                           In the

 United States Court of Appeals
                For the Seventh Circuit

No. 09-3001

G ARY S PANO , et al.,
                                           Plaintiffs-Appellees,
                              v.

T HE B OEING C OMPANY, et al.,
                                       Defendants-Appellants.

No. 09-3018

P AT B EESLEY, et al.,
                                           Plaintiffs-Appellees,
                              v.

INTERNATIONAL P APER C OMPANY, et al.,

                                       Defendants-Appellants.


            Appeals from the United States District Court
                for the Southern District of Illinois.
Nos. 06-0743-DRH and 06-0703-DRH—David R. Herndon, Chief Judge.


       A RGUED M AY 27, 2010—D ECIDED JANUARY 21, 2011




  Before B AUER, W OOD , and T INDER, Circuit Judges.
2                                    Nos. 09-3001 & 09-3018

   W OOD , Circuit Judge. Employer-supported, defined-
contribution plans, including those commonly known
as 401(k) plans, play a vital role in the retirement
planning of millions of Americans. The Employee Re-
tirement Income Security Act of 1974 (“ERISA”), 29 U.S.C.
§ 1001 et seq., uses the following definition for such a plan:
    The term “individual account plan” or “defined
    contribution plan” means a pension plan which pro-
    vides for an individual account for each participant
    and for benefits based solely upon the amount con-
    tributed to the participant’s account, and any
    income, expenses, gains and losses, and any for-
    feitures of accounts of other participants which may
    be allocated to such participant’s account.
ERISA § 3(34), 29 U.S.C. § 1002(34). In the cases we have
before us, we must decide whether complaints chal-
lenging the practices of two such plans were properly
certified as class actions.
  In Spano, et al. v. The Boeing Company, et al., No. 09-3001,
the plaintiffs complain that Boeing breached its fiduciary
duties to participants in The Boeing Company Voluntary
Investment Plan (the “Boeing Plan”). Specifically, their
brief in this court asserts that the various defendants
associated with the Boeing Plan violated those enhanced
responsibilities “in three general respects: [1] causing the
Plan to pay excessive fees and expenses, both through
contract fees and revenue sharing payments from
mutual funds included in the Plan; [2] including impru-
dent investment options in the Plan; and [3] concealing
from participants material information regarding Plan
Nos. 09-3001 & 09-3018                                    3

fees and expenses and Plan investment options.” Br. for
Appellees, No. 09-3001, at 4. Several participants in the
Boeing Plan (to whom we refer as the Spano plaintiffs, after
lead plaintiff Gary Spano) sued The Boeing Company, the
Employee Benefits Plans Committee, Scott M. Buchanan
(Director of Benefits Delivery for the Boeing Plan), and
the Employee Benefits Investment Committee, individ-
ually and as representatives of an alleged class, seeking
relief under ERISA §§ 409, 502(a)(2) and (3), 29 U.S.C.
§§ 1109, 1132(a)(2) and (3). (We refer to these defendants
collectively as “Boeing” unless the context requires other-
wise.) After considerable procedural activity had taken
place, the district court granted the plaintiffs’ motion to
certify a class under Federal Rule of Civil Procedure
23(b)(1). Boeing asked this court to accept an appeal
from that decision, as we are entitled to do under
Rule 23(f). We agreed to do so.
  At approximately the same time, a nearly identical
lawsuit was proceeding before the same district court
judge on behalf of participants in two defined-contribu-
tion plans sponsored by the International Paper Com-
pany. A group of individual plaintiffs led by Pat Beesley
sued International Paper, the International Paper 401(k)
Committee, the International Paper Fiduciary Review
Committee, and a group of individual defendants who
were involved with the operations of the 401(k) plans.
(We refer to these defendants collectively as “IP.”) Al-
though International Paper offered two defined-contribu-
tion plans, one known informally as the Hourly Plan
and the other as the Salaried Plan, everyone agrees that
there is no material difference between the two, and so
4                                      Nos. 09-3001 & 09-3018

our discussion does not distinguish between them. Like
their counterparts in the Boeing litigation, the Beesley
plaintiffs accused IP of “causing the Plans to pay excessive
fees; maintaining imprudent investment options in the
Plans; and miscommunicating to participants about Plan
investment options.” Br. for Appellees, No. 09-3018, at 5.
The district court, in an order entered on the same day
as the one it issued in the Boeing case, certified an
identical class under Rule 23(b)(1). IP also filed a request
for interlocutory review under Rule 23(f); we granted that
request and consolidated the two cases together for
disposition.
  The class definitions adopted by the district court in
each of these cases are the same in all material respects.
For convenience, we set forth only the description of
the class that was certified in the Boeing litigation:
    All persons, excluding the Defendants and/or other individ-
    uals who are or may be liable for the conduct described in
    this Complaint, who are or were participants or benefi-
    ciaries of the Plan and who are, were or may have
    been affected by the conduct set forth in this Com-
    plaint, as well as those who will become participants
    or beneficiaries of the Plan in the future.
(Emphasis in original.) A primary assertion in both
Boeing’s and IP’s appeals is that this class definition
fails to meet the standards of Rule 23(c)(1)(B), which
requires an order certifying a class to “define the class
and the class claims, issues, or defenses . . . .” FED. R. C IV .
P. 23(c)(1)(B). This definition, they argue, is so diffuse
as to be no definition at all. In addition, both sets of
Nos. 09-3001 & 09-3018                                    5

defendants assert that the district court erred when it
concluded that this class met the criteria of Rule 23(a) (in
particular, the commonality, typicality, and adequacy
requirements—numerosity is conceded), and when it
found that this case should be treated as a mandatory
class action under Rule 23(b)(1), either because indi-
vidual treatment risked the establishment of inconsistent
standards of conduct for the defendants, F ED. R. C IV.
P. 23(b)(1)(A), or because individual cases would, as a
practical matter, be dispositive of the claims of non-
parties, F ED. R. C IV. P. 23(b)(1)(B).
  The submissions of both sides bring to mind the phe-
nomenon of ships passing in the night. The Spano and
Beesley plaintiffs insist that they are raising common
questions that are perfectly suited for class treatment and
accuse Boeing and IP of taking the position that class
treatment is never permissible for a defined-contribution
plan, since each employee chooses which instruments
to include in his or her account and how much to in-
vest. Neither the plaintiffs nor the district court spent
much time defending the actual class that the district
court certified. The defendants, for their part, protest
that they would not dream of taking any such rigid
position, but by the time they have finished cutting
away at the plaintiffs’ assertions, it is hard to see what
is left. Both sides have support from amici curiae: the
Secretary of Labor and a consortium including the Ameri-
can Association of Retired Persons, the Pension Rights
Center, and the National Senior Citizens Law Center
support the plaintiffs, while the Chamber of Commerce
of the United States supports the defendants.
6                                     Nos. 09-3001 & 09-3018

   In order to sort all of this out, we begin with one critical
observation: our task is to review only the class certifica-
tion orders issued by the district court in these two
cases. We are not here to review any or all hypothetical
orders that the court might have crafted. Our opinion
therefore steers away from absolute statements of any
kind, either to the effect that all of these cases are inher-
ently class actions, or that none of them is. On that under-
standing, we examine both the substantive law on
which the plaintiffs are relying and Federal Rule of Civil
Procedure 23. With that background in place, we turn
to the question whether these two orders can stand, or
if they must be vacated.


                               I
  As we noted earlier, this suit arises under ERISA, and in
particular section 502(a)(2), 29 U.S.C. § 1132(a)(2). The
plaintiffs also allude to section 502(a)(3), 29 U.S.C.
§ 1132(a)(3), however, and so we set forth most of sub-
part (a) in the interest of providing the necessary context:
    (a) Persons empowered to bring a civil action
    A civil action may be brought—
    (1) by a participant or beneficiary—
        (A) for the relief provided for in subsection (c) of
        this section, or
        (B) to recover benefits due to him under the terms
        of his plan, to enforce his rights under the terms
        of the plan, or to clarify his rights to future bene-
        fits under the terms of the plan;
Nos. 09-3001 & 09-3018                                      7

    (2) by the Secretary, or by a participant, beneficiary
    or fiduciary for appropriate relief under section 1109
    of this title;
    (3) by a participant, beneficiary, or fiduciary (A) to
    enjoin any act or practice which violates any provi-
    sion of this subchapter or the terms of the plan, or
    (B) to obtain other appropriate equitable relief (i) to
    redress such violations or (ii) to enforce any provi-
    sions of this subchapter or the terms of the plan; . . . .
ERISA § 502(a), 29 U.S.C. § 1132(a). Focusing for now on
section 502(a)(2), we find a cross-reference to the part of
the statute codified at 29 U.S.C. § 1109, which is ERISA
section 409. The critical part appears in section 409(a),
the pertinent part of which reads as follows:
    (a) Any person who is a fiduciary with respect to a
    plan who breaches any of the responsibilities, obliga-
    tions, or duties imposed upon fiduciaries by this
    subchapter shall be personally liable to make good to
    such plan any losses to the plan resulting from each
    such breach, and to restore to such plan any profits
    of such fiduciary which have been made through
    use of assets of the plan by the fiduciary, and shall
    be subject to such other equitable or remedial relief
    as the court may deem appropriate, including removal
    of such fiduciary.
ERISA § 409(a), 29 U.S.C. § 1109(a).
  Notably, it is only section 502(a)(2) that gives a partici-
pant a right to sue for a breach of fiduciary duty. Section
502(a)(1) provides the authority to sue to recover
8                                    Nos. 09-3001 & 09-3018

benefits, and section 502(a)(3) focuses on the right to
obtain equitable relief for violations of ERISA or of the
plan. Both the Spano plaintiffs and the Beesley plain-
tiffs alleged breaches of fiduciary duty in their com-
plaints. It is for that reason that most of the attention
both in the district court and in this court has appropri-
ately been on subpart (a)(2).
   A company establishing a pension plan has a choice of
two models: a defined-benefit plan, or a defined-contribu-
tion plan. The former plans assure participants whose
rights had vested that they will receive a specified pay-
out upon retirement, while the latter plans make no
such promise. For many years, most retirement plans
took the form of a defined-benefit plan, and this fact is
reflected in the earlier Supreme Court decisions in this
area. In Massachusetts Mutual Life Insurance Co. v. Russell,
473 U.S. 134, 148 (1985), the Court held that a fiduciary
to a defined-benefit plan could not be held personally
liable to a plan participant or beneficiary for damages
that resulted from improper or untimely processing of
benefit claims. (The plaintiff there had no claim under
section 501(a)(1) because the plan had already paid all
retroactive benefits that were due.) Instead, the Court
held, “[T]he entire text of § 409 persuades us that Congress
did not intend that section to authorize any relief ex-
cept for the plan itself.” Id. at 144. Earlier in the opinion,
it had explained that the drafters of ERISA “were
primarily concerned with the possible misuse of plan
assets, and with remedies that would protect the entire
plan, rather than with the rights of an individual bene-
ficiary.” Id. at 142. The key fiduciary duties that the
Nos. 09-3001 & 09-3018                                     9

statute addressed, it added, “relate to the proper man-
agement, administration, and investment of fund
assets, the maintenance of proper records, the disclosure
of specified information, and the avoidance of conflicts
of interest.” Id. at 142-43.
  These rules apply in a straightforward way to defined-
benefit plans. Employers typically hold a pool of assets
in trust for the plan, and that plan is administered by
trustees who are fiduciaries with respect to those assets.
ERISA § 403(a), 29 U.S.C. § 1103(a); see also ERISA
§ 3(14)(A), 29 U.S.C. § 1002(14)(A) (defining fiduciary to
include “any administrator, officer, trustee, or custodian”).
Russell held that section 502(a)(2) applies only if there is
a plan-wide breach, although the Court had no need
to consider what might amount to injury to the plan
outside the context of defined-benefit plans. 473 U.S. at
139-48; see also ERISA § 409(a), 29 U.S.C. § 1109(a) (re-
quiring the fiduciary to “make good to such plan” and
to “restore to such plan any profits” in the event that a
breach was proven). Restoring funds to the plan, for a
defined-benefit plan, assures that the plan will have
enough funds to remain actuarially sound. Each partici-
pant is affected in the same way by anything that dimin-
ishes the fund’s assets.
  More than twenty years later, the Court found it neces-
sary to decide how these principles apply to defined-
contribution plans. In LaRue v. DeWolff, Boberg & Associates,
Inc., 552 U.S. 248 (2008), it had before it the case of a
participant, LaRue, in an ERISA-regulated 401(k) retire-
ment savings plan—that is, a defined-contribution plan—
10                                  Nos. 09-3001 & 09-3018

who alleged that the plan’s fiduciaries had failed to
carry out his directions to make certain changes to the
investments in his individual account. That failure,
LaRue asserted, depleted his interest in the plan by ap-
proximately $150,000 and amounted to a breach of fidu-
ciary duty. As relief, he sought an order requiring the
fiduciaries to restore the $150,000 to the plan’s assets
that were designated for his account. Both the district
court and the court of appeals thought that the de-
fendants (the employer and the plan) were entitled to
judgment on the pleadings. They reasoned that any
relief that LaRue might receive would be personal to
him, rather than on behalf of the plan as a whole, and
thus that Russell barred his action.
  The Supreme Court saw matters otherwise. It began
by assuming that the defendants had breached their
fiduciary obligations and that those breaches had an
adverse impact on the value of the plan assets in
LaRue’s individual account. It then made the critical
statement that “the legal issue under § 502(a)(2) is the
same whether [LaRue’s] account includes 1% or 99% of
the total assets in the plan.” Id. at 253. That part of
ERISA, it noted, “authorizes the Secretary of Labor as
well as plan participants, beneficiaries, and fiduciaries,
to bring actions on behalf of a plan to recover for viola-
tions of the obligations defined in § 409(a).” Id. It
reviewed those obligations, underscoring that the
fiduciary duties under section 409 “relate to the plan’s
financial integrity and reflect a special congressional
concern about plan asset management.” Id. (quoting Varity
Corp. v. Howe, 516 U.S. 489, 511-12 (1996)) (internal quota-
Nos. 09-3001 & 09-3018                                   11

tion marks and modifications omitted). LaRue, it then
stated, had alleged misconduct that fell “squarely within
th[e] category” identified in Russell and Varity. LaRue,
552 U.S. at 253.
  The Court recognized that there was language in
Russell that might have pointed the other way, but it
distinguished Russell as a case in which the plaintiff
had “received all of the benefits to which she was con-
tractually entitled, but sought consequential damages
arising from a delay in the processing of her claim.” Id. at
254. In elaborating on the difference between Russell
and LaRue, the Court stressed the fact that the rules
operate somewhat differently, depending on whether the
plan uses the defined-benefit or defined-contribution
model:
      The “entire plan” language in Russell speaks to the
    impact of § 409 on plans that pay defined benefits.
    Misconduct by the administrators of a defined benefit
    plan will not affect an individual’s entitlement to a
    defined benefit unless it creates or enhances the risk
    of default by the entire plan. It was that default risk
    that prompted Congress to require defined benefit
    plans (but not defined contribution plans) to satisfy
    complex minimum funding requirements, and to
    make premium payments to the Pension Benefit
    Guaranty Corporation for plan termination insur-
    ance. See Zelinsky, 114 Yale L. J., at 475-478.
      For defined contribution plans, however, fiduciary
    misconduct need not threaten the solvency of the
    entire plan to reduce benefits below the amount that
12                                   Nos. 09-3001 & 09-3018

     participants would otherwise receive. Whether a
     fiduciary breach diminishes plan assets payable to
     all participants and beneficiaries, or only to persons
     tied to particular individual accounts, it creates the
     kind of harms that concerned the draftsmen of § 409.
     Consequently, our references to the “entire plan” in
     Russell, which accurately reflect the operation of § 409
     in the defined benefit context, are beside the point
     in the defined contribution context.
LaRue, 552 U.S. at 255-56. It concluded with this holding:
“[A]lthough § 502(a)(2) does not provide a remedy for
individual injuries distinct from plan injuries, that provi-
sion does authorize recovery for fiduciary breaches
that impair the value of plan assets in a participant’s
individual account.” Id. at 256.
  Shortly after LaRue was decided, this court had the
occasion to consider its effect on a case brought by par-
ticipants in the retirement plan for employees of Baxter
International. See Rogers v. Baxter International, Inc., 521
F.3d 702 (7th Cir. 2008). Like the plans before us in
the present cases, Baxter’s plan permitted each par-
ticipant to exercise some control over the investments
in his or her individual account. Again similarly to the
plans in our case, the Baxter plan and its trustees
limited what investment vehicles the plan would offer
to its participants and when trading could occur. One
of the funds in which the plan permitted employees to
invest was comprised exclusively of Baxter’s own stock.
On two occasions, however, the value of Baxter’s stock
dropped. Based at least in part on those incidents, a
Nos. 09-3001 & 09-3018                                   13

plaintiff class sued Baxter and the plan’s trustees under
ERISA section 502(a)(2), arguing that they had violated
their fiduciary duties to the class by continuing to offer
the Baxter stock fund as an investment when they knew
it was overvalued in the market. After the district
court denied the defendants’ motion to dismiss on the
ground that there was no right of action for losses
limited to individual accounts, this court accepted an
interlocutory appeal under 28 U.S.C. § 1292(b). We held
the case until LaRue was released. At that point, we
acknowledged that LaRue held “that § 502(a)(2), and thus
§ 409(a), may be used by the beneficiary of a defined-
contribution account that suffers a loss, even though
other participants are uninjured by the acts said to consti-
tute a breach of fiduciary duty.” Rogers, 521 F.3d at 705.
We remanded for further proceedings, underscoring
the fact that our holding was limited to a finding that a
right of action for individual plan participants exists
in theory under section 502(a)(2) and alerting the
district court to a number of hurdles the plaintiffs had
yet to clear. Id. at 705-06. The Rogers opinion had nothing
to say about the plaintiffs’ effort to proceed as a class.


                             II
  All of that suggests that at a high level of generality
the theory that the plaintiffs are advancing in these two
cases is a sound one. But we must not get ahead of our-
selves. Unlike LaRue, which was a case brought on an
individual basis, the Spano and Beesley plaintiffs are
attempting to proceed as classes. And the propriety of
14                                 Nos. 09-3001 & 09-3018

the district court’s order certifying these two classes is
the only question presently before us.
   While LaRue leaves no doubt that plan beneficiaries
are entitled to resort to section 502(a)(2) after a breach
of fiduciary duty reduces the value of plan assets in
their defined-contribution accounts, that tells us very
little about whether or under what circumstances em-
ployees resorting to section 502(a)(2) may properly
proceed as a class under Federal Rule of Civil Procedure
23. To determine whether class treatment is appropriate,
we must distinguish between an injury to one person’s
retirement account that affects only that person, and an
injury to one account that qualifies as a plan injury. The
latter kind of injury potentially would be appropriate
for class treatment, while the former would not.
  We know from Russell that a plan’s failure to process
a particular claim properly or promptly falls in the
former category, at least where the plan eventually
pays everything to which the employee is entitled. If
the benefits are never paid, such a person would presum-
ably be entitled to sue under section 502(a)(1). The Ninth
Circuit’s decision in Wise v. Verizon Communications
Inc., 600 F.3d 1180, 1189-90 (9th Cir. 2010), describes
another individual injury, suffered when a fiduciary
allegedly mishandled a claim under a long-term
disability plan.
  The latter kind of injury—one that has a plan-wide
effect, in the sense that the loss of benefits occurring
in one account diminishes the plan assets as a whole—
is well described in one of our pre-LaRue decisions,
Nos. 09-3001 & 09-3018                                   15

Harzewski v. Guidant Corp., 489 F.3d 799 (7th Cir. 2007).
There we considered a case in which employees of
Guidant Corporation complained that the price of
Guidant stock in their defined-contribution plan had
been inflated by a fraud committed by the company’s
managers. After concluding (consistently with LaRue)
that participants who had retired and cashed out their
plan benefits were entitled to sue under section 502(a)(2),
we explained how those participants might have been
injured by a breach of fiduciary duty on Guidant’s part.
If, we said, “Guidant by imprudent management caused
the account to be half as valuable as it would have
been under prudent management,” then the employees
would have been injured to that extent. 489 F.3d at 804.
Another situation in which the plan as a whole is
injured at the same time as the individual employee
arises when the entity responsible for investing the
plan’s assets charges fees that are too high. Inflated fees
leave less money left over for investing in shares of stock,
or mutual funds, or bonds, or whatever else the plan
has offered. At year’s end, and at career’s end, the em-
ployee’s portfolio will be worth less because plan
assets were burned up in transaction costs. Finally,
there could be situations in which the plan has been
reckless in its selection of investment options for its
employees, offering nothing but junk-rated bonds or
highly leveraged packages. One might say that em-
ployees are never forced to participate in the plan spon-
sored by their employer, but such a statement would
prove too much. ERISA encourages employers to sup-
port retirement funds; many employers dangle the
16                                  Nos. 09-3001 & 09-3018

carrot of employer matching at some level; and em-
ployees have a statutory entitlement to fiduciary care
from their plans.
  The question whether to certify a class asserting
section 502(a)(2) claims is, however, a complex one if
the underlying plan takes the defined-contribution form.
Consider, for example, the circumstances of LaRue itself.
One of the employee’s rights under the plan in that
case was to choose among the investment vehicles offered
by the plan and to shift money around as he wished,
in accordance with specified procedures. The plan, how-
ever, did not carry out his instructions, and so he
earned $150,000 less than he would have if his funds
had been shifted to a more profitable investment. It is
not at all clear that his injury, even though it affected
the plan as a whole, was shared by any other participant
in that plan. Perhaps no one else was interested in the
same funds. Maybe all other instructions were carried
out promptly. In either of those two situations, class
treatment seems out of the question. If, however, the
plan fiduciaries had simply stopped implementing all
investment directions for a period of time, then it is
more likely that a class could be formed. The propriety
of class treatment thus will turn on the circumstances
of each case.
   To determine whether the Spano and Beesley plaintiffs
may proceed as a class, we must therefore turn from the
law of ERISA to Rule 23 of the Federal Rules of Civil
Procedure, to see whether the district court abused
its discretion by certifying the class it defined. (We recog-
Nos. 09-3001 & 09-3018                                  17

nize that the parties do not agree whether the normal
abuse-of-discretion standard applies here, see Andrews
v. Chevy Chase Bank, 545 F.3d 570, 573 (7th Cir. 2008),
or whether a more stringent de novo standard is appro-
priate because pure legal questions underlie the court’s
decision. We see little practical difference in the two
standards for this case, and so we will use the normal
abuse-of-discretion approach.) In order to go forward,
the proposed class must meet the four prerequisites
set forth in Rule 23(a), and it must fall within one of
the three general categories recognized by Rule 23(b).
  While Rule 23 is well known to litigation specialists, it
is worth reviewing exactly what it requires before pro-
ceeding to decide this case. The relevant part of the
rule reads as follows:
   (a) Prerequisites. One or more members of a class
   may sue or be sued as representative parties on
   behalf of all members only 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 ade-
       quately protect the interests of the class.
   (b) Types of Class Actions. A class action may
   be maintained if Rule 23(a) is satisfied and if:
18                                  Nos. 09-3001 & 09-3018

        (1) prosecuting separate actions by or against
        individual class members would create a risk of:
            (A) inconsistent or varying adjudications
            with respect to individual class members that
            would establish incompatible standards of
            conduct for the party opposing the class; or
            (B) adjudications with respect to individual
            class members that, as a practical matter,
            would be dispositive of the interests of the
            other members not parties to the individual
            adjudications or would substantially impair
            or impede their ability to protect their inter-
            ests;
        (2) the party opposing the class has acted or re-
        fused to act on grounds that apply generally
        to the class, so that final injunctive relief or cor-
        responding declaratory relief is appropriate re-
        specting the class as a whole; or
        (3) the court finds that the questions of law or
        fact common to class members predominate
        over any questions affecting only individual mem-
        bers, and that a class action is superior to other
        available methods for fairly and efficiently adjudi-
        cating the controversy. . . .
F ED. R. C IV. P. 23. In short, all classes must satisfy the
Rule 23(a) criteria of numerosity, common questions of
law or fact, typicality of claims or defenses, and adequacy
of representation. If they do, then they must also be
either (1) a mandatory class action (either because of the
Nos. 09-3001 & 09-3018                                    19

risk of incompatible standards for the party opposing
the class or because of the risk that the class adjudica-
tion would, as a practical matter, either dispose of the
claims of non-parties or substantially impair their inter-
ests), (2) an action seeking final injunctive or declaratory
relief, or (3) a case in which the common questions pre-
dominate and class treatment is superior.
  Before certifying a class, the district court must do
more than review a complaint and ask whether, taking
the facts as the party seeking the class presents them,
the case seems suitable for class treatment. We expressly
disapproved of this approach in Szabo v. Bridgeport Ma-
chines, Inc., 249 F.3d 672, 675 (7th Cir. 2001). As we ex-
plained there, “[A]n order certifying a class usually is
the district judge’s last word on the subject; there is no
later test of the decision’s factual premises (and, if the
case is settled, there could not be such an examination
even if the district judge viewed the certification as pro-
visional). Before deciding whether to allow a case to
proceed as a class action, therefore, a judge should
make whatever factual and legal inquiries are necessary
under Rule 23.” Id. at 676. If some of the determina-
tions required by Rule 23 cannot be made without a look
at the facts, then the judge must undertake that inves-
tigation.
  At the end of that process, if the court concludes that
class certification is proper, it must issue a certification
order. For present purposes, the most important part of
that order is the place where it defines the class. See F ED.
R. C IV. P. 23(c)(1)(B). This is a vital step. Both the scope
20                                  Nos. 09-3001 & 09-3018

of the litigation and the ultimate res judicata effect of the
final judgment depend on the class definition. If the
unnamed members of the class have received constitu-
tionally adequate representation, then the judgment in
the class action will resolve their claims, win or lose. See
Cooper v. Federal Reserve Bank of Richmond, 467 U.S. 867
(1984).
  The Third Circuit faced a case quite similar to ours in
In re Schering Plough Corporation ERISA Litigation, 589
F.3d 585 (3d Cir. 2009), and we find much of its
reasoning helpful. In Schering, Wendel, a former em-
ployee of Schering-Plough who participated in its defined-
contribution plan, wanted to bring a class action
against Schering-Plough and some of its officers and
directors under ERISA section 502(a)(2). The plan used
the familiar self-directed individual account; it permitted
participants to choose among a variety of investment
funds, including the Schering-Plough Stock Fund, and
to contribute up to 50% of their pre-tax compensation
to one or more funds. This case was another stock-
drop case, filed after the value of Schering-Plough
declined significantly over two years (from $60 per share
to less than $20 per share). The district court certified
the following class: “[A]ll persons who were par-
ticipants in or beneficiaries of the Schering-Plough Corpo-
rations Employees’ Savings Plan at any time between
July 29, 1998 to the present and whose accounts in-
cluded investments in Schering stock.” Id. at 593.
  After concluding that a release that Wendel had
signed upon leaving Schering was not void under ERISA
Nos. 09-3001 & 09-3018                                   21

section 410, the court turned to the question of the
release’s effect on her ability to serve as a class repre-
sentative. The release, it concluded, affected only any
individual claim that Wendel might have brought
against Schering. But a claim under section 502(a)(2)
went well beyond that, it held: “Section 502(a)(2) claims
are, by their nature, plan claims.” Id. at 594. If the right
of action belongs to the plan, then only one who is
entitled to speak for the plan could release it; Wendel’s
individual release could have no such effect. Id. at 595.
   That conclusion, however, merely cleared the way to
the court’s consideration of both the propriety of the
class certification and Wendel’s ability to serve as a
class representative. The court found no problem with
either the numerosity element (over 10,000 people par-
ticipated in the Schering-Plough Stock Fund) or com-
monality. Among the common questions of law or fact
that it identified were these: whether the defendants
were fiduciaries; whether they breached their duties to
the plan by failing to conduct an appropriate investiga-
tion into the soundness of Schering’s stock; whether
they breached their duties by continuing to invest
in Schering stock too long; whether they failed ade-
quately to monitor the plan’s investment committee de-
fendants; whether they erred by failing to hire
independent fiduciaries; and whether their breaches
caused plan losses. Id. at 597. It was with typicality and
adequacy of representation that Wendel’s class failed.
Although Wendel’s legal claims appeared to be identical
to those of the class she sought to represent, the release
that she signed gave rise to a possible defense that was
22                                   Nos. 09-3001 & 09-3018

unique to her; indeed, it was possible that she might
not have a monetary stake in the outcome at all. The
court was also concerned that the record showed
nothing about how many others in the putative class
might have signed comparable releases. Id. at 599-600.
With respect to adequacy, although the court had no
qualms about counsel’s competence to handle the case,
it thought that Wendel might have different incen-
tives from her fellow class members and thus a different
willingness to pursue the litigation. Id. at 602. Finally, the
court accepted the defendants’ argument that the
temporal scope of the class was not adequately defined.
Id. at 602-03. For these reasons, it vacated the class certif-
ication and remanded for further proceedings. Before
concluding, it commented that the class appeared to be
a good candidate for mandatory treatment under Rule
23(b)(1)(B), since “Wendel’s proofs regarding defendants’
conduct will, as a practical matter, significantly impact
the claims of other Plan participants . . . .” Id. at 604.


                             III
                         A. Spano
  We are now in a position to resolve the direct ques-
tions before us: whether the Spano and Beesley classes
were properly certified. We address first the Spano class.
As we noted earlier, after concluding that the require-
ments of Rule 23(a) were satisfied, the district court
went on to find that this was amenable to treatment as
a mandatory Rule 23(b)(1) class; it apparently meant to
use (b)(1)(B), since it mentioned that adjudications of
Nos. 09-3001 & 09-3018                                   23

the representative plaintiffs’ cases “would, as a practical
matter, be dispositive of the interests of the other par-
ticipants claims [sic] on behalf of the Plan,” and
that “separate actions by individual plaintiffs would
impair the ability of other participants to protect their
interests if the suit proceeded outside of a class context.”
Although Boeing’s brief has emphasized its objections
to the district court’s use of Rule 23(b)(1), we think it
best to begin with Rule 23(a) (as the Third Circuit did
in Schering) and to proceed as needed from there.
  No one has argued that the class defined by the
district court failed the numerosity requirement, nor
could anyone take that position with a straight face. As
the district court pointed out, Boeing’s 2004 filings with
the Department of Labor on behalf of the Boeing Plan
disclosed that there were 189,577 participants with
account balances. We therefore move directly to the
other three requirements under Rule 23(a).
  Rule 23(a)(2) does not demand that every member of
the class have an identical claim. It is enough that there
be one or more common questions of law or fact; sup-
plemental proceedings can then take place if, for
example, the common question relates to liability of the
defendant to a class and separate hearings are needed
to resolve the payments due to each member. The
district court highlighted two such common questions
in Spano’s case: (1) the allegedly imprudent choice of
the investment options included as part of the Boeing
Plan, and (2) the reasonableness of the administrative
fees that Boeing charged to all participants. On appeal,
24                                   Nos. 09-3001 & 09-3018

Spano adds a third point: an alleged failure to describe
the investment options accurately in materials dis-
tributed to the participants. Boeing insists that al-
though these might have been common questions if the
Boeing Plan had offered defined benefits, they lose that
character for a defined-contribution plan. Each indi-
vidual participant’s account reflects that person’s
choices among the 11 options Boeing has offered since
1997. This fact, Boeing says, destroys any commonality
that might exist.
  Boeing’s argument, in our view, proves too much. By
focusing exclusively on the final step of the defined-
contribution plan—that is, the participant’s decisions
with respect to the allocation of his or her funds—it
ignores the fact that fund participants operate against a
common background. As the Secretary of Labor empha-
sizes, the logic of LaRue compels the conclusion that
there might be plan losses in a defined-contribution
setting, and at least some of those losses might be of the
type that do not vary from participant to participant.
The assertion that Boeing imposes excessive fees on
all participants, as well as the assertion that Boeing has
failed to satisfy its fiduciary duties in its selection
of investment options, both describe problems that
would operate across the plan rather than at the in-
dividual level Cf. Hecker v. Deere & Co., 556 F.3d 575, 584-87
(7th Cir. 2009) (noting that the record showed sufficient
variety in investments and fee levels to satisfy
ERISA requirements). We thus conclude, as did our
colleagues in Schering, that the class met the com-
monality requirement of Rule 23(a)(2).
Nos. 09-3001 & 09-3018                                   25

  Matters become more difficult when we turn to
the typicality requirement of Rule 23(a)(3). The class
definition adopted by the district court is breathtaking
in its scope. Anyone, in the history of Time, who was
ever a participant in the Boeing Plan, or who in the
future may become a participant in the Boeing Plan, is
swept into this class, if he or she “may have been affected
by the conduct set forth in this Complaint.” Our starting
point for purposes of the typicality question is the
Supreme Court’s decision in General Telephone Company
of the Southwest v. Falcon, 457 U.S. 147 (1982). In that
case, the Court found that a putative class representa-
tive who asserted that he had been the victim of national-
origin discrimination in promotion did not have a
claim that was common with, and typical of, others who
had suffered discrimination in hiring. Id. at 158-59. (The
Court noted in passing that “[t]he commonality and
typicality requirements of Rule 23(a) tend to merge.” Id.
at 157 n.13.) The lesson we take from that is that there
must be enough congruence between the named rep-
resentative’s claim and that of the unnamed members
of the class to justify allowing the named party to litigate
on behalf of the group.
   Unfortunately, we cannot even assess that question
rationally for the class that the district court defined.
Reading the plaintiffs’ brief, it appears that one of their
particular objections is to the fact that Boeing included
a Technology Fund and the Boeing Stock Fund as two of
its investment options. But many participants in the
past (and who knows about the future) never held a
single share in either or both of those funds. It is inter-
26                                  Nos. 09-3001 & 09-3018

esting in this connection to contrast the Spano class defini-
tion with the one the Third Circuit found defective
in Schering: there, at least, the class was limited to people
whose accounts included Schering stock. In keeping
with the teachings of General Telephone, it seems that a
class representative in a defined-contribution case
would at a minimum need to have invested in the
same funds as the class members. It is entirely possible,
after all, that out of the 11 options a particular plan
might offer, 10 were sound and one was ill-advised
and should never have been offered. We are not saying
that this is the case with the Boeing Plan; we take no
position on that issue. But the possibility cannot be ruled
out, and thus we think that there must be a congruence
between the investments held by the named plaintiff
and those held by members of the class he or she wishes
to represent.
  The same concerns arise again when we consider ade-
quacy of representation. Like the district court, we have
no reason to question the competence of the lawyers
who are representing the class. But adequacy of repre-
sentation implicates more than that. Indeed, there is a
constitutional dimension to this part of the inquiry;
absentee members of a class will not be bound by the
final result if they were represented by someone who
had a conflict of interest with them or who was other-
wise inadequate. See Richards v. Jefferson County, Ala., 517
U.S. 793 (1996); Hansberry v. Lee, 311 U.S. 32 (1940). The
district court dismissed these concerns by repeating
the observation that the class was complaining about
the structure of the plan as a whole. That is an insuf-
Nos. 09-3001 & 09-3018                                  27

ficient answer, however, to the assertion that many mem-
bers of the class have no complaint about those funds,
in light of the dates when they first invested and the
date when they exited. It is not enough to say that the
named plaintiffs want relief for the plan as a whole, if
the class is defined so broadly that some members
will actually be harmed by that relief.
  Since the Spano class as presently defined does not
meet the criteria of Rule 23(a), we could leave it at that.
But since this is an interlocutory appeal and there is
nothing to prevent the plaintiffs from asking the
district court to certify a more-targeted class (or
perhaps more than one more-targeted class), we think
it desirable to address Rule 23(b) as well (which,
incidently, occupied the bulk of Boeing’s attention in its
briefs). The leading Supreme Court decision on
Rule 23(b)(1)(B) is Ortiz v. Fibreboard Corp., 527 U.S. 815
(1999). Although the immediate focus of the Court’s
attention was a proposed settlement class in the
seemingly eternal asbestos litigation, its analysis other-
wise applies to all class actions. See Amchem Products,
Inc. v. Windsor, 521 U.S. 591, 619-20 (1997) (pointing out
that while there is no need to be concerned with
trial management issues when evaluating a settlement
class, all other parts of Rule 23 “demand undiluted,
even heightened, attention”).
  In Ortiz, the Supreme Court cautioned strongly against
overuse of (b)(1) classes. 527 U.S. at 841-48. It con-
trasted the mandatory nature of (b)(1) classes with the
features of (b)(3) classes, under which notice to all class
28                                  Nos. 09-3001 & 09-3018

members is required, see F ED. R. C IV. P. 23(c)(2)(B),
and those notified have a right to opt out of the class if
they so desire, see F ED. R. C IV. P. 23(b)(2)(B)(v). See
Ortiz, 527 U.S. at 846-48 (citing Phillips Petroleum Co. v.
Shutts, 472 U.S. 797, 812 (1985)). The Ortiz Court also
paid heed to the command in the Rules Enabling Act, 28
U.S.C. § 2072(b), that the rules of procedure “shall not
abridge, enlarge or modify any substantive right.” See
Ortiz, 527 U.S. at 845. Too liberal an application of the
mandatory-class device risks depriving people of one
of their most important due process rights: the right to
their own day in court. Id. at 846. The primary issue in
Ortiz—whether the district court had properly identified
a limited fund—is not implicated here, but the deci-
sion’s broader teachings operate with full force.
  In Schering, the Third Circuit thought that it was fairly
easy to conclude that the plaintiffs had presented a
case that met the criteria of Rule 23(b)(1)(B) (if on remand
they could cure their 23(a) problems). But the class defini-
tion was limited to persons who had invested in the
Schering stock fund, and the allegation was a very
specific one, that the stock was overvalued because of
undisclosed problems with the company’s regulatory
compliance systems and delays in the release of a
major new product. We have no need to decide
whether, under those circumstances, we might endorse
the use of Rule 23(b)(1)(B), because Spano’s case is so
different. It is not enough to say, as the plaintiffs do
here, that they have asserted a common and undivided
interest in plan performance that was harmed by
Boeing’s conduct. Saying so does not make it so.
Nos. 09-3001 & 09-3018                                         29

  Focusing only on the class that the district court
actually certified, we cannot find the necessary identity
of interest among all class members. A claim of
imprudent management, for example, is not common if
the alleged conduct harmed some participants and
helped others, which appears to be the case. Without
the common interest, there is no reason to assume that
an adjudication of one person’s claim “as a practical
matter, would be dispositive of the interests of the
other members not parties to the individual adjudica-
tions or would substantially impair or impede their
ability to protect their interests.” FED. R. C IV. P. 23(b)(1)(B).
The plaintiffs fare no better under Rule 23(b)(1)(A), to
which they also appeal (even though the district court
does not seem to have been relying on it). That part of
the rule is concerned with the risk of inconsistent or
varying adjudications that might establish incompatible
standards of conduct for the defendant. The plaintiffs
assume that Boeing could not simultaneously offer the
Technology Fund to some people and not to others, but
we do not see why that would be a problem. Should
that ultimately be required, Boeing would simply have
to divide its plan into one or more sub-plans.
  Nothing we have said should be understood as
ruling out the possibility of class treatment for one or
more better-defined and more-targeted classes. Whether,
for such a class or classes, the strict requirements of
Rule 23(b)(1) can be met will depend on the new class
definitions. We are also not in a position to guess
whether any new class might be suitable for treatment
under Rule 23(b)(2), which also permits class treatment
30                                  Nos. 09-3001 & 09-3018

without mandatory notice and opt-out rights, but only
if the ultimate relief will be an injunction or cor-
responding declaratory relief. Otherwise, the district
court will be free to decide whether a common-question
class action under Rule 23(b)(3) may go forward.


                       B. Beesley
   Much of what we have said about the Spano class
applies with equal force to the Beesley class. The defini-
tion endorsed by the district court was identical to the
one in the Spano class, except that instead of referring
simply to “the Plan,” it said “the Salaried Plan or the
Hourly Plan,” reflecting the fact that the suit related to
the two plans that IP sponsored. As in Spano, no one
contests the fact that the plaintiffs have met the numer-
osity requirement of Rule 23(a)(1); the two IP plans had
approximately 71,291 participants as of 2006. IP’s chal-
lenges to the commonality requirement of Rule 23(a)(2)
mirror those presented by Boeing. For example, IP
takes the position that the individual nature of each par-
ticipant’s investment decisions, and also the individual
response each person might have had to the alleged
misrepresentations, preclude a finding that common
questions of law or fact exist. But this assumes that
every question must be common, and, as we have dis-
cussed, that is not what Rule 23(a)(2) demands. The plan-
wide communications about which the Beesley plain-
tiffs complain either were or were not misleading.
Whether the fees charged by the plans were excessive
(either on their own, or as a result of the fee structures
Nos. 09-3001 & 09-3018                                    31

the plans used) also is common to all class members,
at least to the extent that their objection is to plan-wide
fees. Finally, the package of investment options offered
by each plan was the same for every participant. The
question whether that package was prudent, in light of
ERISA’s standards, is a common one.
   The Beesley plaintiffs, like their counterparts, encounter
trouble when they reach the typicality and adequacy
inquiries of Rule 23(a)(3) and (a)(4). Recall that the plain-
tiffs are pursuing three general theories: (a) misrepresenta-
tion; (b) imprudent investment; and (c) excessive fees. We
address them in that order.
  It is hard to be sure exactly what misrepresentation
claims have been certified (this is another flaw with the
district court’s order). The Beesley plaintiffs appear to
identify two types of misrepresentations: first, fraudulent
concealment of the imprudence of the IP Stock Fund
and the Large Cap Stock Fund; and second, concealment
of the conflict of interest that arose from the close rela-
tionship between IP and JPMorgan, the manager of most
of its funds. IP, for its part, has identified four misrepre-
sentation allegations: the use of a deliberately mis-
leading benchmark (the S&P 500 Stock Index) for
the Large Cap Stock Fund; the use of deliberately mis-
leading benchmarks (the S&P Paper and Forest
Products Index and the S&P 500 Materials Index) for the
IP Stock Fund; the publication of fraudulent reconstructed
returns for IP’s newly pooled funds; and the deliberate
description of the return potential for the IP Stock Fund
as high, at the same time as IP was unloading this stock
32                                  Nos. 09-3001 & 09-3018

for the corporate defined-benefit plan. It is not for us to
say whose description of the issues is correct. The
district court, however, should have clarified what
issues it was certifying and why Beesley’s claim was
typical for these purposes.
  IP has made a more ambitious argument: it says that
these misrepresentation theories are inherently personal
and can never be certified for class treatment. That is
because, in IP’s view, they require evidence of reliance,
and the facts pertaining to reliance will be different
for every participant. The district court rejected this
argument for two reasons: first, it noted that this court
has never expressly held that reliance is an element of
a suit under ERISA for breach of fiduciary duty; and
second, it thought that the individual questions fell by
the wayside since the allegedly misleading communica-
tions were distributed plan-wide. It seems possible to
us that some misrepresentations might be so central to
the operation of a plan that injury to someone who
held shares in the affected funds might be inferred. But
other arguments, we believe, would require precisely
the kind of individualized attention that would make
it difficult to find a class representative with claims
typical of enough people to justify class treatment. Fur-
thermore, we note that IP has conceded that this would
be a different case if the plaintiffs were seeking only
prospective injunctive relief to correct a misstatement. See
Varity Corp., 516 U.S. at 508-12. All we need say at this
juncture is that there is no guarantee in the class certified
by the district court that Beesley’s claims are typical of
those of the rest of the group.
Nos. 09-3001 & 09-3018                                  33

   The Beesley plaintiffs also argue that the IP Stock Fund
and the Large Cap Stock Fund were imprudent invest-
ments. IP is willing to admit that claims of excessive risk
or artificial inflation may permit class certification, but
it contends that the plaintiffs have made no such claims
here. As Boeing did, IP points out that any given par-
ticipant may or may not have chosen to include those
funds in his or her portfolio. It should not be blamed,
it says, if a person opted to put her money in a riskier
or more questionable fund. And more to the point, the
close-to-infinite variety of combinations in each partici-
pant’s account—varying by which investment, when
purchases were ordered, when money was shifted
from one fund to another—make this claim singularly
unattractive for class treatment.
  In Hecker, we left open the question whether a plan
could ever be liable for the selection of investment
options in a defined-contribution plan. 556 F.3d at 586-
87. In the related cases we are deciding today, Howell
v. Motorola, Inc. and Lingis v. Dorazil, Nos. 07-3837 & 09-
2796 (7th Cir. Jan. 21, 2011), we conclude that the
answer is yes. See slip op. at 32-35. But the availability
of such a claim in theory is not the same as the ability
to assert it as a class in a particular case. Here, if a
proper class can be constituted on remand with a repre-
sentative who personally held one or both of the
allegedly imprudent funds, the question on the merits
would be whether the mere existence of a fund that
is undesirable taints the entire plan, or, if more is
needed, what would that be? A showing of deliberate
misrepresentations about soundness? A showing that
34                                 Nos. 09-3001 & 09-3018

participants had such a small number of options that
they were forced into the bad fund? A showing that the
menu of options included only, or mostly, imprudent
options? Something else? An extra hurdle such a class
representative or individual plaintiff would need to
surmount in the IP litigation is the fact that IP, like
Deere in the Hecker litigation, not only offers 12
pooled funds in addition to the IP Stock Fund, but it also
makes available a brokerage window into over 11,000
publicly traded mutual funds. IP represents that par-
ticipants are free to take advantage of any of these, in
order to meet their own investment goals.
  Finally, the Beesley plaintiffs complain that the IP
plans charge excessive administrative fees. IP has con-
ceded that a claim accusing a plan of excessive, plan-
wide administrative fees may be suitable for class treat-
ment of some kind. (It has not, however, conceded that
the class definition the court used would work for this
claim, nor that such a class could be maintained under
Rule 12(b)(1).) Even this part of the case is more compli-
cated than it appears to be at first glance. The complaint
implies that some fees are fund-specific, while others
may be imposed equally on every plan participant. Preci-
sion on this point is essential to ensure that the class
representative’s claim is typical.
  As was the case with the Spano class, the class defini-
tion provided by the district court in the Beesley litiga-
tion fails to satisfy the typicality and adequacy require-
ments of Rule 23(a). As before, nothing we have said
rules out the possibility that the district court might be
Nos. 09-3001 & 09-3018                                     35

able to craft a properly defined class. If, when the
district court revisits the class certification issue, it con-
cludes that one or more classes can be defined that
meet the Rule 23(a) criteria, then it will need to
reconsider its analysis under Rule 23(b). Although the
plaintiffs have invited us to find on our own that
Rule 23(b)(2) or (b)(3) have been satisfied, we decline to
do so. Too much is up in the air, and too much work
remains to be done in the district court, before any conclu-
sions on that point are possible. Whether Rule 23(b)(1)’s
mandatory-class requirements have been satisfied, as we
said above, will depend on the new class definition
(if any) that the district court devises. As in the Spano
litigation, nothing we have said is intended to rule out
class treatment under Rule 23(b)(2) and (3) on remand.


                             IV
   Although the Supreme Court’s decision in LaRue estab-
lished the fact that a participant in a defined-contribu-
tion plan may sue under ERISA section 502(a)(2) for
damages to the plan, even if the only place those
damages are reflected is in his or her own account, there
is much that LaRue does not resolve. Importantly, LaRue
was an individual case, and so it does not answer
the question whether, or when, the kind of suit it was
addressing may proceed as a class action. In our view, it
would be inconsistent with LaRue to assume that class
actions are impossible in these cases. On the other
hand, there is no denying the fact that a greater number
of issues will be suitable for class treatment in a defined-
36                                   Nos. 09-3001 & 09-3018

benefit case than will be in a defined-contribution case.
There is greater potential for intra-class conflict in the
defined-contribution context. For example, a fund that
turns out to be an imprudent investment over a par-
ticular time for one participant may be a fine invest-
ment for another participant who invests in the same
fund over a slightly different period. If both are in-
cluded in the same class, a conflict will result and class
treatment will become untenable.
  Ortiz teaches that short-cuts in the class certification
process are not permissible. General Telephone stresses
the fact that the class representative must, at a
meaningful level of detail, stand in the same position as
the absentee members of the class. And once the court
has completed its analysis under Rule 23(a) and (b), it
must craft a definition of the class that assures that
the action will not drift beyond the boundaries the
court has drawn. The district court in these cases
certified classes that were defined so broadly that the
requirements of Rule 23(a) cannot be met. Accordingly,
additional proceedings to consider the requirements of
both Rule 23(a) and Rule 23(b) are required. We
therefore V ACATE the district court’s order certifying the
classes in both Spano, No. 09-3001, and Beesley, No. 09-3018,
and R EMAND for further proceedings consistent with
this opinion.




                           1-21-11
