United States District Court, D. South Carolina, Charleston Division
ORDER AND OPINION
RICHARD MARK GERGEL, UNITED STATES DISTRICT COURT JUDGE.
matter is before the Court on Plaintiffs' motion to
proceed as a derivative action under Rules 23.1(a) and
23.1(c) of the Federal Rules of Civil Procedure. For the
reasons set forth below, the Court denies the motion.
participants in the Piggly Wiggly Carolina Company, Inc. and
Greenbax Enterprises Inc. Employee Stock Ownership Plan and
Trust (the "Plan"), have brought this class action
on behalf themselves and all other participants under the
Employee Retirement Income Security Act of 1974
("ERISA"). Plaintiffs estimate that the number of
Plan participants is approximately 5, 000 persons. Plaintiffs
have now moved for leave to proceed without class
certification, as a derivative action on behalf of the Plan
under Rule 23.1 of the Federal Rules of Civil Procedure. They
also seek to be excused from compliance with the
derivative-action pleading requirements of Rule 23.1(b).
Defendants oppose Plaintiffs' motion.
support of their motion, Plaintiffs argue that class actions
are not required for claims under ERISA § 502(a), but
courts sometimes have nonetheless required procedural
safeguards to ensure the plaintiffs are bona fide
representatives of other interested parties. Thus, according
to Plaintiffs, courts have allowed ERISA § 502(a) claims
to proceed as derivative actions on behalf of plans under
Rule 23.1. Plaintiffs note that other courts have excused
such actions from compliance with the pleading requirements
of Rule 23.1(b), but they provide no argument about why that
rule should not apply in this case. In opposition, Defendants
argue that an ERISA plan lacks standing to sue, that the
amended complaint does not comply with Rule 23.1(b), that the
relief Plaintiffs seek would unfairly shift the burden of
proof to Defendants, and that it would cause unreasonable
questionable whether, under Fourth Circuit case law, an ERISA
plan may bring ERISA claims against plan fiduciaries. See
Provident Life & Ace. Ins. Co. v. Waller, 906 F.2d
985, 987-88 (4th Cir. 1990). The Court however does not need
to reach that issue. Plaintiffs pleaded a class action. The
complaint has nearly one hundred references to "class,
" "class members, " and the "class
period." It does not meet the pleading requirements for
a derivative action under Rule 23.1(b) and Plaintiffs do not
attempt to explain why Rule 23.1(b) should not
apply. Further, Defendants' argument that
that allowing a class action to proceed as a derivative
action would unfairly shift to Defendants the burden of
proving or disproving the adequacy of the named Plaintiffs as
representatives of all interested parties is well taken. In a
class action, the plaintiffs must prove the adequacy of the
class. In re A.H. Robins Co., 880 F.2d 709, 728 (4th
Cir. 1989). In a derivative action, the defendant arguably
has the burden to prove that the plaintiff cannot adequately
represent the interests of the shareholders or of the
corporation. Lewis v. Curtis, 671 F.2d 779, 788 (3d
Cir. 1982), abrogation on other grounds recognized by
Garber v. Lego, 11 F.3d 1197 (3d Cir. 1993);
Smallwood v. Pearl Brewing Co., 489 F.2d 579, 592
n.15 (5th Cir. 1974); but see Audio-Video World of
Wilmington, Inc. v. MHI Hotels Two, Inc., No.
7:09-CV-39-F, 2011 WL 1059169, at *2 (E.D. N.C. Mar. 18,
2011) (concluding that cases placing the burden on the
defendant to prove inadequacy rely on a misstatement of the
holding of Bernstein v. Levenson, 437 F.2d 756, 757
(4th Cir. 1971)). Allowing this class action to proceed as a
derivative action without amendment of the complaint could
make it impossible to ascertain from the complaint exactly
what Defendants must prove or rebut to defend themselves.
That would deny Defendants the benefit of notice pleading,
which is "to give the defendant fair notice of what ...
the claim is and the grounds upon which it rests."
Bell Ail. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(internal quotation marks omitted).
therefore are correct when arguing that recasting this action
as a derivative action would require amendment of the
complaint. Amendment of the complaint to base the entire
action on a new legal theory would require adjudication of
new motions to dismiss. This action was filed 18 months ago.
The Court will not return it to the pleading stage absent
extraordinary circumstances. Plaintiffs, however, do not even
attempt to show cause why, having chosen to file a class
action, they nonetheless should be excused from
"jump[ing] through the procedural hoops" of
prosecuting a class action. (See Dkt. No. 99-1 at
3.) The Court therefore denies Plaintiffs' motion to
proceed as a derivative action.
foregoing reasons, the Court DENIES
Plaintiffs' motion to proceed under Rules 23.1(a) and
23.1(c) of the Federal Rules of Civil Procedure (Dkt. No.
IT IS SO ORDERED.
 Many cases Plaintiffs cite in which
Rule 23.1(b) compliance was excused involved the consent of
the parties. E.g., Koerner v. Copenhaver, No.
12-1091, 2014 WL 5544051 (CD. 111. Nov. 3, 2014) (order on
unopposed motion for preliminary approval of settlement);
Stipulation, Fish v. Greatbanc Tr. Co., No.
1:09-cv-1668 (N.D. 111. Dec. 29, 2009), ECF No. 115; but
see In re Wilmington Tr. Corp. Erisa Litig, No. CV
10-1114-SLR, 2013 WL 4757843, at *3 (D. Del. Sept. 4, 2013)
(sua sponte excusing compliance with Rule 23.1(b)
(the issue was not briefed), citing Fish ...