The plaintiffs in a lawsuit alleging that Chevron Corporation and its defined contribution (DC) plan committee breached their Employee Retirement Income Security Act (ERISA) duties of loyalty and prudence by, among other things, offering a money market fund rather than a stable value fund as a capital preservation option and paying excessive administrative fees, have petitioned the 9th U.S. Circuit Court of Appeals to review the case en banc.
The plaintiffs request a review by the full appellate panel, rather than the three-judge panel that affirmed dismissal of the case, because they say the court imposed strict pleading standards that conflict with the decisions of the 9th and other circuits. “En banc consideration is necessary to secure and maintain the uniformity of this Court’s decisions on the proper pleading standards in this Circuit and to avoid a conflict among the Circuits,” they say in their petition.
Agreeing with a federal district court that plaintiffs did not allege sufficient facts to support a plausible claim, the 9th Circuit said the complaint must allege “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,” and where there are “two possible explanations, only one of which can be true and only one of which results in liability, plaintiff cannot offer allegations that are ‘merely consistent with’ [its] favored explanation but are also consistent with the alternative explanation.”
Using these standards, the appellate court found that the facts alleged are insufficient to support a plausible inference of breach of the duty of loyalty, breach of the duty of prudence, or that a prohibited transaction took place. “Rather, as to each count, the allegations showed only that Chevron could have chosen different vehicles for investment that performed better during the relevant period, or sought lower fees for administration of the fund. None of the allegations made it more plausible than not that any breach of a fiduciary duty had occurred,” the memorandum says.
The plaintiffs cite case precedent in which the 9th Circuit held that a complaint need not contain “detailed factual allegations,” but only “sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face,” and “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.” They also argue that the court previously decided that at the pleading stage, the details of how a fiduciary made decisions “will frequently be in the exclusive possession of the breaching fiduciary,” and a court must “relax pleading requirements where the relevant facts are known only to the defendant.”
In their petition, the plaintiffs say that even if it is possible that Chevron came to its decisions after a prudent process, “it is not obvious that it did so, and it is improper to require a plaintiff to rule out every possible lawful explanation for these results.” They added that it is not a matter at the pleading stage of what inference from the facts is more “plausible”; it is only a matter of determining whether it is plausible at all under the allegations that a fiduciary breach occurred.The plaintiffs also argue that the three-judge panel misconstrued their allegations in suggesting they “showed only that Chevron could have chosen different vehicles for investment that performed better during the relevant period.” The petition says, “Plaintiffs show that the far superior performance of stable value funds over money market funds with the same or less risk existed well before 2010, the start of the relevant period, so that a prudent fiduciary of a plan such as Chevron’s as of 2010 would have known of the availability of that superior investment and determined whether there was any reason not to use it instead of a low-interest money market fund.”
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