to shape FLSA through opinion letters and other guidance documents and without having to resort to the time-consuming process of issuing revised regulations.

House Approves Fairness in Class Action Litigation Act

Last night, the House approved the Fairness in Class Action Litigation Act by a vote of 220-201.  To review our post last month detailing exactly how this bill would affect class action litigation, click here.  To review the full statement of House Judiciary Committee Chairman Bob Goodlatte (R-Va.), the author of the bill regarding its recent approval, click here.  Next, the Act will move to the Senate and be referred to the Committee on the Judiciary.  We will continue to monitor how this bill progresses. For more information or to discuss the potential implications of this bill in more detail, please contact the authors listed above or the Jackson Lewis attorney with whom you regularly work.



Citing to the “significant uncertainties in predicting the outcome” of their litigation “where the critical issue is pending before the Supreme Court” (oral argument on the scope of ERISA’s church plan exemption is set in three consolidated cases for March 27), Plaintiffs in Butler et al. vs. Holy Cross Hospital, another church plan class action, have filed an unopposed motion for preliminary approval of settlement.

In Butler, former employees of Holy Cross Hospital filed suit in June of 2016 on behalf of themselves and other participants of the Pension Plan for Employees of Holy Cross Hospital, alleging that Defendants breached duties under ERISA by incorrectly treating the Plan as an ERISA-exempt “church plan.”  Among Plaintiffs’ allegations are that Defendants underfunded the Plan by $31 million and improperly attempted to terminate the Plan while it was underfunded.

The Plan was originally sponsored by Holy Cross Hospital, which transferred plan sponsorship and liabilities to the Sisters of Saint Casimir shortly before the hospital’s merger with Sinai Health System.  Plaintiffs allege that this transfer was an unlawful attempt to avoid liability for the Plan’s underfunding. They claim that upon the Plan’s purported termination, Defendants offered participants a discounted distribution based on incorrect classification of the Plan as a church plan.

The parties’ settlement provides for a settlement amount of approximately $9 million, which would consist of $4 million paid by Defendants into an escrow account (less attorney’s fees not to exceed 15% of the amount in escrow), as well as approximately $5 million in Plan assets held in trust that have not yet been distributed. According to the motion, after notice and administrative costs, Defendants anticipate that approximately $8.4 million will be available for distribution to Plan participants.  After final distribution of the settlement amount the Plan will be fully liquidated and formally terminated.