ERISA-Fifth Circuit Upholds District Court’s Dismissal Of Claims Of Breach of Fiduciary Duty By Continuing To Allow Employees To Invest In Employer Stock

In Martone v. Robb, No. 17-50702 (5th Cir. 2018), Thomas Martone, a former Whole Foods employee, brought an action against certain Whole Foods executives who are named fiduciaries for the company’s 401(k) plan.  Martone alleges that these executives breached their fiduciary duties by allowing employees to continue to invest in Whole Foods stock while its value was artificially inflated due to a widespread overpricing scheme.  The district court dismissed the claims, finding that Martone failed to plausibly allege an alternative action that the fiduciaries could have taken that would have been consistent with the securities laws and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.

Upon reviewing the case, the Fifth Circuit Court of Appeals agreed with the district court’s finding and therefore affirmed the district court’s decision.