Revisiting the State of the Law in ERISA Forfeitures Cases

On July 14, 2025, we published a detailed Legal Update describing the state of the law with respect to the ongoing wave of ERISA forfeiture lawsuits. This Legal Update analyzes the material developments that we have seen over the past six weeks, which include additional motion to dismiss rulings and a growing number of pending appeals. While this Legal Update focuses on the recent legal developments in these cases, we continue to see new forfeiture lawsuits, with at least seven new cases being filed over the same time period (for a total of almost 70 forfeiture lawsuits). For a more detailed background on the forfeiture lawsuits and the claims being asserted, please see our prior Legal Update.

Recent Motion to Dismiss Rulings

Since July 14, there have been eight motion to dismiss rulings in ERISA forfeiture lawsuits (beginning with Cain v. Siemens Corp. on July 31, 2025). District courts granted motions to dismiss in six of those cases and denied motions to dismiss in two cases. In total, 15 federal district courts in 13 states have now ruled on motions to dismiss in 22 forfeiture cases. Of those 22 forfeiture cases, district courts granted motions to dismiss in 16 cases (eight with prejudice) and denied motions to dismiss in six cases. With dismissals leading denials by an overall count of 16-6, the motion to dismiss win-rate for plan sponsors continues to exceed 70 percent.

The table below includes an updated list of the 22 motion to dismiss rulings.

Summary of Recent Rulings Granting Motions to Dismiss

As reflected in the above table, district courts have granted motions to dismiss in six cases since our prior Legal Update: (1) Cain v. Siemens Corp. (D.N.J.); (2) Middleton v. Amentum (D. Kan.); (3) Nykiel v. Smith & Nephew (D. Mass.); (4) Barragan v. Honeywell Int’l (D.N.J.); (5) Fumich v. Novo Nordisk (D.N.J.); and (6) Cano v. The Home Depot (N.D. Ga.). We discuss these rulings below.

1. Article III Standing

A second district court has now dismissed a forfeiture lawsuit because the plaintiffs lacked Article III standing. In Nykiel v. Smith & Nephew, the district judge adopted the magistrate judge’s report and recommendation finding the plaintiffs lacked Article III standing because they failed to plausibly allege an injury in fact. In Nykiel, the plaintiffs alleged they were harmed because the plan defendants used forfeitures to pay for the plan’s allegedly “unreasonable” recordkeeping fees. Had the forfeitures not been used for that purpose, the plaintiffs reasoned, the forfeitures could have instead been allocated directly to their plan accounts (and increased their balances). The magistrate judge rejected this argument, explaining that the plan “explicitly states how, and in what priority, forfeitures should be used,” and “does not, in any circumstance, require, or even allow, forfeitures to be redistributed to Plan participants.” Accordingly, the magistrate judge held—and the district judge agreed—that the plaintiffs failed to demonstrate Article III standing.

The majority of district courts granting dismissal continue to do so under Federal Rule 12(b)(6) for failure to state a claim, rather than for a lack of standing. We note, however, that the dismissal for lack of standing in Matula v. Wells Fargo, described in our prior Legal Update, is currently on appeal in the Eighth Circuit (see below). If the Eighth Circuit affirms the dismissal, we expect more district courts to take a closer look at standing. Because the district court in Nykiel permitted certain non-forfeiture claims to proceed to discovery, we do not anticipate an immediate appeal of the dismissal of the forfeiture claims in that case.

2. Per Se Fiduciary Breach (Duty of Prudence and Loyalty)

The majority of forfeitures complaints continue to espouse the theory that allocating forfeitures to offset employer contributions is a per se fiduciary breach, because forfeitures should always be used to pay for plan expenses or be allocated directly to participant accounts before they are allocated to contributions. While plaintiffs have started arguing they are not pursuing a per se theory because it is potentially permissible to allocate forfeitures to contributions if the plan sponsor is insolvent, this supposed qualification is disingenuous—it has not been applicable in any of the almost 70 forfeitures lawsuits that have been filed.

District courts granting motions to dismiss continue to emphasize the overbreadth of the plaintiffs’ forfeiture theory, and the lack of the context-specific allegations required to state a fiduciary breach claim. As the district court explained in Cain v. Siemens Corp., the plaintiffs’ “theory would impose categorical liability anytime a company chose to use forfeitures to reduce its own contributions.” The recent dismissal orders also agree with the earlier dismissal orders (described in our prior article) that the plaintiffs’ forfeitures theory is inconsistent with ERISA, because (i) the plaintiffs “impermissibly seek to create a new benefit” not promised by either ERISA or their plan and (ii) their theory “is contrary to the settled understanding of Congress and the Treasury Department regarding defined contribution plans.” See Middleton v. Amentum (internal citations omitted).³ With respect to the Treasury Department regulations permitting the allocation of forfeitures to contributions, the district court in Cano v. The Home Depot emphasized that, even though the regulations were not dispositive, the plaintiff could “hardly say that it was unreasonable or imprudent for Home Depot to act both consistently with its own Plan documents and consistently with regulations that have been effective for decades.” 

Plan language also continues to play an important role in motion to dismiss rulings, particularly when the plan document expressly authorizes allocating forfeitures to employer contributions. For example, the district court in Cain emphasized in dismissing the plaintiff’s fiduciary breach and prohibited transaction claims that “all Plaintiff has alleged is that Defendant did something expressly permitted by the Plan Document.” Similarly, in Cano, the district court explained that the plan document allowed Home Depot to allocate forfeitures to contributions and that “[t]he benefit Home Depot received from using forfeitures in this way does not constitute a breach.”

3.  Prohibited Transaction and Anti-Inurement Clause Claims

Perhaps in response to the growing number of courts dismissing prohibited transaction and anti-inurement clause claims, some of the more recent forfeiture lawsuits omit these claims altogether. For example, the now-dismissed Novo Nordisk complaint did not include a prohibited transaction claim. In the other five recent dismissals of forfeitures claims, the district courts agreed with the large majority of earlier dismissal orders and rejected the plaintiffs’ prohibited transactions claims because the reallocation of forfeitures within the plan is not a “transaction” for purposes of ERISA § 406.⁴ In Middleton, the district court also held that the prohibited transaction claim failed because the plaintiffs did not allege that the challenged transaction (i.e., the allocation of forfeitures to contributions) resulted in any plan injury, harm, or underfunding that would make it a prohibited transaction.

Only three of the six recently dismissed cases included anti-inurement clause claims: Middleton v. Amentum, Fumich v. Novo Nordisk, and Cano v. The Home Depot. In each case, the district courts held the plaintiffs failed to state an anti-inurement clause claim because they did not allege that the plan forfeitures ever left the plan (i.e., they were simply reallocated within the plan as employer contributions). The district courts also agreed with the plan defendants that using forfeitures to offset the employers’ contribution obligations was an “incidental benefit” to the employers that was not actionable under ERISA.

Summary of Recent Rulings Denying Motions to Dismiss

While the large majority of district courts continue to grant motions to dismiss, two recent district courts refused to do so: Stewart v. Nextera Energy (S.D. Fla.) and Becerra v. Bank of America (W.D.N.C.). We believe the recent decisions granting motions to dismiss (as well as the decisions summarized in our prior Legal Update) are better-reasoned and accurately reflect the law.

The two recent denial orders do so on different bases. In Stewart, the district court denied the motion to dismiss based on its interpretation of the plan language governing forfeitures. Specifically, the district court found that the plan specified that forfeitures had to first be used to pay for “Plan administrative expenses” and could only then be applied to company’s contributions if no administrative expenses remained. Because the parties disagreed over the meaning of the phrase “Plan administrative expenses” in the plan and whether it included the recordkeeping fees charged to the participant accounts, the district court permitted the claims to proceed to discovery because the phrase was susceptible to multiple interpretations. Based on our review of the decision, we believe more weight could have been given to the plan language granting the Nextera Energy retirement plan committee discretionary authority to construe and interpret the terms of its plan.

In Becerra, the district court did not, at least in its written opinion, engage in a detailed review of the plaintiff’s forfeitures claims or other district court rulings addressing similar lawsuits. Rather, the district court denied the motion to dismiss in a brief opinion. While the district court noted that “the claims and arguments made by both parties involve questions about how to interpret the plan,” and that “courts have come to different conclusions as to when there is a fiduciary duty under ERISA and what constitutes a breach,” it did not explore those arguments. Instead, the district court simply held that “Plaintiff has sufficiently stated a claim that Defendants breached their fiduciary duties by using Plan assets to lower new employer contributions.” The district court likewise permitted the anti-inurement clause claim to survive. Finally, the district court declined to dismiss the prohibited transaction claim on the basis that the US Supreme Court’s decision in Lockheed Corp. v. Spink was inapposite⁵ and two district courts (Rodriguez v. Intuit and Perez-Cruet v. Qualcomm) had refused to dismiss similar prohibited transaction claims. Notably, the district court did not address the myriad district court decisions dismissing prohibited transaction claims, nor did it explain how allocating forfeitures within the plan to other participants in the form of contributions was meaningfully different from the surplus plan funds being allocated to participants as additional benefits in Spink.

Pending Forfeiture Appeals

There are now seven forfeiture cases on appeal in three Federal Courts of Appeal: Ninth Circuit (four appeals); Third Circuit (two appeals); and Eighth Circuit (one appeal). The table below includes a list of the forfeiture cases currently on appeal and the status of those appeals. Although oral argument has not yet been scheduled, the HP, Inc. appeal is sufficiently ahead of the other appeals such that the Ninth Circuit may issue a ruling in that case first. With the recent dismissal with prejudice of the forfeiture claims in Cano v. The Home Depot, we could soon see an appeal in the Eleventh Circuit as well.

Additional Takeaways for Plan Sponsors

While the wheels of justice often turn slowly, we are starting to see more frequent material developments in the pending forfeiture lawsuits. In some good news for plan sponsors, the large majority of district courts that have ruled on motions to dismiss have granted those motions. However, there continue to be exceptions. For now, the ERISA plaintiffs’ bar remains undeterred, having filed almost 35 new forfeiture lawsuits in the first eight months of 2025. Accordingly, while we wait to see how other district courts and the federal appellate courts address these forfeiture lawsuits, plan forfeitures should continue to be an area of focus for plan sponsors.

¹ On May 16, 2025, the parties announced a $1.995 million class-wide settlement to resolve the forfeiture claims in the Rodriguez matter. No. 5:23-cv-5053, Dkt. 76 (N.D. Cal.). The district court granted preliminary approval of the settlement on July 15, 2025, and scheduled a fairness hearing for final approval of the settlement on November 13, 2025. Id., Dkt. 80.

² The district court dismissed the claims against the named Home Depot defendants (The Home Depot, Inc. and its 401(k) plan administrative committee) with prejudice. The court only granted plaintiff leave to amend with respect to the unnamed “Doe” defendants. 

³ See also Cain v. Siemens Corp.; Barragan v. Honeywell Int’l; Fumich v. Novo Nordisk; Cano v. The Home Depot.

⁴ See Cain v. Siemens Corp.; Middleton v. Amentum; Nykiel v. Smith & Nephew; Barragan v. Honeywell Int’l; Cano v. The Home Depot.

⁵ In Spink, the U.S. Supreme Court held that the use of surplus plan funds to offer early retirement benefits was lawful under ERISA and not a “transaction” under ERISA’s prohibited transaction rules. 517 U.S. 882, 892–93 (1996).

⁶ On August 26, 2025, Knight-Swift Transportation filed a joint notice of settlement in principle in a separate pending ERISA class action (Hagins v. Knight-Swift Transp., Case No. 2:22-cv-1835, Dkt. 76 (D. Ariz.)) stating that the parties had reached a class-wide settlement that would include the forfeiture claims in the Sievert matter currently on appeal in the Ninth Circuit. The parties intend to file a motion for preliminary approval of the class-wide settlement by October 24, 2025. Id.