Ann Dormani v. Target Corporation, 970 F.3d 910

Background

Target’s 401(k) plan included an ESOP invested almost exclusively in Target common stock; Target’s 2013–2015 expansion into Canada failed and materially depressed Target’s stock price.
Plan participants sued Target, the Plan Investment Committee, several executives who served as Plan fiduciaries, and Target’s CEO, alleging breaches of ERISA fiduciary duties (prudence, loyalty, and monitoring) tied to the Canadian losses.
Plaintiffs alleged fiduciaries had inside information about Target Canada’s supply-chain problems and should have either publicly disclosed those problems or otherwise halted Plan purchases of Target stock.
The complaint was dismissed by the district court (this was plaintiffs’ second amended pleading after an earlier consolidated securities/ERISA action); the plaintiffs appealed.
The Eighth Circuit reviewed whether plaintiffs pleaded viable ERISA fiduciary breaches under governing standards (especially Dudenhoeffer) and affirmed the dismissal.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Breach of prudence (failure to disclose or freeze purchases)	Fiduciaries knew adverse inside facts about Target Canada and a prudent fiduciary would have disclosed the problems or frozen Plan purchases to avoid buying inflated stock.	ERISA fiduciaries cannot be required to take actions (like disclosure or trading) that would violate securities laws or reasonably be expected to reduce plan value; alternative actions could harm the plan more than help.	Dismissed — plaintiffs failed Dudenhoeffer pleading standard; alleged economic theories about market correction were too speculative to show no prudent fiduciary could reasonably conclude disclosure would do more harm than good.
Breach of loyalty (conflict of interest / misleading participants)	Fiduciaries were conflicted (company officers) and acted to entrench management by keeping Plan heavily invested; they also allegedly misled participants about Plan/stock risks.	Dual roles are permitted under ERISA; mere tension from officer status is insufficient, and plaintiffs did not plead specific knowingly false statements by fiduciaries.	Dismissed — dual-role allegations insufficient; misstatement claims inadequately pleaded and cannot be used to evade the Dudenhoeffer prudence standard.
Duty to monitor	CEOs failed to monitor fiduciaries and appoint independent fiduciaries to protect participants.	A monitoring claim requires an underlying breach by monitored fiduciaries; without a viable underlying breach, monitoring claim fails.	Dismissed — monitoring claim fails because no adequately pleaded underlying fiduciary breach.

Key Cases Cited

Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (2014) (establishes pleading standard for ESOP fiduciary duty claims based on inside information)
Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transp. Inc., 472 U.S. 559 (1985) (ERISA imports trust law fiduciary duties)
Pegram v. Herdrich, 530 U.S. 211 (2000) (fiduciaries may serve in multiple roles; ERISA does not categorically forbid dual capacities)
DiFelice v. U.S. Airways, Inc., 497 F.3d 410 (4th Cir. 2007) (officer status alone does not establish disloyalty)
Kalda v. Sioux Valley Physician Partners, Inc., 481 F.3d 639 (8th Cir. 2007) (duty to avoid affirmatively misleading plan participants)
Usenko v. MEMC LLC, 926 F.3d 468 (8th Cir. 2019) (standards for pleading ERISA fiduciary breach; review de novo)
Braden v. Wal-Mart Stores, Inc., 558 F.3d 585 (8th Cir. 2009) (elements required to state ERISA fiduciary breach)
Trs. of Graphic Commc’ns Int’l Union Upper Midwest Local 1 M Health & Welfare Plan v. Bjorkedal, 516 F.3d 719 (8th Cir. 2008) (recognizing permissible conflicts from dual roles)
Martone v. Robb, 902 F.3d 519 (5th Cir. 2018) (ESOP disclosure/freezing arguments rejected as speculative)
Saumer v. Cliffs Natural Res. Inc., 853 F.3d 855 (6th Cir. 2017) (similar rejection of speculative market-correction theory)
Whitley v. BP, P.L.C., 838 F.3d 523 (5th Cir. 2016) (same)