Forfeiture Complaint Against WillScot Dismissed

A federal judge in Arizona dismissed a 401(k) plan forfeiture complaint against WillScot Holdings Corp., dismissing with prejudice all but one of the claims in the complaint.

In Armenta v. WillScot Mobile Mini Holdings Corp., filed in U.S. District Court for the District of Arizona, the plaintiff alleged that WillScot breached its fiduciary duties under the Employee Retirement Income Security Act because the plan’s documents “required” WillScot to use the forfeitures to pay for the administrative expenses before later using them to reduce contributions.

However, U.S. District Judge Michael Liburdi ruled that WillScot did not violate its duty to act in accordance with the plan or its duty of loyalty, since “the plan terms and the law allow WillScot to reallocate forfeitures for plan contributions.”

The plan’s most recent Form 5500 stated that “any forfeitures not used to pay administrative expenses under the Plan shall be applied to reduce the contributions of the employer for the immediately following plan year.”

Liburdi also ruled that the plan sponsor did not engage in prohibited transactions, and since the reallocation of forfeitures was permissible in the plan documents, the action does not qualify as a prohibited transaction.

However, Liburdi allowed the plaintiff the opportunity to amend its complaint alleging that the defendant violated its duty of prudence, because WillScot’s decisionmaking process could plausibly be flawed.

Plan forfeiture cases have been one of the more consistently filed ERISA complaints of the last two years, with some district courts dismissing the complaints, while others have allowed them to move forward.

In perhaps the highest-profile case, involving HP Inc., the Department of Labor argued in favor of the employer in a July amicus brief, stating that a fiduciary’s use of forfeited funds to offset contributions does not violate ERISA.

Still, months after the DOL’s brief was filed, district courts have continued to issue mixed opinions in forfeiture cases.

The WillScot Mobile Mini 401(k) Plan had approximately $246 million in assets with 5,535 plan participants at the end of 2023, according to its most recent Form 5500.

The plaintiffs in the case are represented by Rader Mayrose LLP and Chirinos Law Firm PLLC, while the defendants are represented by Jackson Lewis PC.