November 30, 2009
--- The 8th U.S. Circuit Court of Appeals has vacated a district court's dismissal of a suit alleging Wal-Mart Stores, Inc. breached its fiduciary duties to 401(k) participants by selecting investment options that charged excessive fees. ---
In its opinion, the appellate court said the district court erred in concluding that Jeremy Braden lacked standing to maintain claims for the period before he began participating in the plan (see “Wal-Mart Captures Resounding Excessive Fee Suit Victory”). The court found Braden satisfied the requirements for constitutional standing because he alleged actual injury to his own plan account, and that injury is fairly traceable to the defendants' conduct because Braden alleged a causal connection between their actions –even those taken before his participation in the plan–and his injury.
The appellate panel also concluded that the district court erred in finding the complaint inadequate because it did not allege sufficient facts to show how Wal-Mart's decision making process was flawed. "Accepting Braden's well pleaded factual allegations as true, he has stated a claim for breach of fiduciary duty," the court said.
In addition, the court determined the injury is likely to be redressed by a favorable judgment.
Braden alleged that Wal-Mart and other employees involved in administering the plan failed to adequately evaluate the investment options included in the plan, and that the process by which the mutual funds were selected was tainted by their failure to consider trustee Merrill Lynch's interest in including funds that shared fees with Merrill Lynch.
While the appellate court said the district court correctly noted that none of Braden's allegations directly addresses the process by which the plan was managed, it said it is reasonable, however, to infer from what is alleged that the process was flawed.