Braden v. Wal-Mart Stores, Inc.

Decision Date25 November 2009
Docket NumberNo. 08-3798.,08-3798.
PartiesJeremy BRADEN, Appellant, v. WAL-MART STORES, INC.; Stanley Gault; Betsy Sanders; Don Soderquist; Jose Villareal; Stephen R. Hunter; Debbie Davie Campbell, Appellees. Secretary of Labor, Amicus on Behalf of Appellant, ERISA Industry Committee; Chamber of Commerce; American Benefits Council, Amici on Behalf of Appellees.
CourtU.S. Court of Appeals — Eighth Circuit

Robin Springberg Parry, argued, Washington, DC, on Behalf Amicus, Secretary of Labor.

Paul J. Ondrasik, Jr., argued, Washington, DC, William C. Martucci, Kristen A. Page, Kansas City, MO, Morgan D. Godgson, Eric G. Serron, Washington, DC, on the brief, for appellees.

Janet M. Jacobson, Robin S. Conrad, Shane B. Kawka, John M. Vine, Thomas L. Cubbage, III, Washington, DC, for Amici on Behalf of appellees.

Before MURPHY, BRIGHT, and RILEY, Circuit Judges.

MURPHY, Circuit Judge.

Jeremy Braden, an employee of Wal-Mart and participant in its employee retirement plan (Plan), brought this putative class action against appellees — Wal-Mart and various executives involved in the management of the Plan. Braden alleges that they violated fiduciary duties imposed by the Employee Retirement Income Security Act (ERISA). Appellees moved for dismissal under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). The district court granted the motion, concluding that Braden lacked constitutional standing to assert claims based on breaches of fiduciary duty prior to the date he first contributed to the Plan and that he otherwise failed to state any plausible claim upon which relief could be granted.1 Braden timely appealed. We reverse and remand for further proceedings.

I.

Wal-Mart's "Profit Sharing and 401(k) Plan" is an "employee pension benefit plan" covered by ERISA. 29 U.S.C. § 1002(2)(A). It is also an "individual account plan," 29 U.S.C. § 1002(34), establishing an individual profit sharing and 401(k) account for each participating employee. Wal-Mart is the Plan's sponsor and administrator under 29 U.S.C. § 1002(16). Merrill Lynch & Co., Inc. is the Plan's trustee, holding its assets in trust and providing various administrative services necessary to the maintenance of participants' accounts.

At the end of 2007, the Plan had over one million participants and nearly $10 billion in assets. Individual participants directed investment of the assets in their Plan accounts by selecting from a menu of investment options. During the period relevant to Braden's claims, the available options included ten mutual funds, a common/collective trust, Wal-Mart common stock, and a stable value fund. These options were selected by Wal-Mart's Retirement Plans Committee, the Plan's named fiduciary and the entity responsible for the operation, investment policy, and administration of the Plan.

Jeremy Braden began working for Wal-Mart in May 2002. He became eligible to participate in the Plan in June 2003 and made his first contribution on October 31, 2003. He continued his employment with Wal-Mart and his participation in the Plan throughout the period relevant to this appeal.

Braden filed his complaint on March 27, 2008, alleging five causes of action against Wal-Mart and the individual appellees, executives serving on or responsible for overseeing the Retirement Plans Committee.2 The gravamen of the complaint is that appellees failed adequately to evaluate the investment options included in the Plan. It alleges that the process by which the mutual funds were selected was tainted by appellees' failure to consider trustee Merrill Lynch's interest in including funds that shared their fees with the trustee. The result of these failures, according to Braden, is that some or all of the investment options included in the Plan charge excessive fees. He estimates that these fees have unnecessarily cost the Plan some $60 million over the past six years and will continue to waste approximately $20 million per year.

Braden alleges extensive facts in support of these claims. He claims that Wal-Mart's retirement plan is relatively large and that plans of such size have substantial bargaining power in the highly competitive 401(k) marketplace. As a result, plans such as Wal-Mart's can obtain institutional shares of mutual funds, which, Braden claims, are significantly cheaper than the retail shares generally offered to individual investors. Nonetheless, he alleges that the Plan only offers retail class shares to participants. Braden also avers that seven of the ten funds charge 12b-1 fees, which he alleges are used to benefit the fund companies but not Plan participants.

Braden alleges further that the relatively high fees charged by the Plan funds cannot be justified by greater returns on investment since most of them underperformed lower cost alternatives. In support of this claim, he offers specific comparisons of each Plan fund to an allegedly similar but more cost effective fund available in the market. In comparison to an investment in index funds, Braden estimates that the higher fees and lower returns of the Plan funds cost the Plan some $140 million by the end of 2007.

Finally, the complaint also alleges that the mutual fund companies whose funds were included in the Plan shared with Merrill Lynch portions of the fees they collected from participants' investments. This practice, sometimes called "revenue sharing," is used to cover a portion of the costs of services provided by an entity such as a trustee of a 401(k) plan, and is not uncommon in the industry. Braden alleges, however, that in this case the revenue sharing payments were not reasonable compensation for services rendered by Merrill Lynch, but rather were kickbacks paid by the mutual fund companies in exchange for inclusion of their funds in the Plan. The Plan's trust agreement requires appellees to keep the amounts of the revenue sharing payments confidential.

Count I of the complaint spells out Braden's breach of fiduciary duty claim in detail. Count III alleges that appellees breached their duty of loyalty by failing to inform Plan participants of certain information relating to the fees charged by the Plan funds, as well as the amounts of the revenue sharing payments made to Merrill Lynch. Count V alleges that the revenue sharing payments were "prohibited transactions" under 29 U.S.C. § 1106(a)(1). Finally, Counts II and IV allege, respectively, that those appellees with oversight responsibility failed adequately to monitor those who managed the Plan and that they are liable for the breaches of their cofiduciaries pursuant to 29 U.S.C. § 1105(a).

The district court dismissed all claims. It concluded that Braden could not personally have suffered injury before October 31, 2003, the date he first contributed to the Plan. According to the district court, Braden therefore did not have Article III standing to assert claims for breaches before that date. It dismissed the remaining claims on the grounds that Braden had alleged insufficient facts to support the claim of imprudent or disloyal management that appellees had no duty to disclose the information Braden sought, and that he had failed to show the alleged prohibited transactions with Merrill Lynch were not exempted by 29 U.S.C. § 1108. Because each of the direct claims failed, the court also dismissed the derivative claims based on monitoring and cofiduciary liability.

Braden challenges each of the district court's conclusions on appeal. We review the court's order de novo, accepting as true the complaint's factual allegations and granting all reasonable inferences to the non-moving party. Taxi Connection v. Dakota, Minn. & E. R.R. Corp., 513 F.3d 823, 825 (8th Cir.2008).

II.

In order to proceed with his claims on behalf of the Plan, Braden must have both Article III standing and a cause of action under ERISA. See, e.g., Glanton ex rel. ALCOA Prescription Drug Plan v. AdvancePCS Inc., 465 F.3d 1123, 1124 (9th Cir. 2006). We conclude that Braden has made a sufficient showing at this stage of the litigation to satisfy both requirements and that the district court erred in concluding that he lacked standing to maintain claims for the period before he began participating in the Plan.

The doctrine of standing limits the jurisdiction of federal courts to "those disputes which are appropriately resolved through the judicial process." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (quoting Whitmore v. Arkansas, 495 U.S. 149, 155, 110 S.Ct. 1717, 109 L.Ed.2d 135 (1990)). Some elements of the doctrine are prudential, involving self imposed limits on judicial power. These limits may be "modified or abrogated by Congress." Bennett v. Spear, 520 U.S. 154, 162, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997). The heart of standing, however, is the principle that in order to invoke the power of a federal court, a plaintiff must present a "case" or "controversy" within the meaning of Article III of the Constitution. This "irreducible constitutional minimum of standing" requires a showing of "injury in fact" to the plaintiff that is "fairly traceable to the challenged action of the defendant," and "likely [to] be redressed by a favorable decision." Lujan, 504 U.S. at 560-61, 112 S.Ct. 2130 (citations and alterations omitted).

"Injury in fact" is an invasion of a legally cognizable right. Whether a plaintiff has shown such an injury "often turns on the nature and source of the claim asserted." Warth v. Seldin, 422 U.S. 490, 500, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). In most cases, then, a plaintiff's standing tracks his cause of action. That is, the question whether he has a cognizable injury sufficient to...

To continue reading

Request your trial
1803 cases
  • Petters Grp. Worldwide, LLC v. Jpmorgan Chase & Co. (In re Petters Co.)
    • United States
    • United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of Minnesota
    • 31 Agosto 2016
    ...be read as a whole, not parsed piece-by-piece to determine whether each allegation, in isolation, is plausible.Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009)(citations omitted). See also Brown v. Medtronic, Inc., 628 F.3d 451, 459 (8th Cir. 2010).B. Heightened Requiremen......
  • Toledo-Colon v. Puerto Rico
    • United States
    • U.S. District Court — District of Puerto Rico
    • 21 Septiembre 2011
  • Moitoso v. FMR LLC, CIVIL ACTION NO. 18-12122-WGY
    • United States
    • U.S. District Court — District of Massachusetts
    • 27 Marzo 2020
    ...1484, 1488 (9th Cir. 1996) ). These duties of loyalty and prudence are among "the highest known to the law." Braden v. Wal–Mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009) (quoting Donovan v. Bierwirth, 680 F.2d 263, 272 n.8 (2d Cir. 1982) ).a. Duty of Loyalty The duty of loyalty requir......
  • In re Pork Antitrust Litig., Civil Nos. 18-1776
    • United States
    • U.S. District Court — District of Minnesota
    • 20 Octubre 2020
    ...the complaint as true to determine if the complaint states a claim for "relief that is plausible on its face." Braden v. Wal-Mart Stores, Inc. , 588 F.3d 585, 594 (8th Cir. 2009) (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). "A claim has facial pl......
  • Request a trial to view additional results
6 firm's commentaries
2 books & journal articles
  • LEGAL TECH, CIVIL PROCEDURE, AND THE FUTURE OF ADVERSARIALISM.
    • United States
    • University of Pennsylvania Law Review Vol. 169 No. 4, March 2021
    • 1 Marzo 2021
    ...In other words, the court will ask itself could these things have happened, not did they happen."); Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009) ("The plausibility standard requires a plaintiff to show at the pleading stage that success on the merits is more than a 'sh......
  • Taking exit rights seriously: why governance and fee litigation don't work in mutual funds.
    • United States
    • Yale Law Journal Vol. 120 No. 1, October - October 2010
    • 1 Octubre 2010
    ...which imposes a prudent man standard of care and loyalty. 29 U.S.C. [section] 1104 (2006); see, e.g., Braden v. Wal-Mart Stores, Inc., 588 F.3d 585 (8th Cir. (102.) Barclay et al., supra note 78; Coates & Hubbard, supra note 61, at 199. (103.) See supra Section II.C; infra Section III.A......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT