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Foster v. Adams and Associates, Inc.

United States District Court, N.D. California

September 11, 2019

CAROL FOSTER, et al., Plaintiffs,
v.
ADAMS AND ASSOCIATES, INC., et al., Defendants.

          AMENDED RE: PLAINTIFFS' MOTION FOR CLASS CERTIFICATION Re: Dkt. No. 79

          JACQUELINE SCOTT CORLEY, UNITED STATES MAGISTRATE JUDGE

         Plaintiffs Carol Foster and Theo Foreman bring a class action suit under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001, et seq., on behalf of participants and beneficiaries of the Adams and Associates Employee Stock Ownership Plan (“ESOP”). Plaintiffs allege that Adams and Associates, Inc., Roy A. Adams, Leslie G. Adams, Daniel B. Norem, Joy Curry Norem, and The Daniel Norem Revocable Trust Dated January 9, 2002, (collectively “Defendants”) breached their fiduciary duty to the Plaintiffs, participated in prohibited transactions, and failed to make required disclosures. Plaintiffs' motion for class certification is now pending before the Court.[1] (Dkt. No. 79.) Defendants' only opposition to Plaintiffs' motion is that Plaintiff Carol Foster is not an adequate class representative. (Dkt. No. 80.) Having considered the parties' briefs and having had the benefit of oral argument on August 29, 2019, the Court GRANTS the motion for class certification as set forth below.

         BACKGROUND

         A. Factual Background

         Adams and Associates purports to be one of the “largest private sector entities involved in the federal Job Corps program.” (First Amended Complaint (“FAC”), Dkt. No. 40 at ¶ 18.[2]) Plaintiffs are participants in the Adams and Associates ESOP from October 2012 or any time thereafter who vested under the Plan terms.

         Plaintiffs' claims arise out of a transaction in or about October 2012 in which Defendants Roy A. Adams, Leslie G. Adams, and The Daniel Norem Revocable Trust dated January 9, 2002 sold 100% of the stock of Adams and Associates, Inc (“the October 2012 Transaction”) to the Adams ESOP as well as alleged subsequent breaches by the Adams ESOP fiduciaries. (Id. at ¶ 2.) Plaintiffs allege that the transaction was “not in the best interests of the ESOP participants, ” that it was “implemented by a Trustee who was a felon and was later incarcerated for stealing from other ESOPs and caused the ESOP to pay in excess of fair market value.” (Id.) Adams and Associates and Roy A. Adams, Leslie G. Adams, and Daniel Norem (“the Director Defendants”) knew and failed to disclose that the ESOP Trustee, Alan Weissman, was a felon. (Id.) As a result of Defendants' fiduciary breaches “Plaintiffs and the Class have not received all of the hard-earned retirement benefits or the loyal and prudent management of the ESOP to which they are entitled.” (Id.)

         Plaintiff Carol Foster was employed as a Security Advisor by Adams and Associates from February 2015 through March 2018 at the Treasure Island Job Corps Center in San Francisco, California. (Id. at ¶ 6.) Plaintiff Theo Foreman is a current employee of Adams and Associates, and has worked at the Treasure Island Job Corps Center in San Francisco as a Center Shift Manager since June 2009. (Id. at ¶ 7.) By virtue of Foster and Foreman's employment with Adams and Associates they became participants in the Adams ESOP under ERISA § 3(7), 29 U.S.C. § 1002(7). (Id. at ¶¶ 6-7.)

         B. Procedural Background

         Plaintiffs filed this action in May 2018 alleging that Defendants collectively committed multiple ERISA violations including (1) prohibited transactions by Roy Adams, Leslie Adams, Daniel Norem, the Norem Trust, and Weissman under 29 U.S.C. § 1106(a); (2) prohibited transactions by Roy Adams, Leslie Adams, Daniel Norem, and the Norem Trust (the “Selling Shareholder Defendants” under 29 U.S.C. §§ 1106(a)-(b); (3) breach of fiduciary duty by Weissman under 29 U.S.C. §§ 1104(a)(1)(A)-(B); (4) breach of fiduciary duty by Roy Adams, Leslie Adams and Daniel Norem under 29 U.S.C. §§ 1104(a)(1)(A)-(B), (D); (5) failure to make required disclosures by Adams and Associates under 29 U.S.C. §§ 1022, 1024(b)(1), 1104(a)(1)(A)-(B); and (6) that Roy Adams, Leslie Adams and Daniel Norem created a prohibited indemnification agreement for Weissman under 29 U.S.C. § 1110(a).[3] (Dkt. Nos. 1 & 40.) Plaintiffs seek to restore losses from the ESOP, disgorge Defendants' profits from the ESOP, and other equitable relief. (Id. ¶ 1.) Plaintiffs also request a long list of additional remedies including: (1) declaratory relief regarding each of the claims; (2) injunctive relief; (3) orders requiring disclosures and pertinent information; (4) monetary damages relating to ESOP losses; (5) equitable relief, including accountings; (6) attorney fees and costs; and (7) any further relief the Court finds appropriate. (Id. at 25-27.)

         The Court denied the motion to dismiss of Adams and Associates, Roy A. Adams, Leslie G. Adams, and Daniel B. Norem for failure to state a claim and as barred by the statute of limitations. (Dkt. No 61.) Defendants thereafter answered the complaint. (Dkt. No. 70.) The now pending motion for class certification followed. (Dkt. No. 79.)

         DISCUSSION

         Plaintiffs seek certification of a class of all participants in the Adams and Associates ESOP from October 25, 2012 or any time thereafter, who vested under the terms of the ESOP, along with the participants' beneficiaries. The class definition excludes Defendants and their immediate family, any fiduciary of the ESOP, the officers and directors of Adams and Associates, Inc. or of any entity in which a Defendant has a controlling interest, and legal representatives, successors, and assigns of any such excluded persons.

         I. Legal Standard

         “Federal Rule of Civil Procedure 23 governs the maintenance of class actions in federal court.” Briseno v. ConAgra Foods, Inc., 844 F.3d 1121, 1124 (9th Cir. 2017). To succeed on their motion for class certification, Plaintiffs must satisfy the threshold requirements of Federal Rule of Civil Procedure 23(a) as well as the requirements for certification under one of the subsections of Rule 23(b). Mazza v. Am. Honda Motor Co., 666 F.3d 581, 588 (9th Cir. 2012). Rule 23(a) provides that a case is appropriate for certification as a class action if:

(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a). “[A] party must not only be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, typicality of claims or defenses, and adequacy of representation, as required by Rule 23(a), ” but “also satisfy through evidentiary proof at least one of the provisions of Rule 23(b).” Comcast v. Behrend, 569 U.S. ...


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