Genworth 401(k) Class-Action Suit May Head to Rehearing

The U.S. 4th Circuit Court of Appeals ordered Genworth Financial Inc. to respond to a petition seeking a full-court rehearing, signaling that a recent ruling limiting class actions in 401(k) fiduciary cases may face renewed scrutiny.

In a brief order issued April 16, the 4th Circuit directed the company to file a response by April 27 to a petition for a rehearing by the full appellate court in Trauernicht v. Genworth Financial Inc. The plaintiffs filed the petition requesting an en banc rehearing on April 14, following a March decision by a three-judge panel rejecting class certification for thousands of retirement plan participants, ruling their claims were too individualized to proceed as a mandatory class action. The plaintiffs claim the 4th Circuit’s ruling represented a fundamental misinterpretation of ERISA that conflicts with the statute’s text, Supreme Court precedent and the law of every other circuit, according to their request for a rehearing.

To obtain a rehearing, according to the 4th Circuit, a petition must include an introduction stating that, in the judgment of counsel, at least one of the following circumstances exists: a material factual or legal matter was overlooked in the decision; a change in the law occurred after the case was submitted and was overlooked by the panel; the opinion conflicts with a decision of the U.S. Supreme Court, the circuit court or another court of appeals and that conflict is not addressed in the opinion; or the proceeding involves one or more questions of exceptional importance.

Dispute About How Workers Can Sue

The complaint was filed by former employees who accused Genworth of breaching its fiduciary duties under the Employee Retirement Income Security Act by offering and retaining certain BlackRock target-date funds in its 401(k) plan.

The plaintiffs argued that those funds underperformed alternative options from other providers, harming participants’ retirement savings.

A federal district court in Virginia allowed the case to proceed as a class action covering plan participants invested in the funds since 2016. The 4th Circuit reversed that decision, concluding that losses in defined contribution plans like 401(k)s depend on each participant’s individual investment choices, timing and account balances.

Because of those differences, the panel held, the claims could not be certified under a rule that allows mandatory class actions without opt-out rights.

ERISA attorneys previously told PLANADVISER that the ruling could lead plaintiffs to file fewer claims if those claims had to be filed individually, rather than as class actions.

A Broader Legal Clash

The petition now before the full court challenges the panel’s reasoning, arguing that it conflicts with longstanding interpretations of ERISA and Supreme Court precedent.

In an amicus brief filed April 14, a group of employee benefits law professors contended that the panel misread the statute by treating plan-wide fiduciary breaches as a collection of individual claims, rather than a single representative action on behalf of the plan.

Under ERISA, they wrote, participants bringing claims for fiduciary misconduct act “on behalf of the plan as a whole” and may seek recovery for “any losses” to the plan—not just those tied to their own accounts.

The three-judge panel’s approach, the brief argued, could force workers to bring separate lawsuits over the same alleged misconduct, potentially producing inconsistent results and increasing litigation costs.

The 4th Circuit’s request does not indicate that the full court will rehear the case, only that it is seeking input before deciding. Such requests are a common step when judges are weighing whether a case raises issues of exceptional importance or conflicts with existing precedent.

Genworth Financial Inc. is represented by Gibson, Dunn & Crutcher LLP and McGuireWoods LLP. The plaintiffs are represented by Miller Shah LLP and Tycko & Zavareei LLP.

The Genworth Financial Inc. Retirement and Savings Plan had 4,365 participants with nearly $960 million in assets at the end of 2024, according to its most recent Form 5500 filing.