Khan v. Board of Directors of Pentegra Defined Contribution Plan

Background

Imran Khan, Joan Bullock, and Pamela Joy Wood sought certification of a class in their claims under the Employee Retirement Income Security Act (ERISA). They alleged that the defendants breached fiduciary duties, caused the Plan to pay unreasonable and excessive recordkeeping and administrative fees, engaged in prohibited transactions, and breached a duty to monitor fiduciaries. The plaintiffs withdrew their third claim for relief in a footnote to their motion and were directed to file an order and stipulation formally withdrawing it.

The defendants were the Board of Directors of Pentegra Defined Contribution Plan, Pentegra Services Inc., several named individuals, and John Does 1-20. The plaintiffs sought certification under Federal Rule of Civil Procedure 23(b)(1), which permits class treatment when separate lawsuits could produce inconsistent standards or impair the interests of other class members.

Rule 23 Requirements

The court found that the proposed class satisfied Rule 23(a)’s requirements:

- Numerosity: The plaintiffs alleged that the Plan had more than 26,000 participants at year-end 2014 and similar numbers during the class period. The court found that a class potentially numbering in the thousands met the size requirement. - Commonality: The court concluded that the claims presented common questions, including whether the defendants were fiduciaries, whether they breached their duties by causing the Plan to pay excessive fees or by causing a prohibited transaction, whether the Plan suffered losses, and how those losses should be calculated. The court emphasized that the claims were brought on behalf of a single Plan and concerned a single services agreement between the Plan and Pentegra Services Inc., rather than hundreds of separate plans. - Typicality: The named plaintiffs and proposed class members participated in the same Plan, were subject to the same alleged conduct concerning the Plan’s recordkeeping services, asserted the same ERISA claims, and relied on the same legal arguments. The court stated that any fee differences resulting from participating employers’ arrangements were minor variations that did not defeat typicality. - Adequacy: The court found that the named plaintiffs sought the same relief as the class, shared the class’s interest in addressing alleged Plan mismanagement, and had no conflicting interests. It also found that their counsel was qualified. The court rejected the defendants’ argument that the plaintiffs were inadequate because they lacked detailed personal knowledge, noting their testimony that they understood the general nature of the claims and their responsibilities, reviewed documents, participated in discovery and depositions, monitored the case, and communicated with counsel.

Rule 23(b)(1)

The court held that certification was proper under Rule 23(b)(1)(A) or Rule 23(b)(1)(B). Under Rule 23(b)(1)(A), separate cases could create inconsistent decisions about the defendants’ duties toward Plan participants. Under Rule 23(b)(1)(B), decisions about the defendants’ alleged fiduciary breaches could affect other participants’ interests, and any monetary recovery would be paid to the Plan rather than directly to individual plaintiffs. The court rejected the defendants’ arguments that differences among employer arrangements, fees, liability, causation, and damages made certification improper, because the claims concerned the single Plan and were derivative claims on the Plan’s behalf.

Disposition

The court granted the plaintiffs’ motion for class certification. It certified this class: “All participants and beneficiaries of the Pentegra Defined Contribution Plan for Financial Institutions from September 15, 2014 through the date of judgment, excluding Defendants.” The court appointed Schlichter, Bogard & Denton LLP as class counsel and appointed Khan, Bullock, and Wood as class representatives.

The court also granted in part the request to maintain specified declarations and exhibits under seal. It deemed the request concerning other specified exhibits withdrawn and directed the plaintiffs and defendants to file those exhibits publicly by October 6, 2023. The parties were also directed to meet and confer and file an order and stipulation withdrawing the plaintiffs’ third claim for relief. The Clerk was directed to terminate the pending motions.