In a significant application of Second Circuit “class standing” doctrine to ERISA service-provider litigation, the U.S. District Court for the Southern District of New York issued a ruling in Carfora v. Teachers Insurance Annuity Association of America on March 4, 2026 that limits the scope of class actions against nonfiduciary service providers under ERISA. Judge Katherine Polk Failla granted the defendants’ motion to dismiss the plaintiffs’ class claims as to approximately 9,900 retirement plans other than those in which the named plaintiffs participated, holding that the named plaintiffs lack class standing. The opinion underscores that, where a defendant’s liability turns on plan-by-plan proof of third-party fiduciary conduct, putative ERISA class actions against service providers can be materially narrowed at the pleading stage.
As addressed below, Carfora provides guidance on class standing requirements for claims alleging knowing participation in fiduciary breaches, and it will be of particular interest to ERISA plan service providers and sponsors alike.
Background of the Carfora Litigation
The initial complaint was filed in October 2021 by John Carfora, Sandra Putnam and Juan Gonzales—current or former researchers and university professors who participated in defined contribution retirement plans sponsored and administered by their employers or related entities (the “Plan Sponsors”), who are not named defendants. The Plan Sponsors retained Teachers Insurance Annuity Association of America and an affiliated entity (together, “TIAA”) to provide recordkeeping and investment-related services for their plans, including assembling menus of TIAA-affiliated investment options and providing individualized advisory services.
At the heart of the case are allegations that TIAA engaged in an aggressive cross-selling campaign, pressuring participants in employer-sponsored retirement plans to roll over their assets into a TIAA managed account program that charged higher fees than the employer-sponsored plans. Plaintiffs alleged that TIAA employed hundreds of wealth management advisors who cold-called plan participants to promote this managed account program using techniques that included exploiting participants’ “pain points” and employing misleading comparisons of investment options.
Plaintiffs sought relief on behalf of a putative class of:
All participants of defined contribution plans subject to ERISA who (i) initiated a rollover of assets from the participant’s individual plan account to any non-plan product or service affiliated with TIAA or TIAA Services at any time between January 1, 2012 and the date of judgment, (ii) for which a TIAA Services Wealth Management Advisor received credit toward an annual variable bonus under TIAA’s incentive compensation plan.
The proposed class would have covered participants in approximately 9,900 retirement plans.
Evolution of Plaintiffs’ Theory of Liability
Prior to the latest decision, the court had issued three opinions resolving earlier motions:
- Carfora v. Teachers Insurance Annuity Association of America, 631 F., Supp. 3d 125 (S.D.N.Y. 2022) (“Carfora I”) – The court dismissed the plaintiffs’ original complaint, rejecting the plaintiffs’ theory that TIAA was liable as an ERISA fiduciary.
- Carfora v. Tchrs. Ins. Annuity Ass’n of Am., No. 21 Civ. 8384 (KPF), 2023 WL 5352402 (S.D.N.Y. Aug. 21, 2023) (“Carfora II”) – Following a motion for reconsideration, the court permitted the plaintiffs to amend their complaint to pursue a different theory that TIAA is liable for knowingly participating in breaches of fiduciary duty committed by the non-defendant Plan Sponsors themselves.
- Carfora v. Tchrs. Ins. Annuity Ass’n of Am., No. 21 Civ. 8384 (KPF), 2024 WL 2615980 (S.D.N.Y. Mar. 31, 2024) (“Carfora III”) – The court then denied TIAA’s motion to dismiss this reformulated claim, holding that the plaintiffs had plausibly alleged that TIAA was a knowing participant in the Plan Sponsors’ alleged breaches.
Class Standing Denied for Participants in Other Plans
Judge Failla’s latest ruling addressed the defendants’ third motion to dismiss the plaintiffs’ claims, filed as discovery progressed, on the basis that the plaintiffs lacked standing to pursue claims on behalf of participants in the approximately 9,900 retirement plans in which the named plaintiffs themselves did not participate.
The court applied the Second Circuit’s established class standing test, which requires a named plaintiff to demonstrate that (i) the plaintiff has personally suffered actual injury as a result of the defendant’s putatively illegal conduct, and (ii) such conduct implicates “the same set of concerns” as the conduct alleged to have caused injury to other members of the putative class. The parties and the court agreed that the plaintiffs satisfied the first prong, so the dispute centered on whether TIAA’s alleged conduct gave rise to the “same set of concerns” for participants across the approximately 9,900 different plans. The court ultimately concluded that it did not.
Application of NECA and BNYM Precedent
The court analyzed the motion through the lens of two key Second Circuit precedents: NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (2d Cir. 2012) and Retirement Board of the Policemen’s Annuity & Benefit Fund of the City of Chicago v. Bank of New York Mellon, 775 F.3d 154 (2d Cir. 2014).
In NECA, the Second Circuit held that even where a defendant makes nearly identical misrepresentations across multiple securities offerings, plaintiffs may lack class standing if the misrepresentations’ falsity depends on conduct by different third parties—in that case, different mortgage loan originators. In BNYM, the Second Circuit found that class standing was lacking for breach of fiduciary duty claims where the claims had to be proved “loan-by-loan and trust-by-trust.”
The court characterized the instant case as “NECA-plus” and “BNYM-plus,” reasoning that the inquiry into third-party conduct here—i.e., how 9,900 different plan sponsors reacted to TIAA’s communications—was even more complex than in those precedents.
The Critical Role of Plan-Specific Inquiries
Central to the court’s analysis was the fact that the plaintiffs’ claims required proof of fiduciary breaches by plan sponsors and administrators, which necessitates a highly context- and plan-specific inquiry. Under ERISA, a plan sponsor must act “with the care, skill, prudence, and diligence under the circumstances then prevailing.” The court emphasized that this standard requires evaluation of the sponsor’s process, not merely its results.
The court found that proving whether each plan sponsor breached its fiduciary duty would require examining, at minimum,
- the extent of cross-marketing activity as to each specific plan;
- the number of participant rollovers out of each plan;
- each plan sponsor’s process for monitoring the activity; and
- the interactions each plan sponsor had with TIAA regarding its cross-marketing
Notably, the Court relied on the plaintiffs’ own discovery conduct to support its class standing determination. During the litigation, the plaintiffs served subpoenas on numerous third-party plan sponsors—including those who sponsored plans in which the named plaintiffs did not participate—seeking documents related to how those plans addressed TIAA’s alleged conduct. Many of those third-party plan sponsors objected to these requests, and the court ultimately denied the bulk of the plaintiffs’ consolidated motion to compel on February 12, 2026. Significantly, at a conference, the plaintiffs acknowledged that through these discovery efforts they were “trying to . . . see which plans were addressing this problem and which ones weren’t and how they were handling them.” The court found this admission telling, noting that it suggested even the plaintiffs recognized they could not plead uniform breach among plan sponsors. Plaintiffs also conceded that they had “already” seen through their limited discovery that “different plans have treated th[e] issue” distinctly. The court reasoned that extending class standing to the named plaintiffs would require the same plan-by-plan inquiry across approximately 9,900 plans—an undertaking the named plaintiffs could not possibly be incentivized to perform given the significant time and cost associated with each such inquiry.
Common Conduct Insufficient
The plaintiffs argued that their allegations of TIAA’s uniform conduct across all plans should be sufficient to establish class standing. The court rejected this argument, emphasizing that under Second Circuit precedent, the class standing inquiry must consider not only the defendants’ conduct, but also the conduct of relevant third parties when that conduct determines the defendants’ liability. As the court explained, “even if Defendants’ actions were uniform, the Plan Sponsors’ reactions to them were not; but even if the reactions were uniform, the need for the court to inquire into those reactions precludes class standing.”
The court also rejected the argument that the plaintiffs had alleged “identical fiduciary breaches,” finding that at most, the plaintiffs alleged identical fiduciary duties—not identical breaches. The “generalized proof” related to TIAA’s conduct and whether it would trigger a fiduciary’s duty to act, but said nothing about the plan sponsors’ responses to that conduct.
Distinction from Other ERISA Class Actions
The court distinguished the case from other ERISA class actions where courts have found class standing, noting that those cases typically involved suits against plan fiduciaries themselves, where the harm relates to the defendants’ fiduciary processes. Here, by contrast, the ERISA fiduciaries were third party plan sponsors, shifting the focus of the inquiry away from TIAA’s conduct to the conduct of numerous nonparty plan sponsors.
Implications for Future Litigation
The court’s decision has several important implications for ERISA litigation involving nonfiduciary service providers:
- Considerations for Plan Sponsors – Plan sponsors should take note that the court’s analysis reinforces the plan-specific, context-dependent nature of the fiduciary inquiry under ERISA. The decision emphasizes that prudence is evaluated based on each sponsor’s individual process, not uniform assumptions across thousands of different organizations.
- Considerations for Service Providers and Plan Recordkeepers – The decision provides meaningful protection in the Second Circuit for service providers facing claims that they knowingly participated in plan sponsors’ fiduciary breaches. Where such claims are brought on behalf of participants across multiple plans, service providers may be able to limit the scope of class actions to only those plans in which the named plaintiffs actually participated.
- Broader Class Standing Principles – The ruling reinforces that under Second Circuit precedent, common conduct by defendants alone is insufficient to establish class standing where defendants’ liability depends on individualized inquiries into third-party conduct. This principle may have implications beyond the ERISA context.
Conclusion
Carfora v. TIAA represents a significant development in class standing jurisprudence for ERISA claims. While the ruling does not dismiss the named plaintiffs’ individual claims, it substantially narrows the potential scope of the litigation by limiting claims to only those plans in which the named plaintiffs participated. The court has directed the parties to submit a joint letter concerning proposed next steps in the case by March 27, 2026.
Service providers, plan sponsors and their counsel should continue to monitor this case as it proceeds, as well as any appellate review of the class standing ruling. The decision provides important guidance on structuring defenses to knowing participation claims and underscores the continued significance of the NECA and BNYM framework in the class standing analysis.
