Macy’s Stock Fiduciary Breach Suit Certified as Class Action

Responding to Macy’s arguments that the plaintiffs’ misrepresentation claim requires each member of the proposed class to establish that he or she individually relied to his or her detriment on any misrepresentation, and that plaintiffs and each class member are subject to the individual, transaction-by-transaction defense of the Employee Retirement Income Security Act (ERISA) Section 404(c), the court said there will be no need to engage in individualized fact-finding regarding the extent to which individual class members detrimentally relied on any misrepresentations made because, at the merits stage, the relevant factual question with respect to misrepresentations will be whether material misrepresentations were made on a plans-wide basis.  

According to Senior District Judge S. Arthur Spiegel of the U.S. District Court for the Southern District of Ohio, the relevant question is whether defendants breached their fiduciary duties to the plans by allowing for investment in company stock at a time when they knew or had reason to know it was an imprudent investment. The answer to that question is in no way implicated by individual participants’ investment decisions, so the potential applicability of 404(c) to some members of the class is simply not sufficient to defeat the typicality requirement.  

Macy’s also argued that plaintiffs’ attempt at class certification fails under the adequacy prerequisite because plaintiffs’ counsel will be forced to take positions that will advantage some class members over others, and intra-class conflicts preclude certification. However, the court noted that when a line is drawn, some people suffer. “That is simply the nature of the class action beast and is not a compelling reason to find intra-class conflicts precluding certification,” Spiegel wrote, adding that “the Court will make its determination of if and when Defendants breached their fiduciary duties to the Plans based on the evidence in the record and the controlling law, irrespective of the “preferred” or “optimal” breach dates for any given individual.”  

Macy’s did not challenge plaintiffs on the question of numerosity or commonality.  

The court certified a class of all participants in or beneficiaries of the Macy’s, Inc. Profit Sharing 401(k) Investment Plan and the May Department Stores Company Profit Sharing Plan at any time from February 27, 2005, through and including the present, whose accounts included investments in Macy’s stock and were damaged thereby.  

The action, filed in 2007, alleges that the plan’s fiduciaries should have known Macy’s had made a series of financial misrepresentations and omissions when it acquired May Department Stores in August 2005 with the intention of converting the acquired locations into Macy’s stores (see Macy’s Fiduciary Breach Suit Will Stay in Ohio). The suit claims while the fiduciaries continued to let participants hold and acquire Macy’s company stock during this time, company insiders were selling their shares.