Second Circuit Clarifies Tests for Individual and Class Standing in 401(k) Plan Dispute 

The Court of Appeals for the Second Circuit affirmed, in part, and vacated, in part, the dismissal of putative class claims brought by participants in the Northeast Grocery 401(k) Savings Plan (the Plan) alleging Plan fiduciaries failed to prudently select and monitor Plan investments and fees and failed to monitor and control the performance and fees of fund managers and the Plan's investment advisors and recordkeepers. Collins v. Northeast Grocery, Inc., No. 24-2339-cv (2d. Cir. August 18, 2025). In its decision, the Second Circuit sought to clarify the "standards applicable to the standing of a defined contribution plan plaintiff individually and on behalf of a putative class." 

According to the court, 

Plaintiffs must establish for each claim that they have what we previously called "statutory standing," a "statutory cause of action to sue a defendant over the defendant's violation of federal law," constitutional, or Article III, standing, (a constitutionally-cognizable injury arising from the defendant's breach of a statutorily imposed duty); and, because this is a putative class action, "class standing" (standing to bring class claims on behalf of absent class members). (internal citations omitted)

Finding the plaintiffs had statutory standing to bring their ERISA claims, the court focused on whether the plaintiffs had Article III and class standing and found they did not with respect to some of the claims alleged. Regarding Article III standing, the court stated, "Our precedents demonstrate that defined contribution plan participants seeking to obtain monetary relief for alleged ERISA violations must allege a non-speculative financial loss actually affecting, or imminently threatening to affect, their individual retirement account."

As to the plaintiffs' claims that the defendants failed to investigate the availability of lower-cost and equal or better-performing share classes with respect to three investment options in the Plan and also failed to investigate the availability of lower-cost, better-performing alternative funds, the Second Circuit, agreeing with the district court, found the plaintiffs lacked Article III standing to assert those claims because the complaint failed to allege that the plaintiffs invested in the allegedly imprudent funds. As to the claims that defendants imprudently failed to monitor recordkeeping fees that included revenue sharing and selected excessively costly funds with revenue sharing at the expense of Plan participants, the court similarly found a lack of standing because the complaint did not clearly allege that any of the plaintiffs invested in a fund with revenue sharing.

Next, the court concluded the plaintiffs lacked "class standing." According to the court, 

…our class standing test permits Plaintiffs to assert claims on behalf of absent class members only if they plausibly alleged "(1) that [they] personally ha[ve] suffered some actual injury as a result of the [purportedly] illegal conduct of the defendant, and (2) that such conduct implicates the same set of concerns as the conduct alleged to have caused injury to other members of the putative class by the same defendants." 

Because the plaintiffs failed step one of this test, the court concluded they did not have standing to pursue class claims. The court emphasized the need for "alignment" of the named plaintiffs' and absent class members' claims, stating that alignment occurs "when proof that a named plaintiff develops for his individual claims tends to prove the class claims." Further, citing Thole v. U.S. Bank, N.A., 590 U.S. 538, 543 (2020), the court stated that ERISA plaintiffs cannot rectify a deficient showing of an injury-in-fact by asserting they have standing as representatives of the plan.

The court addressed the district court's dismissal for failure to state a claim in a separate summary order. In that order, the court vacated the dismissal of two of the plaintiffs' claims asserting prohibited transactions related to payments of allegedly excessive fees to Plan service providers and remanded them to the district court "for further consideration in light of Cunningham v. Cornell University, 145 S. Ct. 1020 (2025)."

Eighth Circuit Reverses District Court's Permanent Injunction of Arkansas Ban on Gender Transition Procedures for Minors

On August 12, 2025, the Court of Appeals for the Eighth Circuit, sitting en banc in Brandt ex rel. Brandt v. Griffin, No. 23-2681, reversed the district court's permanent injunction of the Save Adolescents from Experimentation Act, Act 626 (the Act). 

The Act prohibits physicians and other healthcare professionals from providing "gender transition procedures to any individual under eighteen (18) years of age" as well as referrals to health professionals for such procedures. A violation of these provisions constitutes "unprofessional conduct... subject to discipline by the appropriate licensing entity or disciplinary review board," and allows the Arkansas attorney general to bring enforcement actions. The Act also prohibits the use of public funds for gender transition procedures for minors including tax deductions for individuals or entities for the "provision of gender transition procedures or as premiums for health care coverage that includes coverage for gender transition procedures" and reimbursements and/or coverage under the Arkansas Medicaid Program. The Act also provides that "[a] health benefit plan under an insurance policy or other plan providing healthcare coverage in this state" "shall not include reimbursement for gender transition procedures" for minors and is "not required to provide coverage for gender transition procedures."

This case was previously before the Eighth Circuit on an unsuccessful interlocutory appeal of the district court's preliminary injunction. After an eight-day bench trial, the district court ruled that the Act violates the Equal Protection Clause, the Due Process Clause, and First Amendment and permanently enjoined the Arkansas attorney general and the state medical board from enforcing the Act. 

Several amicus briefs were filed in this case on appeal in support of the district court's permanent injunction of the Act, including one by 20 state attorneys general, which cited Bostock v. Clayton County, 590 U.S, 644, 660 (2020), for the premise that the law discriminates on the basis of sex and transgender status and is therefore subject to heightened scrutiny. The Department of Justice (DOJ) also filed an amicus brief in support of the injunction, but that brief was subsequently withdrawn. 

The plaintiffs-appellees argued that the Act discriminates on the basis of sex — because "a minor's sex determines whether he or she can receive certain medical treatments," such that "a male minor can receive testosterone to masculinize his appearance, but a female minor cannot" — as well as on transgender status — because the Act prohibits gender transition procedures, and the Act's definition of "gender transition" is "synonymous with being transgender." The plaintiffs-appellees also argued that even if rational basis review applies, there is no rational basis for the Act because it "permits minors to receive the same medications for purposes other than gender transition procedures, even though those medications still have risks," and given that it bans all gender transition procedures when only some gender transition procedures pose risks. Additionally, the plaintiffs-appellees challenged the Act on due process grounds based on a violation of the right to provide appropriate medical care for their children. 

The Eighth Circuit disagreed with plaintiffs-appellees, relying principally on United States v. Skrmetti, 145 S. Ct. 1816, 1829 (2025), which upheld a similar Tennessee law prohibiting healthcare providers from prescribing or administering hormones or puberty blockers to minors for the purpose of gender-affirming care. The court found that the Act, like the Tennessee law at issue in Skrmetti, "classifies based on age," as well as based on medical procedure. The court reasoned that the Act "does not classify based on sex" because "[a] minor male who receives testosterone in order to masculinize his appearance receives a different procedure than a minor female who receives testosterone as a gender transition procedure." Also citing Skrmetti, the court declined to decide "whether Bostock's reasoning applies in Equal Protection Clause cases because applying Bostock's reasoning does not change the outcome of this case." 

The court also relied on Skrmetti to reject several of plaintiffs-appellees' other arguments. First, it found that the Act does not discriminate based on stereotypes, i.e. turning on "what is 'typical' for an individual's sex," noting that the plaintiffs-appellees "do not allege that an invidious sex-based discriminatory purpose motivated the Arkansas General Assembly." Second, the Eighth Circuit found that there was no discrimination based on transgender status because the Act "effectively divides minors into two groups," (1) "minors seeking drugs or surgeries for the purposes that the Act prohibits," and (2) "minors seeking drugs or surgeries for purposes the Act does not prohibit," and that "[a]lthough the first group may include only minors with transgender status, the second group encompasses both transgender and nontransgender individuals." Third, the court found that there was a rational basis for discrimination based on age and medical procedure here. 

Lastly, the court reversed the district court's ruling that the referral provision of the Act, which prohibits referrals only for gender transition procedures rather than other medical services, violates the First Amendment as a content-based restriction, reasoning that "a referral for treatment is not part of the 'speech process,'" but instead "a part of the treatment process for gender transition procedures." The court found that to the extent the Act regulates speech, it does only incidentally, and the Act survives intermediate scrutiny given that Arkansas has a "'compelling interest' in protecting the physical and psychological health of minors" and the Act is appropriately tailored. 

Circuit Judge Jane L. Kelly, joined by Circuit Judge James B. Loken, dissented regarding the majority's holdings under the Equal Protection Clause and Due Process Clause (but concurred in part regarding the First Amendment rulings). Judge Kelly argued that the district court must assess whether the Act survives rational basis review as to the plaintiffs-appellees' Equal Protection Clause and Due Process Clause claims in the first instance given the intervening decision in Skrmetti and that this case, unlike Skrmetti, involves "factual findings from a lengthy trial," which "reveal a startling lack of evidence concerning Arkansas' ban on gender-affirming care with its purported goal of protecting children." The dissent also stated that the Act "plausibly" fails rational basis review given the factual findings in the case, concluding that "this record implies that the Act reflects... a moral panic about gender dysphoria in adolescents." 

Since the Supreme Court's decision in Skrmetti, the Tenth Circuit issued a decision similar to this one in Poe v. Drummond, No. 23-5110, which upheld the constitutionality of Oklahoma Senate Bill 613, prohibiting access to gender transition procedures for minors.

Court Rejects Forfeitures Claim and Finds Imprudent Fund Claim Deficient on Process

On August 19, 2025, the court in Fumich, v. Novo Nordisk Inc., No. 24-9158 (D.N.J.), granted Novo Nordisk's (Novo) partial motion to dismiss the plaintiffs' complaint, adding to the number of courts that have rejected allegations that plan sponsors misapplied retirement plan forfeitures to their benefit. 

The plaintiffs filed their putative class action lawsuit in September 2024, alleging that Novo violated ERISA with respect to its 401(k) plan (Plan) by: (1) breaching the fiduciary duty of prudence; (2) breaching the fiduciary duty of loyalty; (3) causing retirement plan assets to inure to its benefit; and (4) failing to monitor Plan fiduciaries. Specifically, the plaintiffs alleged that Novo failed to "objectively and adequately review the Plan's investment portfolio... to ensure that each investment was prudent." The plaintiffs further alleged that Novo failed "to defray reasonable expenses of administering the Plan, by using Plan participant funds to reduce company contributions instead of using the funds to reduce amounts charged to participants." Novo moved to dismiss some of the plaintiffs' claims related to the inclusion of relevant Schwab funds in the Plan and the use of forfeited funds but did not move to dismiss the excessive recordkeeping fees or the failure to monitor claim related to the recordkeeping fees. 

In rejecting the plaintiffs' prudence claim, the court found their allegations were "conclusory and speculative and fail to make out a claim that [Novo's] Retirement Committee breached the fiduciary duty of prudence." The court noted that the plaintiffs' reliance on comparator funds that outperformed the Plan's funds was not enough to warrant a finding that Novo was imprudent without pleading allegations regarding Novo's process for selecting or retaining of the Plan's funds. The court further stated that the plaintiffs failed "to offer the numerous and specific factual allegations of substantial circumstantial evidence that would allow this Court to reasonably infer a breach of Defendants' duty of prudence."

The court also rejected the plaintiffs' loyalty claim, which was based on allegations that Novo should have used the Plan's forfeited funds to reduce recordkeeping costs and fees instead of offsetting its employer contributions. The court determined that although Novo was a fiduciary with respect to its management of the Plan's forfeitures, its application of the forfeitures was consistent with the express language of the Plan, which allowed forfeitures to be used to "reduce the applicable Employer's future contributions." The court explained that to follow the plaintiffs' reasoning seeking to require "defendants to use the forfeitures to pay administrative costs would use the fiduciary duties of loyalty and prudence to create a new benefit to participants that is not provided in the plan document itself." 

As to the plaintiffs' anti-inurement claim, which was also based on Novo's use of forfeitures, the court stated that "allegations that fiduciaries received incidental or indirect benefits does not satisfy a claim for breach of ERISA's anti-inurement provision." The court also rejected the failure to monitor claim with respect to the Schwab funds and the use of Plan forfeitures given the dismissal of the plaintiffs' underlying breach claims regarding the same. 

Following the court's decision, the case will proceed with a much narrower set of issues focused on the Plan's recordkeeping fees. This decision is another example of a court holding that forfeited funds in retirement plans may be used as permitted by ERISA and where consistent with plan documents to reduce an employer's voluntary contributions.

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