May 1, 2020

Court Dismisses Claim for Injunctive Relief and ERISA Causes of Action Against Trader Joe's

Holland & Knight Regulatory Litigation Blog
Lynn E. Calkins | Cynthia A. Gierhart

On April 24, the U.S. District Court for the Central District of California dismissed an Employee Retirement Income Security Act (ERISA) action against Trader Joe's, finding that former employees did not have standing to pursue injunctive relief and that their claims alleging breach of the fiduciary duty of prudence and failure to monitor failed to rise above speculative and conclusory allegations. See Marks v. Trader Joe's Co., Case No. 2:19-CV-10942 (C.D. Cal. Apr. 24, 2020).

The court held that, because plaintiffs are former employees of Trader Joe's, they are not permitted to seek injunctive relief, stressing that former plan participants are not "realistically threatened" by any potential future violations of ERISA.

The case also illustrates that plaintiffs cannot fuel ERISA litigation on speculation in the hopes of finding documents in defendants' possession to support the claim. For example, the plaintiffs alleged that Trader Joe's paid excessive fees to a third-party record-keeper of the company's retirement plan (the Plan). Yet, the plaintiffs admitted they did not know how much Trader Joe's paid the record-keeper and that discovery was needed to determine the amount. The plaintiffs estimated a dollar amount that was paid, but Trader Joe's called the estimate a "pure guess." The court agreed that plaintiffs' "guess … has no factual basis."

The remainder of plaintiffs' claims fared no better. The plaintiffs argued Trader Joe's should have competitively bid the recordkeeping services every three years, but the court recognized that "[n]othing in ERISA compels periodic competitive bidding" and that the plaintiffs did not allege facts to suggest the same services were available for less.

The court also held the mere fact of failing to offer institutional class shares, as opposed to investor class shares, cannot support a claim for breach of the duty of prudence and that the record-keeper's repayment of money to the Plan at the end of each fiscal year does not alone demonstrate "an admission of excessive fees."

Having dismissed each of the allegations supporting the breach of duty of prudence claim, the court dismissed plaintiffs' failure to monitor claim as derivative of the breach of duty claim.

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