Class Certification in ERISA Litigation: Not So Automatic Anymore

In March 2026, the Fourth Circuit issued a favorable and groundbreaking opinion calling into question the all-too-common practice of district courts “rubber stamping” broad classes of plaintiffs in ERISA lawsuits. That case, Trauernicht v. Genworth,¹ received some attention, but not nearly the attention it deserved. At the end of July, the Ninth Circuit followed suit and addressed similar class certification issues in a similar way in Munoz v. Alorica.² These two decisions are a welcome signal of a possible new way to defeat baseless litigation that is filed simply in the hopes of surviving a motion to dismiss and obtaining a settlement.

The tidal wave of ERISA lawsuits has been driven by plaintiffs’ lawyers, not disaffected participants, and plaintiffs’ lawyers are driven by the dollars available in large class actions. If suits cannot be maintained as broad class actions, the dollars may not be there to attract the interest of the plaintiffs’ lawyers. Hence, the importance of class certification issues.

The Genworth decision provided a robust analysis of the issues, and the Alorica decision echoed key themes from Genworth, reinforcing the viability of defeating motions for class certification. Very briefly, if the points made in Genworth and Alorica were to be the law in all Circuits, the following would be true:

• No fund underperformance cases (or virtually none) could be brought effectively as class actions, severely undermining or even eliminating the incentives for plaintiffs’ lawyers to bring underperformance cases. The only possible exception could be underperformance suits regarding fixed-rate products that consistently underperformed over many years.
• When defined contribution plan administrative fees are asset-based, rather than a flat dollar amount per-participant, many suits could not be brought effectively as class actions, with the same effect on plaintiffs’ lawyers’ incentive to bring cases. This would apply to both fiduciary breach claims and prohibited transaction claims, thus avoiding the Cornell³ problem, under which an allegation that a service provider has been retained at an excessive fee may be enough to survive a motion to dismiss.

I. Class Certification Rules

In order to have a class of plaintiffs certified, Federal Rule of Civil Procedure 23(a) (“Rule 23(a)”) and at least one prong of Federal Rule of Civil Procedure 23(b) (“Rule 23(b)”) must be satisfied. Very generally, Rule 23(a) requires that there be a large class with common complaints, so that the named plaintiffs can be seen as appropriate representatives of the class. More specifically, Rule 23(a) has four requirements: (1) the class is so numerous that joinder of all members is impracticable (“numerosity”), (2) “commonality” of the issues among the entire class, (3) the named plaintiffs’ claims must be typical of the claims of the class (“typicality”), and (4) the named plaintiffs must be situated to fairly and adequately protect the entire class (“adequacy”).

Rule 23(b) provides three options. First, to fit under Rule 23(b)(1), there has to be a common issue (or set of issues) that, as a practical matter, must be resolved uniformly for the whole class and the defendant. Second, to fit under Rule 23(b)(2), the complaint must seek to force the defendant to perform an act — such as eliminating an investment option — that by its nature must be ruled on in one suit.

Third, even if neither of the first two rules are satisfied, under Rule 23(b)(3), a class action may be brought if the court finds (1) that the questions of law or fact common to class members predominate over any questions affecting only individual members (“predominance”), and (2) a class action would be the most efficient way to conduct the litigation. In the case of a Rule 23(b)(3) class, the named plaintiffs must give notice to the entire class, including a notice that members of the class may opt out of the class (such as to bring their own suit). That option to opt out does not apply to Rule 23(b)(1) or (b)(2) cases, where membership in the class is “mandatory.”

II. Genworth Says District Court Failed to Analyze Commonality

A lawsuit was brought as a class action against Genworth for breaching its fiduciary duties by selecting and retaining the BlackRock LifePath Index Funds in its 401(k) plan because those funds were allegedly imprudent, based on a comparison to four other sets of target date funds. Unlike most of the suits alleging that the selection and retention of the BlackRock funds were imprudent, this suit survived the motion to dismiss.⁴ Subsequently, the district court certified a mandatory class made up of all plan participants and beneficiaries who invested in any of the vintages of the BlackRock funds during the class period beginning on August 1, 2016 through the date of the court’s judgment.⁵

In order to satisfy the “commonality” requirement in Rule 23(a)(2), under Supreme Court precedent, all class members must have “suffered the same injury.”⁶ The district court in the Genworth case agreed that that is the law, but held that fiduciary breach claims under ERISA section 502(a)(2) “inherently present issues common to the class because liability arises out of the defendant’s conduct with respect to the plan which does not vary depending on which participant brings the action.”

The Fourth Circuit reversed the district court and very appropriately held that if a fiduciary breach affects different participants differently, they have not suffered the same injury, quoting the Supreme Court as saying that “[the commonality requirement] does not mean merely that [the class members] have all suffered a violation of the same provision of law.”⁷ Accordingly, because the district court skipped over this key requirement — i.e., the district court didn’t address whether every class member suffered the same injury — the Fourth Circuit remanded the case to the district court to rigorously analyze the commonality issue.

A. Different Effects On Different Participants

The Fourth Circuit very appropriately raised questions about the ability to, on remand, certify the putative class because different class members were affected very differently by the alleged breach of fiduciary duty. Depending on the period of time that a participant invested in a particular vintage of the BlackRock target date funds, that vintage could have fared better or worse than one or more of the comparison funds. In other words, even if the BlackRock funds as a whole fared worse than a comparator set of funds during the entire class period, that does not take into account the variation among the different vintages or the variation during different periods of time during the class period. Some class members might have fared well, very well, poorly, very poorly, or about the same as under a comparison fund. In this context, it cannot be said that they all suffered the same injury.

Obviously, if applied in Circuits across the county, this holding alone would render it extremely difficult to maintain underperformance cases as class actions. Under the Fourth Circuit’s opinion, in order to suffer the same injury, different plaintiffs arguably must be in the same underperforming fund (not just the same family of target date funds) for the same period of time, a rule that would create very small classes in many situations. As noted, plan fiduciaries currently facing similar underperformance claims should strongly consider class challenges asserting similar logic.

B. Applying the Logic of Genworth to Excessive Fee Cases

Under Genworth‘s interpretation of Rule 23(a), if administrative fees are charged as a percentage of assets, the Fourth Circuit’s decision could undercut the ability of plaintiffs’ lawyers to bring broad class actions in alleged excessive fee cases, again regardless of whether the suit alleges imprudent fees or a prohibited transaction based on fees. Assume, for example, that a reasonable recordkeeping fee is alleged by the plaintiffs to be $50 per participant, per year in a plan with 1,250 participants, for total fees of $62,500. In reality, however, the plan service provider charges 10 basis points for administrative services, which comes to a total of $100,000 for the plan in a given year when it has $100 million of assets. The plaintiffs bring a class action based on allegedly excessive fees.

The class members “suffer” very different alleged injuries. For Participant A with a $5,000 account, 10 basis points is $5, so the fees charged to Participant A are clearly not excessive (and the participant benefits from being charged as a percentage of assets compared to the allegedly reasonable $50 per participant fee). For Participant B with a $60,000 account, 10 basis points is $60, which would be an alleged injury of $10 (since the $60 fee is $10 higher than $50). For Participant C with a $500,000 account, 10 basis points is $500, which would be an alleged injury of $450 (since they are charged $450 more than $50). In other words, participants with different-sized accounts have very different “injuries,” with some having no injury at all.

Very clearly, under Genworth, a class could not include any participants whose share of fees were less than $50, the alleged “right” amount. Could a class include all participants whose share of fees were more than $50, even though the degree of the injury varies tremendously? The Genworth decision is not entirely clear on this point, but in our view it is best read to say that participants who all have some type of injury, but whose injuries are different, cannot be in a single class: “[A] rigorous analysis of commonality would also have required the court to address whether class members suffered different injuries resulting from their different circumstances arising in the context of a defined contribution plan.”

In the context of the above type of fee case, the above interpretation of Genworth makes complete sense. It does not make sense to group together participants with very different injuries who would have different perspectives on how to resolve the case in a fair way. For example, Participant B might find a resolution that $75 is a fair fee is an adverse result, whereas Participant C might find that resolution very attractive.

Thus, under the Fourth Circuit’s interpretation of the same injury requirement, there would be a number of classes, with different interests, undermining the ability of plaintiffs’ lawyers to bring large class actions effectively. And that is even assuming that plaintiffs’ lawyers could identify the participants in a class with the same injury, which could be very difficult.

The application of Genworth to an excessive fee case is being put to an immediate test in the appeal of a class certification by a district court in the Fourth Circuit in Mullins v. National Rural Electric Cooperative Association, No. 26-1823 (4th Cir. 2026). This case presents an excellent opportunity for the Fourth Circuit to clarify that its ruling in Genworth is not limited to investment underperformance claims.

C. Genworth Also Addresses Rule 23(b)

The Fourth Circuit held that, in the context of a defined contribution plan, fiduciary breach claims seeking damages are “individualized monetary claims,” rather than plan-wide claims, and the Supreme Court has been clear that “individualized monetary claims belong in Rule 23(b)(3),” not Rule 23(b)(1) or (b)(2).⁸ Since each participant may have different interests, it is not appropriate to certify a class without giving different participants the right to opt out and pursue their own claims separately.

Questions have been raised about the effects of this part of the Fourth Circuit decision. For example, how burdensome is it for plaintiffs’ lawyers to provide notices to all class members of the right to opt out, taking into account the court’s discretion to assign certain tasks to the defendant? If some potential class members opt out, how troublesome is that for the plaintiffs’ lawyers? Could they face competing class actions brought by other firms on behalf of those opting out? Could those opting out object to settlements, including the fees paid to the plaintiffs’ lawyers? Initial indications are that these additional burdens would be material for plaintiffs’ lawyers in deciding whether to bring class actions, creating hesitancy for plaintiffs’ lawyers to launch “why not sue” lawsuits regardless of merit.

Others have asked if defendants would be concerned about the possibility of multiple lawsuits from multiple potential classes. That is certainly not ideal, but defendants are far less worried about smaller lawsuits with lower dollar amounts at stake, due to the lack of incentive for plaintiffs’ lawyers to bring such suits.

Overall, it appears that the application of Rule 23(b)(3) with notice and the ability for class members to opt out, instead of Rule 23(b)(1) with no ability to opt out, is a favorable development for plan sponsors.

Interestingly, the Fourth Circuit did not address whether the class in Genworth could satisfy the predominance requirement in Rule 23(b)(3), which could be difficult in light of the court’s analysis of the different interests of the different participants under Rule 23(a).

III. Alorica Says District Court Failed to Analyze Typicality and Adequacy

In October 2022, a lawsuit was brought against Alorica alleging imprudent investments and excessive recordkeeping fees in its 401(k) Retirement Plan. This suit also survived the motion to dismiss, and the district court certified a class including all plan participants over a specified period. On July 29, 2026, the Ninth Circuit vacated the District Court’s certification of the class, directing the district court to reexamine the class issues more rigorously.

Unlike in Genworth, in the Alorica case, the Ninth Circuit did not address “commonality,” but used a very similar analysis in addressing the Rule 23(a) requirements of “typicality” and “adequacy.” The Ninth Circuit did not address Rule 23(b).

On typicality, the Ninth Circuit held that the district court did not sufficiently analyze typicality with respect to the plaintiffs’ claim of imprudent investment options. The Ninth Circuit explained that the district court did not address whether the investment funds in which the named plaintiffs invested were typical in relevant respects to all the funds being challenged. In other words, if the investment fees or performance of the different funds varied materially, the named plaintiffs’ claims may not be typical of the claims that other participants could have. Although the court used typicality instead of commonality, this analysis is similar to Genworth — a court must determine if all the potential plaintiffs were affected similarly. Since fund performance can vary materially over different periods and investment fees can also vary from fund to fund, concluding that all participants were affected similarly can be hard to establish, creating a material obstacle to class certification.

On adequacy, the Ninth Circuit held that the District Court did not sufficiently analyze “adequacy” regarding the excessive recordkeeping fees element of the suit. The Ninth Circuit stated that the plaintiffs’ theory regarding the proper level of fees, especially their purported loss model, would have harmed some participants, thus creating internal conflicts within the class and undermining the named plaintiffs’ ability to adequately represent the entire class. Genworth‘s analysis only related to underperformance, not recordkeeping fees, but as discussed above, Genworth‘s logic applies fully to excessive asset-based recordkeeping fees. As noted, Genworth relied on a lack of “commonality,” but an “adequacy” failure is another way to get to the same result.

In cases where recordkeeping fees are charged as a percentage of assets, as noted, plaintiffs often allege that the plan should have charged a reasonable flat per-participant fee, which would harm participants with low account balances and help participants with large balances, thus creating a clear conflict within the class. This conflict can make it impossible to adequately represent an entire class with members who are differently affected.

IV. Other Courts Often Certify Classes Using Broad Language About Common Issues, Without Analyzing the Issues Rigorously

Courts often find that broad, overarching questions of fact or law are sufficient to satisfy Rule 23(a) without much analysis.⁹ Sometimes, in fact, the parties will agree to stipulate that a proposed class satisfies Rule 23(a), or the defendants will not bring a challenge under Rule 23(a).¹⁰

But it is important to note that there have been other decisions like Genworth and Alorica, though somehow those decisions did not generate greater attention to this set of issues. For example, the Seventh Circuit found that a district court had improperly certified a class in an excessive fee/underperformance case, using reasoning similar to Genworth and Alorica in Spano v. The Boeing Co., 633 F.3d 574 (7th Cir. 2011), relying on adequacy. The court found that the “adequacy” requirement was not met with respect to the underperformance claim. The court noted: “It is not enough to say that the named plaintiffs want relief for the plan as a whole, if the class is defined so broadly that some members [such as those who have no complaints about those funds, based on when they first invested and the date they exited] will actually be harmed by that relief.” [emphasis added]¹¹

V. Concluding Thoughts

It is too early to know how other excessive fee and imprudent investment cases will be affected by the decisions in Genworth and Alorica, but these decisions certainly present an opportunity for defendants to attempt to hold off the explosion of baseless cases that are being filed.¹² And, as noted above, we are likely to soon have a decision addressing the application of Genworth to an asset-based fee case, by reason of the pending appeal in Mullins v. National Rural Electric Cooperative Association.

Class certification has seemingly been automatic in prior ERISA litigation alleging breach(es) of fiduciary duty. But now the Fourth Circuit and Ninth Circuit have both rejected this automatic mandatory plan-wide class certification, ruling that individual plan participants are impacted differently depending on their investment history. If other courts similarly rule that a more robust analysis is required to certify a class of participants who bought/entered and sold/exited investment funds at different times with different market conditions or are affected differently by excessive fee claims, it is possible that plaintiff firms will view the cost of such additional analysis as too steep to bring so many meritless lawsuits and instead return their focus on the cases where an actual breach of fiduciary duty was likely to have occurred.

As written many times on the Fid Guru Blog (for example, https://encorefiduciary.com/erisa-fiduciary-litigation-in-2025-plaintiff-law-firms-continuefrenetic-pace/), the explosion of meritless cases filed in the last ten years has upended the fiduciary liability insurance landscape, leading to policies with seven-figure or higher self-insured retentions, meaning plan sponsors who have done nothing wrong must pay millions of dollars of their own money defending meritless lawsuits before their insurance policies begin to pay. This high cost of defending unfair litigation has already stifled innovation in retirement plans, with many plan sponsors stating they are afraid of being sued and thus refrain from actions that could potentially benefit participants but raise litigation risks.¹³

Going forward, defense counsels in ERISA imprudent investment cases are likely to use Genworth and Alorica as bases to challenge automatic mandatory plan-wide class certification, arguing that variations in individual participant investment experiences undermine any claim of shared injury sufficient to satisfy Rule 23(a)’s requirements. Although this article highlighted investment underperformance and asset-based fee cases, the rationales underlying both Genworth and Alorica can potentially be applicable in other fiduciary litigation, such as actuarial performance cases, forfeiture cases, tobacco surcharge cases, and voluntary benefits cases. In each of these cases, individuals, or groups of individuals, are impacted differently than on a plan-wide basis, and so a similar analysis of purported injuries to each individual, or groups of individuals, may be required. These rulings by the Fourth and Ninth Circuits could reshape the future of ERISA litigation if other courts follow their lead requiring a comprehensive analysis of such individual experiences before automatically certifying a plan-wide class.