Batt v. 3M Company

Background

Plaintiffs Jennifer Batt, Madhu Chandnani, Karen Davison, and Willard Jenkins are current or former employees of 3M Company who participated in the 3M Voluntary Investment Plan and Employee Stock Ownership Plan (VIP Plan) and the 3M Savings Plan (collectively, the Plans). The Plans are participant-directed defined-contribution retirement plans. In 2023, the Plans had approximately 58,127 participants and about $12.4 billion in assets; as of 2024, roughly 30% of plan assets (approximately $3.78 billion) were invested in 3M's proprietary target-date funds, known as the '3M TDF Series.'

Target-date funds (TDFs) are investment vehicles designed for retirement savers: they hold a mix of stocks, bonds, and other assets, and gradually shift toward more conservative allocations as the fund's target retirement date approaches. This shift is known as the 'glide path.' The 3M TDF Series offered seven vintages (target retirement years): 2025, 2030, 2035, 2040, 2045, 2050, and 2055. The series is modeled after BlackRock LifePath TDFs and is the only target-date option available to plan participants. New employees are automatically enrolled with contributions directed to the vintage closest to the year they turn 65.

Defendants are 3M Company (plan sponsor, named fiduciary, and plan administrator), the Board of Directors of 3M, the 3M Benefits Fund Investment Committee (responsible for designating investment options), and 3M Investment Management Corporation (a wholly owned subsidiary acting as investment advisor to the Plans).

Claims

Plaintiffs brought two claims under ERISA, 29 U.S.C. § 1001 et seq.:

Plaintiffs alleged the 3M TDF Series underperformed two sets of benchmarks from 2014 to 2023: (1) the S&P Target Date Indices, and (2) comparable TDF series offered by T. Rowe Price, Fidelity (Freedom Funds), Vanguard, and American Funds.

Legal Standard

Defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Under this standard, the court accepts all factual allegations as true and draws all reasonable inferences in the plaintiff's favor, but the complaint must state a claim that is 'plausible on its face.' Ashcroft v. Iqbal, 556 U.S. 662 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

In ERISA duty-of-prudence cases in the Eighth Circuit, the focus is on process, not results. A plaintiff must allege facts sufficient to infer that the fiduciary's decision-making process was flawed. Critically, to nudge an inference of imprudence from 'possible' to 'plausible,' a plaintiff must provide 'a sound basis for comparison—a meaningful benchmark'—not merely allege that returns were too low. Matousek v. MidAmerican Energy Co., 51 F.4th 274, 278 (8th Cir. 2022). This is a context-specific, totality-of-the-circumstances inquiry; there is no one-size-fits-all approach.

The court also noted that, in ERISA breach-of-fiduciary-duty cases, relevant fund prospectuses, fact sheets, and plan disclosure documents are 'embraced by the pleadings' and may be considered without converting the motion into one for summary judgment. The court declined to consider three prospectuses submitted by 3M that did not match funds identified in the complaint.

Analysis: Meaningful Benchmarks

S&P Target Date Indices

The court held that plaintiffs did not plausibly allege the S&P Indices were meaningful benchmarks for the 3M TDF Series.

- Industry acceptance argument: Plaintiffs cited a study showing 51% of TDFs use the S&P Indices as a primary benchmark. The court found this unhelpful: roughly half do not use the S&P Indices, so the statistic does not establish that the 3M TDF Series belongs in the benchmarking half. The complaint did not allege that 3M itself used the S&P Indices as benchmarks (an allegation that was dispositive in Snyder v. UnitedHealth Group, a case plaintiffs cited). - Coverage argument: Plaintiffs argued the S&P Indices are meaningful because they cover a wide range of TDF strategies and the 3M funds are TDFs. The court rejected this as insufficient, requiring either an allegation that all TDFs meaningfully benchmark against all other TDFs (not alleged), or specific allegations about shared composition between the 3M TDFs and the S&P Indices (also not alleged). The court noted that index benchmarks are meaningful when funds are designed to track the index—but plaintiffs made no such allegation. - Case law: The court distinguished several cases plaintiffs cited. Gaines v. BDO USA and Moler v. University of Maryland Medical System did not discuss the S&P Indices at all. Snyder v. UnitedHealth Group relied on the fact that defendants themselves used the index as a benchmark. Kistler v. Stanley Black & Decker and Brown-Davis v. Walgreen Co. applied a more permissive pleading standard than the Eighth Circuit requires. Thomson v. Caesars Holdings approved S&P Indices as comparators without explanation. Johnson v. Parker-Hannifin Corp. (Sixth Circuit) involved stronger factual allegations (the challenged funds were designed to mimic index-based benchmarks), which were absent here.

Comparator TDF Suites

The court also held that plaintiffs did not plausibly allege the T. Rowe Price, Fidelity, Vanguard, and American Funds TDF series were meaningful benchmarks.

- 'All TDFs are alike' argument: Plaintiffs alleged all TDFs share the characteristic of shifting to more conservative allocations as they approach their target date. The court found this insufficient—it reduces to saying any TDF is a benchmark for any other TDF, a proposition the Eighth Circuit rejected in Meiners v. Wells Fargo & Co., 898 F.3d 820 (8th Cir. 2018), where a Vanguard TDF was found not to be a meaningful benchmark for Wells Fargo TDFs due to different investment strategies and bond allocations. - 'Shared characteristics' argument: Plaintiffs alleged the funds shared 'size, category, and risk ratio.' The court found: shared size was a fair starting point but insufficient on its own; 'same category' was just another way of saying they are all TDFs; 'same risk ratio' would imply comparable asset allocation and could go a long way toward establishing meaningful comparison—but the allegation was conclusory. The complaint did not identify any specific risk ratio or asset allocation shared by the funds. - Prospectus evidence: The court reviewed the available prospectuses and fund fact sheets (covering 2 of 7 3M TDF vintages and 3 of 28 comparator TDFs). These documents revealed material differences: - Glide path type: The 3M 2025 and 2040 TDF Series use 'to' retirement glide paths (reaching maximum conservatism at the retirement date and staying static). The American Funds 2025 TDF and Vanguard 2040 TDF use 'through' retirement glide paths (continuing to shift after the target date). - Asset allocation: The 3M 2040 TDF Series and Vanguard 2040 TDF hold materially different percentages of bonds and non-U.S. stocks at comparable time horizons. - Terminology: The funds described their assets using different and incompatible categories, making direct comparison unreliable. - Market concentration argument: Plaintiffs argued that if 3M had replaced the 3M TDF Series, it would have chosen one of the four comparator families because they dominate the TDF market. The court found this speculative and logically weak—market dominance does not mean the new funds would be comparable to the old ones. - Morningstar Category argument: Plaintiffs alleged the funds share a Morningstar Category (a peer-grouping system based on fund holdings). Some courts have found shared Morningstar categories indicative of meaningful benchmarks. However, courts applying Matousek's more rigorous standard have been reluctant to accept Morningstar categories alone, and the Eighth Circuit has not endorsed them as sufficient. The court declined to find this allegation sufficient without more.

Analysis: Alleged Underperformance (Addressed but Not Decisive)

Although the court found no plausible meaningful benchmark, it addressed underperformance for completeness:

- Comparator TDFs: Had the benchmarks been adequate, the trailing 10-year underperformance figures (-9.98 to -12.98 percentage points across vintages) would plausibly support a breach-of-fiduciary-duty claim. This magnitude of consistent, cumulative underperformance over a decade bears the hallmarks of a viable claim. - S&P Indices: The trailing 10-year underperformance figures (-3.69 to -5.03 percentage points) were more moderate and complicated by the fact that the 3M TDF Series outperformed the S&P Indices in 38 of 98 measured trailing 3-year and 5-year snapshots in more recent years. The court found this moderate, inconsistent underperformance insufficient to state a claim even if the S&P Indices were proper benchmarks.

Disposition

The court granted 3M's motion to dismiss both counts. The complaint was dismissed without prejudice. Plaintiffs were given until March 31, 2026 to file an amended complaint with additional factual allegations—particularly facts plausibly showing that the proposed benchmarks share comparable investment strategies, asset compositions, and glide-path structures with the 3M TDF Series. The court noted that plaintiffs 'could conceivably plead facts making it plausible that the proffered comparator TDFs are meaningful benchmarks.' If no amended complaint is filed by that deadline, the court ordered that judgment will be entered dismissing the complaint with prejudice (permanently barring refiling).

3M had requested dismissal with prejudice, arguing plaintiffs had not identified any additional facts that could cure the deficiencies. The court declined, finding that a with-prejudice dismissal is typically reserved for cases of persistent pleading failures after multiple amendment opportunities, or where amendment would clearly be futile—neither of which applied here.