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The U.S. Chamber of Commerce and other prominent industry groups are backing Wells Fargo & Co. in an appeal challenging the in-house target date funds in the company’s 401(k) plan ( Meiners v. Wells Fargo & Co., 8th Cir., No. 17-2397, amicus briefs filed 10/27/17 ).
The groups are urging the U.S. Court of Appeals for the Eighth Circuit to uphold a decision dismissing a challenge to the affiliated target date funds in the 401(k) plan for Wells Fargo employees. The employee who sued said the company intentionally boosted the 401(k) assets invested in its target date funds—which allegedly carried high fees and performed poorly—by making the funds the default investment option for the plan. Industry groups are pushing back in briefs filed Oct. 27, saying that Wells Fargo’s conduct was reasonable and that 401(k) investors shouldn’t get to force companies into expensive litigation and discovery over such unremarkable allegations.
The dispute between Wells Fargo and its employees is poised to become the first appeals court decision in the recent flurry of lawsuits targeting financial companies that put their own investment products in their workers’ 401(k) plans. Out of more than two dozen financial companies to have been sued in the past few years, Wells Fargo is the only one to have seen all claims against it dismissed on their merits. Many judges have ruled against the financial companies, refusing to dismiss cases against American Century, Insperity, Edward Jones, BB&T, Allianz, and Franklin Templeton.
The groups, which include the American Benefits Council, the ERISA Industry Committee, and the Securities Industry and Financial Markets Association, emphasize the problems that will arise if lawsuits like this are allowed to move past the motion-to-dismiss stage. The Chamber and its partners said it would create an “avalanche of new suits supported only by bare allegations.” SIFMA argued that if financial companies are made to go through the “expensive and disruptive” discovery process, they’ll stop giving their employees access to affiliated funds in their 401(k) accounts.
The groups also took aim at the specific allegations made against Wells Fargo, saying they were unremarkable and insufficient to make a case under the Employee Retirement Income Security Act.
The case against Wells Fargo alleged only that there were two investment funds cheaper than the one Wells Fargo put in its 401(k) plan, according to the Chamber. “Identifying just two cheaper funds does not state a plausible claim because there is no obligation to choose the cheapest investment options available,” the Chamber said in its brief.
SIFMA made similar arguments, pointing out that it’s “ubiquitous” within the financial industry for companies to offer affiliated funds in their workers’ 401(k) plans. There’s nothing sinister about this practice, SIFMA said—rather, it’s lawful under ERISA and it provides “meaningful benefits” to plan participants.
The district court decision in favor of Wells Fargo was written by Judge David S. Doty of the U.S. District Court for the District of Minnesota. The Eighth Circuit affirms Doty’s decisions more than 75 percent of the time, according to data from Bloomberg Law’s Litigation Analytics.
The Chamber’s brief was filed by Alston & Bird LLP. SIFMA’s brief was filed by O’Melveny & Myers LLP.
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Text of the Chamber's brief is at http://www.bloomberglaw.com/public/document/John_Meiners_v_Wells_Fargo__Company_et_al_Docket_No_1702397_8th_C/1?doc_id=X1Q6NTRRUU82&fmt=pdf. Text of SIFMA's brief is at http://src.bna.com/tM4.
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