Alert June 27, 2012

Recent ERISA Decision

Failure to Exhaust Appeals Defeats Adequacy of Representation Requirement

In Tolbert v. RBC Capital Markets, Corp., 2012 U.S. Dist. LEXIS 42974 (S.D. Tex. Mar. 28, 2012), the court declined to certify a putative class action under the Employee Retirement Income Security Act of 1974 (ERISA), finding that the plaintiff was not an adequate class representative under Rule 23(a)(4) because her claim was subject to a non-common ground for dismissal for failure to exhaust administrative remedies. The plaintiff had alleged that RBC improperly “forfeited” the amounts that RBC contributed to the Wealth Accumulation Plan (“WAP”) upon her termination and sought recovery of the WAP benefits allegedly accrued and vested to the participants.

In the motion for class certification, the plaintiff claimed the case turned on the single common issue of whether the WAP was a valid “top hat” plan exempt from certain ERISA requirements. The court refused to certify a class on that basis because that was not an “issue that is central to the validity of each one of the class member’s claims” as required by Wal-Mart. Applying Wal-Mart’s “rigorous analysis” requirement, the court found that the plaintiff’s failure to exhaust the WAP’s appeal process – which was an issue that was central to the validity of her claim but not common to the class – rendered her claim subject to dismissal. Given that prospect, the court found that the plaintiff could not fairly and adequately protect the interests of a class of individuals whose claims might not be subject to that same defense.