Ninth Circuit Vacates Class Certification in 401(k) Fee Case, Holding District Court Failed to Rigorously Analyze Typicality and Adequate Representation While Affirming Plaintiffs’ Standing

In Munoz v. Alorica, Inc., No. 25-7359, 2026 WL 2199195 (9th Cir. July 30, 2026), former participants in the Alorica 401(K) Retirement Plan brought this action under ERISA on behalf of a putative class, alleging that Defendants breached their fiduciary duty of prudence with respect to the Plan’s investment options and its payment of recordkeeping fees. The district court granted class certification, and Defendants appealed under 28 U.S.C. § 1292(e) and Federal Rule of Civil Procedure 23(f). The Ninth Circuit vacated the certification order and remanded, while rejecting Defendants’ challenges to Plaintiffs’ standing.

The court first held that the named plaintiffs had standing to pursue claims covering investment options in which they did not personally invest. Applying Melendres v. Arpaio, 784 F.3d 1254 (9th Cir. 2015), the court reiterated that once a named plaintiff demonstrates individual standing to bring a claim, the standing inquiry concludes, and any dissimilarity in injuries between the class representative and passive class members bears on class certification rather than standing. Because both named plaintiffs invested in at least one challenged option, and Defendants conceded standing as to those options, differences among individual investment options went to certification, not Article III standing.

The court next held that Plaintiffs established standing to pursue their recordkeeping-fee prudence claim by a preponderance of the evidence. Plaintiffs offered the declaration of Rick Rodgers, AIFA, who averred that the Plan as a whole appeared to have overpaid for recordkeeping services, resulting in individual overpayments for both named plaintiffs. The court concluded that this declaration sufficed at the class certification stage to establish that the named plaintiffs suffered individual injuries from Defendants’ choice of recordkeeping services.

Although it affirmed standing, the court concluded that the district court erred by failing to conduct the rigorous analysis Rule 23 requires. On typicality, the district court focused exclusively on the recordkeeping theory and did not address whether distinctions between investment options rendered the named plaintiffs’ claims atypical of the class as to the imprudent-investment theory. Expressing no view on the merits of that question, the court held that this failure warranted vacatur. On adequate representation, the district court did not sufficiently address Defendants’ contention that Plaintiffs’ loss theory created an irreconcilable class conflict. The district court had noted that the named plaintiffs each paid less than $40 annually in recordkeeping fees, but it did not resolve Defendants’ evidence suggesting that, once recordkeeping fees were converted to asset-based fees under Plaintiffs’ loss model, certain class members would have paid higher recordkeeping fees than they actually paid during the class period. The court held that the failure to resolve this factual dispute was error under Black Lives Matter L.A. v. City of L.A., 113 F.4th 1249 (9th Cir. 2024), and Ellis v. Costco Wholesale Corp., 657 F.3d 970 (9th Cir. 2011). Because the district court did not rigorously analyze whether Rule 23’s typicality and adequate representation requirements were satisfied, the court vacated the class certification order and remanded for further proceedings.