United States Court of Appeals
For the Eighth Circuit
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No. 11-2554
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Joseph Ruppert, as Trustee of and on behalf of Fairmount Park, Inc. Retirement
Savings Plan and on behalf of all others similarly situated
lllllllllllllllllllll Plaintiff - Appellant
v.
Principal Life Insurance Company
lllllllllllllllllllll Defendant - Appellee
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AARP
lllllllllllllllllllllAmicus on Behalf of Appellant
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Appeal from United States District Court
for the Southern District of Iowa - Des Moines
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Submitted: April 18, 2012
Filed: February 13, 2013
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Before LOKEN, COLLOTON, and SHEPHERD, Circuit Judges.
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COLLOTON, Circuit Judge.
Joseph Ruppert, as a trustee of the Fairmount Park, Inc. Retirement Savings
Plan (“the Plan”), brought this action against Principal Life Insurance Company
(“Principal”), alleging violations of the Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. § 1001 et seq. The district court1 denied Ruppert’s request for
class certification, and the case proceeded on an individual basis. Pursuant to a
confidential settlement agreement reached by the parties, the district court entered a
consent judgment in favor of Ruppert. The consent judgment incorporated the terms
of the agreement. The agreement purports to reserve Ruppert’s right to appeal the
denial of class certification, but there are nonetheless threshold questions about
whether this court has jurisdiction over the appeal. Having considered those
questions, we conclude that this court lacks jurisdiction, and we therefore dismiss the
appeal.
I.
Fairmount Park, Inc. is the owner and operator of a racetrack near St. Louis,
Missouri. The company offers its employees a 401(k) retirement savings plan.
Joseph Ruppert, as one of the trustees of the Plan, hired Principal as the Plan’s service
provider. As a service provider, Principal provides administrative and recordkeeping
services for the Plan and arranges access to investment options for the Plan’s
participants. Principal offers the Plan’s trustees a group of investment options, and
the Plan’s trustees choose which of the options to offer to the Plan’s participants. For
instance, Principal offered approximately thirty to forty investment options for the
Fairmount Park Plan, which chose approximately a dozen to include in the Plan’s
401(k) lineup. Participants in the Plan then could choose to invest their contributions
in any of the options the Plan had selected.
1
The Honorable John A. Jarvey, United States District Judge for the Southern
District of Iowa.
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Principal receives part of its compensation for servicing plans through revenue-
sharing arrangements with the mutual funds and separate accounts offered to the
plans. Revenue sharing occurs when a portion of a fund’s expense ratio is sent from
the fund to Principal after plan participants invest in that fund. According to
Principal, these revenue-sharing payments are used to offset the direct fees charged
to each plan.
In 2006, Ruppert filed this suit as a putative class action, alleging that Principal
violated ERISA by receiving revenue-sharing payments from mutual funds that
Principal offered to 401(k) plans and by failing to disclose the receipt of the
payments. According to the complaint, these actions constituted a breach of fiduciary
duty in violation of 29 U.S.C. § 1104(a)(1)(A) and prohibited transactions in violation
of 29 U.S.C. § 1106(b)(1) and (b)(3). Ruppert later amended the complaint to add a
third count, alleging that Principal breached its fiduciary duty and engaged in
prohibited transactions by investing the plans’ contributions overnight, between the
time Principal received the contributions from the plans and the time Principal
invested the plans’ contributions in the various mutual funds. According to the
amended complaint, Principal kept the proceeds of the overnight investments for
itself.
After the case was transferred from the Southern District of Illinois to the
Southern District of Iowa, Ruppert moved for certification of the following class:
“All trustees and plan sponsors of (and on behalf of) 401(k) retirement plans
governed by the Employee Retirement Income Security Act of 1974 (ERISA) to
which Principal Life Insurance Company provided services and which included
investment options from which Principal Life Insurance Company received revenue
sharing payments.”
The district court denied Ruppert’s motion for class certification. The court
ruled that the class proposed by Ruppert failed to satisfy two requirements of Federal
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Rule of Civil Procedure 23(a)—namely, that there are questions of law or fact
common to the class, and that the claims or defenses of the representative party are
typical of the claims or defenses of the class. The court found these elements lacking,
because determinations of Principal’s fiduciary status and breach thereof would
require individualized, fact-specific inquiries. Ruppert petitioned for permission to
appeal the denial of class certification, but this court denied the petition.
After some more motions and pretrial rulings, Ruppert and Principal eventually
entered into a confidential settlement agreement. Pursuant to that “Confidential
Agreement,” the district court entered a consent judgment in favor of Ruppert and
against Principal in the amount of $80,000. The agreement further provided that “the
Trustee explicitly reserves, on behalf of the Plan, his right to appeal the Court’s denial
of class certification.” The district court incorporated the terms of the Confidential
Agreement into the consent judgment.
The Confidential Agreement allows Ruppert to seek further recovery if the
court of appeals reverses or vacates the district court’s denial of class certification.
In the event of a reversal, Ruppert and the Plan may petition the district court to be
paid out of any future recovery awarded to any class that is certified. The payment
allowed under the agreement is the amount to which the Trustee and the Plan would
have been entitled as a member of any such class, if that recovery would have
exceeded the $80,000 provided for by the agreement. The agreement also allows
Ruppert and the Plan to petition the district court for an award of attorney’s fees,
costs, and expenses to be paid out of any future recovery awarded to any class that is
certified. Under the fee contract between Ruppert and his attorneys, the Plan must
pay to the attorneys $5,000 as advanced costs and expenses of litigation, and 33.3
percent of the lump sum recovered from Principal under the agreement. If it turns out
that this amount exceeds the pro rata share that Ruppert or the Plan would have been
required to pay as a member of a class that is later certified, then Ruppert and the Plan
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may petition the district court for an award from the class recovery to the extent of
the difference.
Ruppert now appeals, arguing that the district court abused its discretion in
refusing to certify a class.
II.
Ruppert asserts that we have jurisdiction over this appeal. He maintains that
the consent judgment entered pursuant to the Confidential Agreement is a final
judgment, and that there is still a live case or controversy despite the settlement. He
notes that he expressly reserved his right to appeal the class certification ruling, and
he asserts a continuing interest in the outcome of the litigation—namely, his right to
participate in any future recovery by a certified class and to shift costs and attorney’s
fees to the class. Principal is silent on the question of jurisdiction. In the
Confidential Agreement, Principal agreed that once Ruppert filed a timely notice of
appeal, it would not “take any position in any judicial proceedings . . . that in any way
questions whether [this court] has appellate jurisdiction to hear the Trustee’s
anticipated appeal of the Court’s denial of class certification.”
Even when the parties agree that this court has appellate jurisdiction, however,
the court is obliged to consider whether they are correct. Williams v. Cnty. of Dakota,
Neb., 687 F.3d 1064, 1067 (8th Cir. 2012). Having considered the matter in light of
the consent judgment and the Confidential Agreement, we conclude that there are two
reasons why this court lacks jurisdiction.
First, this court has jurisdiction of appeals from all “final decisions” of the
district courts, 28 U.S.C. § 1291, but the terms of the Confidential Agreement destroy
the purported finality of the district court’s judgment. Although the agreement
characterizes the consent judgment as “a final judgment from which an appeal of the
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Court’s denial of class certification shall lie,” the agreement allows for Ruppert’s
individual claims to spring back to life. If this court were to reverse the district
court’s denial of class certification, then Ruppert would be permitted to petition the
district court for additional recovery based on any future recovery of a class that is
certified on remand by the district court. His individual claims are thus not finally
resolved.
In the Second Circuit, a decision is considered final, notwithstanding the
potential for a plaintiff to reassert a dismissed claim on remand, if the “plaintiff’s
ability to reassert a claim is made conditional on obtaining a reversal from [the court
of appeals].” Purdy v. Zeldes, 337 F.3d 253, 258 (2d Cir. 2003); see SEC v. Gabelli,
653 F.3d 49, 56-57 (2d Cir. 2011), cert. granted on other grounds, 133 S. Ct. 97
(2012); cf. Doe v. United States, 513 F.3d 1348, 1354 (Fed. Cir. 2008). This court,
however, has refused to accept that approach to finality. In Clos v. Corrections Corp.
of America, 597 F.3d 925 (8th Cir. 2010), we rejected an attempt “to manufacture
appellate jurisdiction by crafting a stipulation in which [the appellant] tied the fate
of his remaining claim to the outcome of his appeal.” Id. at 928. In this circuit,
unless the appellant’s claims are unequivocally dismissed with prejudice, there is no
final appealable decision. Accord India Breweries, Inc. v. Miller Brewing Co.,
612 F.3d 651, 656-57 (7th Cir. 2010); Federal Home Loan Mortg. Corp. v. Scottsdale
Ins. Co., 316 F.3d 431, 440 (3d Cir. 2003) (“[T]he Consent Judgment preserved
Freddie Mac’s right to reinstate Counts Two and Three, if we were to reverse and
remand the district court’s ruling. . . . The Consent Judgment thus represented an
inappropriate attempt to evade § 1291’s requirement of finality.”); Dannenberg v.
Software Toolworks, Inc., 16 F.3d 1073, 1076 (9th Cir. 1994). The Confidential
Agreement and consent judgment in this case permit Ruppert to revive his individual
claim in order to petition the district court for additional recovery. Therefore, the
district court’s decision is not final.
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Second, if we are wrong about finality, then Ruppert’s voluntary dismissal of
his individual claims renders the case moot. Ruppert has relinquished his claims, and
there is no longer an Article III case or controversy. There is no party before the
court with a sufficient personal stake in challenging the district court’s denial of class
certification.
In two cases, the Supreme Court permitted an appeal of an order denying class
certification even after the named plaintiff no longer could pursue his individual
substantive claim. In both instances, however, the termination of the plaintiff’s
substantive claim was involuntary. In United States Parole Commission v. Geraghty,
445 U.S. 388 (1980), a federal inmate challenged the lawfulness of the federal parole
guidelines and sought certification of a class that included other inmates. After the
district court denied certification, the inmate’s claim expired because he was released
from prison. Id. at 390. Citing the “flexible character of the Art. III mootness
doctrine,” id. at 400, the Supreme Court held that the inmate nonetheless retained a
“personal stake” in the procedural class certification claim, such that appeal did not
become moot upon expiration of the inmate’s substantive claim. Id. at 404. The
Court intimated no view, however, “as to whether a named plaintiff who settles the
individual claim after denial of class certification may, consistent with Art. III,
appeal from the adverse ruling on class certification.” Id. at 404 n.10 (emphasis
added).
In Deposit Guaranty National Bank v. Roper, 445 U.S. 326 (1980), the
plaintiffs sued a bank, alleging that the bank made usurious finance charges. The
plaintiffs sought to represent their interests and those of a class of similarly aggrieved
customers. The district court denied a motion to certify a class, and the bank then
tendered to each plaintiff the maximum amount that each could have recovered. Id.
at 329. The plaintiffs declined the tender, but the district court entered judgment in
favor of the plaintiffs and dismissed the action over their objections. Id. at 329-30.
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The plaintiffs appealed the district court’s denial of class certification, and the
Supreme Court held that the case was not moot. The Court explained that the right
to certify a class is procedural only, and it is “ancillary to the litigation of substantive
claims.” Id. at 332. The Court then made a significant observation: “Should these
substantive claims become moot in the Art. III sense, by settlement of all personal
claims for example, the court retains no jurisdiction over the controversy of the
individual plaintiffs.” Id. The Court emphasized, however, that the “factual context
in which this question arises is important.” Id. Because “at no time did the named
plaintiffs [in Roper] accept the tender in settlement of the case,” id., and because
judgment was entered “over their continued objections,” id., the case was not moot,
so long as the plaintiffs retained an economic interest in class certification. Id. at
332-33. The Court concluded that the desire of the named plaintiffs to shift a portion
of the fees and expenses incurred in the litigation to successful class members was a
sufficient personal stake for the named plaintiffs to pursue the appeal. Id. at 334 n.6.
This court held in Potter v. Norwest Mortgage, Inc., 329 F.3d 608 (8th Cir.
2003), and Anderson v. CNH U.S. Pension Plan, 515 F.3d 823 (8th Cir. 2008), that
an appeal of the denial of class certification is moot where the named plaintiff
voluntarily settles his claim and retains no personal stake in spreading litigation costs.
As the Seventh Circuit recognized, we noted that after a voluntary settlement, “a
plaintiff may have a continuing interest in the class certification issue if he retains an
interest in shifting costs and attorney fees to the putative class members.” Muro v.
Target Corp., 580 F.3d 485, 490 n.5 (7th Cir. 2009) (internal quotation omitted). But
we did not decide that issue, and this case requires us to do so. Unlike the plaintiffs
in Potter and Anderson, Ruppert asserts that the terms of the Confidential Agreement
give him an economic interest in shifting litigation costs to a class if the certification
ruling is reversed.
Although Potter and Anderson left open the possibility of appellate jurisdiction
in this scenario, we now conclude that Ruppert does not have a sufficient personal
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stake to maintain a case or controversy, because his individual claims have “become
moot in the Article III sense.” Roper, 445 U.S. at 332. We recognize that the D.C.
Circuit saw “no difference between those who voluntarily settle individual claims and
those who have their individual claims involuntarily extinguished,” so long as the
litigant retains an interest in shifting the fees and expenses of class litigation.
Richards v. Delta Air Lines, Inc., 453 F.3d 525, 529 (D.C. Cir. 2006). But the
“personal stake” in spreading litigation costs was sufficient to maintain a case or
controversy in Geraghty and Roper only because the named plaintiffs’ substantive
claims were involuntarily dismissed. The Court reserved judgment in Geraghty about
whether voluntary settlement would be different, Geraghty, 445 U.S. at 404 n.10, and
the Court specifically contemplated in Roper that the outcome would be different if
the substantive claims became moot “by settlement of all personal claims.” Roper,
445 U.S. at 332. We therefore agree with the Fourth Circuit that “when a putative
class plaintiff voluntarily dismisses the individual claims underlying a request for
class certification, . . ., there is no longer a self-interested party advocating for class
treatment in the manner necessary to satisfy Article III standing requirements.”
Rhodes v. E.I. du Pont de Nemours & Co., 636 F.3d 88, 100 (4th Cir. 2011) (internal
quotation omitted); see also Pettrey v. Enterprise Title Agency, Inc., 584 F.3d 701,
705 (6th Cir. 2009) (“[I]t is doubtful that there is a live controversy here because the
named plaintiffs’ claims were voluntarily relinquished, whereas they were
involuntarily terminated in both Roper and Geraghty.”). If there is a final decision
here, then the case is moot.
The appeal is dismissed.
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