good morning your honor is may it please the court and monique olivier and i represent the appellant richard rosen in light of the standards that the district court was obligated to apply and consider credentials motion to dismiss the core aerate in several respects which require reversal at first like to turn the court's attention to the issues with respect to the separate accounts and then talk about the fiduciary status in the trusts with respect to the separate accounts the district erred in finding that there were no plausible allegations of breach the district court found fiduciary status with respect to the separate accounts but then failed to conduct the appropriate analysis of the allegations instead it concluded that revenue sharing generally does not violate the duty of prudence where you disagree with we do not disagree that as a general our allegations with respect to revenue sharing are not revenue sharing as a general matter in the marketplace it's the way the potential uses general uses revenue sharing in this type of case where it is receiving indirect compensation in a way that could put it in a conflicted mutual funds and revenue sharing when we are talking about mutual funds as it is defined in the complaint it is not limited to forty act funds includes mutual funds affiliates of mutual fund sub advisors separate accounts function they have sub accounts and sub advisors and our allegations are in those contexts you have circumstances where the sub advisors are making indirect payments of indirect compensation prove in a way that impacts the assets in that account and puts production in a conflicted position so the fact act that the the form fifty five hundred that were submitted to the court with respect to the separate accounts don't have funds does not resolve that question and in fact if you look at the for the form five hundred there are  one one eighty five as one example there's also that's for one year there's also one ninety eight and three thirty one the phone yes your honor and of the receipt of indirect compensation you see priya retirement listed in the middle of the form and then if you look at the sub column did the service provider receive interact compensation and the boxes check yes that that occurs year after year  and and weirdnesses form say what is the nature of the sentiment this is form say it does not say it it indicates that indirect compensation was received with respect to the separate account and that is the basis for your claim that there was a breach of the basis well the basis for our claim are the allegations the detailed allegations that we set forth in the complaint and what did they were they received in direct commons and i understand that but what did they get what did they get then i would like to have they receive they receive payments they receive payments from so if you look at with respect to that there's two different issues there's the separate accounts on the trust but if you look at the separate other one if you concentrate on the separate accounts absolutely your honor so if you look at paragraphs eight w page twenty five of the joint appendix that puts forth their presidential uses its ownership in control over the separate accounts paragraph eight or act from the receipt of the rabbit revenue sharing payments for mutual funds and remember mutual funds as earlier defined as not as as a as a broader term than a on a forty act and the revenue sharing payments have the effect of increasing the expense ratios of the funds and those expenses are generally deducted directly from the retirement assets of the separate accounts that allegation repeats throughout the complaint if you look at page forty five if you look at page paragraph forty five and paragraph forty seven which are on pages thirty seven to thirty eight and if you turn to the charge in the complaint isn't that always the case that if if  if if someone investing on one's behalf receives compensation whatever that compensation is the beneficiary would have gotten more if they didn't get their compensation that's just a truism that's what you really arguing and now you're saying that they got that they got other payments and then you're arguing as a truism that if they didn't get the beneficiaries would have would have would have reaped that benefit but i'm not sure you understand why prudential can't get paid whatever basis what is the what is the claim that that's what that that's illegal or breach of of loyalty you're not claiming that projectile does not have a right to get paid we appreciate that that would be the case in a structure that ok why can't they get paid based on revenue share in this  month because this is in the context of a rest and this is in the context where rissa provide specific protection against self dealing and conflicts of interest and in a situation there are ways to do revenue sharing there are companies like a on hewitt and empower and they they do have revenue sharing and they do it in a way that's lawful because they provide a dollar for dollar credit back to the accounts back to the plans and that's not our issued those both of those letters which we discussed in detail in our briefs out outline the circumstances in which revenue sharing could present a conflict of interest or not what we're asking this court is we need to get past the pleadings phase to to examine exactly what is happening one of the key things we do not have the documents that we are missing are the participation agreements those participation agreement will indicate exactly what indirect compensation is paid but we are only at the planning stage and we have the appropriate allegations with respect to indirect compensation the district court found that there was a duty with respect to the separate accounts and then failed to do the appropriate burden shifting analysis under law and there was an f but there wasn't a way to distribute said was you can plausibly plead absent the mutual fund that there was some other relationship  to the to the indirect compensation well i think there's two points the first goes to what so he did he he or she didn't have to get to the burden shifting because they once once the mutual funds are out once mutual funds are out there and it's clear to me please that if the mutual funds really and you've got an argument you've got a great argument because they're there inherently conflicted because they've selected the this is the one area where they get to select the pool of investment opportunities where as they are they don't in the other areas and they're not at the do sure but but you haven't shown the othe and i disagree your honor i think the allegations in the complaint make it very clear what we're talking about that we're not talking about a traditional forty act fund we're also that that may be one instrument but we're also talking about and if you look at  definition in the complaint it's in the first few paragraphs mutual fund as described in paragraph three on page twenty four to include affiliates of mutual funds mutual fund advisors sub advisors that same contacts the same idea of revenue sharing takes place in that context so the district court at that point ron and then the district court also failed to analyze which production admits the duty of loyalty or the prohibited transactions per your reserves three minutes  function when it receives revenue sharing payments i think your honour's have honed in on the distinction between on the one hand prudential's role as a directed trustee under the trusts and on the other hand its role with respect to the separate accounts let's talk about the separate accounts so with respect to the separate accounts is just what judge leslie observed and as mr rosen conceded in the district court it is undisputed that there were no mutual fund investments through the separate accounts now mr rosen largely at oral arguments in the district court has developed this what the district court referred to as a similar instruments kind of theory and there are essentially two problems with that theory broadly one problem is that it's the theory and that is eventually the one place in the committee trying to be a theory were correct so let me break down the similar instruments into two types one is part some of the items listed in the paragraph three definition are investment vehicles that i i think one could indeed think of as similar to mutual funds so things like other pool separate accounts common collective trusts and so on in fact the form fifty five hundred make irrefutably clear that there were no investments in those type of vehicles in the exact same way that there were no mutual funds and where where that information is available is  schedule all ages to the fifty five hundreds that were submitted by the pooled separate accounts so the way this works is you have a page at the joint yes so there's an example there's an example page at page one thousand nine hundred of the join appendix one nine zero zero form fifty five hundreds and each of the individual separate accounts annually must also file its own point form fifty five hundreds and those forms state how the assets in each of those accounts were invested  so and where that's done isn't particularly in schedule age and we have given in a footnote in our brief a citation to each of the schedule ages for every year of the class period and so looking at the example at page one thousand eight hundred of the join appendix this is the pooled separate accounts on report of how the assets in that account were invested and under assets you can see that this particular pool separate account had funds as well as all these other sorts of similar entities other point separate accounts common collective trusts other sorts of registered investment companies or investment entities so anything that is a quote unquote similar to a of the forms submitted by one of the pulled separate accounts this schedule the separate account uses to report how its assets were invested throughout the reporting year you were describing things where on th so if you look down there's this table it's titled asset liability statement part one underneath of that there's a list of all the different kinds of assets in which the in which the account could be invested in the there's  words the report was it wasn't anywhere other than in corporate stock exactly in other words in the same way that mr rosen conceded that these undisputed documents show no true forty x mutual fund investments they also show for the exact same reason no investments in similar instruments and now i think the sub advisor that that in mind common stock bought these reputable things instead they bore you know russian so there's no dispute that that there were indirect compensation paid it's not surprising that we would see that reported on pages that mr livia referred to because there were mutual fund investments on the trust side of the house the point for compensation that isn't already reported elsewhere so that's not a that doesn't completely capture all of it though the deal well requires the indirect compensation to be reported in a uniform called a four o eight b two and there's no doubt there's no allegation here that those that those disclosures were not made and so the way this works is that before any contract is entered into between the service provider and the plan  requires that the service provider disclose to the plan all of the information about the many hundreds of investments in its big menu including whether it gets revenue share or other indirect compensation it's then up to the plan in this case ferguson acting with the advice of cap financial to decide do i want to wind gauge the service provider on those terms and how do i want to compensate them do i want to compensate them by charging a fee  participants do i want to compensate them by a fee straight from the plan or do i want to compensate them based on by choosing usual funds in the lineup that are going to generate a certain degree of indirect compensation and he choose on the trust side directed prudential to make certain mutual funds available on the separate accounts side for the reasons we've shown there were no mutual funds mr rosen conceded that below the sub advisor theory i think is even less plausibly alleged because you can't invest in a sub advisor a sub advisor is a manager or an advisor to a fine and in fact paragraph one fifteen of the amended complaint that captures what how it actually works with respect to the payment of the investment managers which is that the plan pays prudential and then prudential contracts with managers or sub advisors and pays them it's not an indirect compensation it's direct so that's even less plausibly alleged but i'd like to address that even if question suppose there were investments in mutual funds or some other kind of something that resulted in indirect compensation within the separate accounts the reason why the judge bolton was correct nonetheless to find as a matter of law no fiduciary violation is because the standard under the supreme court's test in pete requires the plaintiffs to establish at the threshold is not a burden shifting question is at the threshold the first issue is was the defendant acting as a fiduciary when it received the revenue sharing payments here and what's been alleged in this case is that to the extent there were any investments in mutual fund like things in the separate accounts that happened for two reasons one because ferguson selected those accounts to be included in the lineup and two because a plan participant directed for directed prudential and said i want my money to well that's true across the board but i'm addressing particularly the separate accounts and the similar instruments theory you're saying than the separate accounts it's ferguson or the individual employee for had an employee you count who directed which mutual funds were investments should be yes that's correct that's the allegation what's the difference between the separate accounts and that's that's where i'm introduced that's where i'm going with not suggesting that prudential imprudently chose a bad manager or otherwise imprudently mismanaged the assets in the separate accounts the allegations are about revenue sharing and i refer to the letter credit in one for one of anything that was only true in frost and at the dio well wrote and i'm just quoting if a fiduciary does not exercise any authority or control to cause the plan clear that the decisions were made by the plan advised by cap financial and by the plan participants so this this puts this case more in line with cases like the no letters cases like this court out a decision made by someone else i am not exercising fiduciary control by doing so and that's what's happening here and that's that's the basis for the decisions in line let me ask you this i mean if if an individual employee directs that your client invest her funds in an inquest run mutual funds and get money if you give money the belong to somebody else not that make you a fiduciary not if because being a fiduciary doesn't turn on whether you're getting money it turns on whether you are exercising a function that's laid out in the statutory definition the one that's relevant here is are you exercising control over the management of the assets when a plan here the plan sponsor ferguson who no doubt is a fiduciary along with the advice of their investment manager decides i want to engage plant the acme for a one case service provider and i don't want any of my participants to have to pay any direct fees at all i want acme to be compensated entirely through revenue sharing i know what all the revenue sharing is for all of the funds in the line up because i've been i've been giving the disclosure volume one and that this out the separate accounts that makes it clear that the form fifty five hundred that were submitted only pertain to the separate accounts so you go from there to the fact that there is a box check saying that receive indirect compensation that combined with the allegations of our complaint a different form schedule c to which you directed or tension and which contains the the the  instruments that are listed are d and the separate accounts there's no mention there of the of the of the the mutual funds held and held by the trust one of the points that i i want to bring this court's attention to is the fact that why are we having this discussion at the motion to dismiss stage the formed it would be one thing to look at the contractual documents and make a determination but and have that be part of the complaint on the motion to dismiss but let me ask you but you seem to indicate earlier and you're resorting to the same argument now quite the opportunity of which you would deprive the primary of primary opportunity would be to get into discovery and look at for example the participation agreements that would and why the participation of women is not available to you now this is all rather why why those are unavailable because they were not produced by production any pre meditation proceeding so we do not have access to those documents and those documents are the contracts that's correct your honor and and going against her and one of the points that was made by my colleague it in terms of how the payment flows we have a separate account rewriter that makes it very clear credential gets paid by the sub advisors to have those those assets listed as part of the plan assets that's where the indirect compensation takes place or something that that is that is part of the premise but we know just by virtue of the fact of the way these separate accounts function that there are agreements between them in the end correct john or if there's there's there's you know public information widely accounts were invested in corporate stock in that wasn't invested in any other investment right but even if that's the case those those securities are held in account that account is managed by somebody in order for that account to be listed as part of the plan assets it pays prudential to list the account so it pays it pays to be included in the in the options of plan assets so this isn't something that's directed by the participant in the moment this is post contractual conduct that has occurred occurring on an ongoing basis but then again the stand further your your grief and here we have  of documents before how did we come to have these documents if you haven't had discovered because prudential submitted them in support of its motion to dismiss your honor i say that we have had no opportunity to test the documents related all of this stuff out of the goodness of their heart yes your honor we haven't had an opportunity to take a deposition to ask any questions about the form fifty five hundred to obtain the participation agreements and in this instance you have the district court finding fiduciary status with respect to the separate accounts and so they've produced volumes enormous here and you think you didn't get enough and you asked for those other documents that you didn't get