Dormani v. Target Corp., No. 18-2543 (8th Cir. 2020)
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Plaintiffs, participants in Target's employee stock ownership plan (ESOP), filed suit against Target and its senior executives, alleging violations of the Employee Retirement Income Security Act (ERISA).
The Eighth Circuit affirmed the district court's dismissal of the claims, holding that plaintiffs failed to show that the fiduciaries breached their duty of prudence. In regard to plaintiffs' proposed alternative actions, the court held that Target could not have implemented a purchase freeze without inevitable disclosure and a reasonably prudent fiduciary could still believe disclosure was the more dangerous route than the route taken. The court also held that plaintiffs failed to show that the fiduciaries violated the duty of loyalty in administering the plan because of their potential conflicts where plaintiffs point to nothing more than the tension inherent in the fiduciaries' dual roles as ERISA fiduciaries and Target officers. Plaintiffs also failed to show that the fiduciaries breached the duty of loyalty by making misleading statements to Plan participants because they failed to allege that the fiduciaries knew they were making untruthful statements in their disclosures and to specify which statements were untrue. Finally, plaintiffs' claim that Target's CEOs breached their duty to monitor the other ERISA fiduciaries cannot survive without an underlying breach.
Court Description: [Kobes, Author, with Shepherd and Grasz, Circuit Judges] Civil case - ERISA. In action alleging Target and its ESOP investment committee failed to protect the Plan from the fall in Target's stock price after the failure of Target's expansion into Canada, the plaintiffs failed to show the committee members violated the duty of prudence they owed as fiduciaries; a reasonably prudent fiduciary could believe that early disclosure of the information about the failing Canadian operations was the more dangerous course of action than the actions taken; with respect to plaintiffs' claim the fiduciaries violated the duty of loyalty in administering the plan because of their potential conflicts, plaintiffs point to nothing more than the tension inherent in fiduciaries' dual roles as ERISA fiduciaries and Target officers, and they fail to state a claim for breach of loyalty; with respect to the claim that the fiduciaries breached the duty of loyalty by making misleading statements to Plan participants, the complaint fails to allege that the fiduciaries knew they were making untruthful statements and fails to specify which statements were untrue; plaintiff's claim that Target's CEOs breached their duty to monitor the other ERISA fiduciaries fails without an underlying breach of duty.
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