Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-16-07029/USCOURTS-caDC-16-07029-0/pdf.json

Parties Involved:
Donna Marie Coburn
Appellant
Evercore Trust Company, N.A.
Appellee

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 13, 2016 Decided December 30, 2016

No. 16-7029

DONNA MARIE COBURN, ON BEHALF OF HERSELF AND ALL 

OTHERS SIMILARLY SITUATED,

APPELLANT

v.

EVERCORE TRUST COMPANY, N.A.,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:15-cv-00049)

Peter W. Overs, Jr. argued the cause for the appellant. 

Robert I. Harwood was with him on brief. Daniel M. Cohen

entered an appearance. 

Jonathan D. Hacker argued the cause for the appellee. 

Meaghan VerGow was with him on brief. Jeffrey W. Kilduff

entered an appearance.

Before: HENDERSON and ROGERS, Circuit Judges, and 

EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge HENDERSON.

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Opinion concurring in the judgment filed by Circuit Judge

ROGERS.

Concurring opinion filed by Senior Circuit Judge

EDWARDS.

KAREN LECRAFT HENDERSON, Circuit Judge: Donna M. 

Coburn, on behalf of herself and all others similarly situated, 

appeals the district court’s dismissal of her complaint against 

Evercore Trust Company, N.A. (Evercore) pursuant to the 

Employee Retirement Income Security Act of 1974 (ERISA)

§§ 409, 502(a)(2)-(3), 29 U.S.C. §§ 1109(a), 1132(a)(2)-(3). 

Coburn, a former J.C. Penney employee and investor in a J.C. 

Penney employee stock ownership plan (ESOP) managed by 

Evercore, claims that Evercore breached its fiduciary duties of 

prudence and loyalty when it failed to take preventative action 

as the value of J.C. Penney common stock tumbled between 

2012 and 2013, thereby causing significant losses. Despite 

clear factual similarities, Coburn argues that the pleading 

requirements outlined in Fifth Third Bancorp v. Dudenhoeffer, 

__ U.S. __, 134 S. Ct. 2459 (2014), are inapplicable to her 

allegations because she challenges Evercore’s failure to 

appreciate the riskiness of J.C. Penney stock rather than 

Evercore’s valuation of its price. We disagree and therefore 

affirm the district court’s judgment. 

I. Background

While Coburn was employed by J.C. Penney, the large 

retailer offered its employees the opportunity to “save for their 

retirement” by investing in the J.C. Penney Savings 

Profit-Sharing and Stock Ownership Plan (the Plan). Its 

defined contribution plan was an “employee pension benefit 

plan” within the meaning of ERISA § 3(2)(A), 29 U.S.C. 

§ 1002(2)(A), and an eligible individual account plan within 

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the meaning of ERISA § 407(d)(3), 29 U.S.C. § 1107(d)(3). 

Once an employee opted into the Plan, she could allocate her 

contribution among a variety of investment options. One of the 

options was the Penney Stock Fund, an ESOP that consisted 

largely of J.C. Penney common stock. This was the option 

Coburn selected.

On December 17, 2009, Evercore became the designated 

fiduciary and investment manager of the Penney Stock Fund. 

In this role, Evercore had the authority to restrict or limit the 

ability of Plan participants to purchase or hold J.C. Penney 

stock, including the power to “eliminate the [Penney Stock 

Fund] as an investment option under the Plan and to sell or 

otherwise dispose of all of the Company Stock held in the 

[Penney Stock Fund].” Evercore did not manage any other 

investment option available through the Plan. 

In 2011, J.C. Penney attempted to reconceptualize its 

brand and hired former Apple, Inc. executive Ron Johnson as 

its chief executive officer. Distancing himself from J.C. 

Penney’s historic reliance on sales, coupons and rebates to 

boost sales, Johnson implemented a more straightforward 

pricing scheme, reasoning that a “fair and square” pricing 

policy would attract shoppers. Johnson also reworked both the 

Company logo and the traditional layout of its stores in an 

effort to modernize. Taken as a whole, Johnson sought to bring 

J.C. Penney up to speed with the fads and fashions of 2012, 

simplifying the business model in order to lower expenses and 

increase gross profit margins. This strategy proved to be less 

than successful. 

J.C. Penney’s 2012 first quarter earnings report showed a 

$163 million loss, or a $0.75 loss per share. Johnson’s poor 

start was only the beginning, as the next twenty-one 

months—from the end of 2012’s first quarter to the end of 

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2013’s fourth quarter—saw J.C. Penney’s stock price fall from 

$36.72 to $5.92 per share. As market analysts became 

increasingly bearish regarding its stock, J.C. Penney cancelled 

dividends for only the second time since 2006. The disastrous 

performance led Johnson to a telling realization: the abandoned 

coupons “were a drug” that “really drove traffic.” Johnson’s 

tenure ended in April 2013. 

Throughout the entire period that the value of J.C. Penney 

common stock dipped ever lower, Evercore stood resolute. 

Despite its authority to eliminate the Penney Stock Fund as an 

investment option in the Plan and its ability to sell shares 

currently in the Fund, Evercore exercised neither option. The 

shares in the Penney Stock Fund that Coburn and other 

investors owned took the full force of the hit. In 2015, Coburn 

sued on behalf of herself and all others similarly situated, 

alleging that Evercore was liable for $300 million in losses to 

the Plan for having breached its fiduciary duty under ERISA §§ 

409, 502(a)(2)-(3), 29 U.S.C. §§ 1109(a), 1132(a)(2)-(3). 

On February 17, 2016, the district court granted 

Evercore’s motion to dismiss the complaint for failure to state a 

claim. Primarily relying on the United States Supreme Court’s

opinion in Dudenhoeffer, the district court held that Coburn’s 

allegations that Evercore should have recognized from 

publicly available information alone that continued investment 

in J.C. Penney common stock was “imprudent” were generally 

implausible absent “special circumstances” affecting the 

market. Because Coburn failed to plead special 

circumstances—indeed, Coburn expressly disclaimed any 

need to plead them—the district court held that Coburn’s 

complaint could not survive Evercore’s Rule 12(b)(6) 

challenge. The district court also rejected Coburn’s alternative 

argument that, pursuant to Tibble v. Edison International, __ 

U.S. __, 135 S. Ct. 1823 (2015), Evercore violated its fiduciary 

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“duty to monitor” investments and remove imprudent ones. 

The court reasoned that Tibble did not affect the Dudenhoeffer

holding and thus could not save Coburn’s complaint. Coburn 

timely filed her notice of appeal.

II. Analysis

We review de novo the dismissal of a complaint for failure 

to state a claim. Taylor v. Reilly, 685 F.3d 1110, 1113 (D.C. 

Cir. 2012). The familiar pair of Iqbal and Twombly guide the 

analysis of a Rule 12(b)(6) motion to dismiss. Ashcroft v. 

Iqbal, 556 U.S. 662 (2009); Bell Atl. Corp. v. Twombly, 550 

U.S. 544 (2007). Under that precedent, a complaint must “state 

a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 

678 (internal quotation marks omitted) (quoting Twombly, 550 

U.S. at 570). That is, the complaint must include factual 

allegations that, when taken as true, rise above a “speculative 

level.” Twombly, 550 U.S. at 555. It is “a plaintiff’s obligation 

to provide the grounds of his entitle[ment] to relief [with] more 

than labels and conclusions, and a formulaic recitation of the 

elements of a cause of action will not do.” Id. (first alteration in 

original) (internal quotation marks omitted). 

In Dudenhoeffer, the Supreme Court further refined 

pleading requirements regarding “allegations that a fiduciary 

should have recognized from publicly available information 

alone that the market was over- or undervaluing the stock.” 

See Dudenhoeffer, 134 S. Ct. at 2471; accord In re Lehman 

Bros. Sec. & ERISA Litig., 113 F. Supp. 3d 745, 755 (S.D.N.Y. 

2015) (noting that Dudenhoeffer “appears to have raised the 

bar for plaintiffs seeking to bring a claim based on a breach of 

the duty of prudence” (internal quotation marks omitted) 

(emphasis removed)), aff’d sub nom. Rinehart v. Lehman Bros. 

Holdings Inc., 817 F.3d 56, 66 (2d Cir. 2016). In 

Dudenhoeffer, a putative class of employees brought a claim 

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against fiduciaries who oversaw an ESOP, alleging that they 

had violated the duties of loyalty and prudence imposed by 

ERISA §§ 409, 502(a)(2), 29 U.S.C. §§ 1109, 1132(a)(2). 

Dudenhoeffer, 134 S. Ct. at 2464. Specifically, the 

Dudenhoeffer plaintiffs alleged that the fiduciaries “knew or 

should have known that [the employer company’s] stock was 

overvalued and excessively risky,” in part because “publicly 

available information such as newspaper articles provided 

early warning signs” of the company’s financial troubles. See 

id. The Dudenhoeffer fiduciaries, however, “continued to hold 

and buy” the company’s stocks, a move that ultimately 

“eliminated a large part of the retirement savings that the 

participants had invested in the ESOP.” Id. 

The Supreme Court affirmed the district court’s dismissal 

of the complaint, holding that “where a stock is publicly traded, 

allegations that a fiduciary should have recognized from 

publicly available information alone that the market was overor undervaluing the stock are implausible as a general rule, at 

least in the absence of special circumstances.” Id. at 2471. 

Driving the Dudenhoeffer opinion was the recognition that 

“investors . . . have little hope of outperforming the market in 

the long run based solely on their analysis of publicly available 

information, and accordingly they rely on the security’s market 

price as an unbiased assessment of the security’s value in light 

of all public information.” Id. at 2471 (internal quotation marks 

omitted) (quoting Halliburton Co. v. Erica P. John Fund, Inc., 

__ U.S. __, 134 S. Ct. 2398, 2411 (2014)). Dudenhoeffer was

thus grounded in the efficient capital market theory—the 

“theory that security prices reflect all available information.” 

Yesha Yadav, How Algorithmic Trading Undermines 

Efficiency in Capital Markets, 68 VAND. L. REV. 1607, 1632

(2015) (citing Eugene F. Fama, Efficient Capital Markets: A 

Review of Theory and Empirical Work, 25 J. FIN. 383, 384 

(1970)); Appellee’s Br. 11-12. Indeed, according to the 

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efficient capital market theory, a security price in an efficient 

market “represents the market’s most accurate estimate of the 

value of a particular security based on its riskiness and the 

future net income flows that investors holding that security are 

likely to receive.” Yadav, supra at 1633; accord Basic Inc. v. 

Levinson, 485 U.S. 224, 246 (1988) (“[T]he market price of 

shares traded on well-developed markets reflects all publicly 

available information . . . .”). “Where efficient markets exist, 

traders cannot profit by using existing information available in 

the market, since this news should already be reflected in 

securities prices.” Yadav, supra at 1633. Instead, a security’s 

price fluctuates only on the “arrival of new information into the 

exchange.” Id. (emphasis added). Echoing this theory, 

Dudenhoeffer agreed that “[a] fiduciary’s ‘fail[ure] to outsmart 

a presumptively efficient market . . . is . . . not a sound basis for 

imposing liability.’” Id. at 2472 (quoting White v. Marshall & 

Ilsley Corp., 714 F.3d 980, 992 (7th Cir. 2013)). 

Thus, because a stock price on an efficient market reflects 

all publicly available information, Dudenhoeffer requires

additional allegations of “special circumstances” when a 

plaintiff brings a breach of the duty of prudence claim against a 

fiduciary based on that information. Special circumstances, the 

Court instructed, includes evidence questioning “the reliability 

of the market price as an unbiased assessment of the security’s 

value in light of all public information . . . that would make 

reliance on the market’s valuation imprudent.” Id. (quoting 

Halliburton Co., 134 S. Ct. at 2411) (internal quotation marks 

omitted). This evidence may demonstrate that illicit forces 

(such as fraud, improper accounting, illegal conduct, etc.) were 

influencing the market, Smith v. Delta Air Lines Inc., 619 F. 

App’x 874, 876 (11th Cir. 2015) (per curiam), or may

otherwise suggest that the market was not efficient and 

therefore the market price of a security in that market was not

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necessarily indicative of its underlying, fundamental value. 1

See id. Ultimately, “[Dudenhoeffer] suggested that the special 

circumstances might include something like available public 

information tending to suggest that the public market price did 

not reflect the true value of the shares.” Allen v. GreatBanc Tr.

Co., 835 F.3d 670, 679 (7th Cir. 2016).

Applying Dudenhoeffer here, we believe Coburn’s claim 

falls far short. Despite the Supreme Court’s instruction that 

claims of imprudence based on publicly available information 

must be accompanied by allegations of “special 

circumstances,” Coburn acknowledges that she “did not allege 

the market on which J.C. Penney stock traded was inefficient 

. . . .” Appellant’s Br. 21. Quite clearly, then, if 

Dudenhoeffer controls, Coburn’s complaint was properly 

dismissed.2 Dudenhoeffer, 134 S. Ct. at 2471.

 

1

“An inefficient market, by definition, does not incorporate 

into its price all the available information about the value of a 

security.” Freeman v. Laventhol & Horwath, 915 F.2d 193, 198 (6th 

Cir. 1990). In an inefficient market, it is plausible that a fiduciary 

could act imprudently by not acting on publicly available 

information because there is less assurance that that information has 

already been incorporated into the security price. Cf. Dudenhoeffer, 

134 S. Ct. at 2471. “[M]arket efficiency is a matter of degree and 

accordingly . . . a matter of proof.” Halliburton Co., 134 S. Ct. at

2410. The degree to which a market must be inefficient to meet the 

“special circumstances” bar need not be decided here—we leave that 

question for another day.

2

In district court, Coburn also argued that Evercore violated a 

continuing duty to monitor investments as set forth in Tibble, 135 S. 

Ct. at 1828. Whereas Dudenhoeffer primarily focuses on allegations 

of misvaluation in the marketplace, see 134 S. Ct. at 2471, Tibble 

focuses on the prudence of holding particular investments over time, 

requiring a fiduciary “to conduct a regular review of its investment 

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Perhaps recognizing the inadequacy of her claim under 

Dudenhoeffer, Coburn instead attempts to distinguish 

Dudenhoeffer, arguing that the additional pleading 

requirements set forth therein are inapplicable to her 

allegations. Appellant’s Br. 11-12, 19-20. Coburn insists that 

her claim is not that Evercore over- or undervalued J.C. Penney 

stock but instead that Evercore exposed her to “outsized and 

unnecessary retirement savings risk” by failing to act as J.C. 

Penney stock value dipped ever lower. Id. at 11. This risk 

exposure, according to Coburn, was especially egregious given 

that the purpose of the Penney Stock Fund was to help 

employees like Coburn prepare for retirement—Evercore 

should have recognized its investors’ low risk tolerance. Id. at 

19-20. In a nutshell, then, Coburn argues that Evercore was 

imprudent for continuing to hold J.C. Penney common stock 

when it became increasingly and excessively risky—a claim 

that should fall under Iqbal/Twombly instead of Dudenhoeffer. 

 

with the nature and timing of the review contingent on the 

circumstances.” 135 S. Ct. at 1827-28. It is conceivable, then, that 

publicly available information that is insufficient to allege a 

plausible claim against a fiduciary under Dudenhoeffer would 

nonetheless be sufficient to survive a motion to dismiss under Tibble

if the fiduciary failed to “conduct a regular review” of its investment 

in light of that publicly available information. See id. And indeed, 

Coburn’s allegations—that Evercore “failed to engage in proper 

monitoring of the [Penney] Stock Fund,” Joint Appendix 20—would 

perhaps be sufficient to survive a motion to dismiss under Tibble. 

Coburn failed, however, to make this argument on appeal—indeed, 

Coburn does not cite Tibble once in her brief—and the argument is 

therefore forfeited. Am. Wildlands v. Kempthorne, 530 F.3d 991, 

1001 (D.C. Cir. 2008) (issues not raised in opening brief are forfeited 

on appeal).

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We disagree. 3For one, the plaintiffs in Dudenhoeffer

itself made the same argument, specifically claiming that the 

fiduciaries there should have known that the company stock 

was both “overvalued and excessively risky.” Dudenhoeffer, 

134 S. Ct. at 2464 (emphasis added). Without preamble, the 

Supreme Court disposed of the risk-based claims through its 

broad rule that “allegations that a fiduciary should have 

recognized from publicly available information alone that the 

market was over- or undervaluing the stock are implausible as 

a general rule.” Id. at 2471. If the Supreme Court had no 

difficulty in using its value-centric rule to dismiss a risk-based 

claim by plaintiffs with similar risk tolerance, we have no 

license to deviate therefrom here. See id.; Rinehart, 817 F.3d at

66 (“Although the language of [Dudenhoeffer] refers primarily 

 

3 The factual premise on which Coburn’s argument rests is 

itself faulty. Although we have previously recognized as a central 

pillar of financial analysis that “past trend[s] can often be accepted as

a dependable index of the future,” Am. Airlines, Inc. v. Civil 

Aeronautics Bd., 192 F.2d 417, 421 (D.C. Cir. 1951), this 

acknowledgement is a far cry from the proposition that past market 

trends will always continue into the future. If the latter proposition 

were true, any investor with an elementary understanding of a put 

option would be exceedingly wealthy after having shorted J.C. 

Penney stock in 2012, the beginning of the class period. Instead, at 

any given point, a security’s risk of loss is counterbalanced by the 

possibility of gain and a stock price reflects, inter alia, the market’s 

equilibrium point between those competing forces. See Cent. Nat’l 

Bank of Mattoon v. U.S. Dep’t of Treasury, 912 F.2d 897, 901 (7th 

Cir. 1990) (“The prices of the stocks of weak companies are bid 

down in the market until those stocks yield the same risk-adjusted 

expected return as the stocks of the strongest companies; otherwise 

no one would hold stock in a weak company—the prices of such 

stock would fall to zero.”). To the extent Coburn argues that 

Evercore knew that J.C. Penney stock was certain to suffer future 

losses because of past poor performance, see Appellant’s Br. 8 

(“Evercore Saw It Coming”), we reject that claim as implausible. 

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to ‘over- or undervaluing’ stock, the . . . Court applied [the 

heightened pleading] rule to the plaintiffs’ risk-based claims in 

that case.”). 

Additionally, well-reasoned decisions by our sister 

circuits have also determined that risk-based claims must 

nonetheless meet Dudenhoeffer’s pleading requirement to 

survive a motion to dismiss. For example, in no uncertain 

terms, the Second Circuit held that “the purported distinction 

between claims involving ‘excessive risk’ and claims 

involving ‘market value’ is illusory.” Rinehart, 817 F.3d at 66. 

The Rinehart court agreed that Dudenhoeffer “foreclose[d] 

breach of prudence claims based on public information 

irrespective of whether such claims are characterized as based 

on alleged overvaluation or alleged riskiness of a stock.” Id. 

(emphases and internal quotation marks omitted) (quoting In re 

Lehman Bros. Sec. & ERISA Litig., 113 F. Supp. 3d at 756). 

The Sixth Circuit also followed this approach in Pfeil v. State 

Street Bank and Trust Co., where it reiterated that the 

“excessively risky character of investing ESOP funds in stock 

of a company experiencing serious threats to its business . . . is 

accounted for in the market price, and the Supreme Court held 

that fiduciaries may rely on the market price, absent any 

special circumstances affecting the reliability of the market 

price.” 806 F.3d 377, 386 (6th Cir. 2015) (internal quotation 

marks omitted) (quoting In re Citigroup ERISA Litig., 104 F. 

Supp. 3d 599, 615 (S.D.N.Y. 2015)); accord Smith, 619 F. 

App’x at 876 (complaint must plead “special circumstances” 

whenever alleged breach stems from fiduciary’s failure to act 

on public information). 

Rinehart and Pfeil—like Dudenhoeffer—are grounded in 

the efficient capital market theory. See Rinehart, 817 F.3d at 

65-66; Pfeil, 806 F.3d at 386. In fact, Rinehart declares that 

“viewing [Dudenhoeffer’s] rule as applicable to all allegations 

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of imprudence based upon public information—regardless of 

whether the allegations are framed in terms of market value or 

excessive risk—is consistent with the efficient market 

hypothesis that risk is accounted for in the market price of a 

security.” Rinehart, 817 F.3d at 66; accord Pfeil, 806 F.3d at 

386 (noting that related Modern Portfolio Theory “rests on the 

understanding that organized securities markets are so efficient 

at discounting securities prices that the current market price of 

a security is highly likely already to impound the information 

that is known or knowable about the future prospects of that 

security” (quoting JOHN H. LANGBEIN ET AL., PENSION AND 

EMPLOYEE BENEFIT LAW 634 (5th ed. 2010))); Yadav, supra at 

1633 (in efficient market, market’s most accurate estimate of 

particular security’s value is based on its riskiness and future 

net income flows investors holding that security are likely to 

receive). We likewise reject Coburn’s claim that risk is 

attenuated from price such that risk-based 

allegations are totally free from Dudenhoeffer’s constraints.4

See Dudenhoeffer, 134 S. Ct. at 2471. Because a stock price 

fluctuates, in part, to achieve “the same risk-adjusted expected 

return as the stocks of the strongest companies,” Cent. Nat’l

Bank of Mattoon v. U.S. Dep’t of Treasury, 912 F.2d 897, 901

 

4 Coburn herself provides ample evidence of the connection 

between risk and value as, throughout her brief, she argues the risky 

nature of J.C. Penney stock by highlighting past declines in the price

of the security. Appellant’s Br. 18 (“Even with ever decreasing stock 

price value caused by the Company’s continually bad financial 

performance, Evercore stood on the deck of the sinking ship of J.C. 

Penney and did precisely nothing to protect the assets of the Plan and 

its participants . . . .” (emphasis added)); Appellant’s Br. 21-22 

(“Evercore should have discontinued investment in J.C. Penney 

stock precisely because the steady decline of the Company’s stock 

price ‘accurately tracked the company’s steadily worsening 

fortunes.’” (emphasis added)). 

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(7th Cir. 1990), arguing that a stock is too risky to hold at 

current market prices is part and parcel of the claim that that 

stock is overvalued,5see Dudenhoeffer, 134 S. Ct. at 2471.

 

5 Coburn’s attempt to bypass this reality is unpersuasive. As 

noted above, stock prices fluctuate to achieve the same expected 

return as the stocks of the strongest companies in the market. Cent. 

Nat’l Bank of Mattoon, 912 F.2d at 901. This means that, inter alia, a 

“risk discount” is applied to stocks of weaker companies—when a 

stock becomes increasingly risky (and hence, its potential for loss 

increases), its price falls so as to maintain the expected market rate of 

return. See id. Here, however, Coburn argues that Evercore could not 

rely on the market to apply an appropriate “risk discount” because 

Penney Stock Fund investors had a lower risk tolerance than average 

market investors. See Appellant’s Br. 19-21. The investors therefore 

demanded a greater risk discount than the one applied by the market 

at large and Evercore should have recognized that the market price of 

J.C. Penney stock constituted an imprudent investment if this more 

conservative risk discount were applied. See id. 

Coburn’s argument fails, however, because she 

mischaracterizes the risk tolerance of ESOP investors. “Congress, in 

seeking to permit and promote ESOPs, was pursuing purposes other 

than the financial security of plan participants.” Dudenhoeffer, 134 

S. Ct. at 2467-68. Although the alternative purposes are insufficient 

to create a presumption of prudence on the part of an ESOP 

fiduciary, id. at 2470-71, they nonetheless reflect a clear reality: 

Whatever evils [that exist in ESOPs] are endemic to 

the ESOP form established by Congress. A benefit 

of employees investing in their employer is that 

when the employer does well, the employees do 

well. A risk is that when the employer goes 

bankrupt, the employees do poorly. 

Pfeil, 806 F.3d at 387. Undiversified ESOPs are thus not fairly 

characterized as “low-risk” investments because of their direct 

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For the foregoing reasons, the judgment of the district 

court is affirmed.6

So ordered.

 

relationship to the fortunes of a single company. Cf. Terrence R. 

Chorvat, Ambiguity and Income Taxation, 23 CARDOZO L.REV. 617, 

630 (2002) (citing RICHARD A. BREALEY & STEWART C. MYERS,

PRINCIPLES OF CORPORATE FINANCE 153-56 (1996)) (elementary 

principle of finance instructs “ceteris paribus, a diversified portfolio 

of investments has less risk than an undiversified portfolio of 

stocks”). We therefore reject the premise of Coburn’s claim that 

Evercore should have considered its investors as low risk (i.e., that 

Evercore should have applied an above-market risk discount) when 

assessing the prudence of continued investment in J.C. Penney 

common stock. This conclusion is in accord with Dudenhoeffer 

itself, which—as noted above—rejected the risk-based claims of 

ESOP investors with a similar risk tolerance. See supra at 10-11.

6 Because we conclude that Dudenhoeffer applies to Coburn’s 

claim, we need not reach the question whether, absent Dudenhoeffer, 

Coburn was nonetheless required to allege that J.C. Penney was “no 

longer viable” in order to survive dismissal. See Appellant’s Br. 

22-23. 

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ROGERS, Circuit Judge, concurring in the judgment. The

Employee Retirement Income Security Act (“ERISA”), 29

U.S.C. § 1001 et seq., was designed “to protect . . . the interests

of participants in employee benefit plans and their

beneficiaries.” Id. § 1001(b). Congress’ “massive undertaking,”

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44 (1987), followed

“almost a decade of studying the Nation’s private pension

plans,” and resulted in a complex and comprehensive statute,

Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359,

361 (1980), under which every employee benefit plan is to be

managed by fiduciaries subject to common law duties of care

and specific duties set forth in ERISA, 29 U.S.C. §§ 1102(a),

1104(a)(1). ERISA fiduciaries ordinarily have a duty to

diversify investments in retirement plans “so as to minimize the

risk of large losses.” Id. § 1104(a)(1)(C). But employee stock

ownership plans (“ESOP”) are different. Such plans, which

invest “primarily” in the stock of the employer’s company, id.

§ 1107(d)(6)(A), are exempt from the diversification

requirement, id. § 1104(a)(2), and serve multiple purposes,

generally to protect employees’ retirement savings and also to

provide capital growth funds, see Tax Reform Act of 1976,

§ 803(h), 90 Stat. 1590. Despite the risk of undiversified

retirement investments acknowledged in ERISA, see 29 U.S.C.

§ 1104(a)(1)(C), Congress has continued to use tax incentives to

encourage the creation of ESOPs, Fifth Third Bancorp v.

Dudenhoeffer, __ U.S. __, 134 S. Ct. 2459, 2469 (2014). 

Coburn’s purported class action complaint, on behalf of

herself as a J.C. Penney ESOP participant and other current and

former employees who participated in the J.C. Penney ESOP,

alleged that Evercore Trust Company, N.A. (“Evercore”), the

J.C. Penney ESOP fiduciary, violated its duty of prudence by

failing “to evaluate the merits of the [ESOP’s] investments on

an ongoing basis and take all necessary steps to ensure that the

[ESOP’s] assets were invested prudently.” Compl. ¶ 67 (Jan.

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13, 2015). According to the complaint, given the results of new

management initiatives beginning in 2012, Evercore “knew or

should have known that [J.C. Penney] stock was not a suitable

and appropriate investment for the [ESOP], but was, instead, a

highly speculative and risky investment in light of [J.C.

Penney’s] serious mismanagement and precarious financial

condition.” Id. ¶ 69. Further, it alleged that a loyal and prudent

fiduciary would “have in place a regular, systemic procedure for

evaluating the prudence of investment in [J.C. Penney] stock.” 

Id. ¶ 70. More particularly, the complaint alleged that Evercore

should have ceased “to offer [J.C. Penney] stock as an

investment option for participant contributions in the [ESOP]

when [Evercore] knew that [J.C. Penney] stock no longer was a

prudent investment for participants’ retirement savings,” id.

¶ 77, and it “could not possibly have acted prudently when it

continued to invest the [ESOP’s] assets” in J.C. Penney stock,

id. ¶ 76.

Opposing Evercore’s motion to dismiss the complaint

pursuant to Federal Rule of Civil Procedure 12(b)(6), on the

ground the complaint “is identical to the claim alleged” and

rejected in Dudenhoeffer, Mem. in Supp. of Def. Evercore Trust

Co. N.A.’s Mot. to Dismiss 6, Apr. 13, 2015 (“Def.’s Motion”),

Coburn pointed to the Supreme Court’s May 18, 2015 decision

in Tibble v. Edison International, __ U.S. __, 135 S. Ct. 1823

(2015). She argued not only that Tibble “reconfirmed

[Evercore’s] fiduciary obligations under trust law and ERISA,”

but that Dudenhoeffer “is only relevant in cases where the stock

price is alleged to have been artificially inflated,” which “is not

alleged here.” Pl.’s Opp. to Def.’s Mot. to Dismiss 1, 10, June

12, 2015 (“Pl.’s Opposition”). Absent a claim that J.C. Penney

stock was either overvalued or undervalued, Coburn asserted she

did not need to plead special circumstances in order to survive

the motion to dismiss. Id. at 10–11. In Coburn’s view, Tibble

“clarified that the duty of prudence under ERISA includes a duty

USCA Case #16-7029 Document #1653481 Filed: 12/30/2016 Page 16 of 24
3

to continually monitor the prudence of investments of plan

assets.” Id. at 9. Evercore responded that Tibble “says nothing

about whether Evercore breached the duty [to monitor] by

failing to foresee the future decline in the price of J.C. Penney

stock. . . . Dudenhoeffer already resolves this issue.” Reply

Mem. in Support of Def. Evercore Mot. to Dismiss 2–3, July 13,

2015.

Surprisingly, Coburn does not raise a Tibble contention on

appeal. See Op. 8 n.2; Concurring Op. 1 (Edwards, J.). 

Consequently, the question before this court is whether

Dudenhoeffer is dispositive. The Supreme Court has confirmed

that the role of ESOP fiduciaries gives rise to the “tension”

between the “general duty of prudence” required of ERISA

fiduciaries and the authorization of non-diversified, high-risk

ESOPs. Amgen Inc. v. Harris, __ U.S. __, 136 S. Ct. 758, 759

(2016); see also Pfeil v. State St. Bank & Trust Co., 806 F.3d

377, 382–83 (6th Cir. 2015); Rinehart v. Lehman Bros. Holdings

Inc., 817 F.3d 56, 63–65 (2d Cir. 2016); Gedek v. Perez, 66 F.

Supp. 3d 368, 372–74 (W.D.N.Y. 2014); Concurring Op. 3–4

(Edwards, J.). But neither the economic theory underlying the

appropriate balancing of the duties owed by ESOP fiduciaries,

nor the theory of ESOPs, nor the interaction between Tibble and

Dudenhoeffer were briefed on appeal; Tibble itself is not

mentioned in the briefs. Instead, Coburn places no reliance on

economic theory. Her position on appeal is that “[c]ommon law

concepts of fiduciary duty . . . cannot be reconciled with

[Evercore’s] tortured reading which ignores Dudenhoeffer’s

distinguishable facts that made market efficiency a relevant

topic there, but not here.” Reply Br. 1. She accepts that

Evercore was an independent plan fiduciary with no inside

information about J.C. Penney’s prospects, see Appellant’s Br.

11, and focuses on common law obligations where there is a

“properly functioning efficient market,” Reply Br. 2.

USCA Case #16-7029 Document #1653481 Filed: 12/30/2016 Page 17 of 24
4

Consequently it behooves the court not to endorse a

particular economic theory that could have unforeseen and even

unintended consequences in future ERISA litigation, much less

in a class action, where the issues are squarely presented and a

court must decide them. See Op. 6–8, 11–13. The economic

theories underlying ERISA, and ESOPs specifically, have been

the subject of much scholarship.1

 Although some theories of

stock valuation and ESOP fiduciary responsibilities were

addressed in the district court, see, e.g., Def.’s Motion 11–13;

Pl.’s Opposition 11–13, on appeal the parties’ economic analysis

is limited to general principles of market efficiency. See

Appellant’s Br. 18–21;Resp’t’s Br. 11–12, 16–18. Coburn rests

her appeal on Dudenhoeffer’s “extensive teaching” with respect

to the common law of trusts to which she asserts ESOP

fiduciaries, no less than other ERISA fiduciaries, are held, Reply

Br. 2 (citing Dudenhoeffer, 134 S. Ct. at 2465, 2467, 2470), and

on the district court opinion in Gedek (which was not followed

by the Second Circuit Court of Appeals in Rinehart, 817 F.3d at

66 n.3). Hence, it is unnecessary for this court to weigh in on

the economic theory of ESOPs, much less elaborate upon the

economic theory implied by Dudenhoeffer. In this complex,

technical ERISA context, I would not venture further than is

necessary to decide Coburn’s appeal, and, as she has presented

it, Dudenhoeffer is controlling.

The legal theory in Coburn’s complaint is based nearly

verbatim on the complaint filed in Dudenhoeffer. Compare

1

 For three different analytical approaches to ERISA, see, e.g.,

Catherine L. Fisk, Lochner Redux: The Renaissance of Laissez-Faire

Contract in the Federal Common Law of Employee Benefits, 56 OHIO

ST. L.J. 153 (1995); Sean M. Anderson, Risky Retirement Business:

How ESOPs Harm the Workers They are Supposed to Help, 41 LOY.

U. CHI. L.J. 1 (2009); Brendan S. Maher & Peter K. Stris, ERISA &

Uncertainty, 88 WASH. U. L. REV. 433 (2010).

USCA Case #16-7029 Document #1653481 Filed: 12/30/2016 Page 18 of 24
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Compl. ¶¶ 67–80 with Consol. Class Action Compl. for

Violations of the Emp. Ret. Income Sec. Act ¶¶ 228–240,

246–48, Dudenhoeffer v. Fifth Third Bancorp, 757 F. Supp. 2d

753 (S.D. Ohio 2010) (No. 08-cv-538) (“Dudenhoeffer

Compl.”). Those theories from the Dudenhoeffer complaint

were argued in the employees’ brief to the Supreme Court. See

Br. For Resp’ts, Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct.

2459 (2014) (No. 12-751). The employees urged the Court to

conclude, where ESOP fiduciaries “‘continued to allow the

Plan’s investment in Fifth Third Stock even during the time that

the stock price was declining in value as a result of [the]

collapse of the housing market’ . . . that ‘[a] prudent fiduciary

facing similar circumstances would not have stood idly by as the

Plan’s assets were decimated.’” Dudenhoeffer, 134 S. Ct. at

2471 (quoting Dudenhoeffer Compl. at 53). 

 

The Supreme Court in Dudenhoeffer was thus faced with

virtually identical arguments to those Coburn brings to this

court. That Court rejected as “implausible” the employees’ view

that, based solely on publicly available information, a

fiduciary’s failure to divest from an ESOP whose stock price is

declining has violated the duty of prudence, “at least in the

absence of special circumstances.” Id. Coburn urges this court

to conclude that Dudenhoeffer is inapplicable because her claim

is not based on the over- or undervaluation of J.C. Penney stock,

but rather that class members’ “risk aversion as retirement

investors must also be taken into account by a fiduciary when

assessing the prudence of continued investment of retirement

funds over the long term.” Appellant’s Br. 14. In her view,

“Evercore should have discontinued investment in J.C. Penney

stock precisely because the steady decline of the Company’s

stock price ‘accurately tracked the company’s steadily

worsening fortunes.’” Id. at 21–22 (quoting Gedek, 66 F. Supp.

3d at 375). In this context, she concludes, no “special

circumstances” needed to be pleaded. Id. at 14. 

USCA Case #16-7029 Document #1653481 Filed: 12/30/2016 Page 19 of 24
6

Whatever merit there might be to Coburn’s risk-aversion

contention in the absence of Dudenhoeffer — a contention that

presumably would require examination of economic theory on

types of information incorporated into a stock price, market

efficiencies, and the extent of the duty of prudence in the context

of ESOPs — Dudenhoeffer forecloses the need for such

consideration here. Although the employees in Dudenhoeffer

also argued the employer’s stock was overvalued, and that

fiduciaries had failed to act on the basis of non-public

information, that does not undermine Dudenhoeffer’s rejection

of arguments as “implausible” that are indistinguishable from

those Coburn presents on appeal. 134 S. Ct. at 2471–72. And

because Dudenhoeffer is dispositive, it is unnecessary to address

Coburn’s challenge to the district court’s alternative holding on

Gedek, much less to attempt to resolve the tension between

Tibble and Dudenhoeffer or to expound on a possible economic

theory of ESOPs.

USCA Case #16-7029 Document #1653481 Filed: 12/30/2016 Page 20 of 24
EDWARDS, Senior Circuit Judge, concurring: I do not take 

issue with anything in the opinion for the court. I write only to 

emphasize what we do not decide today. 

I agree that Coburn’s claim of “outsized and unnecessary 

retirement savings risk” is foreclosed by the Supreme Court’s 

decision in Fifth Third Bancorp v. Dudenhoeffer, __ U.S. __, 

134 S. Ct. 2459 (2014). I write separately to emphasize that, 

in affirming the judgment of the District Court, we do not 

mean to denigrate the viability of a separate “duty to monitor” 

claim under Tibble v. Edison International, __ U.S. __, 135 S. 

Ct. 1823 (2015). Although Coburn raised a duty to monitor 

cause of action with the District Court, she failed to preserve 

the claim and raise it on appeal. It is therefore forfeited. 

 Coburn raised two separate theories in support of her 

complaint alleging that Evercore breached its fiduciary duty. 

First, Coburn claimed that Evercore “knew or should have 

known that Company stock was not a suitable and appropriate 

investment for the Plan, but was, instead, a highly speculative 

and risky investment.” Complaint ¶ 69, reprinted in Joint 

Appendix (“J.A.”) 24. Second, Coburn claimed that 

“Evercore Trust failed to engage in proper monitoring of the 

Company Stock Fund.” Complaint ¶ 53, J.A. 20. Specifically, 

Coburn argued that Evercore “fail[ed] to have in place 

rudimentary trip wires that would have spurred a prudent 

fiduciary into action.” Complaint ¶ 54, J.A. 20. 

 Coburn cited facts indicating that J.C. Penney’s stock 

plummeted between 2012 and 2013 because of CEO Ron 

Johnson’s poor management. Johnson’s misguided approach, 

including changes to J.C. Penney’s pricing, the “store 

experience,” and the merchandise offered, cost the company 

stock plan approximately $300 million. See Complaint ¶¶ 19–

20, 36–37, J.A. 11, 14–15. In the wake of Johnson’s firing, 

analysts described Johnson’s reign as “a tumultuous 17 

USCA Case #16-7029 Document #1653481 Filed: 12/30/2016 Page 21 of 24
2 

months,” Stephanie Clifford, Chief’s Silicon Valley Stardom 

Quickly Clashed at J.C. Penney, N.Y. TIMES, Apr. 10, 2013, 

at A1; “a troubled stint,” Daisuke Wakabayashi, Corporate 

News: Apple Ex-Retail Chief Leads Startup, WALL ST. J., Oct. 

24, 2014, at B2; and an “abysmal tenure,” Sean Williams, The 

Motley Fool’s Worst CEO of the Year Is . . ., MOTLEY FOOL

(Dec. 12, 2013, 10:05 AM), 

http://www.fool.com/investing/general/2013/12/12/themotley-fools-worst-ceo-of-the-year-is-2.aspx. Asked to 

describe Johnson’s performance, a prominent former CEO 

responded: “There is nothing good to say about what he’s 

done.” James Surowiecki, The Turnaround Trap, NEW 

YORKER, Mar. 25, 2013, at 44. 

 In light of these uncontested facts, Coburn asserted that 

Evercore did “absolutely nothing,” even though its “sole 

responsibility was to evaluate and monitor the performance of 

a single equity.” Complaint ¶¶ 52, 53, J.A. 19–20. Given the 

facts and allegations pled, it is hard to comprehend how 

Coburn’s complaint could not survive a motion to dismiss 

under Tibble. 

 The opinion for the court properly distinguishes, as 

Coburn did, distinct theories of a breach of fiduciary duty: 

Whereas Dudenhoeffer primarily focuses on 

allegations of misvaluation in the marketplace, 

see 134 S. Ct. at 2471, Tibble focuses on the 

prudence of holding particular investments 

over time, requiring a fiduciary to “conduct a 

regular review of its investment with the nature 

and timing of the review contingent on the 

circumstances.” 135 S. Ct. at 1827–28. 

USCA Case #16-7029 Document #1653481 Filed: 12/30/2016 Page 22 of 24
3 

Maj. Op. Part II n.2. These theories are fundamentally 

different: Dudenhoeffer addresses the “over- or undervaluing” 

of a stock, 134 S. Ct. at 2471; Tibble, in turn, addresses the 

“fail[ure] to properly monitor investments,” 135 S. Ct. at 

1829. Broadly speaking, Dudenhoeffer involves the substance 

of investment decisions, while Tibble has to do with a 

fiduciary’s obligation to monitor those decisions. These 

theories embrace distinct, albeit not mutually exclusive, 

causes of action for violations of a fiduciary’s duty. 

I recognize that the holding in Tibble may be in tension 

with some of what the Court said in Dudenhoeffer. 

Nevertheless, Tibble post-dates Dudenhoeffer, and it is quite 

clear in what it says: 

Under trust law, a trustee has a continuing 

duty to monitor trust investments and remove 

imprudent ones. This continuing duty exists 

separate and apart from the trustee’s duty to 

exercise prudence in selecting investments at 

the outset. The Bogert treatise states that “[t]he 

trustee cannot assume that if investments are 

legal and proper for retention at the beginning 

of the trust, or when purchased, they will 

remain so indefinitely.” A. Hess, G. Bogert, & 

G. Bogert, Law of Trusts and Trustees § 684, 

pp. 145–146 (3d ed. 2009) (Bogert 3d). Rather, 

the trustee must “systematic[ally] conside[r] all 

the investments of the trust at regular 

intervals” to ensure that they are appropriate. 

Bogert 3d § 684, at 147–148. 

. . . . 

USCA Case #16-7029 Document #1653481 Filed: 12/30/2016 Page 23 of 24
4 

In short, under trust law, a fiduciary 

normally has a continuing duty of some kind to 

monitor investments and remove imprudent 

ones. A plaintiff may allege that a fiduciary 

breached the duty of prudence by failing to 

properly monitor investments and remove 

imprudent ones. 

135 S. Ct. at 1828–29 (alterations in original). 

 It seems plain to me that Appellant’s complaint and her 

argument to the District Court stated a cause of action under 

Tibble that easily should have survived a motion to dismiss. 

See Moreno v. Deutsche Bank Americas Holding Corp., 15 

Civ. 9936, 2016 WL 5957307, at *5–7 (S.D.N.Y. Oct. 13, 

2016) (citing Tibble, 135 S. Ct. at 1828–29) (denying motion 

to dismiss a failure to monitor claim); Northstar Fin. Advisors 

v. Schwab Invs., 135 F. Supp. 3d 1059, 1075–76 (N.D. Cal. 

2015) (quoting Tibble, 135 S. Ct. at 1828) (same). However, 

because it is not before us, we have no occasion to address the 

issue on appeal. 

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