Mutual Fund Challenges Must Allege Poor Performance Against Meaningful Benchmarks to Avoid Dismissal -

In Meiners v. Wells Fargo & Company, the U.S. Court of Appeals for the Eighth Circuit clarified the burden plaintiffs must meet to state a claim for breach of fiduciary duty under the Employee Retirement Income Security Act (“ERISA”) based on the inclusion of allegedly underperforming and expensive investment funds. Because plaintiffs often lack detailed information about the process plan fiduciaries followed to make investment choices, pleading a plausible claim that those fiduciaries have acted imprudently can pose a significant challenge. But the Eighth Circuit refused to water the pleading standard down to account for this reality in Meiners. Rather, the Eighth Circuit held that “[t]o show that ‘a prudent fiduciary in like circumstances’ would have selected a different fund based on the cost or performance of the selected fund, a plaintiff must provide a sound basis for comparison—a meaningful benchmark.” As one of the first appellate decisions to tackle this thorny issue head on, litigants should expect Meiners to be cited as persuasive authority beyond the Eighth Circuit.