Scholin v. Digi-Key Corporation

Background

Defendant Digi-Key Corporation, a Minnesota-based company, sponsors the Digi-Key Corporation 401(k) Profit Sharing Plan (the Plan). Plaintiff Paige Scholin is a former Digi-Key employee and former participant in the Plan. The Plan is governed by ERISA, which imposes fiduciary duties — including a duty of prudence — on those who manage it.

The Plan used target date funds (TDFs) managed by American Century Investments (AC), known as the American Century One Choice target date fund series (AC TDFs). The Plan retained the AC TDFs from 2018 through at least the end of 2023, and they comprised approximately 75% of Plan assets from 2020 to 2023. TDFs are investment vehicles that gradually shift from higher-risk growth investments to lower-risk preservation investments as participants approach a target retirement date; this shift is called the 'glide path.'

Scholin filed this class action in February 2026 on behalf of herself and other similarly situated Plan participants and beneficiaries. She brought two claims: (1) breach of ERISA's fiduciary duty of prudence, alleging that Defendants imprudently selected and continued to retain the AC TDFs despite alleged consistent underperformance across multiple metrics; and (2) failure to adequately monitor other fiduciaries, alleging that Digi-Key failed to oversee those responsible for Plan investment management and failed to remove underperforming funds or inadequate managers.

Scholin identified four comparator TDF series — American Funds (Capital Group Target Retirement Series), Vanguard Target Retirement Series, T. Rowe Price Target Series, and BlackRock LifePath Index series — as funds a prudent fiduciary would have considered instead of the AC TDFs.

Legal Standard

The court applied the Rule 12(b)(6) standard for motions to dismiss, accepting all alleged facts as true and asking whether the complaint states a claim that is 'plausible on its face.' Under ERISA's duty of prudence (29 U.S.C. § 1104(a)(1)(B)), fiduciaries must act with the care, skill, prudence, and diligence of a prudent person in like circumstances. Courts evaluate the process by which fiduciaries made decisions, not merely the outcomes.

To survive a motion to dismiss on an ERISA imprudence claim, the Eighth Circuit requires that a complaint allege a 'meaningful benchmark' — that is, the complaint must provide enough detail about proposed alternative investments to allow a meaningful comparison. Simply naming alternative funds or labeling them as comparable is insufficient. The complaint must allege whether the alternative funds hold similar securities, follow similar strategies, and carry similar risk profiles.

Analysis

Claim 1: Breach of Duty of Prudence

The court agreed with Defendants that Scholin failed to allege a meaningful benchmark. Although the complaint named four comparator TDF series, it contained no allegations about those funds' objectives, strategies, risk profiles, specific glide paths, or specific investments. The court cited Matousek v. MidAmerican Energy Co. (8th Cir. 2022) for the proposition that without such detail, 'the composition of the peer groups remains a mystery' and no plausible inference of imprudence can be drawn.

The court distinguished Snyder v. UnitedHealth Grp., Inc. (D. Minn. 2021), which Scholin cited, noting that the complaint in Snyder specifically referenced Morningstar's peer-universe classification system and explained the methodology Morningstar used to group funds — including analysis of investments, strategic goals, and glide paths. Scholin's complaint contained no comparable allegations or references to any investment research firm's classification methodology.

The court also noted (in a footnote, without resolving the question) additional concerns: the complaint focused primarily on fund performance outcomes rather than on any failure of the fiduciary's decision-making process, and included few details about the duration and magnitude of the alleged underperformance. However, because dismissal was warranted on the benchmark ground alone, the court did not decide whether these additional deficiencies would independently require dismissal.

The court dismissed the duty of prudence claim without prejudice.

Claim 2: Failure to Monitor

Scholin's failure-to-monitor claim was dismissed as a derivative matter. Under Eighth Circuit precedent, a failure-to-monitor claim cannot succeed absent an underlying breach of ERISA's duties of prudence or loyalty. Because the duty of prudence claim was dismissed, the failure-to-monitor claim also failed.

Defendants' Request to Consider Outside Documents

Defendants submitted fund prospectuses and fact sheets alongside their motion, arguing these documents were 'necessarily embraced by the pleadings.' The court declined to resolve whether to consider those documents because its ruling was the same either way.

Disposition

Judge Bryan granted Defendants' Motion to Dismiss in its entirety and dismissed the action without prejudice.