represented as much as twenty one percent of the plans assets during the relevant period this court the supreme court and other courts is said that single security stock arms are inherently undiversified and generally imprudent for up i understand that but i as i read your brief i was troubled by the fact that this plan is an elective clam and has a menu of funds that can be selected by the investor and so that instead of assessing a given fund which with which the investor is stuck and lacks diversification here the investor doesn't have to invest a single dollar in this fund he can select any funds and in fact these investors did reduce the percentage they had so it it makes no sense to look at a single fund and say  well that troubles me about this case in other words all of your arguments seem to rest on the fact that they had this one fund devoted to the company's stock and that's always a problem that's always a problem but this plan is totally elective it's a four a one k and you get to put the money where they want it and how much they want that's certainly true garner but st from a factual basis the offering a plan can have one fund devoted entirely to company stock as long as they offer other funds diversified funds and under forty one k which is it does make a difference and it's a defined benefit plan that has these elections in other words it's totally different from plan where they're managing your pension fund and they choose to invest in the where to invest and not invest it seems to me there's a problem there but here we have a different structure you know and i'm just it's not a question of whose if i do share it's a question of whether that  is exist express a statutory exemption for employers to are is not implicated by our lawsuit and i think that's important because when congress want stock the fact that it didn't create a broader exception for defined contribution plans for participant so action plan such as this tells us that no such broader exemption applies indeed i by investing in a particular security that's traded on efficient market and presume is that all that risk associated with that particular security aren't pounded into the stock price i'm compensated risk is the risk that occurs when you concentrate too much of an investment portfolio in a particular as is security and thereby take on risk that is not compensated by the efficient market that's essentially the teaching separate answer apart from the statute itself with regard to the participant choice is this case corners already foreclosed that analysis in the de felice case this court held that it was no answer to a no defense to a breach of duty claim that the defined contribution plan offered a wide array of investment options so this court has already addressed that issue and foreclosed it as a matter of law and should therefore rejected here with both respect so we submit that the issue is to participate choice is completely irrelevant to the threshold pleading or harms of putting a duty to diversify and a breach of the duty prudence to the extent has any application whatsoever in any context dollars factor test then to the extent a loss arises from the participants individual investment choice that can be made at the fishery store but that's an affirmative defense and not appropriate for resolution on the so your question at least in terms of clarification make sure i understand what you said earlier the take no stock does here used to be employer stock before the spend off is that is that what you say well you know is the stock that was included then there was a spin off of the publishing versus the non publishing octon exam they assigned different names to him but sticking with pre separation there was only one company and it was the employer from liability in defined contribution plans you're left with the typical creating standards from a breach of the duty of prudence and a breach of the duty to diversify and we clearly played a breach of the duty  agreement even though their job is fit do sure it's to be familiar with the governing documents with respect to investments the plan producers were repeatedly warned about the risks inherent in a single security stop f in august of two thousand and fifteen they were warned by their plans on auditor ernst and young that single security stock funds carry an inherent concentration risk ernst and young doesn't issue warnings to plan producers lightly in two thousand and fifteen they hired investment consultant to provide detailed information about the plans investments but that they didn't hire them to provide any information about the taking stock funds that they would get quarterly reports saying about the performance of each and every option in the plan detail financial metrics but nothing about the taking the stock fine except for the fact how much was invested in that's not the prudent conduct with respect to monitoring investments farms that one given the fact that the and where he matters agreement commanded them to divest they take the stock by now i'm not saying they should have sold it on day one but they shouldn't undertaken serious consideration of what to do about it by day want on day one and according to their own advisors they could have sold the stock in one big ball off without depressing the stock price since it so they could have moved very quickly on liquidating why is it imprudent to have among the choice of funds a fund dedicated exclusively to one company with a disclosure that that's what it is i mean the company is relevant because it was a grandfather company but the question it imprudent to keep a single fund in a single stock i mean for instance another offering might be one that has apple and amazon in it nothing else they say you can invest and apple an  an amazon apple fund you want to offer a techno fund and you have a bunch of others highly diversified is it imprudent to have that kind of offering what i would submit your honor question is if you offer specialized funds and you left the investor choose it's hard for me to understand what the imprudence is of offering a single company markets in the fund and the risks were disclosed in the price of fish and there's no supply stores in this case that the fund was not represented by the market price now we made no such representation your honor we're not saying that the the market price was not for the risks the particular security were not reflected by the market price what we're saying is that this particular crime had massive concentration risk because it is one hundred percent it's one hundred percent that's right it's there's no diversity my question to you and you're not answer is can you prudently offer a single company fund as no you cannot no you cannot and what cases that average there is perhaps a totally of the circumstances one could argue but this is the this is a point in your honor we i think we possibly alleged that under the circumstances here that the rug you're having trouble with but with all due respect your honor the statute does not allow a producer to escape liability simply because participants have choice this statute and this court and we have to start with the question of whether there is a l escape from liability i'm suggesting that the in the plan for i do series decided to offer this in total concentration one fund among others we're not talking i'm not one fun concededly is not diversified and doesn't pretend to be the question is can a menu of funds that are in the control of the investor can they offer a came down just on friday from the th circuit and if ever there were two cases that were very similar or that's not closed identical it's these two it's the exact same legal theory under more or less the same factual circumstances spinoff of one company from another the continuation of the legacy stock in the spun off company and plaintiffs allege that that was imprudent and that it breached the duty of diversification was and so the th circuit said essentially really kind of echoed a lot of the same points that the district court made in its rulings in this case that said that the duty of diversification when you're talking about that in the context of a four hundred and one k plan requires that the overall menu be diversified not that any single particular option that a participant can choose must be diversified it also rejected the prudence theory of the same ones the plaintiff is asserting here either that the stock was too risky or that it was so concentrated that it was inherently imprudent and should not have been allowed to continue in the spun off plan so the risk of stating the obvious if this court follows choice or it will affirm the judgment of the district court plaintiff is asking this court to do is create a circuit split and reject the reasoning of course of the district court as well and i know that this court like other courts of appeals it's not that they never create circus which they obviously do but they don't do so unless there's a good reason to do so and here there is facts there were quite dramatically different from what we have here they are the new series acted precipitously they acted too quickly and without enough thought in deciding to close the stock of the former affiliate amended complaint plaintive himself agreed that it was perfectly appropriate for that stock to be in the plan presented and plaintiff agreed that it was perfectly fine for that stock to remain in the spun off company as one option for up to a full year after the spin off and so where we actually part ways with plaintiff is that what actually ended up happening is that the committee decided after about two years that it would close the fund and then gave participants one additional year made an announcement you've got one year it's some point during that year feel free to sell your take the stock if you've been free to do all along if you haven't sold it by the end of that year then we're going to close the fund and move d your money to another option so really when you think about it what plaintiff is saying is not that the committee did something wrong plain for saying that the committee did not act quickly enough the company's stock in the plan even is the case even of the company spiraled towards bankruptcy the tatum case involved the obvious of the case that we're talking about here that's clearly relevant to the duties the courts talking about both of those duties the diversification and prudence duties do not prohibit a planned trustee from holding single stock investments as an option in a plan that includes a no single right answer about when it's appropriate to close a fund like this this is a unique circumstance you've got a situation where everybody agrees that it was appropriate for the stocks to be  plan before the spin off what happens at the spinoff you've got some companies broken up into two and so the new company the spun off company just starts its life with the  legacy stock still in its plan because of the split of the stock and now it's there in the plan and i suppose you could you could posit circumstances when you would want to close that funded mediately you could cause the other side and when you do that what you'll see your honor is in the proposed amended complaint you'll see that that those allegations are far more consistent with a finding of good for  practices than they are with any kind of breach you'll see that plaintiff alleged that the committee that was overseeing this plan receive regular reports on the take the fun it showed the degree of concentration with declining over time you'll see that they heard from experts that talked about the risks associated with any single stock fund and you'll see that they talked about the fact that people had chosen to leave their money in this  and who isn't why is it up to us to say you must sell today let's give people time to make their own decisions which is the fundamental theory behind for a one k plan in the st place you provide a good diverse menu of options to plan for to support us and then the participants have a role to play they can decide to put one percent keep one percent of their their assets and the taking of stock funds they can have a they can have a forty o record show this yes or no the closest i can point you to your honor is in the appendix to the plan documents which is in the record and plaintiff has never objected to being in the record it describes roughly a dozen plan options and it describes them by category so for example and this is quite common for one k plan you have a large cap mutual fund that invests in big companies around the united states you might have a bond fund that invests in corporate bonds around the united states you have a stable value fund that is a very low risk low return fund and on down the line and that that's  dollar into the take no stock fund but everybody who had previously put their money into that fund was free to leave it there or take it out it was up to them and they could do that at any given moment  up until the time roughly three years after the spinoff when when the committee said we're closing the fund altogether is the employee's matters agreement in this case a plan document it is not your honor it's not an agreement that governs it's an agreement between the two so splitting companies and let me say that what the employee matters agreement says is that essentially and i'm paraphrasing here eventually we expect that this taking the stock fund will be closed it says we're going to leave it up to the committee to decide when and how to close it it does not say close it on day one does not say closes after a year has nothing close after five years it says we think that eventually this this fund ought to close and of course that is exactly what happened it's just that it didn't happen as fast is plaintive says it off let me ask you if you have as an offering a single stock fund that has a in a fish market price that's on a big exchange and the price reflects the risks is it ever imprudent to make an offering of such a fund where the price is reflected reflects the risk is long is you offer a wider array of choices on the menu well i'm not making that assumption that you have a four  here the market price truly reflects the value of the stock then then it's hard for me to imagine a scenario where they would be imprudent with the key can be got that you've got to give people a range of choices so that they can put their money and a stable value over risk low return fund or a mutual fund or bond of stocks or bonds fund of some kind as long as you give people that broad menu of choices  army that it seems to me that imprudence would come into play if you have a single stock fund where only you know the value there is not a public market price and you have not assessed the risk in disclosed it adequately and all of a sudden the participant to investing in apple or amazon or coca cola stock whatever they whatever they think is appropriate for their needs and their risk tolerance and really under plaintiff's theory which i think an answer just niemeyer to really is just saying that we just can't have single company stock funds and for one k plans and that's particularly you know appropriate this is a rule when we're talking about this unusual circumstance of a spinoff of a company's stock in the f is hard to argue on those criteria it seems to me the imprudence issue has to be whether the person making the choice number one has a choice and number two whether the stock fund the individual stock fund is reflected by a public price on a price that reflects the risk and and it seems to me the issue would be that if it does reflect the risk and there is an option it's hard to conceive of an imprudence and see that they once you have the didn't call for satisfied respected stock in the particular fund then the question is have you selected a broad enough menu stock at the end of the st year that number could only gone down the degree of concentration had diminished by the time plaintiff says it was time to force the sale of that stock and that that's just crafted it's not based on some rule in a rest it's not based on the statute itself it's just the state so legal conclusion plaintive and that's not sufficient to get past a wide array of investment options all of the courts recognize that single security stock funds are inherently imprudent well let me ask you why wouldn't it be imprudent at the time the company split and for the mr porter just a man who had in this case as i understand it the menu of funds included the tegan a fund which represented twenty one percent at the time of the separation and that that  menu that particular fund declined in importance over the st year to what about seventeen percent or sixteen percent sixteen percent sixteen all right right so during that period of what theory prompts you to say that if it was ok to as long as the price was fairly disclosed the risk ok so we don't say it was ok to have twenty one percent what we do say is that a fiduciary don't turn on  they don't snap their fingers and make things happen they had to engage in it prudent process to make a determination as to what to do about a particular d investment fund that's the entire nature of the prudent process the prudent process commands food issues to take  account the totality of the circumstances of the particular plan so the totality of circumstances might be the high concentration of the fund the correlation to get at stock the employee mazz agreement etc etc but you know process to evaluate the improvements in the investment and then act on it as to this sort of broader concern about participant choice and defined contribution plans there's no reason for this court to carve out an exception for the prudence requirements or single security stock funds the fact of the matter is typical involved defined contribution plan with a rate of investments and the supreme court said you producers have to remove imprudent that satisfies the door for standard in other words this stock was publicly traded the risk was revealed what's the imprudence of holding that stock in a single front as long as the menu is that the investor has a menu from which to choose a broad array of risks bond funds mutual funds and among those is this fund which the price the proposition that an efficient market a prudent produce can rely on the fact that the act securities accurately priced and that all risks that it did that the company faces specifically are impounded in the stock price but taken said that doesn't answer the question tatum said that because of the lack of diversity and the high correlation to the companion fund the other single security stock participants could only sell out of it but yet this is this court analyzed tatum through the lens of the uncompensated risk associated with concentration under the exact same circumstances those present year their concentration is one issue prudence is another issue prudence is disposed of by relying on market price understood an offer if it satisfies that diversification the argument  did we lose counsel here yeah all right i want to thank counsel ought to recognize that we normally at this point come down and shake hands with counsel in the well of the court this is a tradition that's unique to the four circuit and unfortunately we have to forgo that today but i'd like to express our greetings of the whole court and thank you for your arguments there are always very helpful and and we wish you the best on the circumstances maybe when you come back to them next case or this case or whenever we can come down and shake your hand but i thank you very much and we'll stand adjourned today to the next case will take a five minute recess