CHRISTINE BAUER-RAMAZANI and CAROLYN B. DUFFY, on behalf of themselves and all others similarly situated, Plaintiffs,
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA-COLLEGE RETIREMENT AND EQUITIES FUND, COLLEGE RETIREMENT AND EQUITIES FUND, TIAA-CREF INVESTMENT MANAGEMENT, LLC, TEACHERS ADVISORS, INC., TIAA-CREF INDIVIDUAL & INSTITUTIONAL SERVICES, LLC, and TEACHERS' INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, Defendants.
MEMORANDUM AND ORDER (Doc. 204)
J. GARVAN MURTHA, District Judge.
Plaintiffs Christine Bauer-Ramazani and Carolyn Duffy (collectively, "Plaintiffs") move for class certification under Federal Rule of Civil Procedure 23. (Doc. 204.) Defendants Teachers Insurance and Annuity Association of America-College Retirement and Equities Fund, College Retirement and Equities Fund, TIAA-CREF Individual & Institutional Services, LLC, TIAA-CREF Investment Management, LLC, Teachers Advisors, Inc., and Teachers' Insurance and Annuity Association of America (collectively, "Defendants" or "TIAA-CREF") oppose the motion. (Doc. 213.) Plaintiffs filed a reply in support of their motion, including a voluminous statement of facts. (Docs. 224, 224-2, 224-3.) The inclusion of the statement of facts spawned a motion to strike by Defendants (Doc. 231) which the Court denied, instead allowing Defendants to address these facts in a sur-reply, Dkt. Entry No. 255 (text only order). Defendants' sur-reply was filed, and the motion for class certification fully briefed, on March 29, 2013. The Court held a hearing on April 24, 2013, at which the Court heard argument on the class certification motion, among other pending motions. See Dkt. Entry No. 294 (minute entry).
Plaintiffs assert, in a five page motion,  they meet the requirements of Rule 23(a) and 23(b)(1) and (b)(3). (Doc. 204.) Their proposed class definition is:
All persons, including all persons' as defined by 29 U.S.C. § 1002(9), requesting a transfer or distribution of mutual fund or money market accounts covered by ERISA whose accounts TIAA-CREF invested, kept invested, benefitted from, or otherwise used for purposes other than the benefit of the account holder, for a period of time other than that permitted by the fund prospectus.
(Doc. 205 § 30.)
Defendants argue generally Plaintiffs have not met their burden of affirmatively demonstrating the requirements for class certification and have offered a flawed class definition. (Doc. 213.) Specifically, Defendants challenge Plaintiffs' showing on every requirement except numerosity.
This case was originally filed by Norman Walker in August 2009. (Doc. 1.) He alleged Teachers Insurance and Annuity Association of America-College Retirement and Equities Fund wrongfully "kep[t] customer accounts open for days or weeks after receiving instructions to close them, and retain[ed] all investment income earned in the interim for itself." (Doc. 1 at 1.) In September 2011, Mr. Walker was denied class certification and Defendants were granted summary judgment. See Dkt. Entry No. 108; Doc. 186. Walker's ERISA claims were dismissed because Defendants demonstrated he received what the prospectus governing his accounts required: payment within seven days from the business day chosen for his transfer to take effect. (Doc. 186 at 3 (citing Doc. 61-4 at 51, 62).)
The current Plaintiffs and proposed class representatives, Christine Bauer-Ramazani and Carolyn Duffy, have since been granted intervention. See Doc. 101; Dkt. Entry No. 202. The Consolidated Fourth Amended Complaint, the current complaint in this proposed class action, alleges Defendants engaged in prohibited transactions and wrongfully used customer funds in violation of their fiduciary duties of loyalty and impartiality by keeping the funds invested for purposes other than the customers' benefit after a transfer or redemption request and subsequently compensating some, but not all, customers for delayed payment. (Doc. 205.) There are three separate ERISA counts in the complaint: (1) breach of fiduciary duty of loyalty; (2) breach of fiduciary duty of impartiality; and (3) prohibited transactions. Id . §§ 1, 41-55. Plaintiffs seek, on behalf of the proposed class, compensatory damages and equitable relief, including disgorgement, under ERISA section 502(a), and attorney's fees. Id. at 13-14.
Both Bauer-Ramazani and Duffy are St. Michael's College (St. Michael's) professors and were account owners of TIAA-CREF retirement accounts until 2007, during the time the St. Michael's retirement plan placed retirement assets of plan participants with TIAA-CREF. In 2006, St. Michael's, as administrator of the plan, directed TIAA-CREF to transfer plan participants' retirement accounts to another mutual fund platform, Milliman USA. TIAA-CREF refused, claiming the College had no authority to direct it to transfer the accounts because they were subject to individual contracts between TIAA-CREF and the participants. The plan obtained and forwarded to TIAA-CREF the individual signatures of over 750 College employees to authorize the transfer. The accounts were to be valued as of May 1, 2007. The prospectus states transfers "are effective at the end of the business day we receive your request and all required documentation, " or a client could "choose to have [a] transfer... take effect at the end of any future business day." (Doc. 61-4 at 51.)
Defendants received Duffy's transfer authorization prior to May 1. (Doc. 204 at 2 n.1.) Duffy's account was transferred on May 9, 2007, and the check represented the value of her account as of May 1, though the account value had increased by more than $1, 000.00 in the interim. She alleges the funds in her account remained invested between May 1 and May 9. TIAA-CREF states it paid Duffy "delayed payment interest" in connection with the transfer of her account to Milliman. (Doc. 213-2 at 2-3.)
Defendants received Bauer-Ramazani's transfer authorization on May 17. (Doc. 204 at 2.) Bauer-Ramazani's account was transferred on May 21, 2007, and the check represented the value of her account as of May 1 though the account value had increased "by thousands of dollars" in the interim. (Doc. 205 § 22.) She alleges the funds in her account remained invested between May 1 and May 21. TIAA-CREF paid Plaintiff Bauer-Ramazani "delayed payment interest" to "provide compensation for the delays [she] experienced." (Doc. 138-3 at 2.)
Plaintiffs claim "TIAA-CREF must disgorge the investment gains generated by [their] funds after [they] requested them back, or pay other compensation for the use of such funds." (Doc. 204 at 3.)
III. Legal Standard for Class Certification and Analysis
It is well-settled that class action lawsuits are suitable for vindicating statutory rights. In re Amer. Exp. Merchants' Litig. , 667 F.3d 204, 214 (2d Cir. 2012). "[T]he policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights." Id . (quoting Amchem Prods., Inc. v. Windsor , 521 U.S. 591, 617 (1997)). Class actions are governed by Federal Rule of Civil Procedure Rule 23.
Rule 23(a), "Prerequisites, " provides, in relevant part:
One or more members of a class may sue or be sued as representative parties on behalf of all members only if:
(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). If Plaintiffs satisfy the requirements of Rule 23(a), they must also establish that their proposed class action is one of the three types of class action suits identified in Rule 23(b). A proposed class action containing claims for individualized monetary damages, as Plaintiffs seek here, see Doc. 204 at 3 ("TIAA-CREF must disgorge the investment gains generated by her funds after she requested them back"), must be analyzed under Rule 23(b)(3). Nationwide Life Ins. Co. v. Haddock , 460 F.Appx. 26, (2d Cir. 2012); Wal-Mart Stores, Inc. v. Dukes , 131 S.Ct. 2541, 2558 (2011). Under Rule 23(c)(2), classes certified under Rule 23(b)(3) are entitled to notice to the class members and the ...