Fisher v. JP Morgan Chase & Co. , 469 F. App'x 57 ( 2012 )

10-1303-cv
Fisher v. JP Morgan Chase & Co.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.
At a stated Term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan United States Courthouse, at 500 Pearl Street, in the City of New York,
on the 8th day of May, two thousand twelve.
Present: ROBERT D. SACK
ROBERT A. KATZMANN,
DEBRA ANN. LIVINGSTON,
Circuit Judges.
____________________________________________________________
ISADORE FISHER, on behalf of themselves and a class of persons similarly situated, and on
behalf of the JP Morgan Chase 401(k) Savings Plan, JANNA WOOTEN, KELLI M. BUNN,
TAMMY SOILEAU, AMY K. HARVEY,
Plaintiffs-Appellants,
-v- No. 10-1303-cv
JP MORGAN CHASE & CO., MARC J. SHAPIRO, RICHARD DONALDSON, JR., JOHN
DOES, 1-30, J.P. MORGAN INVESTMENT SERVICES, THE PLAN INVESTMENT
MANAGEMENT COMMITTEE, THE BENEFITS FIDUCIARY COMMITTEE, INA R.
DREW, DINA DUBLON, PATRICK L. EDSPARR, JOHN J. FARRELL, PETER H. KOPP,
MARIA ELENA LAGOMASINO, BLYTHE S. MASTER, EDWARD McGANN, JOHN C.
WILMOT, HANS W. BECHERER, RILEY P. BECHTEL, FRANK A BENNACK,
LAWRENCE A BOSSIDY, M ANTHONY BURNS, H. LAURENCE FULLER, ELLEN V.
FUTTER, WILLIAM H. GRAY, III, WILLIAMS B. HARRISON, JR., HELENE L. KAPLAN,
LEE R. RAYMOND, JOHN R. STAFFORD, LLOYD D. WARD,
Defendants-Appellees.
____________________________________________________________
For Plaintiffs-Appellants: EDWIN J. MILLS (Michael J. Klein, on the brief), Stull, Stull &
Brody, NewYork, N.Y.
For Defendants-Appellees: JONATHAN K. YOUNGWOOD (Thomas C. Rice, Janet A.
Gochman, Hiral D. Mehta, on the brief), Simpson Thacher &
Bartlett LLP, New York, N.Y.
For Amicus Curiae Chamber Carol Connor Cohen, Caroline Turner English, Arent Fox LLP,
of Commerce of the United Washington D.C., Robin S. Conrad, Shane B. Kawka, National
States of America: Chamber Litigation Center, Washington D.C.
For Amicus Curiae Securities Pamela Rogers Chepiga, Andrew Rhys Davies, Henry
Industry and Financial Markets Morgenbesser, Lanier Saperstein, Allen & Overy LLP, New
Association: York, N.Y., Ira D. Hammerman, Kevin M. Carroll, Securities
Industry and Financial Markets Association, Washington, D.C.
Appeal from the United States District Court for the Southern District of New York
(Stein, J.).
ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment of the district court is AFFIRMED.
Plaintiffs-Appellants (“plaintiffs”) appeal from a March 31, 2010 opinion of the United
States District Court for the Southern District of New York (Stein, J.), granting Defendants-
Appellees’ (“defendants”) motion for judgment on the pleadings. Plaintiffs were participants in
the JP Morgan Chase & Co. (“JP Morgan”) deferred employee compensation plan -- the JP
Morgan 401(k) Savings Plan (the “Plan”)1 -- whose individual accounts held shares of JP
Morgan common stock between April 1, 1999 and January 2, 2003 (the “Class Period”).
1
The Plan is an “employee pension benefit plan” as defined by 29 U.S.C. § 1002(2)(A)
that provides for an individual account for each participant with benefits based on contributions,
and is thus an “eligible individual account plan” (“EIAP”) within 29 U.S.C. § 1002(34).
Participants may select from a number of investment options, including company common stock
through the JP Morgan Chase Stock Fund (“Stock Fund”), mutual funds, or trusts. The Stock
Fund is designated in the Plan as an employee stock ownership plan (“ESOP”), which is a type
of EIAP.
2
Plaintiffs’ complaint asserts three claims: (1) that defendants negligently permitted Plan
participants to purchase and hold shares of JP Morgan common stock when it was imprudent to
do so (the “Prudence Claim”); (2) that defendants failed to disclose and negligently
misrepresented material facts to Plan participants (the “Communications Claim”); and (3) that JP
Morgan and the “director defendants”2 failed to appoint appropriate fiduciaries, monitor those
fiduciaries, and supply them with the information necessary to fulfill their duties. In October
2011, this Court issued two opinions addressing claims substantially similar to those alleged
here. See In re Citigroup ERISA Litig., 662 F.3d 128, 136, 142 (2d Cir. 2011) (“Citigroup”)
(adopting presumption of prudence when reviewing Employee Retirement Income Security Act
(“ERISA”) fiduciaries’ “decisions not to divest [investment plans] of . . . stock or impose
restrictions on participants’ investment in that stock” and holding that “fiduciaries have no duty
to provide Plan participants with non-public information that could pertain to the expected
performance of Plan investment options”); Gearren v. McGraw-Hill Cos., 660 F.3d 605, 610 (2d
Cir. 2011) (per curiam) (applying presumption of prudence). Subsequently, both parties
submitted letter briefs addressing this legal development. We assume the parties’ familiarity
with the remaining facts and procedural history of the case.
We review de novo the district court’s decision granting judgment on the pleadings.
Bank of N.Y. v. First Millennium, Inc., 607 F.3d 905, 922 (2d Cir. 2010). A Federal Rule of
Civil Procedure 12(c) motion is evaluated using the same standards that we apply to a Rule
2
The “director defendants” are those defendants who served on the JP Morgan board of
directors during at least part of the Class Period: Hans W. Becherer, Riley P. Bechtel, Frank A.
Bennack, Jr., Lawrence A. Bossidy, M. Anthony Burns, H. Laurence Fuller, Ellen V. Futter,
William H. Gray, III, Williams B. Harrison, Jr., Helene L. Kaplan, Lee R. Raymond, John R.
Stafford, and Lloyd D. Ward.
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12(b)(6) motion. Id. “‘Thus, we will accept all factual allegations in the complaint as true and
draw all reasonable inferences’ in favor of the counter-claimant. To survive a Rule 12(c)
motion, the complaint ‘must contain sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.’” Id. (quoting Hayden v. Paterson, 594 F.3d 150, 160 (2d Cir.
2010)) (internal citation omitted).
Plaintiffs first argue that the district court erred by dismissing their claim that the
defendants acted imprudently by continuing to allow Plan participants to invest in JP Morgan
stock during the Class Period. Having adopted the presumption of prudence in Citigroup, 662
F.3d at 138, we review the defendants’ decision to continue to allow Plan participants to invest
in employer stock, in accordance with the Plans’ terms, for an abuse of discretion. “Plan
fiduciaries are only required to divest an EIAP or ESOP of employer stock where the fiduciaries
know or should know that the employer is in a ‘dire situation.’” Gearren, 660 F.3d at 610(quoting Edgar v. Avaya, Inc., 503 F.3d 340, 348 (3d Cir. 2007)). “Mere stock fluctuations,
even those that trend downward significantly, are insufficient to establish the requisite
imprudence to rebut the presumption.” Id. (internal quotation marks omitted); Citigroup, 662
F.3d at 141 (declining to find presumption of prudence rebutted where stock price fell over 50%
during class period).
Here, we agree with the district court that the plaintiffs have not sufficiently alleged that
defendants knew or should have known that JP Morgan was in a dire situation. JP Morgan’s
stock price fell approximately 55% over the course of the class period. However, even when the
stock was at its lowest price -- $15 per share -- it still retained significant value and by the end of
the Class Period, the stock had rebounded to $25 per share. Moreover, throughout the Class
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Period, JP Morgan remained a viable company. Plaintiffs have not identified any cases in which
a fiduciary’s failure to divest in similar circumstances was found to be imprudent.
On appeal, plaintiffs principally argue that the presumption of prudence does not apply to
their negligence claim because, unlike the ERISA plans at issue in Citigroup and Gearren, here
“the Plan’s fiduciaries had unfettered discretion whether to offer” JP Morgan securities “as a
Plan investment option.” Pls.’ Br. at 8. This argument, however, fails after Citigroup, which
adopted the presumption of prudence as applying to all EIAPs and ESOPs. Citigroup, 662 F.3d
at 138 (“We now join our sister circuits in adopting the Moench [v. Robertson, 62 F.3d 553 (3d
Cir. 1995)] presumption -- and do so with respect to both EIAPs and ESOPs -- because, as those
courts have recognized, it provides the best accommodation between the competing ERISA
values of protecting retirement assets and encouraging investment in employer stock.”).
Additionally, plaintiffs’ argument mischaracterizes the amount of discretion afforded to the JP
Morgan Plan fiduciaries. Unlike the ERISA plan at issue in Citigroup, the JP Morgan Plan does
not expressly require participants to be able to purchase employer stock. Notwithstanding that
difference, a number of the Plan’s provisions strongly favor employee investment in JP Morgan.3
Accordingly, this is not a case in which the Plan’s terms grant the fiduciaries “unfettered
discretion whether to offer” the employer’s stock.
We turn next to plaintiffs’ claim that defendants breached their fiduciary duty of loyalty
by: (1) failing to disclose information about JP Morgan’s financial condition to Plan participants
and (2) making false or misleading statements about JP Morgan to the participants. We reject
3
For instance, the Plan mandates that prior to October 1, 2002, 50% of the matching
contributions given by JP Morgan to participants who have not achieved certain age and service
requirements would be “automatically” invested in the Stock Fund. App. 173-75 at § 7.7(b).
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plaintiffs’ first theory of liability in light of our holding in Citigroup that “fiduciaries have no
duty to provide Plan participants with non-public information that could pertain to the expected
performance of Plan investment options.” Citigroup, 663 F.3d at 142. The plaintiffs’ second
theory of liability also lacks merit. The only false or misleading statements identified by
plaintiffs are in SEC filings that plaintiffs contend were incorporated into the Plan’s Summary
Plan Description (“SPD”). ERISA, however, holds fiduciaries liable solely “to the extent that
they were acting as a fiduciary . . . when taking the action subject to the complaint.” Gearren,
660 F.3d at 611 (internal quotation marks omitted). Thus, like the defendants in Gearren,
because the “defendants who signed or prepared the SEC filings were acting in a corporate,
rather than ERISA fiduciary, capacity . . . [they] may not be held liable under ERISA for
misstatements contained in the SEC filings.” Id.; see also Citigroup, 662 F.3d at 144-45(declining to hold plan fiduciaries liable for misstatements made in SEC filings although the
plan’s SPD referred to those filings).
Finally, we consider plaintiffs’ claim that JP Morgan and the director defendants failed to
properly appoint, monitor, and inform the Plans’ fiduciaries. This claim is derivative of
plaintiffs’ Prudence and Communications Claims and was also properly dismissed.
We have considered plaintiffs’ remaining arguments and find them to be without merit.
Accordingly, for the foregoing reasons, the judgment of the district court is AFFIRMED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, CLERK
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