September 22, 2021

Volume XI, Number 265

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401(k) Investment Option Challenge Heads to Ninth Circuit

Recently, in Davis v. Salesforce.com, a California district court dismissed for the second time claims alleging that the defendant 401(k) plan fiduciaries breached their ERISA fiduciary duties by retaining overpriced and underperforming investment options on the plan’s investment menu. Our previous post on that dismissal is available here.

That decision is one in a deluge of similar, recent rulings setting forth differing and sometimes discordant opinions on what is required to state a plausible ERISA fiduciary breach claim challenging defined contribution plan investment menus and recordkeeping fees.  Some, like Salesforce.com, have declined plaintiffs’ invitation to second-guess ERISA fiduciaries’ decision-making and have dismissed the claims on the grounds that allegations that cheaper or better performing, but dissimilar investments were available on the market does not raise an inference that the fiduciaries breached any fiduciary duty by retaining the plan’s investments.  Other courts have sustained the claims, allowing plaintiffs to seek discovery on the fiduciaries’ processes for selecting investment options and service providers.

Although the majority of Circuit courts that have addressed these issues have affirmed dismissal,  some have reversed dismissal and remanded for further consideration.  Thus, the noticed appeal in Salesforce.com joins the list of anticipated decisions that could provide clarity on this issue. The Second Circuit is queued to address similar issues in Cunningham v. Cornell University, et al. and Sacerdote v. New York University, and the U.S. Supreme Court has requested the views of the Acting Solicitor General on the pending petition for certiorari of the Seventh Circuit’s decision in Hughes v. Northwestern University. 

The referenced cases are: Davis v. Salesforce.com, Inc., No. 20-cv-01753 (N.D. Cal.); Cunningham v. Cornell University, et al., No. 21-88 (2d Cir.);  Sacerdote v. New York University, No. 18-2707-cv (2d Cir.); and Hughes v. Northwestern University, et al., No. 19-1401 (U.S.).

Jackson Lewis P.C. © 2021National Law Review, Volume XI, Number 139
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About this Author

Principal

Stacey C.S. Cerrone is a Principal in the New Orleans, Louisiana, office of Jackson Lewis P.C. Her practice focuses on representing employers in workplace law matters, including preventive advice and counseling.

Practices

  • Employee Benefits

Admitted to Practice

  • 5th Circuit Court of Appeals, 1998
  • 6th Circuit Court of Appeals, 2014
  • Louisiana - E.D. La., 1999
  • Louisiana - M.D. La., 1998
  • Louisiana - W.D. La., 1998
  • Louisiana, 1998
504-208-1755
Associate

Lindsey H. Chopin is an Associate in the New Orleans, Louisiana, office of Jackson Lewis P.C. and a member of the firm’s ERISA Complex Class Action, Employee Benefits and Class Action groups.

Ms. Chopin focuses her practice on the defense of complex ERISA class-actions filed against public and private single employer ERISA plan sponsors and fiduciaries, as well as multi-employer plans and fiduciaries and ERISA plan services providers.  She has litigated a wide variety of class action claims, including 401(k) fee claims,...

504-208-1755
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