Haley v. Tchrs. Ins. & Annuity Ass’n of Am., No. 21-805, __F.4th__, 2022 WL 17347244 (2d Cir. Dec. 1, 2022) (Before: Newman, Walker, and Sullivan, Circuit Judges).
In this interlocutory appeal, Defendant Teachers Insurance and Annuity Association of America (TIAA) challenges the district court’s decision to certify a Rule 23(b)(3) nationwide class action alleging that it violated ERISA § 406(a) by engaging in prohibited transactions with respect to its compensation for administering its collateralized loan products. TIAA is a non-fiduciary service provider engaged by Washington University in St. Louis to facilitate participant loans from its defined contribution savings plan that is tax-deferred under 26 U.S.C. § 403(b) and governed by ERISA. Plaintiff Melissa Haley is a participant in this plan and took out five collateralized loans from the plan between 2011 and 2019. TIAA asserts that exemptions to § 406(a), specifically § 408(b)(1) and (b)(17), apply to the transactions at issue. However, the district court did not analyze TIAA’s defenses.
The Second Circuit agreed with TIAA that the district erred when it found that common issues predominated over individual issues without addressing the effect of the § 408 exemptions (affirmative defenses) on liability classwide and without addressing TIAA’s claimed variations among the loans. Rule 23(b)(3) requires that a court analyze defenses and the district court did not do so here. The court vacated the class certification decision and remanded the case to the district court to undertake the inquiry in the first instance.
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