In a pivotal decision, U.S. Circuit Judge Maxine M. Chesney has ruled against Salesforce, mandating the tech giant to confront a sprawling class action involving potentially 50,000 employees. The lawsuit alleges Salesforce's 401(k) plan was stocked with costly and underperforming investment options, marking a significant legal setback for the company.

Denial of Summary Judgment

Judge Chesney's verdict, delivered Wednesday, rebuffed Salesforce.com Inc.'s plea for summary judgment in the Employee Retirement Income Security Act (ERISA) lawsuit. The suit contends that Salesforce, headquartered in San Francisco, breached fiduciary duties by maintaining subpar investment options without seeking superior alternatives.

Salesforce Can't Ax Vast Class Suit Over 401(k) Management : Contentious Arguments

In its bid for dismissal last November, Salesforce defended its choices regarding the 401(k) plan. The company contended that offering an institutional class of JPMorgan target date funds, though not the cheapest option, was financially prudent due to revenue sharing arrangements. Similarly, it opposed replacing Fidelity mutual funds with collective investment trusts (CITs), citing concerns about third-party evaluations and comparative performance.

However, Judge Chesney highlighted discrepancies, noting the dissenting opinion of the workers' expert, Robert Conner. Conner argued that revenue sharing detracted from investment returns and intertwined administrative costs with participant returns, undermining Salesforce's rationale.

Dispute over Damages

Salesforce disputed the $5.2 million damages claim, challenging Conner's methodology and data accuracy. Judge Chesney, however, deemed the discrepancy a factual dispute rather than grounds for summary judgment, signaling the complexity of the case.

Salesforce Can't Ax Vast Class Suit Over 401(k) Management : Legal Odyssey

The lawsuit, initiated by former Salesforce employees Tim Davis, Gregor Miguel, and Amanda Bredlow in March 2020, encountered legal twists. Initially dismissed in October 2020, the Ninth Circuit resurrected the case in April 2022, underscoring the plaintiffs' credible allegations of fiduciary negligence.

Class Certification

Following remand, the workers sought class certification, encompassing individuals participating in Salesforce's 401(k) plan from March 11, 2014, to July 19, 2019, and investing in specified funds. Judge Chesney granted certification in February 2023, potentially encompassing 10,000 to 50,000 plan participants.

Salesforce Can't Ax Vast Class Suit Over 401(k) Management : Awaiting Responses

As the legal battle intensifies, representatives for both sides remained unavailable for immediate comment, setting the stage for a protracted legal showdown.

Representatives of the parties did not immediately respond to requests for comment Thursday.

Legal Representation

The plaintiff class is represented by Daniel L. Germain of Rosman & Germain APC, along with Mark K. Gyandoh and James A. Wells of Capozzi Adler PC. Meanwhile, Salesforce is represented by Robyn C. Crowther, Paul J. Ondrasik Jr., Eric G. Serron, and Justin Ben-Asherm of Steptoe LLP.