Case News

Fifth Circuit Affirms Class Certification in Chavez v. Plan Benefit Services, Inc.

On July 15, 2024, the Fifth Circuit Court of Appeals affirmed the Western District of Texas’s certification of a class of more than 290,000 participants in more than 3,000 plans that provide employee benefits through the Contractors and Employees Retirement Trust (CERT) and the Contractors Plan Trust (CPT). Defendants Fringe Benefit Group (FBG) and Fringe Insurance Benefits, Inc. (FIBI) operate these two trusts and provide administrative and marketing services to plans that participate in the trusts. Plaintiffs allege that Defendants have violated ERISA by controlling disbursements from the trusts (including payment of their own excessive fees), using this control to collect fees that were not explicitly agreed to by employer and were never disclosed to plan participants, and selecting service providers for the plans that maximized Defendants’ compensation at the expense of participants.

The recent decision in Chavez v. Plan Benefit Services, Inc. upheld the ruling that the case can proceed as an opt-out class under Rule 23(b)(3), finding that common questions predominate over individual issues, although it rejected the previous ruling that the case could proceed as a mandatory class action under Rule 23(b)(1). The court agreed that fiduciary status could be determined on a class-wide basis, dismissing arguments for individualized inquiries, and affirmed the plaintiffs’ standing to represent the entire class. The decision emphasizes that common questions about Defendants’ duties, breaches, causation, and losses are at the heart of the case, affecting all class members similarly.

The case has been remanded for the district court for further proceedings. The decision is here, and more background on the case is here.