Archives: District of South Carolina

Court Denies Attempt to Recast ERISA Class Action as a Derivative Claim

View David Wright's Complete Bio at robinsonbradshaw.comAccording to the Company website, “Piggly Wiggly has been bringing home the bacon for millions of American families for over 100 years.” But a putative class of former employees of Piggly Wiggly filed a class action complaint in the District of South Carolina, asserting various claims under ERISA pertaining to the Company’s employee stock ownership plan. The claims include allegations pertaining to excessive compensation, “gross mismanagement,” concealing of financial losses from participants, and various “insider dealings.” Spires v. Schools, No. 2:16-616 (D.S.C. 2016). The scheme culminated, according to Plaintiffs, in the sale of substantially all assets to C&W Wholesale Grocers, Inc. The case was filed under Rule 23 as a class action, not under Rule 23.1 as a derivative action.

Eighteen months into the case, and after the district court had trimmed the complaint, Plaintiffs attempted to switch gears, moving to proceed without class certification and instead as a derivative action under ERISA Section 502(a). But Judge Gergel would have none of it in a decision rendered on November 17. After first observing that a benefit plan may not have standing under ERISA to assert claims for a breach of fiduciary duty, the Court held that “allowing a class action to proceed as a derivative action would unfairly shift to Defendants the burden of proving or disproving the adequacy of the named Plaintiffs as representatives” of the class. The Court observed that the “complaint has nearly one hundred references to ‘class,’ ‘class members’ and the ‘class period.’” According to the Court, plaintiffs did not “even attempt to show cause why, having chosen to file a class action, they nonetheless should be excused from ‘jump[ing] through the procedural hoops’ of prosecuting a class action.”

The case serves as a good reminder of the “stickiness” of filing under Rule 23. After you do that, it isn’t so easy to extricate yourself.

Court Refuses to Certify Class in Product Defect Case

View David Wright's Complete Bio at robinsonbradshaw.comIn February 2014, the Panel on Multidistrict Litigation transferred a series of cases against Pella Corporation, a window manufacturer, to the District of South Carolina. Judge Norton dismissed most of the claims, but preserved claims alleging breach of express warranty with respect to Pella’s failure to repair or replace windows under its limited warranty. The windows, so plaintiffs alleged, leaked, and the plaintiffs sought certification of a class consisting of owners of structures in New York from 1997 through 2007 who had made a claim under Pella’s Limited Warranty. The “common issue” upon which Plaintiffs founded their class certification contentions was whether the windows were defective.

The court first grappled with whether changes in the design of the windows during the class period destroyed commonality under Rule 23(a). The issue there, as Judge Norton saw it, was whether “the design variations had any impact on the windows’ vulnerability to water intrusion.” Without deciding this issue, the court assumed that the design changes did not, and focused on another problem created for class certification – New York law requires that a warranty “actually be breached,” not simply that a product exhibit a defect. Pella, the court reasoned, could not be said to have breached the terms of its own warranty unless it received notice of a defect. And the multiple defects asserted compounded this issue, leading the trial judge to observe that “[w]hatever the outcome of plaintiffs’ proposed class trial, the court will need to make individual determinations as to the underlying cause of each class member’s warranty claim.” Without definitively resolving the commonality issue, the Court determined that plaintiffs had problems showing predominance under Rule 23(b)(3). The court acknowledged that it was not uncommon to certify product liability claims, but distinguished the case before it – which principally involved a challenge to the failure to repair and replace the windows, rather than the plaintiffs’ initial purchase of a defective window. Relying on Fourth Circuit precedent, the court observed that “[t]here is no question that individual inquiries into causation and affirmative defenses may preclude class certification.” (citing to Lienhart v. Dryvit Sys. Inc., and Broussard v. Meineke Discount Muffler Shops, Inc.).

This case is one of several where plaintiffs – recognizing potential commonality problems – have moved for issue certification under Rule 23(c)(4), a subject we have addressed in earlier posts here. Judge Norton noted that “the emerging majority,” including two district court decisions in the Fourth Circuit, have “found that a court ‘may use Rule 23(c)(4) to certify a class as to an issue regardless of whether the claim as a whole satisfies the predominance test in Rule 23(b)(3).’” Although Judge Norton seemed amenable to avoiding the predominance problem through issue certification, he articulated – like many courts – that issue certification would not make a Rule 23 proceeding “superior,” citing Farrar (which we previously covered here). In the end, the court’s decision was founded on this point, concluding that “class certification – even on the limited issue of whether the windows contained a defect – is not superior to other methods of adjudication.”

Court Certifies State Wage and Hour Claims Alongside FLSA Collective Claims

View David Wright's Complete Bio at We have reported recently in this space on the certification of state wage and hour claims. Judge Gergel recently continued with this trend, certifying a class of Jamaican workers at the Kiawah Island Golf Resort who contend they weren’t paid enough by the Resort. See Moodie v. Kiawah Island Inn Co., LLC, No. 2:15-cv-1097 (D.S.C. Aug. 24, 2015). Defendants argued that the differences in class members were such that the court would have to certify six classes, but the Court rejected that notion, saying the argument stemmed from a “novel proposition that Plaintiffs must propose [a] separate class for every claim in the complaint.” Immediately following that, Judge Gergel gave a nod to “issue certification” in dicta, citing the language of Rule 23(c)(4) without wrestling with the difficulties looming in a surface analysis of that question, something which we have dealt with before here. The Court found that the legality of deductions made from the wages of the putative class was “central to the validity of each one of the claims,” and rejected the defense argument that a conflict arose by virtue of the representation of former employees by current employees. Citing Gunnells v. Healthplan Servs., Inc., Judge Gergel also rejected the argument that difficulties in determining damages resulted in a predominance problem for the class. In so holding, the Court did not grapple with the numerous cases post-Gunnells, including Comcast and its progeny that illustrate how individual damages issues can threaten the viability of class relief. In certifying the class, the Court paid particular attention to the difficulties associated with some 500 workers filing individual claims, noting that “class members are residents of a foreign country, likely to have limited financial resources, unfamiliar with the U.S. Court system, and have relatively small claims.”

A Window on Timeliness Issues

View Adam Doerr's Complete Bio at RBH.comLate last year, we explained the tricky statute of limitations issues that can arise regarding “cross-jurisdictional class action tolling.” The issue arose in some of the many Pella window cases pending before Judge Norton in the District of South Carolina. Those cases have now raised several more interesting timeliness issues—when plaintiffs can consolidate pending cases to avoid dismissal on timeliness grounds, and when a failure to move for certification waives class claims.

In October of last year, the Judicial Panel on Multidistrict Litigation (JPML) transferred the Saltzman/Eubank case against Pella to Judge Norton. The Saltzman/Eubank case was originally filed in Illinois in 2006. The other Pella windows cases before Judge Norton were filed much more recently, and many of the plaintiffs face the kind of statute of limitations issues we discussed in our earlier post.

After the Saltzman/Eubank case was transferred to South Carolina, lead counsel in the multi-district litigation (MDL) developed a strategy to use the 2006 complaint in Saltzman/Eubank to avoid the statute of limitations issues in the later-filed cases. Plaintiffs argued that, in effect, the later cases were really just a continuation of the Saltzman/Eubank litigation. They attempted to consolidate with the later-filed cases, and they moved to file an amended complaint that would become the operative complaint for all of the cases in the MDL.

Plaintiffs’ argument was that the named plaintiffs in the later-filed cases were unnamed members of the class in Saltzman/Eubank. Thus, if they could consolidate all of the cases and file an amended complaint, they could argue that the later-filed claims related back to the original 2006 complaint. This would save claims in the later cases from being dismissed as untimely.

In his order, Judge Norton began his analysis with the motion to consolidate. He held that, even if he granted the motion for consolidation, it would not produce the result the plaintiffs wanted. Because consolidation under Rule 42(a) does not merge all the suits into a single action, it would not let plaintiffs file a complaint in the later-filed cases that would relate back to the 2006 complaint in Saltzman/Eubank. The Court also noted that it was unnecessary to consolidate the cases because they were already consolidated when they were transferred to the Court by the JPML.

Next, the Court turned to the motion to file an amended complaint. The Plaintiffs hoped to persuade the Court that all of the MDL plaintiffs were unnamed class members in the Saltzman/Eubank, thereby avoiding timeliness issues. The Court held that the plaintiffs in the later-filed actions were not unnamed class members in Saltzman/Eubank. Although the later-filed claims were part of the original complaint in Saltzman/Eubank, those claims were never certified. Instead, they were apparently abandoned during settlement negotiations in 2008. Citing authority from the 11th Circuit and other federal district courts, Judge Norton held that the failure to move for certification on these claims in Saltzman/Eubank resulted in a waiver. The Court also noted that “[t]o accept plaintiffs’ argument would essentially place Pella in legal limbo for five years, leaving it to speculate whether abandoned claims in a settled case would eventually be resurrected.”

The Fourth Circuit may have the opportunity to address some of these issues. This April, Judge Norton entered an order in Alexander v. Pella Corp, No. 2:14-mn-00001, 2:14-cv-540 (D.S.C. April 21, 2015). As in the case discussed in our earlier post, the Court rejected the argument that their claims were tolled during the pendency of Saltzman/Eubank. The plaintiffs moved the court to reconsider, arguing that their claims related back to the original 2006 complaint, as outlined above. The Court denied the motion to reconsider, and Plaintiffs have now filed an appeal to the Fourth Circuit.

Settlement Approvals: Like Selling a Boat?

View David Wright's Complete Bio at RBH.comThere is a well-known quip about the two best days for boat owners: the day when the owner buys it and the day when he sells it. We’ve previously referred to case law emphasizing the need for more active supervision of settlements, particularly with respect to commonality issues, but the fact remains that judges are often happy to have a class action in their court go away. Indeed, when plaintiffs and defendants unite in their application, and the objectors are few and subdued, settlements most often go through. We highlight Judge Norton’s decision preliminarily approving a settlement in Case v. Plantation Title Co., No. 9:12-CV-2518 (D.S.C. March 5, 2015), not because it is groundbreaking, but because it falls into the mainstream of such approvals. The case was vigorously litigated (there are over 286 docket entries), and it had been filed in 2012. So it doesn’t surprise us that Judge Norton discerned a “strong judicial policy in favor of settlements, particularly in the class action context,” nor that he cited a 25-year-old decision in accord with that sentiment. If you need a quote to support settlement, consider this one from the opinion: “[S]ettlement classes have proved to be quite useful in resolving major class action disputes. While their use may still be controversial, most courts have recognized their utility and authorized the parties to seek to compromise their differences, including class action issues, through this means.” And best of luck in selling your boat.