Court lacked jurisdiction to hear appeal of denial of class certification in fiduciary breach action

A settlement agreement that preserved a plan trustee’s ERISA claims did not represent a final resolution of his claims and, thus, did not allow for the appeal of a decision by a trial court denying class certification, according to the U.S. Court of Appeals in St. Louis (CA-8).

Settlement of fiduciary breach claims

A 401(k) plan retained an insurance company to provide administration and recordkeeping services and to arrange access to investment options for the plan’s participants. The insurance company offered the plan’s trustees a group of investment options from which the trustees selected the options to be offered to participants. However, the insurance company was compensated for servicing plans through revenue sharing arrangements with the mutual funds and separate accounts offered to the plan.

A plan trustee filed a putative class action in 2006, alleging that the insurance company violated ERISA by receiving revenue sharing from the mutual funds offered to the plan and by failing to disclose the receipt of the payments.

A federal trial court denied the trustee’s motion for class certification, and the trustee and insurance company eventually entered into a confidential settlement agreement. However, the agreement, in a provision incorporated into the consent judgment, reserved the trustee’s right to appeal the trial court’s denial of class certification. Further, the agreement allowed the trustee to seek additional recovery in the event an appeals court reversed or vacated the denial of class certification. Specifically, the trustee and the plan were authorized to petition the trial court to be paid out of any future recovery awarded to any class that is certified.

In subsequently appealing the trial court’s denial of class certification, the trustee argued that the confidential agreement was a final judgment, and, therefore, allowed for a live case or controversy. Moreover, he noted that he retained the right to appeal the class certification ruling and asserted a continued interest in the outcome of the litigation (i.e., right to participate in any future recovery by the certified class and to shift costs and attorney’s fees to the class).

Eighth Circuit rejects jurisdiction

The Eighth Circuit initially noted that the insurance company agreed not to challenge the trustee’s arguments for jurisdiction. However, despite the parties’ mutual agreement, the court ruled that it lacked jurisdiction and dismissed the appeal.

The court first explained that, because the settlement agreement allowed for the trustee’s claims to “spring back to life,” his individual claims were not finally resolved. In the Eighth Circuit, the court stressed, there is no final appealable decision unless an appellant’s claims are “unequivocally dismissed with prejudice.” As the confidential agreement and consent judgment permitted the trustee to reserve his independent claims in order to petition the trial court for additional recovery, the trial court’s decision was not final.

Alternatively, the court ruled that, even if the trial court’s decision was final, the trustee’s voluntary dismissal of his individual claims, in the settlement agreement, rendered the case moot.

Source: Ruppert v. Principal Life Insurance Co. (CA-8).

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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