The U.S. Court of Appeals for the Fourth Circuit has issued a decision addressing a common issue in ERISA defined-contribution plan litigation: mandatory class certification. According to the Fourth Circuit’s ruling, alleged fiduciary breaches in retirement plans may not result in sufficient uniform harm to justify mandatory class certification under Fed. Rule of Civ. Pro. 23(b)(1). The case is Trauernicht v. Genworth Fin., Inc., No. 24-1880, 2026 WL 667917 (4th Cir. Mar. 10, 2026).
The Fourth Circuit held in its decision that plan participants’ financial losses are inherently individualized. As the Court pointed out, one participant may experience far different losses than another participant, depending on timing, investment choices, account balances, and other factors. This holding gives plan sponsors a new defense against class certification and ultimately may make it more challenging for plaintiffs to obtain mandatory class certification.
Historically, plaintiffs in ERISA litigation have used Rule 23(b)(1) to seek class certification, arguing that separate suits would lead to inconsistent outcomes and harm participants’ ability to protect their interests. However, the Genworth ruling has reinforced the argument that the individualized losses in defined contribution benefit plans weigh against mandatory class treatment under Rule 23(b)(1). This ruling may be particularly relevant in claims based on plan losses from imprudent investment choices or excessive management fees. When participant harm depends largely on personalized handling of each participant’s account, as opposed to a common benefit formula, plaintiffs in these suits may have a much harder time achieving class status.
The structure of defined contribution plans is based on individual accounts for each plan participant, who can contribute different amounts at varying times, choose diverse investments, and, as a result, have different balances and outcomes. For these reasons, participants may suffer significantly different losses, which undermines an argument in favor of mandatory class certification. In contrast, participants in a defined benefit plan share a universal benefit formula that lends itself to a certain uniformity in losses.
Nonetheless, the Fourth Circuit’s decision is unlikely to substantially reduce the incidence of ERISA litigation. However, it may change how plaintiffs approach, plead, and seek class certification in some cases. For instance, plaintiffs could increasingly rely on Rule 23(b)(3) for class certification, which allows opt-out classes in cases involving predominantly common issues.
In response, plan sponsors may be more likely to argue against class certification based on the individualized losses inherent in some plan structures. This strategic shift could affect case outcomes, as certification uncertainty can alter how both sides value an ERISA case.
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