all right the next case of the morning is cop versus klein number sixteen one one five point nine zero i sold my id york stock a long time ago up to fifty  supposed to manage them entirely for the benefit of the beneficiaries and so in each of those cases there is nothing wrong about having insiders run the pension plan in the first place but when a conflict arises so the mr brewster had decided to line his own pockets so to speak i think i personally think he was a victim of real bad advice but he decided to sell out his and his wife's stock to the plan and everything depended upon the valuation to the plan in so i question whether that for you is the saying we should poll second we held and no cords ever held that that was a breach of the duty of loyalty in other words we ruled on it in the in the first appeal and arguably that law of the case wait so i'll take the second question first it's more interesting and i think you know what you mean prez in ca i think it's somewhat difficult to know what to make about that passage it also follows a passage where you after didn't offer should be very different from the way they were before didn't hover because before didn't offer there was an overwhelming sense that if you're going to play and that owns employer stock what you're supposed to do is buy employer's stock and anything you do to buy a stock is ok alyssa company is near bankruptcy you know after didn't offer that can't be true for the reasons explained in with great vigor in part three of the didn't offer opinion in part three of that opinion the court destroyed the foundation for that presumption the court said the key part of it is his explanation how come she set up a special system for claims that employee stock so statute is even easier for munch has to play to these plans just as it does to all players so basically basically if you offer company stock in a retirement plan and if the stock and you also offer stock incentives tied to you know in control bonuses or something and the stock goes down and the people who get such bonuses happen to be members of to you as they are allowed to be members of one of the plan you know  committees you can see them miss out right so what does that do what is that either this puts companies in the very difficult position of either not offering executive compensation or not offering  their own stock which of course congress certainly is totally contrary to what congress intended absolutely not and that's the heart of the matter showed some clever got to the point that's exactly what's happened since bursaspor with which you cite approvingly repeatedly in all these cases there's nothing wrong with an insiders run employee pension plans just like there's nothing wrong with having insiders run the company but big publicly traded companies frequently come upon a point in time where the interests of the option directors diverge from the interests somebody else and so they have to go get an independent person to make decisions if they want to sell the company they have to hard independent person to surprise if there comes a point where the people the rest of the pension plan can't well the manager why is it you're have to say the managers according to the complaint and i think this is not really subjected to doubt were producing false financial statements and fabricating the state of the council of the companies instead of strong isn't keeping this behavior obscured from the public and so any active year they took to acknowledge what was going on in the company would have caused problems for them that would not affect the employees you only care about the pension plan in each of attended a fundraiser six months a charity deal six months before enron filed bankruptcy where ken lay said we're going to be the biggest company in the world so it was a house of cards and then when the bottom started coming and nobody really expected that whereas in this case everything's quite public about the internet and the yellow pages but i think the question is  in this case and take them both show that the people who are going in the plane had choices to make decisions to be made to of these all asking you why didn't the employees know everything they needed to know from the from that of what was happening because they couldn't they opt out at employer stock and that's for a reason and i think this came up earlier in some of the court's questions because congress has a policy of wanting to encourage employers to invest in employer stock you think congress has made a decision whether it's a good decision bad decision that is congress's decision that this is a good thing overall so the supreme court in fifth third while it's said there is no basis f presumption of prudence in the law in part three of its opinion which my friend read in part here this morning in part four of that opinion the supreme court proceeded to say but we are even though there's no presumption we're going to the either you have a claim based on insider information on a company or a claim based on public information claims based on insider information can't you have to make a plausible allegation that that doesn't violate the securities laws to pass the motion to dismiss and even if it doesn't you have to make a now a plausible allegation that it would do it wouldn't do more harm than good for claims based on public information the supreme court said basically the stock price reflects  presumably the stock price reflects all public information and unless you can show that there is not in the fish market which is again kind of a unicorn situation then you can't bring a claim here so i think the bottom line is after a fifth third the kind of claim that my friends are seeking to bring here is essentially a unicorn claim and they're seeking to basically bring a bulldozer and make it a claim that you can bring in all situations or try to turn th unicorn into like a regular on a mixing metaphors here but it could be a goat or a regular horse or something that you see every day and and you know that that is fundamentally but you saying your claim is one that's based on what is public information yes and on nonpublic information as well but then on page thirty of their blue brief in this court they say well we think that whitley which is this court's post a fifth third precedent can be distinguished but the strength of the other arguments for reversal that we presented above persuades us that it would be an inappropriate use of judicial resources to present those arguments to this point for decision so as i understand with their position they've said we're not even going to try to defend our nonpublic claims so the only issue as i understand their position in this court based on what they see on page thirty of their opening brief is that they are seeking claims based on public information and the supreme court made clear that if there is any exception at all it is this narrow exception that really has its genesis in the securities laws when all the way back to the l t v case and basic nk that one presumes that public markets frankly of which the new york stock show that they have raised a plausible allegation is that that there was inefficiency in the new york stock exchange with respect to i d r information regarding i they really choice to tax to get around fifth third with respect to the duty of prudence first they say well that's for claims based on value and we're not making a value claim we're making a risk that that's really a false dichotomy and fifth third itself if you look at the face of the supreme court opinion part for specifically refutes that this is now one thirty four s court at twenty four seventy two the passage says in this is the supreme court talking in this case the court of appeals held that the complaint state because the markets presumably incorporate risk as well as all other factors into the market price so the idea that somehow risk claims are outside the fifth third framework is has no there itself and and again that frankly that would allow plaintiffs to walk through fifth third and routinely make these kind of claims in every case and that's why each one of your fellow circuits to address this issue of whether the risk claims are outside the fifty third framework in the wake of the third which is the d c circuit in coburn the second circuit in rinehart and the sixth circuit in sound has specifically rejected this argument and i don't see them really making any serious effort to distinguish those  as opposed to just saying that they're wrongly decided and frankly even if you could say that somehow risk was distinct from value which the supreme court has rejected there's no way to say that risk is differ and then diversification which is specifically off the table in claims involving company stock because the risk is not inherently bad the risk is fine as long as you're diversified so if there's if these kind of holdings  immune from a diversification requirement you can't really have a risk based claim and this court's opinion incursion about really i think very clearly highlights that the inextricably linked nature between reliability of the market price and i'm quoting from fifth twenty seven twenty four seventy two the reliability of the market price as an unbiased assessment of the securities value in light of public information so what they're basically saying is that the public markets an efficient market like the new york stock exchange presumably the marketplace price reflects all public information and so if they want to bring a claim based on fraud or hidden information that's a different kind of claim and they have to pursue we're only on the public side of the equation and so they can't bring up nonpublic information as the basis for making a public information kind of claim so that this that doesn't work that they've also thrown in this they can't causally link to any losses under section eleven zero nine to bring this kind of a claim you have to have losses and it's kind of like in any other area the law you can't just say well they you know they violated some procedural duty therefore i get to go to court i mean typically legal the right to seek redress in court you have to show some kind of injury you can't just say well this person you know they should cross their t s and dotted their eyes you have to show how their failure to do so  for limitations purposes the duty to monitor or keep such a claim alive and it's triggered as of the date of the monitoring allegedly didn't occur but temple never suggested that you can bring a claim based on procedure alone without any substantive lawsuits which again just kind of makes common sense the again the whole point of monitoring is to turn up something bad if you don't have the something bad the monitoring really is kind of by the body and so i think it's not surprising then that we find ourselves here today where my friend instead of wanting to talk about any of these duties roots as well let's just forget about the duty of prudence and let's just talk about the duty of of loyalty and the problem with that is to set forth a loyalty claim you have to have for a conflict between the fiduciaries and the plan participants or beneficiaries and then second you have to show that the the fiduciary acted on that conflict in a way that caused losses so going to the first part first the conflict they don't plausibly allege any conflict here as this court already held in the first round of this case copwatch that to be sure then went to the supreme court was vacated by the supreme court in light of fifth and sent back but the fact that it was vacated in light of fifth third doesn't necessarily mean that the supreme court thought this court got it wrong it just means that that this court should take another look at it this court's been very clear about the effect of the g d r and so the real question here is is there anything in fifty third and when you say take another look at it you're contending that that doesn't revive the duty of loyalty there doesn't warrant a second look yes i think the question is you take a look at it when you ask in light of the g d r what is there new that would require or that would warrant a second world if there is nothing new and fifth third didn't add anything new on the conflict issue which is again what we're talking about here so therefore under this court's precedents in light of what you do in a jeep in light of a g b are you look to whether or not there's anything new circumstances since there's no new circumstances you not only can but should stick with the courts initial resolution of this particular issue because the supreme court didn't addressed this issue and i think even if you say i mean active whether the supreme you know we reconsider it but there's no material change in the allegations pertaining to the duty of of the conflict and they don't really allege that there is any conflict between these these fiduciary ease and the plan participants everybody has an interest in having the company stock do well that's why congress wanted to encourage these kind of plans in the first place and they have disclaimed an argument that a plan fiduciary duty that company insiders can't be which is understandable because that's specifically allowed by a risk eleven await c three and would be very radical and what they say is kind of a puzzling thing they say well we're not saying that that in itself is a problem we're saying the problem here is that they acted in a way that was inconsistent with the interest of plant participants but that doesn't actually answer the question of how there was a structural conflict conflict and just kind of a certain a conflict in very conclusory fashion without putting any meat on the bones there and so again based on what this court did fifty or itself this court can  dismiss the loyalty claim or affirm the dismissal of the loyalty claim based on what the order ready said if if in the first round of this that they haven't plausibly alleged coffee but even if you got beyond the conflict point and the that is violative of the duty of loyalty it's the imprudent investments here so they're not alleging any action in this case that is independent of their prudence called and the thing they're complaining about in their loyalty claim is the exact same act that underlies their prudence point so if they don't have a prudent coin for the reasons that i've been discussing here this morning then by definition they can't show that in independen would have taken a different course or that this was imprudent so in the absence of a substantive prudence claim at least the way they have framed their loyalty claim it doesn't work it doesn't add anything let me just go back to the facts here because as i recall and i could be i could be getting the dates a bit long but the stock peaked around two thousand and six throughout two thousand and seven it started to go down a little bit and white three i think any of us who lived through it remember those days of late two thousand and eight when well approximately well because eventually was of down to three by that point was it not down to a half you know i i i i i remember he was sliding very precipitous lee i think the fall of two thousand and eight and the company declared bankruptcy in two thousand and course there were meetings of the board during this period and they actually decided to stop investments in company stock during this period which again somewhat is inconsistent with their argument that these folks weren't even at the switch here i mean obviously these folks were you know very well involved in the company and really knew all this stuff but but  conflict of interest between what the fiduciary wanted and what the plan participants wanted i mean everybody would have been a winner here if the stock had gone up and the fact that the stock is sliding greatly doesn't in  fact that the stock is risky again in and of itself does not mean that it's imprudent it's not imprudent to hold risky stock as long as it's diversified and so again i mean i think they're just kind of describing the facts by saying that the stock price went down precipitously but that doesn't give rise to rudeness claim or a loyalty claim so again i think just looking at this case from thirty thousand  after having done away with the presumption of prudence and saying that it's not in the statute and so there's no basis for why the presumption the supreme court said but they say essentially the court said is we understand where that presumption  district court here did the district court looked at these allegations and said i don't see a basis for an insider trading claim because they haven't shown that this would either not violate the the laws or under this court standards in whitley which is the post fifth third in this order you know not not do more harm than good or i don't see the basis for a public claim as to the real underlying facts here i should have read the complaint into bankruptcy that that's true but i guess the one point is that to keep in mind here that this is not a situation like enron we are these people were sensually wrapped into have to have it into having to keep these stocks this was a situation where company stock was an option and frankly was in the plan that it was an option i see my time is expired thank you very much stock he says they stopped buying stock though they talked about stop buying stock but then they change their mind he was there and didn't do it and it's possible that if they stop buying stock during two thousand and eight which they didn't do that that some other loss the loss is clear in the by the pension plans destroyed we have to prove that they did something not initially beneficiaries and after that we've got the laws we have to prove that they had a conflict and they didn't act with an eye single bin you ledges people didn't think about what to do and so you got a violation here and there are many for that is that means that the have to prove that what they did was right thing as opposed to us having to prove that what they did was wrong with respect to the last thing i'd like t the risk of dying is the same i just encourage you to read part for a didn't have a really carefully and read it as if you're trying to fit what they're actually saying i'll just read one sentence from you see the plane the key things see is the fifth that the market was over or undervalued in the stock or impossible as a general rule of course they are ok of course there are there are you know if if the if that's what exxon stock is worth on them down on the dow jones you don't know anything of the public information it's hard to say it's wrong priced ok but that's totally different from a claim that this is not the kind of thing that people who are about to retire should be investing in p five hundred high bank and you'll see the market those are stocks that are high better the stocks are a little bit suppose you put in extra women i mean you can complain about when the stock went down you're saying that they turned on that that they get there they talked about turning off the spigot but they didn't do it at all that is in your compliance in the first few pages of the complaint that's the introduction of complaint as they came to power they where it was really bad