District Judge Finds ‘Meaningful’ Benchmark in 3M ERISA Case

A federal judge allowed to move forward key portions of an Employee Retirement Income Security Act lawsuit challenging 3M Co.’s retirement plan target-date funds, finding that participants plausibly alleged the company’s funds substantially and consistently underperformed comparable Fidelity target-date funds.

Chief U.S. District Judge Eric Tostrud, in U.S. District Court for the District of Minnesota, on August 11 granted in part and denied in part 3M’s motion to dismiss an amended complaint brought by four current or former employees. The ruling gives new life to a case that had previously been dismissed because the participants failed to identify a meaningful investment benchmark.

The plaintiffs—Jennifer Batt, Madhu Chandnani, Karen Davison and Willard Jenkins—sued individually and on behalf of similarly situated participants in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan and 3M Savings Plan. Defendants include 3M’s board of directors, the 3M Benefits Fund Investment Committee, and 3M Investment Management Corp.—3M IMCO.

The participants allege that 3M violated ERISA’s duty of prudence by continuing to offer customized 3M target-date funds that underperformed suitable alternatives. They also allege that 3M failed to adequately monitor plan fiduciaries and that payments to 3M IMCO—a 3M subsidiary that helped manage plan investments—constituted prohibited transactions and self-dealing.

The case, Batt et al. v. 3M Co. et al., was originally filed in August 2025. Tostrud dismissed the initial complaint without prejudice in March, allowing the plaintiffs to amend their allegations. They filed their amended complaint March 31, supplying substantially more detail about proposed comparators for the 3M target-date-fund series.

Tostrud found that four of five comparator fund families were sufficiently similar to the 3M funds to potentially constitute meaningful benchmarks. In particular, the court’s analysis found BlackRock, Fidelity Freedom, T. Rowe Price and Voya target-date funds to be sufficiently comparable, based on factors that included asset allocation, sector allocation, Morningstar style and risk. Putnam did not clear the comparability threshold.

But establishing comparability was only part of the participants’ burden. When the court examined performance, Fidelity was the comparator that mattered.

Tostrud concluded that the amended complaint plausibly alleged underperformance relative to the Fidelity Freedom target-date funds. His decision stated that the data showed Fidelity’s funds “consistently and significantly outperformed” the 3M funds, supporting a plausible inference of imprudence.

By contrast, the 3M funds’ underperformance against the other comparator funds was smaller and less consistent, which Tostrud deemed insufficient for an imprudence claim.

The ruling consequently dismissed with prejudice the portion of the prudence claim relying on any fund or index other than the Fidelity Freedom TDFs as the meaningful benchmark. Claims based on alleged failures to disclose plan information or adhere to stated investment goals were dismissed without prejudice for lack of subject-matter jurisdiction. Tostrud denied 3M’s motion in all other respects.

The participants also cleared the pleading-stage hurdle on their prohibited-transaction and self-dealing allegations involving 3M IMCO.

According to the amended complaint, 3M IMCO was a fiduciary and investment adviser to the plans and received compensation from plan assets for its investment management role. Tostrud concluded that the participants had pleaded the elements of their ERISA prohibited-transaction and related self-dealing claims.

The allegations do not establish that the payments were unlawful. At the motion-to-dismiss stage, however, Tostrud said potential defenses—including whether the fees were reasonable—could not resolve the claims, allowing them to proceed.

The decision also allows the plaintiffs’ failure-to-monitor theory to survive to the same extent as the underlying prudence claim. The litigation now moves beyond the pleading stage on the surviving Fidelity-based imprudence allegations and the prohibited-transaction and self-dealing claims.

The plaintiffs are represented by Kahn, Swick & Foti LLC and Lockridge Grindal Nauen PLLP. The defendants are represented by Thompson Hine LLP.

The two 3M defined-contribution plans had a combined 58,127 participants and approximately $12.4 billion in assets in 2023, according to figures cited in the amended complaint and recounted by the court. Of those participants, 55,591 were in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan, and 2,536 were in the 3M Savings Plan. The court also noted that roughly $4.09 billion—about 38% of plan assets—was invested in the 3M target-date-fund series in 2024.