Ninth Circuit Revives ERISA Breach of Fiduciary Duty Claim Against Salesforce for 401(k) Plan Investments

In Davis, et al. v. Salesforce.com, Inc., et al., No. 21-15867, 2022 WL 1055557 (9th Cir. Apr. 8, 2022), Plaintiffs-Appellants alleged that Defendants breached their ERISA duty of prudence with respect to the management of the Salesforce 401(k) Plan by imprudently failing to select lower-cost share classes or collective investment trusts with substantially identical underlying assets. The Ninth Circuit reversed the district court’s dismissal of the lawsuit because it found that Plaintiffs adequately alleged a claim for breach of the duty of prudence under the pleading standard articulated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009).

Here, “Plaintiffs identify two lower-cost JPMorgan share classes (R5 and R6) that they allege were available substitutes for nine JPMorgan SmartRetirement mutual funds offered by the plan during the class period.” While Defendants had plausible explanations for their investment choices, the court found that judicially noticed documents, which showed Institutional class shares held by the plan, were not sufficient at the pleading stage to make Plaintiffs’ plausible allegations inadequate. Plaintiffs made several allegations supporting its claim that Defendants unreasonably retained allegedly high-cost target date funds. Whether Defendants’ actions are reasonable cannot be resolved at the pleading stage. The court reversed the dismissal of Plaintiffs’ breach of fiduciary duty claim and their derivative duty-to-monitor claim.