Because it establishes standards that must be followed by employee pension and welfare benefit plans across the country, ERISA is well suited to serve as a vehicle for class actions. However, one fly in the class action ointment is the requirement imposed by the federal judiciary that an individual bringing a claim for benefits must exhaust prelitigation appeals to the plan and its fiduciaries. Defendants in ERISA class actions routinely argue that all members of an ERISA plan must exhaust their prelitigation appeals before they can be part of the class. Adopting that argument would, as a practical matter, eliminate the possibility of bringing class actions in ERISA cases. Fortunately, most courts that have considered this argument have rejected it and allowed the case to go forward as a class action as long as the class representatives, as opposed to all class members, have exhausted their prelitigation appeals.
That position was strengthened considerably by an opinion from the U.S. Seventh Circuit Court of Appeals yesterday, In Re Household International Tax Reduction Plan, 2006 U.S. App. LEXIS 6821. Judge Richard Posner wrote the decision. I’ve blogged about Judge Posner before. He wrote the short decision for the panel specifically holding that so long as the class representative's claims fairly present the issue to be adjudicated to the ERISA fiduciary and that fiduciary has an opportunity to consider the class representative's claims, further exhaustion by other class members "would merely produce an avalanche of duplicative proceedings and accidental forfeitures, and so is not required."
Judge Posner is a very influential jurist. This opinion will carry some weight among his federal courtmates