In ERISA Class Action, Eleventh Circuit Affirms Decision that Home Depot 401(k) Plan Participants Did Not Carry Their Burden of Proof for Fiduciary Breach Claims

In Pizarro, et al. v. The Home Depot, Inc., et al., No. 22-13643, __F.4th__, 2024 WL 3633379 (11th Cir. Aug. 2, 2024), Plaintiffs, a class of current and former Home Depot employees, appealed the district court’s grant of summary judgment to Defendants, finding that Plaintiffs did not show that Defendants’ investment choices for Home Depot’s multi-billion-dollar 401(k) retirement plan were objectively imprudent, and that Plaintiffs could not prevail on their breach of fiduciary duty claims under ERISA § 1109.

Plaintiffs allege that Defendants, fiduciaries of the 401(k) plan, breached their fiduciary duties by failing to monitor the fees charged by the plan’s financial advisor, which resulted in plan participants paying excessive costs. They also allege that Home Depot failed to prudently evaluate four investment options—BlackRock family of target date funds, JPMorgan Stable Value Fund, the TS&W Fund, and the Stephens Fund—which led Home Depot to keep the funds available despite their poor performance. Though the district court found that there were several genuine disputes of material fact as to whether Home Depot complied with its duty of prudence with respect to monitoring plan fees and three of the challenged funds, the district court found that they could not show that the violations had caused them any financial loss.

On appeal, the Eleventh Circuit addressed two questions. First, who bears the ultimate burden of proof on loss causation? And second, what must be proven to establish that element? With respect to the burden of proof, the court explained that its precedent already answers this question. There is no burden-shifting framework. See Willett v. Blue Cross & Blue Shield of Alabama, 953 F.2d 1335, 1343 (11th Cir. 1992) (noting that on remand, the burden of proof on the issue of causation rests with the plaintiffs; they must establish that the claimed losses were proximately caused by the breach). Further, ERISA does not assign the burden of proof to the defendants. Thus, the ordinary default rule applies, that is, the plaintiffs bear the burden of persuasion regarding the essential aspects of their claims.

With respect to the question of what will satisfy Plaintiffs’ burden, the court explained that they must show that the investments were not objectively prudent such that they were not investments a prudent fiduciary would also have made. With respect to the excessive fee claim, “[t]he plaintiffs offer no evidence that a hypothetical prudent fiduciary managing Home Depot’s 401(k) plan—among the largest in the nation—would have considered its financial advisors’ fees unreasonable in comparison to their competitors given their large capacity, experience with similarly sized plans, and integration with Home Depot’s recordkeeper.” With respect to the challenged investments, the court found that Plaintiffs did not offer enough evidence to show that the funds were objectively imprudent investments. “Here, the plaintiffs cannot show that a prudent fiduciary in the same position as Home Depot would have made different choices on either the plan’s service providers or the four challenged funds. We therefore AFFIRM the district court’s grant of summary judgment to Home Depot.”