placed upon the ADM Plans' Committee and its members. See In re McKesson HBOC, Inc. ERISA Litig., 2002 WL 31431588, * 15 (N.D.Cal. Sept.30, 2002) (holding that "to the extent that plaintiffs are asserting a claim for breach of fiduciary duty arising out of the selection of HBOC stock as an investment option or a failure to monitor the fund to determine its suitability as an investment option, the Administrative Committee and its members are proper defendants.").
Accordingly, the Court finds that Defendant Moorman Profit Sharing Plan is entitled to summary judgment because it does not meet ERISA's definition of a fiduciary. Because the Moorman Profit Sharing Plan was not a fiduciary to Plaintiffs under the MMC Plan, it cannot be held liable for an alleged breach of a fiduciary duty.
As for the remaining four Defendants, the resolution of this case turns largely upon the determination of which party has correctly framed the issue. Plaintiffs assert that the issue before the Court is: "whether the Defendants violated their fiduciary duties to the Class members by failing to properly investigate and/or consider the Plan's investment in ADM stock under the relevant circumstances (notably, the Plan's termination), and their subsequent failure to take actions necessary to safeguard the value of the Plan's assets." On the other hand, Defendants assert that the issue which this Court must resolve is: "[a]fter ADM decided to terminate the Profit Sharing Plan, did the ADM Benefit Plans Committee have to sell all of the Plan's ADM stock before it could be distributed to the participants?"
The parties do not dispute many of the factual and legal precursors which are necessary to resolve this case. For example, the parties agree that the MMC Plan is an ERISA governed plan. Moreover, the parties agree that the remaining four Defendants are "fiduciaries" (as that term is used in ERISA § 404(a)(1)) to the MMC Plan, its participants, and its beneficiaries and that, at such, they must discharge their fiduciary duties with prudence, skill, care, diligence, and solely in the interest of the MMC Plan's participants and beneficiaries. 29 U.S.C. § 1104(a)(1). The parties also agree that, if Defendants breached their fiduciary duties in any way, they may be held personally liable for the losses sustained to the MMC Plan as a result of the breach. 29 U.S.C. § 1109(a). Finally, the parties agree that, not only is the MMC Plan an ERISA governed plan, but that the MMC Plan is also an "eligible individual account plan" which means that the MMC Plan is exempt from ERISA's general diversification requirement set forth in ERISA § 404(a)(1)(C).*fn12
The dispute between the parties, therefore, boils down to the question of whether, under the circumstances, Defendants breached their fiduciary duty to Plaintiffs in continuing to invest 65% of the MMC Plan's assets in ADM common stock after the termination of the MMC Plan.
The Court finds that they did not.
First, the Court finds that Defendants' continued holding of 65% of the MMC Plan's assets in ADM common stock after the MMC Plan's termination was prudent, and therefore, Defendants did not breach their fiduciaries duties to Plaintiffs. Contrary to Plaintiffs' argument, the Court believes that the appropriate standard of review when evaluating Defendants' investment decision is for an abuse of discretion. In reaching this conclusion, the Court is persuaded by the opinions of the United States Courts of Appeals for the Third and Sixth Circuits.
In Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995), the Third Circuit held that, based upon trust law, the purpose of ERISA, and the nature of eligible individual account plans, "an ESOP fiduciary who invests in the assets in an employer stock is entitled to a presumption that it acted consistently with ERISA by virtue of that decision." Id. at 571. The Third Circuit also went on to explain that "the plaintiff may overcome that presumption by establishing that the fiduciary abused its discretion by investing in employer securities." Id. Likewise, the Sixth Circuit held in Kuper v. Iovenko, 66 F.3d 1447 (6th Cir. 1995),
that a proper balance between the purpose of ERISA
and the nature of ESOPs requires that we review an
ESOP fiduciary's decision to invest in employer
securities for an abuse of discretion. In this
regard, we will presume that a fiduciary's decision
to remain invested in employer securities was
reasonable. A plaintiff may then rebut this
presumption of reasonableness by showing that a
prudent fiduciary acting under similar circumstances
would have made a different investment decision.
Id. at 1459; see Wright v. Oregon Metallurgical Corp., 222 F. Supp.2d 1224, 1233 (D.Or. 2002)(adopting the Third and Sixth Circuits' position).
In the instant case, the Court cannot say that Plaintiffs have overcome the presumption of reasonableness attached to Defendants' decision to continue to hold 65% of the MMC Plan's assets in ADM common stock. Plaintiffs have conceded that ADM was a sound company and was a good company in which to invest, and the Court believes that Plaintiffs have not established that a prudent fiduciary acting under similar circumstances would have made a different investment decision.
Moreover, the Court is not persuaded by Plaintiffs' attempts to rebut the presumption of reasonableness based upon the termination of the MMC Plan or the shortness of the investment horizon. In Kuper, the Sixth Circuit affirmed the district court's finding that the defendants had not breached their fiduciary duties despite the fact that, during the eighteen-month transfer period, the value of the employer stock plummeted by 80% because "several investment advisors recommended holding [the] stock." Kuper, 66 F.3d at 1451, 1460. Here, during a similar eighteen month period, the MMC Plan's assets took a much less drastic reduction in value, and investment experts continued to rate ADM common stock as a solid investment.
The Court also believes that Plaintiffs' prudence argument, when stripped away to its core, is, in reality, a claim that Defendants failed to diversify and, thereby, failed to protect the MMC Plan's assets.*fn13 As explained supra, however, because the MMC Plan is an eligible individual account plan under ERISA § 407(a)(2), it is exempt from ERISA's general diversification requirement. 29 U.S.C. § 1104(a)(2).
In addition, eligible individual account plans "are not designed to guarantee retirement benefits." Kuper, 66 F.3d at 1457. Rather, these plans are used both to foster employee ownership and as a technique of corporate finance. Id. In the Court's opinion, Plaintiffs are inappropriately attempting to hold Defendants accountable for the fluctuations of the marketplace — fluctuations which even Plaintiffs concede Defendants could not predict with 100% certainty. See Fink v. National Sav. and Trust Co., 772 F.2d 951, 962 (D.C. Cir. 1982) (Scalia, J. concurring in part and dissenting in part)(opining that "I know of no case in which a trustee who has happened — through prayer, astrology or just blind luck — to make (or hold) objectively prudent investments (e.g., an investment in a highly regarded `blue chip' stock) has been held liable for losses from those investments because of his failure to investigate and evaluate beforehand."). The Court believes that Defendants invested 65% of the MMC Plan's assets in ADM common stock in furtherance of ERISA's goals, and therefore, they should not be held liable for the decline in the value of ADM's common stock. See Martin v. Feilen, 965 F.2d 660, 670 (8th Cir. 1992)(noting that "ESOP fiduciaries should not be subject to breach-of-duty liability for investing plan assets in the manner and for the . . . purposes that Congress intended.").
Finally, to the extent that Plaintiffs suffered a loss, it was due, in part, to their decisions regarding the distribution of their assets in the MMC Plan. In reaching this same conclusion, one district court has noted that
[s]hort-term volatility was also of diminished
importance to SBP participants because they could
choose whether to take their benefits in the SBP in
company stock, rather than sell the stock and take
their benefits in cash. Participants could thereby
potentially avoid selling their stock at a time when
the share price is low. Therefore, if the retirement
committee had reviewed the demographics of the SBP or
retained an investment advisor to do an analysis of
whether fiduciaries should be looking long-term or
short-term, they would have determined that plan
assets should be invested for long-term. Accordingly,
the Court finds that such an analysis would not `have
revealed to a reasonable fiduciary that the
investment at issue was improvident.' Kuper, 66 F.3d
Landgraff v. Columbia/HCA Healthcare Corp. of Am., 2000 WL 33726564, * 16 (M.D.Tenn. May 24, 2000)
In short, the Court finds that Defendants did not violate the prudent man standard in retaining 65% of the MMC Plan's assets invested in ADM common stock after ADM merged the MMC Plan into the ADM's ESOP. Although Plaintiffs have tendered expert testimony that a prudent investor would have reconsidered the investment given the time frame between the MMC Plan's termination and the distribution of its assets, Defendants have tendered evidence that ADM stock was a prudent investment, that ADM was a financially solid company, and that investment advisors rated ADM stock as a "buy." Accordingly, the Court cannot say that Defendants abused their discretion in maintaining 65% of the MMC Plan's assets in ADM common stock after the MMC Plan's termination and distribution of its assets.
Second, the Court finds that Defendants did not breach their fiduciary duty to Plaintiffs in their investigation (or lack thereof) prior to retaining 65% of the MMC Plan's assets invested in ADM common stock. Plaintiffs are correct that "[s]ignificant authority does support the proposition that ERISA fiduciaries have a duty to investigate the investment which they administer." Kuper v. Quantum Chemicals Corp., 852 F. Supp. 1389, 1396 (S.D.Ohio 1994)(citing cases).
"Nevertheless, that duty is not absolute." Id. On the contrary, "proof of a causal connection . . . is required between a breach of fiduciary duty and the loss alleged." Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 279 (2d Cir. 1992). In fact, "even if a trustee failed to conduct an investigation before making a decision, he is insulated from liability if a hypothetical prudent fiduciary would have made the same decision anyway." Roth v. Sawye-Cleator Lumber Co., 16 F.3d 915, 919 (8th Cir. 1994); see Bussian v. R JR Nabisco, Inc., 223 F.3d 286, 300 (5th Cir. 2000)(same). "To hold otherwise would be to hold ERISA fiduciaries who exercise less than absolute vigilance automatically accountable for every market decline, even if the decline could not have been anticipated through the most exacting scrutiny." Kuper, 852 F. Supp. at 1397.
"The Court therefore must determine how a `hypothetical prudent fiduciary' would have reacted if faced with the circumstances presented herein. As the prudent person standard is not concerned with results, the Court must evaluate the fiduciaries' actions from the perspective of the time of the investment decision rather than from the vantage point of hindsight. Such judicial review of fiduciary actions has been termed highly deferential." Id. (citations and quotations omitted).
In the present case, even assuming, arguendo, that Defendants failed to conduct an investigation and/or failed to consider alternative investments for the MMC Plan's assets upon its termination, Plaintiffs have failed to identify any fact or circumstance which would have made investment by Defendants in ADM common stock imprudent other than the ones rejected by the Court supra. More importantly, Plaintiffs have failed to tender any evidence which would show that a hypothetical prudent fiduciary would not have decided to retain 65% of the MMC Plan's assets invested in ADM stock.
Accordingly, the Court finds that there are no genuine issues of material fact to be decided by the trier of fact and also finds that Defendants are entitled to judgment as a matter of law on the Class Plaintiffs' Amended Complaint.*fn14
Ergo, Plaintiffs' Motion for Summary Judgment is DENIED, and Defendants' Motion for Summary Judgment is ALLOWED. Accordingly, summary judgment is hereby entered in favor of Defendants and against Plaintiffs.