Haley v. Teachers Investment and Annuity Association

Background

Melissa Haley, an employee of Washington University and a participant in its retirement savings plan, sued Teachers Insurance and Annuity Association of America (TIAA) under section 406 of the Employee Retirement Income Security Act (ERISA). She alleged that TIAA’s retirement-loan program required participants to transfer collateral equal to 110% of their loan balances into TIAA’s general account. TIAA then received loan repayments with interest, while participants did not receive all of the interest earned on the collateral.

Haley sought to represent participants from many ERISA plans. The court had previously certified a Rule 23(b)(3) class, but the Second Circuit vacated that decision and remanded for consideration of ERISA section 408 defenses in deciding whether common issues predominated over individual ones. On remand, Haley again sought certification of substantially the same class.

Court’s analysis

For a Rule 23(b)(3) class, common legal or factual questions must predominate over questions affecting only individual members. The court held that TIAA’s adequate-consideration defense under ERISA section 408(b)(17) would require individualized inquiries. That defense depends on whether each plan received at least fair market value and whether the relevant fiduciary acted in good faith. The court explained that these inquiries would vary based on the plans, loan structures, amounts, dates, interest rates, locations, and evidence concerning particular transactions.

The court also noted evidence that some TIAA loans involved collateral transfers while others did not, and that the record contained only Haley’s plan documents rather than documents showing that the thousands of other plans had materially similar terms. The court rejected Haley’s proposed use of average interest and crediting rates because averages would not establish what any particular class member paid or received. In the court’s view, the individual liability issues raised by the adequate-consideration defense outweighed the common issues.

The court did not decide whether TIAA’s separate defense under ERISA section 408(b)(1)—covering loans made under specific plan provisions, at a reasonable interest rate, and with adequate security—would also defeat predominance, because the adequate-consideration defense was sufficient by itself.

Ruling

Judge J. Paul Oetken denied Plaintiff’s motion for class certification. The court also denied Haley’s requests for permission to seek subclasses and for additional discovery. It concluded that Haley had not shown that subclasses would resolve the predominance problems and had already had an opportunity to develop those issues. The opinion addressed class treatment and did not decide the underlying ERISA liability claims on the merits.