Fourth Circuit: ERISA § 502(a)(2) Defined-Contribution Loss Claims Are Individualized Monetary Claims Not Fit for Rule 23(b)(1) Mandatory Classes

1. Introduction

Two former Genworth Financial employees—Peter Trauernicht and Zachary Wright—sued Genworth Financial, Inc., alleging ERISA fiduciary breaches in the selection and retention of the plan’s target-date investment suite, the BlackRock LifePath Index Funds. They proceeded under ERISA § 502(a)(2) and § 409(a), seeking primarily monetary recovery for alleged plan losses attributable to “imprudent” investment options.

The Genworth Financial, Inc. Retirement and Savings Plan is a defined contribution plan with individual accounts, daily participant-directed allocation changes, and multiple investment options. The district court certified a Rule 23(b)(1) mandatory class of all participants/beneficiaries whose accounts invested in the BlackRock LifePath Index Funds from August 1, 2016 to judgment. Genworth obtained interlocutory review under Rule 23(f).

The appeal presented two interlocking issues: (i) whether account-loss claims under ERISA § 502(a)(2) in a defined contribution plan can be litigated via a mandatory Rule 23(b)(1) class; and (ii) whether commonality under Rule 23(a)(2) can be treated as essentially automatic in ERISA fiduciary-breach cases without resolving whether class members suffered the same injury (including whether many were uninjured).

2. Summary of the Opinion

The Fourth Circuit reversed and vacated the class certification order. It held:

• Rule 23(b)(1) was improperly used. In the defined contribution context, ERISA § 502(a)(2) monetary claims are “individualized monetary claims” because relief tracks losses (or lack thereof) in each participant’s account. Mandatory certification under Rule 23(b)(1) (without opt-out and often without notice) is therefore inappropriate, particularly in light of Supreme Court due-process concerns about mandatory aggregation of damages claims.
• Rule 23(a)(2) commonality was not established. The district court relied on an “inherent commonality” theory (liability arises from plan-level conduct), but the Fourth Circuit required a rigorous, evidence-based inquiry into whether members suffered the “same injury.” Genworth showed that many class members may have suffered no injury (they did better in the challenged funds than in proposed passive comparators), defeating commonality.

3. Analysis

3.1 Precedents Cited (and How They Shaped the Court’s Decision)

A. Class action architecture, due process, and “individualized monetary claims”

Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). This was the court’s principal class-action guidepost. The Fourth Circuit imported two propositions: (i) Rule 23(a)(2) requires more than common questions; it requires a common contention capable of a classwide answer and demands that class members “have suffered the same injury”; and (ii) “individualized monetary claims belong in Rule 23(b)(3),” because Rule 23(b)(1) and (b)(2) lack the notice/opt-out protections needed when damages are individualized. The court also relied on Wal-Mart’s due process warning that mandatory classes for money damages raise constitutional concerns.

Phillips Petrol. Co. v. Shutts, 472 U.S. 797 (1985). Cited via Wal-Mart to underscore that binding absent class members in monetary claims without notice and opt-out implicates due process, reinforcing the Fourth Circuit’s reluctance to treat Rule 23(b)(1) as a vehicle for damages claims.

Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999). The court used Ortiz to define the “classic” Rule 23(b)(1)(B) categories (including “limited fund” and certain trust/accounting scenarios) and to emphasize the “deep-rooted historic tradition” that each person is entitled to a day in court—again cutting against mandatory aggregation of individualized damages.

Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997). Used to delineate the limited domain of Rule 23(b)(1) (especially (b)(1)(A)’s “incompatible standards of conduct” scenarios and (b)(1)(B)’s “limited fund” concept), supporting the conclusion that (b)(1) is not a general-purpose damages device.

The opinion also invoked the 1966 Advisory Committee notes to Rule 23 (through Ortiz) to situate (b)(1)(B) in traditional fiduciary/trust cases requiring “accounting or similar procedure”—a category the court found mismatched to individualized account-loss claims in participant-directed defined contribution plans.

EQT Prod. Co. v. Adair, 764 F.3d 347 (4th Cir. 2014). Provided the Fourth Circuit standard that a district court abuses discretion when it materially misapplies Rule 23. Once the panel characterized the claims as individualized monetary claims, certification under Rule 23(b)(1) became legal error.

B. ERISA § 502(a)(2)/§ 409(a): “plan” recovery vs account-level loss

Mertens v. Hewitt Assocs., 508 U.S. 248 (1993). Cited for the proposition that § 409(a) imposes personal liability on breaching fiduciaries to make good losses to the plan, and that this is a form of compensatory damages—framing the suit as primarily monetary.

In re Mut. Funds Inv. Litig., 529 F.3d 207 (4th Cir. 2008) and Peters v. Aetna Inc., 2 F.4th 199 (4th Cir. 2021). These cases supplied the Fourth Circuit’s own articulation that § 502(a)(2) enables a “derivative” action brought by a participant on behalf of the plan to recover losses caused by fiduciary breaches. Trauernicht uses this baseline but insists that “derivative” does not mean “planwide lump sum” in a defined contribution plan; rather, “appropriate relief” is tailored to losses in particular accounts (still “plan assets”).

Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134 (1985). Plaintiffs relied on Russell’s statement that recovery for § 409 violations “inures to the benefit of the plan as a whole.” The Fourth Circuit read Russell as anchored in the defined benefit paradigm and insufficient to dictate the remedy structure in defined contribution plans.

LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248 (2008). This was decisive on remedy structure. The court emphasized LaRue’s clarification that Russell’s “entire plan” language “does not apply to defined contribution plans,” and that § 502(a)(2) authorizes recovery for breaches that impair the value of plan assets in a participant’s individual account. Trauernicht extends that insight into the Rule 23 context: if impairment and recovery are account-specific, the claims are individualized monetary claims, rendering mandatory Rule 23(b)(1) treatment improper.

Thole v. U.S. Bank N.A., 590 U.S. 538 (2020). Used to contrast defined benefit structures (collective trust paying fixed benefits) with defined contribution structures (individual accounts), reinforcing the opinion’s central plan-type distinction.

Tibble v. Edison Int'l, 575 U.S. 523 (2015). Cited for the duty-of-prudence framing—particularly the obligation to monitor investments and remove imprudent ones—supplying the substantive fiduciary-breach template but not resolving class treatment.

C. Comparator methodology and “same injury” commonality

Smith v. CommonSpirit Health, 37 F.4th 1140 (6th Cir. 2022); Davis v. Wash. Univ. in St. Louis, 960 F.3d 478 (8th Cir. 2020); Albert v. Oshkosh Corp., 47 F.4th 570 (7th Cir. 2022). These cases supported Genworth’s argument that passively managed index funds and actively managed funds have distinct objectives and risk/return profiles—often making them “inapt comparators.” The Fourth Circuit did not definitively decide the comparator dispute on the merits at certification, but held the district court erred by refusing to engage it while simultaneously concluding that commonality was “inherent.”

Stafford v. Bojangles' Restaurants, Inc., 123 F.4th 671 (4th Cir. 2024). Provided an intra-circuit commonality principle: a class that includes members who may lack any claim against the defendant can be too overinclusive to satisfy commonality.

Lab'y Corp. of Am. Holdings v. Davis, 605 U.S. 327 (2025) (Kavanaugh, J., dissenting from dismissal of writ as improvidently granted). Cited for the proposition that damages classes including both injured and uninjured members are improper because uninjured members cannot share the “same injury” required by Rule 23.

D. Competing ERISA-class approaches in other circuits

In re Schering Plough Corp. ERISA Litig., 589 F.3d 585 (3d Cir. 2009). Plaintiffs invoked this decision’s view that § 502(a)(2) claims are paradigmatic Rule 23(b)(1) candidates. The Fourth Circuit did not adopt that categorical approach for defined contribution plans, instead privileging Wal-Mart due process principles and LaRue’s account-level remedy logic.

Dorman v. Charles Schwab Corp., 780 F. App'x 510 (9th Cir. 2019) and In re First Am. Corp. ERISA Litig., 258 F.R.D. 610 (C.D. Cal. 2009). Both were cited to support the conclusion that even though § 502(a)(2) relief is “on behalf of the plan,” it is inherently individualized in a defined contribution plan because participants have individual remedies keyed to their accounts.

Cedeno v. Sasson, 100 F.4th 386 (2d Cir. 2024). The Fourth Circuit flagged Cedeno as taking the contrary view (that § 502(a)(2) contemplates plan-wide remedies “and only plan-wide remedies,” even in defined contribution plans). By expressly disagreeing with Cedeno’s thrust, Trauernicht deepens an emerging circuit split over the interaction between ERISA’s “plan” remedial framing and Rule 23’s procedural safeguards.

3.2 Legal Reasoning (How the Court Reached Its Holding)

The opinion proceeds in two main moves: (1) characterizing the nature of the relief available/appropriate under § 502(a)(2) in a defined contribution plan; and then (2) mapping that characterization onto Rule 23’s procedural categories and prerequisites.

A. Defined contribution plans transform the practical shape of § 502(a)(2) monetary relief

The court accepted orthodox ERISA framing: § 502(a)(2) incorporates § 409(a), which makes fiduciaries liable “to make good to such plan any losses to the plan.” That yields a “derivative” action on behalf of the plan. But the court emphasized that “plan assets” in a defined contribution plan are allocated to individual accounts, and the “appropriate relief” is therefore measured by impairment to each account’s plan assets.

Using hypotheticals, the court reasoned that (i) defined benefit plan losses are necessarily remedied at the plan level (collective trust, fixed benefits), while (ii) defined contribution plan losses vary by participant behavior and timing (how much invested, when bought/sold, which vintage selected, when assets were withdrawn). Therefore, the participant’s § 502(a)(2) damages claim is “individualized,” even if formally paid to the plan and allocated to the account.

B. Once characterized as individualized monetary claims, Rule 23(b)(1) is the wrong vehicle

Rule 23(b)(1) is reserved for situations where separate actions create a risk of incompatible standards of conduct (b)(1)(A) or would practically dispose of others’ interests or impair them (b)(1)(B). The court treated those categories as historically narrow, and—critically—underscored that Rule 23(b)(1) classes are mandatory (no opt-out; no required notice). Under Wal-Mart and Shutts, that structure is constitutionally problematic when monetary relief is individualized.

The district court had reasoned that ERISA § 502(a)(2) damages “flow to the class in bulk rather than to individual claimants.” The Fourth Circuit rejected that as an artifact of labeling: in defined contribution plans, the court said, the “bulk” figure is just an aggregate of heterogeneous account experiences; the legally meaningful injury is account-level.

C. Commonality cannot be presumed; it must be proved, including “same injury”

The district court also treated ERISA fiduciary-breach claims as “inherently” common because liability arises from plan-level conduct. The Fourth Circuit held this misapplied Wal-Mart: a common course of conduct is not enough if it does not yield a common answer that resolves an issue central to each claim, and it does not satisfy the requirement that class members suffer the “same injury.”

Two features mattered. First, the comparator dispute: if passive BlackRock funds must be compared to passive substitutes, Genworth showed multiple vintages where the BlackRock funds outperformed proposed passive comparators, implying many class members were uninjured. Second, individualized participation: daily trading ability, varying investment periods, different vintages (different glide paths and risk), and different withdrawal times create materially different injury (or no injury) profiles.

Because the district court declined to resolve comparator and injury disputes at certification, it did not perform the required “rigorous analysis” and thus erred as a matter of law.

3.3 Impact

A. Immediate procedural consequences for ERISA defined contribution litigation in the Fourth Circuit

• Rule 23(b)(1) becomes difficult for damages-centric § 502(a)(2) defined contribution claims. Plaintiffs seeking monetary make-whole relief for account losses should expect courts to push such cases toward Rule 23(b)(3) (with notice and opt-out) or require narrower, injury-homogeneous classes.
• Certification will demand a front-loaded “same injury” showing. Defendants can be expected to emphasize uninjured members, vintage-by-vintage performance, and participant timing differences as barriers to commonality.
• Comparator methodology becomes a certification battleground. By faulting the district court for postponing the “active vs passive” comparator dispute, Trauernicht signals that methodological disputes bearing on injury cannot be deferred as “merits” questions if they determine whether Rule 23(a) is satisfied.

B. Substantive ERISA implications (without changing substantive fiduciary standards)

The decision does not narrow ERISA fiduciary duties (e.g., Tibble’s monitoring obligation). Instead, it reshapes aggregation: it treats defined contribution loss claims as fundamentally account-specific for Rule 23 purposes, even though ERISA texts relief as payable “to the plan.”

C. Broader doctrinal implications and circuit tension

Trauernicht expressly aligns with decisions viewing defined contribution § 502(a)(2) losses as individualized (e.g., Dorman v. Charles Schwab Corp.) and distances itself from Cedeno v. Sasson’s planwide-only remedial view. That divergence increases the likelihood of continued forum variation and potential Supreme Court attention—particularly because the dispute implicates (i) ERISA’s plan-centric remedial language, (ii) Rule 23’s mandatory vs opt-out class structure, and (iii) constitutional due-process baselines for binding absent claimants in monetary cases.

4. Complex Concepts Simplified

• Defined benefit vs defined contribution. A defined benefit plan promises a fixed payout (plan-level funding matters); a defined contribution plan promises an account whose value rises/falls with investments (account-level outcomes matter).
• ERISA § 502(a)(2) and § 409(a) “derivative” claim. A participant sues “on behalf of the plan” to recover plan losses from a fiduciary breach. In a defined contribution plan, the court treated each participant’s account value impairment as the relevant “plan loss” for measuring relief.
• Rule 23(b)(1) vs Rule 23(b)(3). Rule 23(b)(1) is a mandatory class (no opt-out; notice not required) used for narrow categories like “limited fund” or situations requiring uniform treatment. Rule 23(b)(3) is for damages cases; it requires notice and permits opt-out—protections the Supreme Court has linked to due process when money claims are individualized.
• Commonality (“same injury”). It is not enough that the defendant did one thing to everyone; class members must share an injury that can be resolved with common answers. If many members are uninjured, the class may fail commonality.
• Passive vs active funds (comparator problem). Passive funds track indexes and typically charge lower fees; active funds try to beat the market and differ in goals and risks. Courts often reject “apples-to-oranges” comparisons when evaluating alleged imprudence or loss.

5. Conclusion

Trauernicht v. Genworth Financial Inc. is a procedural turning point for ERISA defined contribution fiduciary-breach litigation in the Fourth Circuit. The court held that § 502(a)(2)/§ 409(a) monetary relief in defined contribution plans is account-specific—an “individualized monetary claim”—and therefore cannot be forced into a mandatory Rule 23(b)(1) class without the notice and opt-out safeguards associated with damages litigation. The opinion further rejects the notion that ERISA fiduciary-breach claims have “inherent” commonality, requiring instead a rigorous showing that class members suffered the same injury—particularly where performance comparisons and participant-specific investment timing may render many members uninjured. In practical terms, ERISA plaintiffs in the Fourth Circuit should expect heightened scrutiny at certification, more emphasis on comparator methodology, and increased pressure to proceed (if at all) under Rule 23(b)(3) or through more targeted, injury-cohesive class definitions.