Allen v. Wells Fargo & Co., No. 18-2781 (8th Cir. 2020)
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The Eighth Circuit affirmed the district court's order dismissing plaintiffs' second amended complaint brought under sections 409 and 502 of the Employee Retirement Income Security Act (ERISA), against Wells Fargo and fiduciaries of Wells Fargo's 401(k) plan. This appeal arose out of the unauthorized-accounts scandal at Wells Fargo where Wells Fargo pressured and induced thousands of its employees to engage in widespread unlawful and unethical sales practices.
The court held that the district court did not err in finding that plaintiffs have failed to plausibly plead that a prudent fiduciary in defendants' position could not have concluded that earlier disclosure of negative information would do more harm than good to the fund. The court also held that the district court did not err in holding that plaintiffs have failed to sufficiently plead a claim of breach of the duty of loyalty. In this case, neither of plaintiffs' claims for failure to disclose material information to plan participants about Wells Fargo's sale practices and conflicts of interests and actions of self-interest sufficiently alleged a plausible inference that defendants breached their duty.
Court Description: [Shepherd, Author, with Grasz and Kobes, Circuit Judges] Civil case - ERISA. In action alleging Wells Fargo and the fiduciaries of its 401(k) plan for employees violated their fiduciary duties under ERISA by failing to take corrective action to protect plan participants actions before the disclosure of Wells Fargo's fraud in 2018,the district court dismissed plaintiffs' second amended complaint and they appeal. The district court did not err in finding plaintiffs failed to plausibly allege claims of breach of duty of prudence and breach of duty of loyalty under ERISA; plaintiffs have failed to plausibly allege that a prudent fiduciary in the defendants' position could not have concluded that earlier disclosure of information about the fraud would have done more harm than good; with respect to the claims of breach of loyalty, neither of plaintiffs' claims against the fiduciaries - failure to disclose material information to plan participants about Wells Fargo's sale practices and conflicts of interest and actions of self-interest - pleaded a claim for breach of the duty of loyalty.
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