Falberg v. The Goldman Sachs Group, Inc.

Background

Leonid Falberg, a participant in the Goldman Sachs 401(k) Plan, brought a proposed class action on behalf of the Plan and similarly situated persons. He alleged that The Goldman Sachs Group, Inc., The Goldman Sachs 401(k) Plan Retirement Committee, and John Does 1–20 breached duties of loyalty and prudence, engaged in prohibited transactions, and failed to monitor Plan fiduciaries, in violation of the Employee Retirement Income Security Act of 1974 (ERISA).

The Plan required claimants to exhaust its claims and appeals procedures before bringing a related action in court and required claims to be raised within 24 months. The defendants moved to dismiss, arguing that Falberg’s claims were untimely and unexhausted. Falberg responded that his statutory ERISA claims were governed by ERISA’s six-year limitations provision and did not require administrative exhaustion.

On July 9, 2020, the Court denied the defendants’ motion to dismiss. It declined to apply the Plan’s 24-month limitations period instead of ERISA’s statutory limitations provision and declined to dismiss for failure to exhaust, reasoning that courts in the district generally did not require exhaustion for statutory ERISA claims and that exhaustion would have been futile in this case.

Motion for Interlocutory Appeal

The defendants moved under 28 U.S.C. § 1292(b) for a certificate allowing an interlocutory appeal of the July order. An interlocutory appeal is an appeal before final judgment. Section 1292(b) allows certification only when the issue presents a controlling legal question, there is substantial ground for disagreement, and an immediate appeal may materially advance the litigation. The court also explained that certification is an exceptional procedure and remains within the district court’s discretion even when the statutory factors may be present.

Timeliness

The court denied certification on the timeliness issue. It agreed that timeliness was a controlling question because reversal could end the case, but found no substantial ground for disagreement and no exceptional circumstance supporting an immediate appeal.

The defendants relied on Heimeshoff v. Hartford Life & Accident Insurance Co. to argue that the Plan could set a limitations period for statutory ERISA claims. The court distinguished that decision, which involved ERISA benefits, and relied on later Supreme Court decisions that, in the court’s view, strongly suggested that ERISA’s statutory limitations provision governed the claims at issue. The defendants cited four nonbinding decisions from outside the district, but the court found them unpersuasive and concluded that their existence did not establish the required substantial disagreement.

The court also found that certifying the issue would waste judicial resources because the timeliness question was not the type of temporary legal issue for which an immediate appeal was appropriate. It therefore denied the motion with respect to timeliness.

Exhaustion

The court also denied certification on exhaustion. It noted that the United States Court of Appeals for the Second Circuit had not definitively resolved whether statutory ERISA claims require exhaustion, but said that courts in the district had repeatedly declined to impose that requirement. The court further observed that most federal appellate courts addressing the issue had agreed that exhaustion was unnecessary for statutory ERISA claims.

The court rejected the defendants’ reliance on the minority view from the Seventh and Eleventh Circuits. It reasoned that exhaustion is less useful for statutory ERISA claims than for benefits claims because statutory claims involve interpreting and applying federal law rather than relying primarily on a plan administrator’s expertise. The court also held that Falberg’s claims would survive on the alternative ground that exhaustion would have been futile, even if exhaustion were required.

The court concluded that the defendants had not shown the substantial disagreement, material advancement, or exceptional circumstances required for interlocutory certification. It therefore denied the motion with respect to exhaustion.

Disposition

The Court denied the defendants’ motion for a certificate of appealability in its entirety and directed the Clerk to terminate the motion. The parties were directed to appear by telephone for an initial pretrial conference on January 21, 2021. This order addressed whether the earlier rulings could be immediately appealed; it did not decide the underlying ERISA claims on their merits.