May 13, 2021

A former Wells Fargo employee can proceed with a potential class action accusing the lender of violating ERISA by shortchanging its own 401(k) plan participants by steering their investments into the bank’s proprietary or affiliated investment vehicles, even though lower-cost, higher-performing options were available, a federal judge in Minnesota ruled Wednesday.

U.S. District Judge Donovan Frank denied Wells Fargo & Co’s motion to dismiss the complaint, saying complaint filed by Yvonne Becker and her lawyers at Cohen Milstein and Zimmerman Reed went beyond “bare allegations” of mismanagement and self-dealing by showing how poorly the 17 affiliated funds stacked up against “the very benchmarks that Defendants themselves selected” as measures of performance.

Wells Fargo’s lawyers at Proskauer Rose and Dorsey & Whitney had offered reams of additional evidence to counter the picture that Becker had painted. However, Frank said those attempts were premature since factual disputes and affirmative defenses “cannot be resolved on a motion to dismiss.”

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