Class Actions Brief Blog

According to the Company website, “Piggly Wiggly has been bringing home the bacon for millions of American families for over 100 years.” But a putative class of former employees of Piggly Wiggly filed a class action complaint in the District of South Carolina, asserting various claims under ERISA pertaining to the Company’s employee stock ownership plan. The claims include allegations pertaining to excessive compensation, “gross mismanagement,” concealing of financial losses from participants, and various “insider dealings.” Spires v. Schools, No. 2:16-616 (D.S.C. 2016). The scheme culminated, according to Plaintiffs, in the sale of substantially all assets to C&W Wholesale Grocers Inc. The case was filed under Rule 23 as a class action, not under Rule 23.1 as a derivative action.

Eighteen months into the case, and after the district court had trimmed the complaint, Plaintiffs attempted to switch gears, moving to proceed without class certification and instead as a derivative action under ERISA Section 502(a). But Judge Gergel would have none of it in a decision rendered on November 17. After first observing that a benefit plan may not have standing under ERISA to assert claims for a breach of fiduciary duty, the Court held 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 the class. The Court observed that the “complaint has nearly one hundred references to ‘class,’ ‘class members’ and the ‘class period.’” According to the Court, plaintiffs did 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.”

The case serves as a good reminder of the “stickiness” of filing under Rule 23. After you do that, it isn’t so easy to extricate yourself.