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United States Court of Appeals for the Ninth Circuit
March 7, 2022, Argued and Submitted, Phoenix, Arizona; April 8, 2022, Filed
Plaintiffs Tim Davis, Gregor Miguel, and Amanda Bredlow appeal from the district court's order granting defendants' motion to dismiss their action under the Employee Retirement Income Security Act of 1974 (ERISA) for failure to state a claim. We reverse and remand for further proceedings.
1. Plaintiffs adequately alleged a claim for breach of the duty of prudence under the pleading standard articulated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007), and [*2] Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009). ] ERISA's duty of prudence is "derived from the common law of trusts," such that a fiduciary "has a continuing duty of some kind to monitor investments and remove imprudent ones." Tibble v. Edison Int'l, 575 U.S. 523, 528-30, 135 S. Ct. 1823, 191 L. Ed. 2d 795 (2015) (citation omitted); see 29 U.S.C. § 1104(a)(1)(B). Accepting the allegations in the first amended complaint as true, as we must, plaintiffs have stated a plausible claim that defendants imprudently failed to select lower-cost share classes or collective investment trusts with substantially identical underlying assets.
Plaintiffs identify two lower-cost JPMorgan share classes (R5 and R6) that they allege were available substitutes for nine JPMorgan SmartRetirement mutual funds offered by the plan during the class period. As to those nine JPMorgan funds, plaintiffs allege that "the more expensive share classes chosen by Defendants were the same in every respect other than price [as] their less expensive counterparts." Accepted as true, plaintiffs' allegations plausibly suggest that defendants acted imprudently by failing to switch to the lower-cost alternatives. As we have held, ] "a trustee cannot ignore the power the trust wields to obtain favorable investment products, particularly when those products are substantially identical—other [*3] than their lower cost—to products the trustee has already selected." Tibble v. Edison Int'l, 843 F.3d 1187, 1198 (9th Cir. 2016) (en banc).
Defendants respond by arguing, as a factual matter, that the plan held R5 class shares of the nine JPMorgan SmartRetirement funds all along. According to defendants, documents of which the district court took judicial notice show that the Institutional class shares held by the plan were simply renamed R5 in 2017. But even if defendants are correct on this point—a matter we do not think can be resolved based on the judicially noticed documents alone, which themselves contain ambiguities—plaintiffs also allege that defendants acted imprudently by failing to switch to the R6 class earlier, and the judicially noticed documents support plaintiffs' allegation that the R6 class had a lower expense ratio than the R5 class.
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2022 U.S. App. LEXIS 9527 *; 2022 WL 1055557
TIM DAVIS; et al., Plaintiffs-Appellants, v. SALESFORCE.COM, INC.; et al., Defendants-Appellees.
Notice: PLEASE REFER TO FEDERAL RULES OF APPELLATE PROCEDURE RULE 32.1 GOVERNING THE CITATION TO UNPUBLISHED OPINIONS.
Prior History: [*1] Appeal from the United States District Court for the Northern District of California. D.C. No. 3:20-cv-01753-MMC. Maxine M. Chesney, District Judge, Presiding.
Davis v. Salesforce.com, Inc., 2021 U.S. Dist. LEXIS 73017, 2021 WL 1428259 (N.D. Cal., Apr. 15, 2021)
Disposition: REVERSED and REMANDED.
investment trust, imprudently, plaintiffs', switch, judicial notice, mutual fund, allegations, defendants', lower-cost, documents, shares, funds, target date, duty-to-monitor, products, ratio, motion to dismiss, claim for breach, district court, pleading stage, counterparts
Business & Corporate Compliance, Fiduciaries, Fiduciary Responsibilities, Duty of Prudence, Plan Administration, Civil Procedure, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Pleadings, Complaints, Requirements for Complaint