                  United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 17-2397
                         ___________________________

 John Meiners, on behalf of a class of all persons similarly situated, and on behalf
                   of the Wells Fargo & Company 401(k) Plan

                         lllllllllllllllllllllPlaintiff - Appellant

                                            v.

Wells Fargo & Company; Human Resources Committee of the Wells Fargo Board
of Directors; Wells Fargo Employee Benefits Review Committee; Hope Hardison;
 Justin Thornton; Patricia Callahan; Michael Heid; Timothy Sloan; Lloyd Dean;
             John Chen; Susan Engel; Donald James; Stephen Sanger

                       lllllllllllllllllllllDefendants - Appellees

                              ------------------------------

   Securities Industry and Financial Markets Association; American Benefits
Council; Chamber of Commerce of the United States of America; ERISA Industry Committee

                    lllllllllllllllllllllAmici on Behalf of Appellees
                                        ____________

                     Appeal from United States District Court
                          for the District of Minnesota
                                 ____________

                              Submitted: June 13, 2018
                               Filed: August 3, 2018
                                   ____________

Before GRUENDER, ERICKSON, and GRASZ, Circuit Judges.
                                   ____________

GRASZ, Circuit Judge.

       John Meiners (“Meiners”) appeals from the district court’s1 order dismissing
his Complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6).
Meiners claimed that his former employer, Wells Fargo & Company (“Wells Fargo”),
and an assortment of Wells Fargo executives and entities (collectively, the “Wells
Fargo Defendants”) breached their fiduciary duty under the Employment Retirement
Income Security Act (“ERISA”). He alleged two breaches: (1) retaining Wells
Fargo’s proprietary investment funds as options for Wells Fargo employees’ 401(k)
retirement plan (the “Plan”), and (2) defaulting to these proprietary investment funds
for Plan participants who did not elect other options.

                                   I. Background

      Meiners sued the Wells Fargo Defendants for breach of fiduciary duty under
ERISA on behalf of the Plan and on behalf of a purported class of similarly situated
Plan participants. During the relevant time period, the Plan allegedly offered more
than two dozen investment options, twelve of which were Wells Fargo Dow Jones
Target Date Funds (“Wells Fargo TDFs”). These Wells Fargo funds were allegedly
more expensive (due to higher fees) than comparable Vanguard and Fidelity funds
and also underperformed the Vanguard funds.

     In his Complaint, Meiners pled three counts against the Wells Fargo
Defendants: (I) Breach of Duty of Loyalty and Prudence Against the Benefit
Committee; (II) Breach of Co-Fiduciary Duty Against Defendants Human Resources


      1
      The Honorable David S. Doty, United States District Judge for the District of
Minnesota.

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Committee, Hardison, and Thornton; and (III) Knowing Participation in Breach of
Fiduciary Duty Against Wells Fargo. All three counts relied on Meiners’s claim that
the Wells Fargo Defendants breached their fiduciary duties when they failed to
remove their inordinately expensive and underperforming funds from the Plan’s
options. Meiners further alleged that the breach occurred because the Wells Fargo
Defendants were maximizing their own profits, selecting their funds as a default out
of improper financial motives to generate fees and “seed” (provide financial support
for) the underperforming funds.

      The Wells Fargo Defendants moved to dismiss the Complaint under Fed. R.
Civ. P. 12(b)(6), and the district court granted the motion. Meiners timely appealed.
We affirm.

                               II. Standard of Review

        We review de novo a grant of a motion to dismiss under Fed R. Civ. P.
12(b)(6). Adams v. Am. Family Mut. Ins. Co., 813 F.3d 1151, 1154 (8th Cir. 2016).
We accept the well-pled allegations in the complaint as true and draw all reasonable
inferences in the plaintiff’s favor. Schriener v. Quicken Loans, Inc., 774 F.3d 442,
444 (8th Cir. 2014). “To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678. If the pled facts are merely consistent with liable acts, the
complaint “stops short of the line between possibility and plausibility.” Id. (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). In deciding or reviewing
motions to dismiss, courts may also consider those materials that are necessarily
embraced by the pleadings. See Schriener, 774 F.3d at 444.



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                                     III. Analysis

       ERISA imposes two primary duties on fiduciaries: loyalty and prudence.
Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 595 (8th Cir. 2009). “[A] fiduciary
shall discharge his duties with respect to a plan solely in the interest of the
participants and beneficiaries . . . .” 29 U.S.C. § 1104(a)(1). The fiduciary shall also
discharge its duties “with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of a like character and
with like aims.” Id. To state a claim for breach of fiduciary duty, “a plaintiff must
make a prima facie showing that the defendant acted as a fiduciary, breached its
fiduciary duties, and thereby caused a loss to the Plan.” Braden, 588 F.3d at 594. See
29 U.S.C. § 1109.

       ERISA plaintiffs claiming a breach of fiduciary duty have a challenging
pleading burden because of their different levels of knowledge regarding what
investment choices a plan fiduciary made as compared to how a plan fiduciary made
those choices. See Pension Benefit Guar. Corp. ex rel. St. Vincent Catholic Med.
Centers Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 718–19 (2d Cir.
2013). ERISA plaintiffs typically have extensive information regarding the selected
funds because of ERISA’s disclosure requirements. See id. at 719–20. In contrast,
they typically lack extensive information regarding the fiduciary’s “methods and
actual knowledge” because those details “tend to be ‘in the sole possession of [that
fiduciary].’” Id. at 719 (alteration in original) (quoting Braden, 588 F.3d at 598). As
a result, the challenge for ERISA plaintiffs is to use the data about the selected funds
and some circumstantial allegations about methods to show that “a prudent fiduciary
in like circumstances would have acted differently.” Id. at 720. See also 29 U.S.C.
§ 1104(a)(1)(B).




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       To show that “a prudent fiduciary in like circumstances” would have selected
a different fund based on the cost or performance of the selected fund, a plaintiff must
provide a sound basis for comparison — a meaningful benchmark. For example, in
Braden, the plaintiff alleged the market index and other shares of the same fund. Id.
at 595–96. However, while recognizing that Braden stated a claim, we cautioned that
“our ultimate conclusions rest on the totality of the specific allegations in this case”
and that “we do not suggest that a claim is stated by a bare allegation that cheaper
alternative investments exist in the marketplace.” Id. at 596 n.7. Because of the
benchmark allegations, we concluded the plaintiff was not “required to describe
directly the ways in which appellees breached their fiduciary duties.” Id. at 595. The
critical inquiry, then, is whether the missing factual allegations are facts about the
funds themselves, which ERISA plaintiffs can research, or facts about the fiduciary’s
internal processes, which ERISA plaintiffs generally lack.

A.    Whether the Wells Fargo TDFs Were an Imprudent Choice

      With these standards in mind, we conclude Meiners’s Complaint fails to state
a plausible claim because it lacks “sufficient factual matter, accepted as true,” to
demonstrate that the Wells Fargo TDFs were an imprudent choice. Iqbal, 556 U.S.
at 678.

      Specifically, Meiners did not plead facts showing the Wells Fargo TDFs were
underperforming funds. He only pled that one Vanguard fund, which he alleges is
comparable, performed better than the Wells Fargo TDFs. The fact that one fund
with a different investment strategy2 ultimately performed better does not establish
anything about whether the Wells Fargo TDFs were an imprudent choice at the outset.



      2
      As the district court noted, “Wells Fargo funds have a higher allocation of
bond[s] than Vanguard funds.”

                                          -5-
See Tussey v. ABB, Inc., 850 F.3d 951, 960 & n.8 (8th Cir. 2017).3 No authority
requires a fiduciary to pick the best performing fund. Cf. Braden, 588 F.3d at 596 n.7
(stating that fiduciaries are not required by ERISA to select “the cheapest possible
fund” available in the market) (quoting Hecker v. Deere & Co., 556 F.3d 575, 586
(7th Cir. 2009)).

       We recognize the district court determined that the Vanguard fund’s
performance was not a meaningful benchmark by considering prospectuses not
attached to the Complaint. This was not improper. The district court, like this Court,
is allowed to look at matters outside the pleadings if those matters are necessarily
embraced by the pleadings. Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n.4 (8th
Cir. 2003).4

       We are also unpersuaded by Meiners’s argument that the Wells Fargo TDFs
were too expensive due to their fees. The argument expands application of Braden
in exactly the way we warned against. See Braden, 588 F.3d at 596 n.7. We found
that different shares of the same fund were a meaningful benchmark, but Meiners
does not match that benchmark by alleging that cheaper alternative investments with
some similarities exist in the marketplace. Such an expansion of Braden is


      3
       While Meiners is correct that Tussey addressed a specific damages issue, not
pleadings, we find its reasoning on this particular point equally applicable here: the
choice of a particular fund is not flawed merely because of the existence of one fund
that ended up performing better.
      4
        Meiners may be correct that certain factual findings made by the district court
regarding Vanguard were improper at this stage. However, the district court was
correct to recognize a potential pattern of plaintiffs trying to convert failure to invest
in Vanguard, without more, into a breach of fiduciary duty. See, e.g., Amron v.
Morgan Stanley Inv. Advisors Inc., 464 F.3d 338, 345 (2d Cir. 2006). Because the
other findings regarding Vanguard were unnecessary to the district court’s decision,
we do not reach them.

                                           -6-
inappropriate because it permits plaintiffs to dodge the requirement for a meaningful
benchmark by merely finding a less expensive alternative fund or two with some
similarity.5

        A few district court opinions appear to support Meiners’s argument, but we do
not find them persuasive. We disagree with the rationale of these cases because we
believe the existence of a cheaper fund does not mean that a particular fund is too
expensive in the market generally or that it is otherwise an imprudent choice. Any
other conclusion would exempt ERISA plaintiffs both from pleading benchmarks for
the funds and from pleading internal processes about selecting funds. An ERISA
plaintiff must offer more than “labels and conclusions” about the fees before a
complaint states a claim. See Twombly, 550 U.S. at 555. We decline to follow the
district court opinions that concluded otherwise.

     We hold that Meiners has failed to allege sufficient facts to demonstrate that
the Wells Fargo TDFs were an imprudent choice.

      B. Whether the Wells Fargo Defendants Engaged in Unlawful Conduct

       Absent any well-pled factual allegations that the Wells Fargo funds were an
imprudent choice, no inference can be reasonably drawn that the Wells Fargo
Defendants retained those funds (or made them default investments) out of improper
motives. We cannot reasonably infer they acted out of a motive to seed
underperforming or inordinately expensive funds if Meiners has not plausibly pled
that those funds were, in fact, underperforming or inordinately expensive. See

      5
        Meiners’s alternative pleading that “effectively” assessing “double charges”
makes an investment fee too expensive is also unpersuasive. It is “[t]he total fee, not
the internal, post-collection distribution of the fee” that is the material figure for
assessing the reasonableness of a fee. Hecker v. Deere & Co., 556 F.3d 575, 586 (7th
Cir. 2009).

                                         -7-
Braden, 588 F.3d at 597 (“An inference pressed by the plaintiff is not plausible if the
facts he points to are precisely the result one would expect from lawful conduct in
which the defendant is known to have engaged.”). While plaintiffs need not rebut
every possible lawful reason for retaining a particular investment option, id. at
596–97, they must establish that a fund is an imprudent choice before they are entitled
to an inference supporting their allegations of unlawful reasons for retaining it.
Because Meiners has failed to establish an imprudent choice, his conclusory
allegations of bad conduct do not save his Complaint from its deficient pleading
regarding the Wells Fargo TDFs.

      C. Viewing the Complaint as a Whole

       Finally, we see no merit in Meiners’s accusation that the district court failed
to consider the Complaint as a whole. The district court's summary statement is
exactly right: “Taken as a whole, the complaint merely supports an inference that
Wells Fargo continued to invest in affiliated target date funds when its rate of return
was lower than Vanguard, which had a different investment strategy, and that was
more expensive than Vanguard and Fidelity funds.” Add. at 9–10. Consequently,
“These allegations do not give rise to an inference of a breach of fiduciary duty, and
as a result, that claim must be dismissed.” Id.

       Furthermore, it is clear the district court read the Complaint as a whole when
it required Meiners to pair allegations of self-interest with allegations of an
imprudently chosen fund in order to survive a motion to dismiss. When both lawful
and unlawful conduct would have resulted in the same decision, a plaintiff does not
survive a motion to dismiss by baldly asserting that unlawful conduct occurred. See
Pension Benefit Guar. Corp., 712 F.3d at 719 (“[T]he price of entry, even to
discovery, is for the plaintiff to allege a factual predicate concrete enough to warrant
further proceedings, which may be costly and burdensome.”(quoting DM Research,
Inc. v. Coll. of Am. Pathologists, 170 F.3d 53, 55 (1st Cir. 1999))).

                                          -8-
       Because the Complaint failed to plausibly allege a breach of fiduciary duty, and
because all of the claims in this case relied on such a breach, the Complaint failed to
state a claim upon which relief can be granted.

                                   IV. Conclusion

     The district court correctly determined that Meiners’s omission of any
meaningful benchmark in his Complaint meant that he failed to allege any facts
showing the Wells Fargo TDFs were an imprudent choice. As a result, Meiners’s
Complaint failed to state a claim for relief under ERISA and we affirm its dismissal.
                       ______________________________




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