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Meiners v. Wells Fargo & Company

United States Court of Appeals, Eighth Circuit

August 3, 2018

John Meiners, on behalf of a class of all persons similarly situated, and on behalf of the Wells Fargo & Company 401(k) Plan Plaintiff- Appellant
Wells Fargo & Company; Human Resources Committee of the Wells Fargo Board of Directors; Wells Fargo Employee Benefits Review Committee; Hope Hardison; Justin Thornton; Patricia Callahan; Michael Heid; Timothy Sloan; Lloyd Dean; John Chen; Susan Engel; Donald James; Stephen Sanger Defendants - Appellees Securities Industry and Financial Markets Association; American Benefits Council; Chamber of Commerce of the United States of America; ERISA Industry Committee Amid on Behalf of Appellees

          Submitted: June 13, 2018

          Appeal from United States District Court for the District of Minnesota

          Before GRUENDER, ERICKSON, and GRASZ, Circuit Judges.

          GRASZ, Circuit Judge.

         John Meiners ("Meiners") appeals from the district court's[1] order dismissing his Complaint for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). Meiners claimed that his former employer, Wells Fargo & Company ("Wells Fargo"), and an assortment of Wells Fargo executives and entities (collectively, the "Wells Fargo Defendants") breached their fiduciary duty under the Employment Retirement Income Security Act ("ERISA"). He alleged two breaches: (1) retaining Wells Fargo's proprietary investment funds as options for Wells Fargo employees' 401(k) retirement plan (the "Plan"), and (2) defaulting to these proprietary investment funds for Plan participants who did not elect other options.

         I. Background

         Meiners sued the Wells Fargo Defendants for breach of fiduciary duty under ERISA on behalf of the Plan and on behalf of a purported class of similarly situated Plan participants. During the relevant time period, the Plan allegedly offered more than two dozen investment options, twelve of which were Wells Fargo Dow Jones Target Date Funds ("Wells Fargo TDFs"). These Wells Fargo funds were allegedly more expensive (due to higher fees) than comparable Vanguard and Fidelity funds and also underperformed the Vanguard funds.

         In his Complaint, Meiners pled three counts against the Wells Fargo Defendants: (I) Breach of Duty of Loyalty and Prudence Against the Benefit Committee; (II) Breach of Co-Fiduciary Duty Against Defendants Human Resources Committee, Hardison, and Thornton; and (III) Knowing Participation in Breach of Fiduciary Duty Against Wells Fargo. All three counts relied on Meiners's claim that the Wells Fargo Defendants breached their fiduciary duties when they failed to remove their inordinately expensive and underperforming funds from the Plan's options. Meiners further alleged that the breach occurred because the Wells Fargo Defendants were maximizing their own profits, selecting their funds as a default out of improper financial motives to generate fees and "seed" (provide financial support for) the underperforming funds.

         The Wells Fargo Defendants moved to dismiss the Complaint under Fed.R.Civ.P. 12(b)(6), and the district court granted the motion. Meiners timely appealed. We affirm.

         II. Standard of Review

         We review de novo a grant of a motion to dismiss under Fed R. Civ. P. 12(b)(6). Adams v. Am. Family Mut. Ins. Co., 813 F.3d 1151, 1154 (8th Cir. 2016). We accept the well-pled allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Schriener v. Quicken Loans, Inc., 774 F.3d 442, 444 (8th Cir. 2014). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. If the pled facts are merely consistent with liable acts, the complaint "stops short of the line between possibility and plausibility." Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). In deciding or reviewing motions to dismiss, courts may also consider those materials that are necessarily embraced by the pleadings. See Schriener, 774 F.3d at 444.

         III. Analysis

         ERISA imposes two primary duties on fiduciaries: loyalty and prudence. Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 595 (8th Cir. 2009). "[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries . . . ." 29 U.S.C. § 1104(a)(1). The fiduciary shall also discharge its duties "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims." Id. To state a claim for breach of fiduciary duty, "a plaintiff must make a prima facie showing that the defendant acted as a fiduciary, breached its fiduciary duties, and thereby caused a loss to the Plan." Braden, 588 F.3d at 594. See 29 U.S.C. § 1109.

         ERISA plaintiffs claiming a breach of fiduciary duty have a challenging pleading burden because of their different levels of knowledge regarding what investment choices a plan fiduciary made as compared to how a plan fiduciary made those choices. See Pension Benefit Guar. Corp. ex rel. St. Vincent Catholic Med. Centers Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 718-19 (2d Cir. 2013). ERISA plaintiffs typically have extensive information regarding the selected funds because of ERISA's disclosure requirements. See id. at 719-20. In contrast, they typically lack extensive information regarding the fiduciary's "methods and actual knowledge" because those details "tend to be 'in the sole possession of [that fiduciary].'" Id. at 719 (alteration in original) (quoting Braden, 588 F.3d at 598). As a result, the challenge for ERISA plaintiffs is to use the data about ...

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