The U.S. Court of Appeals for the Eighth Circuit has reversed the dismissal of Jeremy Braden v. Wal-Mart Stores Inc. by the U.S. District Court for the Western District of Missouri.
The suit alleges that Wal-Mart's pension and 401(k) administrator breached its fiduciary duty by offering retail funds rather than lower-cost institutional funds, which the company could have negotiated, being of such a large size. As a result, the suit alleges, investors lost tens of millions of dollars in retirement savings. The suit also says that seven of the 10 funds in the plan charge 12b-1 fees, to the detriment of plan participants, and that the funds offered revenue-sharing incentives to be included in the plan.
The case is significant because it serves more than 1 million participants, with nearly $10 billion of investments. The district court had ruled in favor of Wal-Mart, which asked that the case be dismissed. But the circuit court reversed that decision, stating that Braden had made a sufficient claim proving a cause of action under the Employee Retirement Income Security Act, sufficient proof of personal injury and sufficient time invested in the plan.
The circuit court said Braden raised a plausible claim that Wal-Mart's method of selecting funds for its 401(k) plan was "tainted by failure of effort, competence or loyalty."