Prudential Nixes Class Bid in Guaranteed-Investment Suit

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

Investors who sued Prudential Retirement Insurance & Annuity Co. over undisclosed profits from guaranteed investment products can’t litigate as a certified class ( Wood v. Prudential Ret. Ins. & Annuity Co. , 2017 BL 273021, D. Conn., No. 3:15-cv-1785-VLB, 8/4/17 ).

A federal judge on Aug. 4 said the lawsuit didn’t lend itself to resolution on a classwide basis because the threshold question of whether Prudential acted as a fiduciary under the Employee Retirement Income Security Act would require analyzing individual contracts between Prudential and various retirement plans. The plans varied in their treatment of crediting rates, investment expenses, spread income, and termination and withdrawal policies, making classwide resolution unwise, the judge said. The court previously denied Prudential’s request to dismiss the case.

The lawsuit by 401(k) investors claims Prudential earned $300 million in undisclosed profits from its guaranteed investment products, which are intended to be conservative retirement investments that safeguard principal and guarantee interest. Several financial companies have been sued over the guaranteed investments they offer, and many lawsuits have seen early success. Courts have also refused to dismiss cases against Principal Life Insurance Co., Metropolitan Life Insurance Co., and Great-West Life & Annuity Insurance Co. Similar case are pending against Massachusetts Mutual Life Insurance Co.. and United of Omaha Life Insurance Co.

By contrast, New York Life Insurance Co. saw more success defending its guaranteed investment products. A proposed class action making similar claims was voluntarily dismissed two days after a federal judge expressed doubt about the claims raised by investors.

In denying class action status to the Prudential investors, the judge broke from recent decisions certifying the classes of investors suing Principal and Great-West.

The judge also found that the retirement plan participant who sought to represent the proposed class might not properly represent the interests of the retirement plans that contracted with Prudential. That’s because plans and plan participants have different motivations in selecting investments, and those motivations could be adverse in some instances, the judge said.

Given this, the proposed class of retirement plans failed to satisfy the federal requirements of commonality, typicality, and adequacy, the judge concluded. The requirements of maintaining a class action under Federal Rule of Civil Procedure 23(b) were similarly unmet, the judge said.

Judge Vanessa L. Bryant of the U.S. District Court for the District of Connecticut wrote the decision.

Izard Kindall & Raabe LLP and Bailey & Glasser LLP represent the investor. Sidley Austin LLP and Pullman & Comley represent Prudential.

To contact the reporter on this story: Jacklyn Wille in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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