Rodriguez v. Intuit Inc.

Background

Deborah Rodriguez brought a proposed class action under the Employee Retirement Income Security Act (ERISA) against her former employer, Intuit Inc., and the Employee Benefits Administrative Committee of the Intuit Inc. 401(k) Plan. She alleged that Intuit used forfeited, nonvested matching-contribution accounts to reduce its own future matching contributions instead of using those funds to pay plan-administration expenses. She claimed this violated the plan’s terms and Intuit’s fiduciary duties under ERISA.

The plan allowed forfeited amounts to be used, at the company’s election, for certain matching contributions and, after a 2020 amendment, for plan-administration expenses. Rodriguez alleged that Intuit used nearly all of the forfeited funds from 2018 through 2020 to reduce its matching contributions, and used only part of those funds for plan expenses in 2021. The complaint asserted claims for breach of the duties of loyalty and prudence, violation of ERISA’s anti-inurement provision, prohibited transactions, and failure to monitor fiduciaries.

Motion to Dismiss Standard

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that the complaint failed to state valid claims. At this stage, the court accepted the complaint’s factual allegations as true and asked whether they plausibly supported liability. Rodriguez agreed to dismissal of all claims against the Committee and Count VI against Intuit.

The court granted the parties’ requests for judicial notice of the plan documents and other filings because the documents were incorporated into the complaint or came from sources whose accuracy could not reasonably be questioned. The court took notice of the documents’ existence and content, but not the truth of factual assertions contained in them.

Fiduciary-Duty Claims

The court denied dismissal of the claims alleging breaches of the duties of loyalty and prudence. It held that Rodriguez plausibly alleged that Intuit acted as an ERISA fiduciary when it decided how to allocate forfeited plan assets. The plan gave Intuit discretion over the management of forfeitures, and the court reasoned that exercising discretionary responsibility over plan assets was fiduciary conduct rather than merely a plan-design decision by a nonfiduciary plan sponsor.

The court also found the loyalty claim plausible. Rodriguez alleged that Intuit used plan assets to save the company millions of dollars while reducing contributions to the plan and leaving participants to bear plan-administration expenses. The court concluded that her interpretation of the plan was plausible: the plan may have permitted forfeitures to offset only specified categories of contributions, not the matching contributions at issue during the class period. The court further explained that compliance with plan terms would not necessarily excuse a fiduciary from ERISA’s separate fiduciary duties.

The court likewise found the prudence claim adequately pleaded. Rodriguez alleged that Intuit failed to use a reasoned and impartial decision-making process and failed to consider whether participants would be better served by another use of the forfeited funds. The court held that these allegations plausibly stated a claim even if Intuit had complied with the plan document, because ERISA’s duty of prudence can limit the effect of plan-document instructions.

The court also held that Rodriguez adequately alleged injury to the plan as a whole. She alleged that Intuit’s actions caused the plan to receive fewer contributions, reducing funds available for participants’ distribution or investment. The court rejected the defendants’ argument that these allegations were purely speculative.

Anti-Inurement Claim

The court denied dismissal of the claim under ERISA’s anti-inurement provision. That provision generally bars plan assets from benefiting an employer and requires that plan assets be held for providing participant benefits and paying reasonable plan-administration expenses, subject to stated exceptions.

The court found Rodriguez’s allegations plausible because she claimed that Intuit used plan assets to reduce its future matching contributions and thereby obtained millions of dollars in savings. The court distinguished a Supreme Court decision involving plan amendments that used surplus assets to provide benefits to plan participants. Here, Rodriguez alleged that Intuit used plan assets for its own benefit rather than to pay the plan’s obligations to beneficiaries. The court also rejected the defendants’ reliance on general Treasury regulations and Department of Labor guidance, reasoning that those authorities did not establish that Intuit’s specific use of forfeitures was permissible under this plan.

Prohibited-Transaction Claims

The court denied dismissal of Rodriguez’s claims under ERISA sections 1106(a)(1) and 1106(b)(1). Rodriguez alleged that Intuit, an employer and therefore a party in interest, used forfeited plan assets as a substitute for future employer contributions. The court held that the alleged reallocation of plan assets could qualify as a transaction or dealing with plan assets, unlike conduct that merely affected the employer’s benefit without using plan assets in a way that harmed the plan.

The court also found a plausible inference of self-dealing because Rodriguez alleged that Intuit’s reallocation benefited the company while reducing funds available to participants and for investment. The court therefore concluded that both prohibited-transaction claims were adequately pleaded.

Disposition

The court granted in part and denied in part the defendants’ motion to dismiss. It granted the motion as to Count VI, the failure-to-monitor claim against Intuit, and as to all claims against the Committee. It denied the motion as to all remaining claims.