No. 12-3736 _______________________________

UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT

_______________________________ ANTHONY ABBOTT, ERIC FANKHAUSER, LLOYD DEMARTINI,

DENNIS TOMBAUGH, and DAVID KETTERER, Plaintiffs-Appellants,

v.

LOCKHEED MARTIN CORPORATION and LOCKHEED MARTIN INVESTMENT MANAGEMENT COMPANY,

Defendants-Appellees. _______________________________

On Appeal from the United States District Court for the Southern District of Illinois

No. 06-cv-0701-MJR Hon. Michael J. Reagan, Presiding _______________________________

BRIEF OF AMICUS CURIAE AARP

_______________________________

Mary Ellen Signorille Counsel of Record AARP FOUNDATION LITIGATION

Melvin Radowitz

AARP 601 E Street, NW Washington, DC 20049 Telephone (202) 434-2060 Facsimile (202) 434-6424 msignorille@aarp.org

Attorneys for Amicus Curiae AARP

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CIRCUIT RULE 26.1 DISCLOSURE STATEMENT

Appellate Court No: 12-3736

Short Caption: Anthony Abbott, et al. v. Lockheed Martin Corporation, et al.

To enable the judges to determine whether recusal is necessary or appropriate, an attorney for a non-governmental party or amicus curiae, or a private attorney representing a government party, must furnish a disclosure statement providing the following information in compliance with Circuit Rule 26.1 and Fed. R. App. P. 26.1.

The Court prefers that the disclosure statement be filed immediately following docketing; but, the disclosure statement must

be filed within 21 days of docketing or upon the filing of a motion, response, petition, or answer in this court, whichever occurs first. Attorneys are required to file an amended statement to reflect any material changes in the required information. The text of the statement must also be included in front of the table of contents of the party's main brief. Counsel is required to complete the entire statement and to use N/A for any information that is not applicable if this form is used.

[ ] PLEASE CHECK HERE IF ANY INFORMATION ON THIS FORM IS NEW OR

REVISED AND INDICATE WHICH INFORMATION IS NEW OR REVISED.

(1) The full name of every party that the attorney represents in the case (if the party is a corporation, you must provide the corporate disclosure information required by Fed. R. App. P 26.1 by completing item #3):

AARP

(2) The names of all law firms whose partners or associates have appeared for the party in the case (including proceedings in the district court or before an administrative agency) or are expected to appear for the party in this court:

None

(3) If the party or amicus is a corporation:

i) Identify all its parent corporations, if any; and None

ii) list any publicly held company that owns 10% or more of the party’s or amicus’ stock:

None

Attorney's Signature: s/ Mary Ellen Signorille Date: January 18, 2013

Attorney's Printed Name: Mary Ellen Signorille

Please indicate if you are Counsel of Record for the above listed parties pursuant to Circuit Rule 3(d). Yes X No

Address: AARP Foundation Litigation

601 E Street, NW Washington, DC 20049

Phone Number: 202 434-2060 Fax Number: 202 434-6424

E-Mail Address: msignorille@aarp.org rev. 01/08 AK

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TABLE OF CONTENTS Page

Circuit Rule 26.1 Disclosure Statement .............................................................. i Table of Authorities ............................................................................................ iv Interest of Amicus Curiae ....................................................................................1 Argument...............................................................................................................2

I. Because 401(k) Plans Are Now The Predominant Private Vehicles For Providing Retirement Income, It Is Crucial That Individuals Be Able To Protect These Retirement Assets Under ERISA ..................................................................................2

A. It Is Essential To Individuals’ Retirement Security

That The Trillions Of Dollars In 401(k) Plans Are Able To Be Protected .................................................................................2

B. Breach Of Fiduciary Duty Cases Can Be Brought Under § 502(a)(2) On Behalf Of A Plan Even If Not All Plan Participants Are Injured By An Alleged Breach. ...............................................................................................4

C. ERISA § 502(a)(2) Cases Can Be Certified As Class Actions Without Exact Congruence Between Class Representatives And Class Members ..............................................5

D. A Restrictive Interpretation Of Spano’s Class Certification Standards Could Have Negative Consequences For ERISA Enforcement. .........................................7

1. There Is Neither An Explicit Nor De Facto

Requirement That Suits Under ERISA § 502(a)(2) Be Brought As Class Actions ...............................7

2. Permitting Class Or Representative Actions Is

Crucial Because The Employee Benefits Security Administration Has Insufficient Resources To Police The Benefits System ............................................ 11

iii

3. Trillions Of Dollars In 401(k) Plans Could

Effectively Be Left Unregulated If This Court Constricts Class Or Representatives Actions Under ERISA § 502(a)(2) ..................................................... 14

CONCLUSION ................................................................................................... 15 CERTIFICATE OF COMPLIANCE .................................................................. 16 CERTIFICATE OF SERVICE ........................................................................... 17

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TABLE OF AUTHORITIES

Cases Coan v. Kaufman, 457 F.3d 250 (2d Cir. 2006) ............................................................... 10, 11 Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) .................................................................................... 4 General Telephone Co. v. Falcon, 457 U.S. 147 (1982) .................................................................................... 6 George v. Kraft Foods, 2011 U.S. Dist. LEXIS 124210 (N.D. Ill. Oct. 25, 2011) ........................ 10 In re Schering-Plough Corp. ERISA Litig., 420 F.3d 231 (3d Cir. 2005) ....................................................................... 6 Kuper v. Iovenko, 66 F.3d 1447 (6th Cir. 1995)...................................................................... 6 LaRue v. DeWolff, Boberg & Associates, Inc., 552 U.S. 248 (2008) ........................................................................ 2, 4, 7, 8 Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985) ................................................................................ 4, 8 Rogers v. Baxter International, Inc., 521 F.3d 702 (7th Cir. 2008)...................................................................... 4 Spano v. Boeing Co., 633 F.3d 574 (7th Cir. 2011)........................................................ 5, 6, 7, 11 Steinman v. Hicks, 352 F.3d 1101 (7th Cir. 2003)................................................................ 8, 9 Tullis v. UMB, 515 F.3d 673 (6th Cir. 2008).................................................................... 10

v

Statutes § 2(b), 29 U.S.C. § 1001(b) ................................................................................... 4 § 403(a), 29 U.S.C. § 1103(a) ............................................................................... 8 § 409(a), 29 U.S.C. § 1109(a) ................................................................... 4, 7, 8, 9 § 502(a)(2), 29 U.S.C. § 1132(a)(2) .................................... 4, 5, 7, 8, 9, 10, 11, 14 26 U.S.C. § 401(a) ................................................................................................ 8

Other Authorities Craig Copeland, Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2011, EBRI Issue Brief no. 378 (Nov. 2012), http://www.ebri. org/pdf/briefspdf/EBRI_IB_11-2012_No378_RetParticip.pdf .................. 3 EBSA, ERISA ENFORCEMENT, http://www.dol.gov/ebsa/erisa

_enforcement.html ................................................................................... 13 Blake Ellis, 401(k) balances hit record high, CNN Money (Nov. 8, 2012), http://money.cnn.com/2012/11/08/retirement/401k-

balances/index.html ................................................................................... 3 Investment Company Institute, Retirement Assets Total $19.4 Trillion in Third Quarter 2012 (Dec. 19, 2012), http://ici.

org/research/stats/retirement/ret_12_q3 ............................................ 3, 14 Donald Kettl & John DiIulio, Jr., Cutting Government (A Report of the Brookings Institution’s Center for Public Management, 1995). ........................................................................................................ 12 Derek W. Loeser & Benjamin Gould, The Continuing Applicability of Rule 23(b)(1) to ERISA Actions for Breach of Fiduciary Duty, 36 BPR 2024, Sept. 1, 2009 ........................................................... 10 Dana Muir, ERISA and Investment Issues, 65 Ohio St. L.J. 199 (2004) .......... 7 Pension and Welfare Benefits Administration; Strategic Enforcement Plan, 65 Fed. Reg. 18207 (Apr. 6, 2000) ........................... 11 U.S. DEP’T OF LABOR, FY 2012 BUDGET IN BRIEF, FISCAL YEAR 2012, http://www.dol.gov/dol/budget/2012/bib.htm#ebsa ...................... 13

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U.S. DEPARTMENT OF LABOR, EMPLOYEE BENEFITS SECURITY ADMINISTRATION, PRIVATE PENSION PLAN BULLETIN

HISTORICAL TABLES AND GRAPHS (Nov. 2012), available at http://www.dol.gov/ebsa/pdf/historicaltables.pdf. ...................... 2, 3, 14 U.S. Department of Labor, PWBA, Task Force on Assistance to the Public (1992) ...................................................................................... 14 U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-02-232, PENSION AND WELFARE BENEFITS ADMINISTRATION: OPPORTUNITIES EXIST FOR IMPROVING MANAGEMENT OF ENFORCEMENT PROGRAM (March 2002) ............................................................................................ 13 U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-07-22, EMPLOYEE BENEFITS SECURITY ADMINISTRATION: ENFORCEMENT IMPROVEMENTS MADE BUT ADDITIONAL ACTIONS COULD FURTHER ENHANCE PENSION PLAN OVERSIGHT (2007) .................... 12, 13 James. A. Wooten, The Most Glorious Story of Failure in the Business: The Studebaker Packard Corporation and the Origins of ERISA, 49 BUFF. L. REV. 683 (2001) ..................................... 14

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INTEREST OF AMICUS CURIAE1 AARP is a nonpartisan, nonprofit organization dedicated to

representing the needs and interests of persons aged 50 and older, working or

retired, that helps people 50+ have independence, choice and control in ways

that are beneficial and affordable to them and society as a whole.

To foster independence, choice and control, in its efforts to foster the

economic security of individuals as they age, AARP seeks to increase the

availability, security, equity, and adequacy of public and private pension,

health, and other employee benefits. Participants in private, employer-

sponsored employee benefit plans rely on ERISA to protect their rights under

those plans. In particular, ERISA’s protections, and plan participants’

opportunities to enforce the statute’s protections, are of vital concern to

workers of all ages and to retirees, since the quality of workers’ lives in

retirement depends heavily on their eligibility for and the amount of their

retirement and welfare benefits.

Thus, resolution of the issues in this case will have a direct and vital

bearing on AARP members’ and other plan participants’ ability to police and

1 The parties have consented to the filing of this brief. No counsel for a party authored this brief, in whole or in part; and no counsel or party made a monetary contribution intended to fund the preparation or submission of this brief. No party other than amicus or its counsel made a monetary contribution to its preparation or submission.

2

protect their pension plans from mismanagement, to guard the integrity of

the administration of employee benefit plans, and to ensure monies for

retirement benefits which will foster their economic security. In light of the

significance of the issues presented by this case, AARP respectfully submits

this brief amicus curiae.

ARGUMENT

I. Because 401(k) Plans Are Now The Predominant Private Vehicles For Providing Retirement Income, It Is Crucial That Individuals Be Able To Protect These Retirement Assets Under ERISA.

A. It Is Essential To Individuals’ Retirement Security That The

Trillions Of Dollars In 401(k) Plans Are Able To Be Protected.

Defined contribution plans, including 401(k) plans like the plan here,

have become – aside from Social Security – the primary vehicle for providing

retirement income in America. LaRue v. DeWolff, Boberg & Associates, Inc.,

552 U.S. 248, 255 & n. 5 (2008). Thus, the importance of protecting 401(k)

plan participants by ensuring that their investment options are prudent

cannot be overstated.

Since the introduction of 401(k) plans in 1980, there has been explosive

growth in these plans as shown by every measure including the number of

plans, number of participants, and amount of assets. From 1984 to 2010, the

number of 401(k) plans increased from 17,303 to 518,675. U.S. DEPARTMENT

OF LABOR, EMPLOYEE BENEFITS SECURITY ADMINISTRATION, PRIVATE PENSION

3

PLAN BULLETIN HISTORICAL TABLES AND GRAPHS 25 (Nov. 2012),2 available at

http://www.dol.gov/ebsa/pdf/historicaltables.pdf. The number of 401(k)

participants increased from approximately 7.5 million in 1984 to 60.5 million

in 2010. Id. Assets in 401(k) plans increased from $91 billion in 1984 to $3.1

trillion in 2010. Id. At the end of the third quarter of 2012, all employer-

sponsored defined contribution plans held $5 trillion in assets, of which $3.5

trillion was held in 401(k) plans. Investment Company Institute, Retirement

Assets Total $19.4 Trillion in Third Quarter 2012 (Dec. 19, 2012), http://ici.

org/research/stats/retirement/ret_12_q3.

However, most 401(k) account balances are modest. Blake Ellis, 401(k)

balances hit record high, CNN Money (Nov. 8, 2012), http://money.cnn.com/

2012/11/08/retirement/401k-balances/index.html (average 40(k) balance

climbed to $75,900 at the end of the third quarter of 2012). Such limited

balances underscore the critical significance of a fiduciary’s duty to select

prudent investments so that retirees can accumulate sufficient assets in

these accounts to fund their retirement years. Craig Copeland, Employment-

Based Retirement Plan Participation: Geographic Differences and Trends,

2011, EBRI Issue Brief no. 378, 7 (Nov. 2012), http://www.ebri.org/pdf/

2 This Bulletin compiles data from the Form 5500, an annual report which is required to be filed with the Internal Revenue Service and the U.S. Department of Labor (DOL). Form 5500 provides information to these agencies to confirm that tax qualified and other employee benefit plans are operated and managed in accordance with certain prescribed standards.

4

briefspdf/EBRI_IB_11-2012_No378_RetParticip.pdf. The growth in 401(k)

plans, the number of participants covered, and the amount of assets held in

these plans warrant considerable scrutiny to ensure the safety and protection

of these assets.

B. Breach Of Fiduciary Duty Cases Can Be Brought Under ERISA § 502(a)(2) On Behalf Of A Plan Even If Not All Plan Participants Are Injured By An Alleged Breach.

Recognizing the importance of protecting the interests of participants

in employee benefit plans, Congress enacted ERISA in 1974. See 29 U.S.C.

§ 1001(b); Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113 (1989). As

a remedial statute, ERISA protects participants from losses incurred through

fiduciary misuse and mismanagement of retirement plan assets. See Mass.

Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140 n.8 (1985). Accordingly,

ERISA § 409(a), 29 U.S.C. § 1109(a), imposes liability on plan fiduciaries for

breaches of their duties, and § 502(a)(2), 29 U.S.C. § 1132(a)(2), creates a

cause of action to enforce § 409(a). It is now well settled that §§ 502(a)(2) and

409(a) authorize recovery for fiduciary breaches that impair the value of plan

assets in a participant's individual account, even if not all of the participants

are injured by the acts alleged to have caused the breach of fiduciary duty.

LaRue, 552 U.S. at 256; Rogers v. Baxter International, Inc., 521 F.3d 702,

705 (7th Cir. 2008). Thus, because of the unique and inherently

5

representative nature of § 502(a)(2), such a claim is necessarily brought on

behalf of a plan.

C. ERISA § 502(a)(2) Cases Can Be Certified As Class Actions Without Exact Congruence Between Class Representatives And Class Members.

Although the authority to bring claims alleging breaches of fiduciary

duty in 401(k) plans has now been resolved, a subsequent open question

concerns the requirements for class certification in such cases. Spano v.

Boeing Co., 633 F.3d 574, 580-81 (7th Cir. 2011) (noting that Rogers did not

address these requirements). In Spano, this Court assessed the class

certification requirements for 401(k) fiduciary breach cases brought under

§ 502(a)(2).

In examining Rule 23(a)’s typicality and adequacy requirements in

these fiduciary breach cases, this Court held that “there must be enough

congruence between the named representative's claim and that of the

unnamed members of the class to justify allowing the named party to litigate

on behalf of the group.” Id. at 586 (emphasis added). Of significance was that

the Court did not require the same or exact congruence. Instead, when

weighing “enough congruence,” the Court identified three specific markers --

time period, stock ownership, and actual harm caused by the alleged conduct

-- to avoid potential intra-class conflicts. Id. at 586-88.

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Similarly, when considering the requirements of Rule 23(b), the Court

called attention to the necessity of “identity of interest among all class

members. A claim of imprudent management, for example, is not common if

the alleged conduct harmed some participants and helped others, . . . .” Id. at

588.

Not surprisingly, Spano concluded that “[t]he propriety of class

treatment thus will turn on the circumstances of each case.” Id at 582. The

Court explicitly confirmed that such cases could be certified as class actions if

the class or subclasses were "better-defined and more-targeted. . . ." Id. at

588. Although the Court acknowledged that “General Telephone [Co. v.

Falcon, 457 U.S. 147 (1982)] stresses the fact that the class representative

must, at a meaningful level of detail, stand in the same position as the

absentee members of the class,” Spano, 633 F.3d at 591, it did not, nor does

General Telephone, require exact equivalence of class members’ interests.

Accordingly, not every individual plan account need be harmed by a

fiduciary's breach,3 or even harmed in the same manner, so long as there are

minimal conflicts between the class representative and class members. See,

e.g., In re Schering-Plough Corp. ERISA Litig., 420 F.3d 231, 235 (3d Cir.

2005); Kuper v. Iovenko, 66 F.3d 1447, 1452-53 (6th Cir. 1995); see generally

3 AARP submits that not incurring a loss from a fiduciary’s actions is very different than benefiting from such action.

7

Dana Muir, ERISA and Investment Issues, 65 Ohio St. L.J. 199, 232 (2004)

(every member of 401(k) plan will be affected differently if there is a fiduciary

breach because type and size of investments will vary from one account to

another). Indeed, § 409(a) contains no requirement that losses flow to all or

most of the plan accounts. LaRue, 552 U.S. at 255-56.

D. A Restrictive Interpretation Of Spano’s Class Certification Standards Could Have Negative Consequences For ERISA Enforcement.

The decision in Spano left many unanswered questions concerning the

requirements for obtaining an order to certify a class in an ERISA § 502(a)(2)

suit. A restrictive interpretation of Spano will have negative consequences for

plan participants, defendants and even the courts -- more individual lawsuits

will be filed, ERISA litigation will not be efficient, defendants will be subject

to multiple lawsuits, and ERISA and its protections will be undermined,

leaving trillions of dollars unprotected. Accordingly, AARP asks this Court to

interpret its decision in Spano, using flexibility and pragmatism, and also to

provide additional guidance to the parties and the courts concerning the

scope of its decision, as suggested below.

1. There Is Neither An Explicit Nor De Facto Requirement That Suits Under ERISA § 502(a)(2) Be Brought As Class Actions.

An ERISA § 502(a)(2) claim seeks relief under § 409(a), which provides,

in relevant part:

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Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach . . . and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary.

29 U.S.C. § 1109(a) (emphasis added).

This section focuses on the plan rather than individual participants,

because a plan's assets are held in a unitary trust comprised of individual

accounts. See 29 U.S.C. § 1103(a); 26 U.S.C. § 401(a). Thus, claims under

§§ 502(a)(2) and 409(a) are brought on behalf of a plan and are derivative in

nature. LaRue, 552 U.S. at 254; Russell, 473 U.S. at 140-41; Steinman v.

Hicks, 352 F.3d 1101, 1102 (7th Cir. 2003). Moreover, § 502(a)(2) authorizes

not just plan participants and beneficiaries to file suit, but also plan

fiduciaries and the Secretary of Labor. This broad authority along with a

comprehensive list of potential plaintiffs is further "indicative of Congress'

intent that actions for breach of fiduciary duty be brought in a representative

capacity on behalf of the plan as a whole." Russell, 473 U.S. at 142 n.9. Any

harm caused by a breach of fiduciary duty impacts the assets available to

participants and beneficiaries and, therefore, impacts the trust.

In addition, any recovery under § 502(a)(2) inures to the benefit of the

plan, further demonstrating that claims under § 502(a)(2) are derivative plan

claims. See Russell, 473 U.S. at 140; LaRue, 552 U.S. at 261 (Thomas, J.,

9

concurring) (“The plain text of § 409(a), which uses the term 'plan' five times,

leaves no doubt that § 502(a)(2) authorizes recovery only for the plan.");

Steinman, 352 F.3d at 1102. Thus, under the plain language of ERISA, a

participant is not authorized to file an individual claim for individual losses

unless such claim can be properly characterized as a claim on behalf of the

plan and such losses will flow to the plan.

Generally, such claims have been brought as class actions because they

are well suited to class treatment. This has enabled the cases to proceed in an

efficient and effective manner that has protected both defendants from the

risk of incompatible standards from individual actions (as well as the ability

to obtain a class-wide release and the finality that such a release provides)

and absent class members from adjudications that would be dispositive of

their interests. In addition, reducing the ability to obtain class certification

would make it more difficult for participants to enforce their rights under

ERISA and obtain relief from violations of ERISA's important fiduciary

protections. It would also create the potential for increased expense,

decreased court control over the litigation, and numerous cases being brought

over an extended period of time that would all seek redress for the same

fiduciary misconduct. These possibilities are obvious because in the absence

of certification, under § 502(a)(2) each participant can bring the same claim

against the same defendant fiduciaries for the same fiduciary misconduct

10

that caused a plan to suffer the same plan losses. See Derek W. Loeser &

Benjamin Gould, The Continuing Applicability of Rule 23(b)(1) to ERISA

Actions for Breach of Fiduciary Duty, 36 BPR 2024, Sept. 1, 2009. By the

plain terms of § 502(a)(2), each participant may do so in a representative

capacity without class certification. Indeed, there is neither an explicit nor de

facto requirement that breach of fiduciary duty suits must be brought by a

class of participants or as a class action. See generally Tullis v. UMB, 515

F.3d 673 (6th Cir. 2008).

Significantly, at least one circuit has conceded that there is no

requirement to bring § 502(a)(2) suits as class actions. That concession seems

inevitable given ERISA’s legislative history that Congress specifically

considered, and rejected, requiring suits under § 502(a)(2) to be brought as

class. See Coan v. Kaufman, 457 F.3d 250, 259-60 (2d Cir. 2006).

Nevertheless, the Second Circuit pronounced that a participant bringing suit

under § 502(a)(2) is required “to take steps to become a bona fide

representative of other interested parties” and “employ procedures to protect

effectively the interests they purport to represent.” Id. at 259; accord, George

v. Kraft Foods, 2011 U.S. Dist. LEXIS 124210 (N.D. Ill. Oct. 25, 2011). Its

reasoning was that Congress must have presumed that the parties and courts

could determine some sort of procedural safeguards on a case by case basis,

Coan, 457 F.3d at 259, even though this would treat participants differently

11

than the other plaintiffs enumerated in § 502(a)(2). Unfortunately, the

Second Circuit did not address what those potential safeguards could be, id.

at 261, leaving the issue of whether a participant or other enumerated

plaintiff could ever bring a suit under § 502(a)(2) in a representative capacity.

Should this Court adopt a restrictive reading of Spano, making it

difficult to develop a class definition, and also agree with the Coan decision, it

will leave participants with few, if any, methods of challenging alleged

fiduciary breaches, and those that remain, will be difficult to navigate. The

consequence is that there will be little private enforcement of ERISA plans.

And, as we show below, the Department of Labor does not have the resources

to step into this void.

2. Permitting Class Or Representative Actions Is Crucial Because The Employee Benefits Security Administration Has Insufficient Resources To Police The Benefits System.

“During fiscal year 1999 [the Employee Benefits Security

Administration (EBSA), formerly the PWBA] had fewer than 400

investigators, the front-line staff who identify and investigate civil and

criminal violations relating to employee benefit plans. With over 700,000

retirement plans and 4.5 million welfare plans,” EBSA has been referred to

as one of the most highly leveraged agencies in the government.” Pension and

Welfare Benefits Administration; Strategic Enforcement Plan, 65 Fed. Reg.

12

18207, 18208 (Apr. 6, 2000) (citing Donald Kettl & John DiIulio, Jr., Cutting

Government 13-14 (A Report of the Brookings Institution’s Center for Public

Management, 1995).

According to 2002 data, the U.S. Government Accountability Office

(GAO) found that EBSA’s 385 frontline investigators are primarily

responsible for overseeing approximately 3.2 million private sector pension

and health benefit plans. See U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-07-

22, EMPLOYEE BENEFITS SECURITY ADMINISTRATION: ENFORCEMENT

IMPROVEMENTS MADE BUT ADDITIONAL ACTIONS COULD FURTHER ENHANCE

PENSION PLAN OVERSIGHT 9-10 (2007). Comparing the IRS and SEC to DOL,

the GAO found that these other agencies oversight responsibility for a

smaller number of entities. Specifically, IRS’s 389 agents have oversight for

some 1.3 million pension, profit-sharing, and stock bonus plans, while the

SEC’s 1,953 investigators and examiners oversee 17,337 registrants, such as

investment advisers and investment companies. Consequently, EBSA’s ratio

of investigators to covered plans within their authority is 1:8,000, whereas

IRS’s ratio of investigators to plans is 1:3,000, and the SEC’s ratio of

investigators and examiners overseeing plan related entities is 1:9. Id. at

Table 1. In fiscal year 2005, EBSA opened approximately 3,400 new

investigations, and closed about 4,000 investigations during that same year.

Id.

13

These numbers have been remarkably consistent. Currently EBSA's

enforcement authority extends to more than 718,000 private retirement

plans, 2.6 million health plans, and a similar number of other employee

welfare plans which together hold over $6.1 trillion in assets (as of December

31, 2010). U.S. DEP’T OF LABOR, FY 2012 BUDGET IN BRIEF, FISCAL YEAR 2012,

http://www.dol.gov/dol/budget/2012/bib.htm#ebsa. If the EBSA’s proposed

budget is approved, the EBSA may be able to conduct only 3,800 civil and

criminal investigations of over 3,318,000 benefit plans. Id. Accordingly, in

2012, a plan would have less than .011452 chance of being investigated.

Due to its limited resources, the EBSA has had to make strategic

choices concerning its priorities. EBSA, ERISA ENFORCEMENT, http://www.

dol.gov/ebsa/erisa_enforcement.html (setting forth priorities such as

Employee Contributions Initiative, Health Benefits Security Project, ESOPs,

Consultant/Adviser Project). These priorities have not focused on the types of

allegations concerning fiduciary breaches like this case, unless they involve

self-dealing of some sort. Id. Given the Department of Labor’s inadequate

resources to police the pension system, see, e.g., U.S. GOV’T ACCOUNTABILITY

OFFICE, GAO-07-22, EMPLOYEE BENEFITS SECURITY ADMINISTRATION:

ENFORCEMENT IMPROVEMENTS MADE BUT ADDITIONAL ACTIONS COULD

FURTHER ENHANCE PENSION PLAN OVERSIGHT 9-10 (2007); U.S. GOV’T

ACCOUNTABILITY OFFICE, GAO-02-232, PENSION AND WELFARE BENEFITS

14

ADMINISTRATION: OPPORTUNITIES EXIST FOR IMPROVING MANAGEMENT OF

ENFORCEMENT PROGRAM 2-3 (March 2002); U.S. Department of Labor,

PWBA, Task Force on Assistance to the Public (1992), it is crucial to permit

pension plan participants to sue via class or representative actions to ensure

proper and prudent plan administration and management of plan assets.

3. Trillions Of Dollars In 401(k) Plans Could Effectively Be Left Unregulated If This Court Constricts Class Or Representatives Actions Under ERISA § 502(a)(2).

A restrictive reading of Spano and additional barriers required to bring

representative suits under § 502(a)(2) could leave $3.5 trillion of 401(k) plan

assets effectively unregulated and over 60 million participants unprotected.

See U.S. DEPARTMENT OF LABOR, EMPLOYEE BENEFITS SECURITY

ADMINISTRATION, PRIVATE PENSION PLAN BULLETIN HISTORICAL TABLES AND

GRAPHS, 25-27 (Nov. 2012); Investment Company Institute, Retirement Assets

Total $19.4 Trillion in Third Quarter 2012 (Dec. 19, 2012). Given the

circumstances from which ERISA arose, Congress could not have intended to

leave 401(k) plans – with their trillions of dollars – so unregulated. See

generally James. A. Wooten, The Most Glorious Story of Failure in the

Business: The Studebaker Packard Corporation and the Origins of ERISA, 49

BUFF. L. REV. 683 (2001).

15

CONCLUSION

For these reasons the district court order denying class certification of

Plaintiffs’ Stable Value Fund claim should be reversed and the case

remanded for certification under Federal Rule of Civil Procedure 23(b)(1).

Respectfully submitted, Dated: January 18, 2013 /s Mary Ellen Signorille Mary Ellen Signorille Counsel of Record AARP Foundation Litigation

Melvin Radowitz AARP

601 E Street, NW Washington, DC 20049 Telephone (202) 434-2060 Facsimile (202) 434-6424 msignorille@aarp.org Attorneys for Amicus Curiae AARP

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CERTIFICATE OF COMPLIANCE

1. This brief complies with the type-volume limitation of

Fed.R.App.P. 32(a)(7)(B) because this brief contains 3,207 words, excluding

the parts of the brief exempted by Fed.R.App.P. 32(a)(7)(B)(iii).

2. This brief complies with the typeface requirements of

Fed.R.App.P. 32(a)(5) and 7th Circuit Rule 32(b) because this brief has been

prepared in a proportionally spaced typeface using Microsoft Word 2010 for

Windows in Century Schoolbook 13 point font (12 point in the footnotes).

Dated: January 18, 2013 /s Mary Ellen Signorille Mary Ellen Signorille

Attorney for Amicus Curiae AARP

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CERTIFICATE OF SERVICE

I hereby certify that on January 18, 2013, I electronically filed the

foregoing Brief of Amicus Curiae AARP with the Clerk of the Court for the

United States Court of Appeals for the Seventh Circuit by using the CM/ECF

system. I certify that all participants in the case are registered CM/ECF

users and that service will be accomplished by the CM/ECF system.

Jeffrey W. Sarles jsarles@mayerbrown.com MAYER BROWN LLP 71 S. Wacker Driver Chicago, IL 60606 Patrick J. Kenny pkenny@armstrongteasdale.com ARMSTRONG TEASDALE LLP 7700 Forsyth Boulevard, Suite 1800 St. Louis, MO 63105

Jerome J. Schlichter jschlichter@uselaws.com Michael Wolff mwolff@uselaws.com SCHLICHTER BOGARD & DENTON, LLP 100 S. Fourth Street, Suite 900 St. Louis, MO 63102

/s Mary Ellen Signorille

Mary Ellen Signorille Attorney for Amicus Curiae AARP