Appellate Court Dismisses Forfeited Funds Case Against Wells Fargo

The U.S. 8th Circuit Court of Appeals dismissed a complaint against Wells Fargo, finding that the plaintiffs—including former employees and plan participants—lacked standing to sue over the alleged improper use of forfeited funds.

The decision marks the first time an appellate court has ruled on this issue, representing a significant victory for plan sponsors as several complaints await decisions across multiple appellate courts.

Court Allow Plaintiffs to Amend

The 8th Circuit remanded Thomas Matula Jr. v. Wells Fargo & Co. et al. back to the U. S. District Court for the District of Minnesota. The district court had dismissed the case with prejudice last June. The appellate court ordered that the case be dismissed without prejudice, meaning the plaintiffs may amend their complaint and attempt to refile and properly state an injury.

A three-judge panel stated that, because the retirement plan documents allowed Wells Fargo to “pay expenses of the plan” or “make corrective adjustments” using forfeited funds, the plaintiffs did not suffer an injury, a point not disputed by the plaintiffs. The ruling did, however, state that the lower court abused its discretion by not allowing the plaintiffs to amend their case.

In December 2025, several interest groups joined in a brief filed with the 8th Circuit insisting the court uphold the lower court’s dismissal.

In the original case against Wells Fargo and its plan fiduciaries, former employee and plan participant Matula alleged Wells Fargo violated the Employee Retirement Income Security Act by misusing forfeited funds in its 401(k) plan to benefit the company, rather than its participants. The complaint alleged that Wells Fargo used the forfeited funds to reduce employer contributions, rather than allocating forfeited funds to participants’ accounts. A similar complaint has been expressed in dozens of other forfeiture disputes.

Forfeiture Cases in Focus

The court’s ruling represents the first appellate decision on a forfeiture case. The Department of Labor has submitted four amicus filings backing employers in similar disputes.

Each of those briefs was filed in appellate courts that have yet to decide on a forfeiture case.

Forfeiture cases have proliferated in recent years, with 29 cases filed in 2024 and 48 filed in 2025, according to Encore Fiduciary—one of the reasons the DOL opted to weigh in.

The central dispute about the use of forfeited funds usually involves plaintiffs arguing that those funds should be used first to pay down plan expenses, while defendants claim plan sponsors can use forfeitures as they wish, as long as the use is permitted in plan documents.

The Wells Fargo & Co. 401(k) Plan had more than $57.8 billion in assets with more than 288,000 participants, as of December 31, 2024, according to its latest Form 5500.