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Wood v. Prudential Retirement Insurance and Annuity Co.

United States District Court, D. Connecticut

August 4, 2017

LEONARD WOOD II and MAYA SHAW, on behalf of themselves and all others similarly situated, Plaintiffs,



         I. Introduction

         The Plaintiff, Maya Shaw, individually and on behalf of all other persons similarly situated, brings this action against Defendant Prudential Retirement Insurance and Annuity Company ("PRIAC"), alleging violations of the Employee Retirement Income Security Act of 1973 ("ERISA"), Sections 404 and 406, 19 U.S.C. §§ 1104, 1106. Currently pending before the Court is Plaintiff's Motion for Class Certification [Dkt. No. 67]. Plaintiff seeks certification of the following class:

All ERISA-covered employee benefit plans whose plan assets were invested in Prudential Retirement Insurance and Annuity Company's Guaranteed Income Fund ("GIF") and/or Principal Preservation Separate Account ("PPSA") on or after December 3, 2009.

For the reasons that follow, Plaintiff's Motion is DENIED.

         II. Background

         PRIAC offers investment options within their Group Annuity Contracts called the Guaranteed Income Fund (“GIF”) and the Principal Preservation Separate Account (“PPSA”). [2/15/2017 Grove Decl. ¶ 5]. The principal distinction between GIF and PPSA is that GIF funds are held in PRIAC's general account and PPSA funds are held in a separate account for investors alone. Id. Plaintiff's 401(k) plan, the EXCO Resources, Inc. (“EXCO”) 401(k), elected to include only the GIF as an investment option. Id.

         The GIF and PPSA plans guarantee participants' principal and accumulated interest at crediting rates that are declared in advance for six-month periods, and are not subject to change within those six-month periods. [Tigges Decl. ¶ 11]. PRIAC's Rate Setting Board meets at least four times per year to set crediting rates for newly funded plans, and twice a year to reset the crediting rates for existing plans. [2/15/2017 Grove Decl. ¶ 4]. While Plaintiff has offered evidence that “most pools” used the same crediting rate, Defendants counter that plans invested in GIF and PPSA benefit from a “wide range” of crediting rates, and that PRIAC provides distinct rate changes to at least 20% of its rate pools. [See, e.g., Exh. O to Pl. Mot. at PRUDENTIAL0001436; 2/15/2017 Grove Decl. ¶ 18; Exh. 9 to Boyle Decl.]. The crediting rates are subject to a contractually mandated minimum interest rate, which for over 90% of the plans within Plaintiff's proposed class is 1.5 percent. [Kindall Decl. ¶¶ 3-5; Tigges Decl. ¶ 11; 2/15/2017 Grove Decl. ¶ 47]. The remaining plans have minimum rates of up to 3 percent or are set based on a National Association of Insurance Commissioners formula. [2/15/2017 Grove Decl. ¶ 47].

         Since 2005, PRIAC has used eight different contract forms for new GIF and PPSA accounts. Id. ¶ 48. However, older forms remain in place for funds established prior to 2005. Id. ¶ 49. These forms have differing language regarding transfer restrictions. Id. GIF and PPSA contract terms also differ based on whether customers participate in full service plans or in investment only plans. Id.

         Plaintiffs allege that Defendant sets the crediting rate “well below its internal rate of return . . . on the invested capital it holds” through the GIF and PPSA and therefore “guarantees a substantial profit for itself.” [Compl. ¶ 4]. Defendant calculates, but does not disclose to its retirement plan clients and their participants the difference between the crediting rate and its internal rate of return. [Id.; Exh. O to Pl. Mot. at PRUDENTIAL0001436]. Plaintiffs therefore allege that Defendant “collects tens of millions of dollars annually in undisclosed compensation from the retirement plans” in violation of its fiduciary duties under Section 502 of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132. Id.

         III. Legal Standard

         In ruling on a motion for class certification, the Court generally accepts the factual allegations of the Complaint as true. Richards v. FleetBoston Fin. Corp., 235 F.R.D. 165, 168 (D. Conn. 2006) (citing Shelter Realty Corp. v. Allied Maintenance Corp., 574 F.2d 656, 661 n.15 (2d Cir. 1978)). However, it may also consider evidence that a plaintiff has submitted in support of her motion for class certification, and evidence that a defendant has submitted in opposition to the motion for class certification. Id. While a judge must resolve factual disputes relevant to each Rule 23 requirement, “a district judge should not assess any aspect of the merits unrelated to a Rule 23 requirement.” In re Initial Pub. Offerings Sec. Litig. (“In re IPO”), 471 F.3d 24, 41 (2d Cir. 2006), decision clarified on denial of reh'g sub nom., In re IPO, 483 F.3d 70 (2d Cir. 2007)

         Class certification is governed by Federal Rule of Civil Procedure 23. To be certified, the class must satisfy all four prerequisites set forth in Rule 23(a), and must meet at least one of the factors set forth in Rule 23(b). Brown v. Kelly, 609 F.3d 467, 476 (2d Cir. 2010). A “district court may not grant class certification without making ...

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