Wehner v. Genentech, Inc.

Background

Matthew Wehner, a former Genentech employee and current participant in the U.S. Roche 401(k) Savings Plan, brought a class action under the Employee Retirement Income Security Act (ERISA). He sued Genentech and the U.S. Roche DC Fiduciary Committee for allegedly breaching fiduciary duties. The First Amended Complaint asserted a claim for breach of the duties of prudence and loyalty and a derivative claim alleging failure to monitor fiduciaries and co-fiduciary breaches.

Wehner alleged that the Plan charged excessive recordkeeping and administrative fees and that the Plan’s master-trust structure caused participants to pay additional indirect expenses. He also challenged the selection and retention of the Roche custom target-date funds and Russell Investment Management Company. The court had previously granted defendants’ motion to dismiss the original complaint for failure to state a claim, with leave to amend.

Motion to Dismiss

Under Federal Rule of Civil Procedure 12(b)(6), a complaint must contain enough factual allegations to make a claim for relief plausible rather than merely possible. Applying that standard, the court concluded that Wehner adequately pleaded an excessive-fee claim based on direct recordkeeping and administrative fees.

Wehner identified the Danaher Corporation and Subsidiaries Savings Plan as a meaningful comparison. Both the Danaher Plan and the Roche Plan used Fidelity Workplace Services as recordkeeper and allegedly received the same kinds of services. The plans had similar numbers of participants, but Wehner alleged that the Danaher Plan paid about $28 per participant while the Roche Plan paid approximately $54 per participant on average during the relevant period. The court found that these allegations supported a plausible inference that the Roche Plan’s fees were excessive in relation to the services provided. The court therefore denied defendants’ motion to dismiss this excessive-fee claim.

The court rejected the separate prudence theory based on the Roche custom target-date funds and Russell. It found that allegations about Russell’s limited number of custom target-date-fund clients, the liquidation of Russell’s retail target-date fund, and the funds’ alleged underperformance did not plausibly show imprudence. The court also found that Wehner had not adequately explained why the retail target-date funds and S&P target-date indices were meaningful benchmarks for the Roche custom funds. Defendants’ motion to dismiss this portion of the prudence claim was granted with prejudice.

The court also rejected Wehner’s duty-of-loyalty theories. It found that his allegations about the master trust relied on an incorrect or unsupported assumption about how expenses were allocated and that his allegations about Russell showed, at most, a potential conflict of interest rather than a plausible intent to benefit defendants or a third party at the Plan participants’ expense. Defendants’ motion to dismiss the duty-of-loyalty claim was granted with prejudice.

Because the excessive-fee allegations plausibly alleged an underlying fiduciary breach, the derivative failure-to-monitor and co-fiduciary-breach claim survived to the extent it was based on the excessive-fee claim. Defendants’ motion to dismiss that portion of the monitoring claim was denied. To the extent the monitoring claim relied on the other insufficient allegations, the motion was granted with prejudice.

Discovery Dispute

Wehner sought documents under ERISA’s disclosure provision and Federal Rule of Civil Procedure 34, including committee meeting minutes and other materials concerning the Plan’s administration and monitoring. The court concluded that the request was too broad and that the ERISA disclosure provision did not entitle him to the requested meeting minutes and similar materials.

The court stated that discovery concerning the plausibly pleaded excessive-fee claim could proceed. It denied Wehner’s request for an order requiring defendants to respond to the broader document request and produce committee meeting minutes and other basic decision-making materials concerning the remaining insufficiently pleaded claims.

Disposition

The order states that defendants’ motion to dismiss the excessive-fee claim was denied. The motion to dismiss the related failure-to-monitor claim was denied to the extent it was based on the excessive-fee claim. The motion was otherwise granted with prejudice. The discovery request concerning the remaining claims was denied, while discovery on the excessive-fee claim could proceed.

The opinion text supplied with the case identifies Richard Seeborg as the judge, but the order’s signature appears to read “William H. Orrick — United States District Judge.” The summary uses the judge’s name as it appears in the signature.