Thomas Matula, Jr. sued Wells Fargo and its benefits committees, alleging the bank violated the Employee Retirement Income Security Act by using forfeited 401(k) funds to offset its own matching contributions rather than paying plan expenses or making corrective adjustments.
Wells Fargo administers a defined contribution plan where employee contributions vest immediately, but the bank’s matching contributions vest over three years. Employees who leave before that mark forfeit their unvested matching funds. In 2022, employees forfeited roughly $2 million in unvested matching contributions.
Under the plan rules, Wells Fargo has sole discretion to use those forfeited funds to offset employer contributions, pay plan expenses, or make corrective adjustments to accounts. Matula argued the bank breached its fiduciary duty by choosing the first option.
The district court dismissed the suit with prejudice, agreeing with Wells Fargo that the plan rules did not authorize the bank to pay participant-borne expenses or distribute funds as corrective adjustments unless correcting a balance calculation error. The court concluded Matula failed to allege an actual injury traceable to the bank’s use of the funds.
The Eighth Circuit reversed the procedural posture but agreed with the substantive outcome. The panel found the district court erred by adopting Wells Fargo’s interpretation of the plan rules rather than accepting the complaint’s allegations as true for standing purposes.
However, the court affirmed the dismissal because Matula failed to establish Article III standing. At oral argument, Matula’s counsel acknowledged the complaint did not allege any actual injury to Matula’s specific plan account stemming from the bank’s use of the forfeited funds.
The court noted that ERISA standing requires a particularized injury affecting the plaintiff in a personal and individual way. Citing the Supreme Court’s decision in Thole v. U.S. Bank N.A., the panel emphasized that participants in defined contribution plans must show a concrete financial loss to sue.
Even assuming the plan rules allowed the bank to use the funds for expenses or adjustments, Matula did not identify specific expenses he paid that could have been offset by the forfeited funds. The complaint identified only “plan-level” harms.
The Eighth Circuit also ruled that the district court abused its discretion by dismissing the case with prejudice. A district court is generally barred from dismissing a case with prejudice if it concludes subject matter jurisdiction is absent, absent stark circumstances like repeated failures to correct deficiencies over years of litigation.
The case is remanded for the district court to enter a dismissal without prejudice.
The panel included Chief Judge Stephen B. Colloton and Circuit Judges Steven A. Gruender and Robert W. Kolbes.