Case: 19-50904 Document: 00515398715 Page: 1 Date Filed: 04/29/2020

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED No. 19-50904 April 29, 2020 Lyle W. Cayce Clerk HERIBERTO CHAVEZ; EVANGELINA ESCARCEGA, as the legal representative of her son Jose Escarcega; JORGE MORENO, Plaintiffs–Appellees, versus PLAN BENEFIT SERVICES, INC.; FRINGE INSURANCE BENEFITS, INCORPORATED; FRINGE BENEFIT GROUP, Defendants–Appellants. Appeal from the United States District Court for the Western District of Texas Before SMITH, GRAVES, and HO, Circuit Judges. JERRY E. SMITH, Circuit Judge: A district court must engage in a “rigorous analysis” when it certifies a class action. In the absence of that rigor, we vacate the certification order. Case: 19-50904 Document: 00515398715 Page: 2 Date Filed: 04/29/2020 No. 19-50904 I. Plan Benefit Services, Inc., Fringe Insurance Benefits, Inc., and Fringe Benefit Group (collectively “FBG” or “the company”) market and administer retirement and health benefit plans to various employers. FBG offers the plans through two trusts, and there are many plan options, which (FBG asserts) vary in fees and structures. Employers can sign up to provide their employees with benefits through those offerings; or they can retain FBG merely to keep records and supply administrative services. The named plaintiffs are current and former employees of a company that contracted with FBG for various services. They sued FBG under the Em- ployee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq. The thrust of their complaint is that FBG has acted as a fiduciary and breached its duties. They charge that the company accepted excessive fees, handpicked providers to maximize its profits, controlled disbursements from the trusts for its own benefit, and unlawfully procured indirect compensation. In short: They allege garden-variety fiduciary misbehavior. The plaintiffs seek to represent a class of “all participants in and bene- ficiaries of employee benefit plans that provide benefits through [the trusts], . . . from July 6, 2011 until the time of trial.” The proposed group involves some 90,000 individuals and implicates many employers and plans. ^[1] Case: 19-50904 Document: 00515398715 Page: 3 Date Filed: 04/29/2020 Case: 19-50904 Document: 00515398715 Page: 4 Date Filed: 04/29/2020

No. 19-50904 at 350. Instead, “[a] party seeking class certification must affirmatively dem- onstrate his compliance with the Rule—that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact,” and so on. Id. As a result, in weighing certification, the court will often have “to probe behind the pleadings,” Falcon, 457 U.S. at 160, because “[t]he class determin- ation generally involves considerations that are enmeshed in the factual and legal issues” of the case, Dukes, 564 U.S. at 351. So the court should seek to “understand the claims, defenses, relevant facts, and applicable substantive law in order to make a meaningful determination[.]” Flecha v. Medicredit, Inc., 946 F.3d 762, 766 (5th Cir. 2020). “If some of the determinations . . . cannot be made without a look at the facts, then the judge must undertake that investi- gation.” Spano v. Boeing Co., 633 F.3d 574, 583 (7th Cir. 2011). The judge cannot merely “review a complaint and ask whether, taking the facts as the party seeking the class presents them, the case seems suitable for class treat- ment.” Id. (emphasis added). Much more is needed. Thus, to satisfy the rigor requirement, a district court must detail with specificity its reasons for certifying. Vizena, 360 F.3d at 503. It must explain and apply the substantive law governing the plaintiffs’ claims to the relevant facts and defenses, articulating why the issues are fit for classwide resolution. ^[3] The court should respond to the defendants’ legitimate protests of individual- ized issues that could preclude class treatment. ^[4] And its analysis must stay Case: 19-50904 Document: 00515398715 Page: 5 Date Filed: 04/29/2020 Case: 19-50904 Document: 00515398715 Page: 6 Date Filed: 04/29/2020 Case: 19-50904 Document: 00515398715 Page: 7 Date Filed: 04/29/2020

No. 19-50904 resolve an issue that is central to the validity of each one of the class member’s claims in one stroke.” Stukenberg, 675 F.3d at 840 (cleaned up). To satisfy the rigor requirement, the district court must explain how that standard is met. Id. at 841. It should do so “with specific reference to the claims, defenses, relevant facts, and applicable substantive law raised by the class claims,” id. at 843 (quotation marks removed), and it must “address actual or potential differences in purported class members’ individual circum- stances and claims,” Ward, 753 F. App’x at 246. Here, however, the court’s analysis—for this huge putative class—is fleeting: In this case, Plaintiffs allege prohibited self-dealing and fiduciary breaches stemming from Defendants’ exertion of discretionary con- trol over [the trusts]. Plaintiffs further allege Defendants’ actions affected all plans participating in [the trusts]. Because Defen- dants’ status as fiduciaries with discretionary control over [the trusts] presents a common question capable of classwide resolu- tion, Plaintiffs’ proposed class satisfies the commonality require- ment (docket citations removed). Our caselaw demands more than this brevity. First, the order does not identify the common question with any specificity. ^[12] And, having defined the question vaguely, the court then analyzes it conclusionally. There is no refer- ence to ERISA. ^[13] Nor does the court explain why clarifying FBG’s status as a fiduciary will in one stroke resolve an issue that is central to the claims of each Case: 19-50904 Document: 00515398715 Page: 8 Date Filed: 04/29/2020

No. 19-50904 one of the class members. ^[14] Most noticeably, the order neglects to consider asserted differences among class members that could prevent the suit from generating “common answers apt to drive the resolution of the litigation.” 15 As the briefs reveal, liability apparently will turn on whether FBG (1) was a fiduciary as to each plan 16 and (2) received too much compensation.^[17] But FBG informs us—just as it told the district court—that differences in fees, structure, and assignment of responsibility among the many plans negate the possibility of a common answer to those issues. The plaintiffs reply that the documents governing each plan are materially indistinguishable, such that the analysis pertaining to one plan will apply to all. FBG retorts that there are fundamental and dispositive differences among the plan documents. Faced with those warring factual contentions, the district court needed to resolve whether there were relevant differences among the many plans— and, if so, to explain why they did not prevent classwide resolution of the common issue. ^[18] Instead, the court offered only its unsupported assurance that Case: 19-50904 Document: 00515398715 Page: 9 Date Filed: 04/29/2020 Case: 19-50904 Document: 00515398715 Page: 10 Date Filed: 04/29/2020

No. 19-50904 trusts]” (quotation marks removed). It then quoted dictum in Ortiz, which stated that Rule 23(b)(1)(B) would often encompass “actions charging a breach of trust by a[] . . . fiduciary similarly affecting the members of a large class of beneficiaries,” because such actions “requir[e] an accounting or similar proce- dure to restore the subject of the trust.” Ortiz, 527 U.S. at 834 (quotation marks removed). The proposed group fell within that “[c]lassic example,” the district court opined, because the plaintiffs sought an ERISA accounting that would make good any losses that resulted from FBG’s fiduciary breaches. So Rule 23(b)(1)(B) applied. Despite relying on Ortiz, the court missed its central premise. Even if a proposed class appears, at first glance, to be an historical example of a 23(b)(1)(B) class, the court must look closely at the facts to ensure that separate adjudications as to each class member would indeed impair nonparties’ ability to protect their interests. ^[21] In other words, the Rule does not tolerate a fleeting analysis that assumes that a given class is appropriate just because it appears to be a classic (b)(1)(B) class. See id. at 848–61. Applying that principle, Ortiz held that a proposed class did not qualify, because it did not sufficiently resemble a “limited fund.” See id. In so doing, the Court applied a “limiting construction” to Rule 23(b)(1)(B) designed “to stay close to the historical model[s]” of such classes. Id. at 842. It spoke warily of the “likelihood of abuse” of that subsection and counseled against its “adven- turous application.” 22 The Court wished to avoid “potential conflict with the Case: 19-50904 Document: 00515398715 Page: 11 Date Filed: 04/29/2020

No. 19-50904 Rules Enabling Act” and “serious constitutional concerns raised by the manda- tory class resolution of individual legal claims.” Id. Ortiz shows that the district court’s order does not analyze the class type with requisite rigor. The court notes that, just as in Ortiz, id. at 834, the plaintiffs’ case relates to one of the historical models—namely, an action against a fiduciary seeking an accounting to restore the subject of the trust (in this case, benefits plans). But, parting ways with Ortiz, the court’s analysis begins and ends there. It fails to examine the facts of this specific class to ensure that it qualifies. That failure is reversible error. ^[23] FBG vigorously asserts that the class in no way resembles a typical ERISA class belonging under (b)(1)(B). Among other things, the company contends—as it did at the district court—that even assuming that the relief sought for one individual’s claim would be dispositive of another individual’s claim in the same plan, that relief would not affect, much less be dispositive of, claims under the other . . . plans. Different plans require their own lia- bility and damage[s] analysis, and their own respective account- ings or other relief. The order has no response to that fact-bound contention. It instead assumes that the desired relief—an ERISA accounting—automatically entitles the plaintiffs to certification via (b)(1)(B). The court’s nonspecific, categorical reasoning contradicts Ortiz and fails to demonstrate a rigorous analysis. It follows that we cannot do this work in the district court’s stead. The Rule requires a case-specific inquiry into whether, “as a practical matter,” one class member’s relief in an adjudication would impair the interests of non- Case: 19-50904 Document: 00515398715 Page: 12 Date Filed: 04/29/2020

No. 19-50904 parties. ^[24] But here, the court bypasses that required analysis, offering instead only its conclusional reassurance that the desired “relief would, as a practical matter, dispose of the interests of the other putative class members.” A more searching analysis is required. “[C]areful attention to the re- quirements of [Rule] 23 remains . . . indispensable.” Rodriguez, 431 U.S. at 405. The court must explain, in the factual context of this case, why adjudi- cations for individual class members would prejudice nonparty members.^[25] Such will necessarily entail considering and responding to FBG’s contention that the existence of many different plans prevents (b)(1)(B) from applying. C. The plaintiffs, maybe sensing the inadequacies, point out that the court had plenty of evidence before it and that the hearing showed that the court was thoughtfully considering the issues. All true. But the rigor requirement does not turn on how much material the parties submit or on how carefully the court seems to weigh the issues at a hearing. It instead asks whether the court’s order sufficiently analyzes Rule 23. E.g., Stukenberg, 675 F.3d at 842–44. For reasons described, the one here does not. The certification order is VACATED. We express no view on whether a class should be certified, and we place no limit on the matters the court may consider in further proceedings.