RIA Compliance Blog
In October 2018, the United States District Court for the District of South Carolina granted class action certification to Robert Berry, a former financial adviser for Wells Fargo. Berry’s suit against Wells Fargo alleges that Wells Fargo did not pay the class members, other former and current Wells Fargo employees money that they were owed as deferred compensation.
According to Berry’s First Amended Class-Action Complaint, he and a number of other Wells Fargo employees were part of two deferred-compensation plans that qualified as “pension benefit plans” under the Employee Retirement Income Security Act (“ERISA”). The complaint claims that the plans failed to follow ERISA’s funding, vesting, and non-forfeitability requirements.
The plans featured a forfeiture clause that permitted Wells Fargo to forfeit an employee’s deferred compensation if the employee became associated with another “financial services business” within a three-year period after the employee retired from Wells Fargo. Berry retired from Wells Fargo in February 2014 and started his own financial firm that same month. As a result, Wells Fargo refused to pay him deferred compensation from the plans under the forfeiture clause.
Berry’s complaint seeks a declaratory judgment holding that the deferral plan does not qualify as a “top-hat” plan, or a plan targeted primarily at officers and other high-level employees. The complaint also calls for a declaratory judgment that the forfeiture clause in the plans is unenforceable. Lastly, the complaint requests damages for breach of fiduciary duty and an injunction that would cause the forfeiture clause to no longer be enforced.
Berry’s complaint seeks relief for both himself and a purported class of current and former Wells Fargo employees. The complaint alleges that the class is ascertainable because the purported members can be pinpointed using Wells Fargo’s payroll and deferred compensation records. Finally, the complaint alleges that the cases involving each class member have common questions of law and fact, such as whether ERISA is applicable to the plans and whether the forfeiture clause is unenforceable under ERISA. Berry’s complaint also requested that he be designated as the class representative.
The court determined that the purported class satisfied the conditions for certification. In his ruling, the judge noted that while the purported class did not include current plan members, he reasoned that ERISA did not obligate a purported class representative to include all plan participants. The judge also ruled that Berry would serve as class representative while his legal counsel would serve as the class’s legal counsel.
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