A federal appeals court in St. Louis upheld a U.S. District Court judge's dismissal of an ERISA breach claim against Wells Fargo & Co. by a participant in the company's 401(k) plan, who alleged fiduciaries could have offered a better-performing nonproprietary investment choice.
The complaint "failed to plausibly allege a breach of fiduciary duty," according to the unanimous ruling by a three-judge panel. "The complaint failed to state a claim upon which relief can be granted."
In the case of Meiners et al. vs. Wells Fargo & Co et al., a U.S. District Court Judge in Minneapolis had dismissed the complaint in May 2017.
The participant, John Meiners, had argued that including the Wells Fargo Dow Jones Target Date Funds series was an ERISA violation because a similar target-date series from Vanguard Group had better returns.
"A comparison of the returns of two different funds is insufficient" to prove a fiduciary breach, U.S. District Court Judge David S. Doty wrote. The Wells Fargo series, he noted, had a higher allocation of bonds than the Vanguard series.
"The District Court correctly determined that Meiners' omission of any meaningful benchmark in his complaint mean that he failed to allege any facts showing the Wells Fargo [target-date funds] were an imprudent choice," the appeals court wrote. "As a result, Meiners' complaint failed to state a claim for relief under ERISA and we affirm its dismissal."
The Wells Fargo & Co. 401(k) Plan had $45.9 billion in assets as of Dec. 31, 2017, according to its latest 11-K filing.
Robert Steyer is a reporter for InvestmentNews' sister publication Pensions & Investments.