Former Genentech Worker Argues ERISA Suit Appeal Before Ninth Circuit Panel

Attorneys for a former Genentech worker recently argued a district court's dismissal of a proposed class action before a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit. The former worker alleged that the biotechnology company retained imprudent investment options in its 401(k) plan for several years in violation of the Employee Retirement Income Security Act (ERISA). They also claimed that the district court failed to properly differentiate the case from a case involving Intel Corp. that it relied on in its order of dismissal. The case is Wehner v. Genentech Inc. et al., Case Number 24-2630, U.S. Court of Appeals for the Ninth Circuit.

Anderson v. Intel Corp. Investment Policy Committee et al.

Anderson v. Intel Corp. Investment Policy Committee et al., a similar case to Genentech, was pending before the Ninth Circuit when attorneys for the proposed class appealed the dismissal of the Genentech appeal. The Ninth Circuit proceeded to affirm the lower court's ruling in Anderson, which led to supplemental briefing in the Genentech case before the recent arguments occurred.

In Anderson, a panel of the Ninth Circuit affirmed the lower court's decision that the ERISA suit presented no comparable funds that performed better than Intel's choice of funds for its retirement plans, or why certain benchmarks for measuring performance were appropriate. The district court judge in that case also found that Intel's choice of funds met the company's intent of protecting workers' savings amidst market uncertainty. As a result, the district court judge and the Ninth Circuit panel agreed that Anderson had failed to maintain a cognizable claim for imprudence based on poor investment fund choices.

Genentech – The District Court Decision

In Genentech, the plaintiff argued that the company violated ERISA by maintaining the Roche TDFs – a series of target date funds – in the employee retirement plan, despite well-known problems with TDFs. The plaintiff also argued that the Roche TDFs performed far worse than the leading benchmark for TDFs and other TDFs identified in plan documents.

Nonetheless, the district court judge dismissed the claims stemming from assertions of imprudent investments. The judge ruled that the plaintiff had failed to prove the propriety of the TDF benchmarks he used and that the investment manager's alleged problems with TDFs were not as widespread as the plaintiff suggested. The judge also noted that designating two other sets of TDFs as "comparable" to the Roche TDFs was insufficient to establish them as meaningful benchmarks for the purposes of comparing performance.

Arguments in Genentech Before the Ninth Circuit Panel

On appeal before the Ninth Circuit panel, the attorneys for the plaintiff argued that the Ninth Circuit should differentiate between the Genentech and Anderson cases and thus reach a different result. The attorneys pointed out that Intel established its plan to minimize risk in the aftermath of the 2008 market crash, unlike the Genentech plan. In response, the Genentech attorneys noted that the district court correctly relied on Anderson in applying the correct pleading standard in this case, in that underperformance of investment funds does not result in an inference of imprudence in violation of ERISA.

The panel judges extensively questioned attorneys for both sides of the case about specific provisions in the Genentech plan and the allegations, allowing both to go well beyond their allotted 15 minutes of argument time. While the judges' questions generally did not reveal a plain preference for either the plaintiff or Genentech, Judge Andrew D. Hurwitz did express concern about the impact of the Ninth Circuit's ruling in the Anderson case.

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