The Clorox Co. must defend itself against a proposed class action alleging it misused forfeited 401(k) funds to offset its own contributions instead of reducing plan participants’ costs. A California federal judge ruled Monday that the claims had enough merit to proceed, dealing a blow to Clorox’s attempt to escape the lawsuit.
Judge Rejects Clorox’s Dismissal Bid
U.S. District Judge Yvonne Gonzalez Rogers denied Clorox’s motion to dismiss, siding with former employee and lead plaintiff James McManus. The judge acknowledged that while McManus’ amended complaint, filed in November, was “sparse,” it sufficiently alleged that Clorox violated the Employee Retirement Income Security Act (ERISA) by prioritizing its own financial interests over those of its plan participants.
“Plaintiff’s argument that defendants were motivated solely by self-interest and conducted no reasoned and impartial decision-making process is plausible given that no other justification is readily apparent,” Judge Gonzalez Rogers wrote. “This is sufficient for the court to infer that defendants are liable for the misconduct alleged.”
Allegations of Fiduciary Breach
McManus, who participated in Clorox’s 401(k) plan, originally sued the consumer goods giant in October 2023. His lawsuit contends that Clorox had the authority to use forfeited 401(k) funds—left behind when employees departed—to lower plan expenses for participants. Instead, the company allegedly funneled the funds toward reducing its own employer contributions, saving millions at employees’ expense and violating ERISA.
