Amgen Inc. v. Harris ( 2016 )


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  •                   Cite as: 577 U. S. ____ (2016)            1
    Per Curiam
    SUPREME COURT OF THE UNITED STATES
    AMGEN INC., ET AL. v. STEVE HARRIS, ET AL.
    ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED
    STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
    No. 15–278.   Decided January 25, 2016
    PER CURIAM.
    The Court considers for the second time the Ninth Cir-
    cuit’s determination that respondent stockholders’ com-
    plaint states a claim against petitioner fiduciaries for
    breach of the duty of prudence. The first time, the Court
    vacated and remanded in light of Fifth Third Bancorp v.
    Dudenhoeffer, 573 U. S. ___ (2014), a case which set forth
    the standards for stating a claim for breach of the duty of
    prudence against fiduciaries who manage employee stock
    ownership plans (ESOPs). On remand, the Ninth Circuit
    reiterated its conclusion that the complaint states such a
    claim. The Court now reverses and remands.
    The stockholders are former employees of Amgen Inc.
    and its subsidiary Amgen Manufacturing, Limited, who
    participated in plans that qualified under 
    29 U.S. C
    .
    §1107(d)(3)(A) as eligible individual account plans. Like
    ESOPs, these plans offer ownership in employer stock as
    an option to employees. The parties agree that the deci-
    sion in Fifth Third is fully applicable to the plans at issue
    here. See 
    788 F.3d 916
    , 935 (2014).
    All of the plans had holdings in the Amgen Common
    Stock Fund (composed, unsurprisingly, of Amgen common
    stock) during the relevant period. The value of Amgen
    stock fell, and in 2007, the stockholders filed a class action
    against petitioner fiduciaries alleging that they had
    breached their fiduciary duties, including the duty of
    prudence, under the Employee Retirement Income Secur-
    ity Act of 1974 (ERISA), 88 Stat. 829, as amended, 
    29 U.S. C
    . §1001 et seq. The District Court granted the
    2                   AMGEN INC. v. HARRIS
    Per Curiam
    fiduciaries’ motion to dismiss, and the Ninth Circuit re-
    versed, Harris v. Amgen, Inc., 
    738 F.3d 1026
    (2013). The
    fiduciaries sought certiorari.
    While that petition was pending, this Court issued a
    decision that concerned the duty of prudence owed by
    ERISA fiduciaries who administer ESOPs. That decision,
    Fifth Third, held that such ERISA fiduciaries are not
    entitled to a presumption of prudence but are “subject to
    the same duty of prudence that applies to ERISA fiduciar-
    ies in general, except that they need not diversify the
    fund’s assets.” 573 U. S., at ___ (slip op., at 1–2).
    Notwithstanding the lack of a presumption of prudence,
    Fifth Third noted that “Congress sought to encourage the
    creation of ” employee stock-ownership plans, id., at ___
    (slip op., at 14), a purpose that the decision recognized
    may come into tension with ERISA’s general duty of pru-
    dence. Moreover, ESOP fiduciaries confront unique chal-
    lenges given “the potential for conflict” that arises when
    fiduciaries are alleged to have imprudently “fail[ed] to act
    on inside information they had about the value of the
    employer’s stock.” Id., at ___ (slip op., at 13). Fifth Third
    therefore laid out standards to help “divide the plausible
    sheep from the meritless goats,” id., at ___ (slip op., at 15):
    “To state a claim for breach of the duty of prudence on
    the basis of inside information, a plaintiff must plau-
    sibly allege an alternative action that the defendant
    could have taken that would have been consistent
    with the securities laws and that a prudent fiduciary
    in the same circumstances would not have viewed as
    more likely to harm the fund than to help it.” Id., at
    ___ (slip op., at 18).
    It further clarified that courts should determine whether
    the complaint itself states a claim satisfying that liability
    standard:
    “[L]ower courts faced with such claims should also
    Cite as: 577 U. S. ____ (2016)            3
    Per Curiam
    consider whether the complaint has plausibly alleged
    that a prudent fiduciary in the defendant’s position
    could not have concluded that stopping purchases—
    which the market might take as a sign that insider fi-
    duciaries viewed the employer’s stock as a bad in-
    vestment—or publicly disclosing negative information
    would do more harm than good to the fund by causing
    a drop in the stock price and a concomitant drop in
    the value of the stock already held by the fund.” Id.,
    at ___ (slip op., at 20) (emphasis added).
    In the matter that is once again before the Court here,
    following the issuance of Fifth Third, the Court granted
    the fiduciaries’ first petition for a writ of certiorari, va-
    cated the judgment, and remanded for further proceedings
    consistent with that decision. Amgen Inc. v. Harris, 576
    U. S. ___ (2014). On remand, the Ninth Circuit reversed
    again the dismissal of the complaint and denied the fidu-
    ciaries’ petition for rehearing en banc. See 
    788 F.3d 916
    .
    The fiduciaries once more sought certiorari.
    The Court now holds that the Ninth Circuit failed to
    properly evaluate the complaint. That court explained
    that its previous opinion (that is, the one it issued before
    Fifth Third was decided) “had already assumed” the
    standards for ERISA fiduciary liability laid out by this
    Court in Fifth 
    Third. 788 F.3d, at 940
    . And it reasoned
    that the complaint at issue here satisfies those standards
    because when “the federal securities laws require disclo-
    sure of material information,” it is “quite plausible” that
    removing the Amgen Common Stock Fund “from the list of
    investment options” would not “caus[e] undue harm to
    plan participants.” 
    Id., at 937–938.
    The Ninth Circuit,
    however, failed to assess whether the complaint in its
    current form “has plausibly alleged” that a prudent fiduci-
    ary in the same position “could not have concluded” that
    the alternative action “would do more harm than good.”
    4                  AMGEN INC. v. HARRIS
    Per Curiam
    Fifth 
    Third, supra
    , at ___ (slip op., at 20).
    The Ninth Circuit’s proposition that removing the
    Amgen Common Stock Fund from the list of investment
    options was an alternative action that could plausibly
    have satisfied Fifth Third’s standards may be true. If so,
    the facts and allegations supporting that proposition
    should appear in the stockholders’ complaint. Having
    examined the complaint, the Court has not found suffi-
    cient facts and allegations to state a claim for breach of
    the duty of prudence.
    Although the Ninth Circuit did not correctly apply Fifth
    Third, the stockholders are the masters of their complaint.
    The Court leaves to the District Court in the first instance
    whether the stockholders may amend it in order to ade-
    quately plead a claim for breach of the duty of prudence
    guided by the standards provided in Fifth Third.
    The petition for certiorari is granted. The judgment of
    the Ninth Circuit is reversed, and the case is remanded for
    further proceedings consistent with this opinion.
    It is so ordered.