United States Court of Appeals 

For the First Circuit 

No. 17-1515 

MARY BARCHOCK; THOMAS WASECKO; STACY WELLER, 

Plaintiffs, Appellants, 

v. 

CVS HEALTH CORPORATION; THE BENEFITS PLAN COMMITTEE OF CVS 

HEALTH CORPORATION; GALLIARD CAPITAL MANAGEMENT, INC., 

Defendants, Appellees. 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF RHODE ISLAND 

[Hon. Mary M. Lisi, U.S. District Judge] 

Before 

Torruella, Kayatta, and Barron, 

Circuit Judges. 

Jason H. Kim, with whom Todd M. Schneider, Schneider Wallace 

Cottrell Konecky Wotkyns LLP, Sonja L. Deyoe, and Law Offices of 

Sonja L. Deyoe were on brief, for appellants. 

Meaghan VerGow, with whom Brian D. Boyle, Bradley N. García, 

O'Melveny & Myers LLP, Robert Clark Corrente, Whelan, Corrente, 

Flanders, Kinder & Siket LLP, Joel S. Feldman, Mark B. Blocker, 

Robert N. Hochman, Daniel R. Thies, and Sidley Austin LLP were on 

brief, for appellees. 

Evan A. Young, Shane Pennington, Baker Botts LLP, Steven P. 

Lehotsky, Janet Galeria, U.S. Chamber Litigation Center, and Janet 

M. Jacobson, on brief for amici curiae Chamber of Commerce of the 

United States of America and American Benefits Council. 

Brian D. Netter, Nancy G. Ross, Mayer Brown LLP, and Kevin 

Carroll, on brief for amicus curiae Securities Industry and 

Financial Markets Association. 
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March 23, 2018 
- 3 - 

BARRON, Circuit Judge. The plaintiffs allege violations 

of the fiduciary duty of prudence under the Employee Retirement 

Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461, by 

the fiduciaries of an employer-sponsored retirement plan. 

Specifically, the plaintiffs contend that a particular investment 

fund offered through the plan was invested too heavily in cash or 

cash-equivalents for the years at issue and thus that the plan was 

imprudently managed and monitored. The District Court dismissed 

the complaint for failure to state a claim under ERISA. We affirm. 

I. 

To understand the sole issue on appeal, it helps to 

provide some background concerning the duty of prudence that ERISA 

establishes. We then describe the particular allegations that the 

plaintiffs offer in support of the imprudence claims that they 

bring and the travel of the case. Finally, we briefly review the 

rulings below. 

A. 

ERISA provides that any person who exercises 

discretionary authority or control in the management or 

administration of an ERISA plan (or who is compensated in exchange 

for investment advice) is a fiduciary. 29 U.S.C. § 1002(21)(A). 

ERISA further provides that such a fiduciary has a duty to act 

"with the care, skill, prudence, and diligence under the 

circumstances then prevailing that a prudent man acting in a like 
- 4 - 

capacity and familiar with such matters would use in the conduct 

of an enterprise of a like character and with like aims." Id. 

§ 1104(a)(1)(B). 

Importantly, the Supreme Court has explained that "the 

content of the duty of prudence turns on 'the circumstances . . . 

prevailing' at the time the fiduciary acts." Fifth Third Bancorp 

v. Dudenhoeffer, 134 S. Ct. 2459, 2471 (2014) (omission in 

original) (quoting 29 U.S.C. § 1104(a)(1)(B)). Accordingly, with 

respect to whether a complaint states a claim of imprudence under 

ERISA, "the appropriate inquiry will necessarily be context 

specific." Id. 

As we explained in Bunch v. W.R. Grace & Co., 555 F.3d 

1 (1st Cir. 2009), in connection with a claim of imprudence 

concerning an ERISA plan's investments, "[t]he test of prudence 

-- the Prudent Man Rule -- is one of conduct, and not a test of 

the result of performance of the investment." Id. at 7 (quoting 

Donovan v. Cunningham, 716 F.2d 1455, 1467 (5th Cir. 1983)). 

Moreover, we explained that "[w]hether a fiduciary's actions are 

prudent cannot be measured in hindsight." Id. (quoting DiFelice 

v. U.S. Airways, Inc., 497 F.3d 410, 424 (4th Cir. 2007)). 

B. 

In 2016, the plaintiffs -- Mary Barchock, Thomas 

Wasecko, and Stacy Weller -- filed this suit in the United States 

District Court for the District of Rhode Island. They did so 
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pursuant to 29 U.S.C. § 1132(a), which authorizes any ERISA plan 

participant to bring a civil action against an ERISA fiduciary 

liable under 29 U.S.C. § 1109 for breach of its duties. 

According to the complaint, the three plaintiffs 

participated from 2010 to 2013 in an ERISA employee retirement 

plan that was sponsored by their employer, CVS Health Corporation 

("CVS"), and administered by the Benefits Plan Committee of CVS.1 

The plan was a 401(k) defined contribution plan that offered 

several investment options to participants, including what is 

known as a "stable value fund." The Benefits Plan Committee 

appointed Galliard Capital Management, Inc. ("Galliard") to manage 

that fund. 

All three plaintiffs allocated portions of their 

retirement investments under the plan to this stable value fund, 

which held approximately $1 billion in assets. Their complaint 

alleged that CVS, the Benefits Plan Committee, and Galliard owed 

the plaintiffs a fiduciary duty of prudence under ERISA with 

respect to the plan's investments in the fund and that each of the 

defendants breached that duty. 

In so claiming, the plaintiffs' complaint described what 

a stable value fund is by quoting the description of such funds 

 1 The undisputed facts are drawn from the complaint and 

documents incorporated by it. See Trans-Spec Truck Serv., Inc. v. 

Caterpillar, Inc., 524 F.3d 315, 321 (1st Cir. 2008). 
- 6 - 

given by the Seventh Circuit in Abbott v. Lockheed Martin Corp., 

725 F.3d 803 (7th Cir. 2013). Specifically, the complaint quoted 

Abbott as describing stable value funds, or SVFs, as "recognized 

investment vehicles" that 

typically invest in a mix of short- and 

intermediate-term securities, such as 

Treasury securities, corporate bonds, and 

mortgage-backed securities. Because they hold 

longer-duration instruments, SVFs generally 

outperform money market funds, which invest 

exclusively in short-term securities. To 

provide the stability advertised in the name, 

SVFs are provided through "wrap" contracts 

with banks or insurance companies that 

guarantee the fund's principal and shield it 

from interest-rate volatility. 

Id. at 806 (citations omitted). 

The complaint did not identify what information was 

provided by the defendants to plan participants before they 

invested in the CVS stable value fund. Notably, the complaint did 

not allege that the plan documents specified how the fund's assets 

would be allocated. The complaint did, however, allege that the 

fund was part of a mix of investment options that the employer 

offered in "lifestyle" funds described as "conservative" and 

"moderate," as opposed to "aggressive." The complaint also alleged 

that, according to the plan's Internal Revenue Service Form 5500 

Annual Return from one of the years at issue, the fund's stated 

objective was "to preserve capital while generating a steady rate 
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of return higher than money market funds provide" (emphasis 

omitted). 

With respect to Galliard, the complaint contended that, 

as a fiduciary, it breached its duty of prudence under ERISA in 

managing the CVS stable value fund by investing "too much" of the 

fund's assets in short-term debt obligations equivalent to cash, 

as opposed to intermediate-term investments that generally provide 

higher returns. Specifically, the complaint alleged that from 

2010 to 2013, Galliard invested between twenty-seven and fiftyfive percent of the fund's assets in an investment fund offered by 

a different firm that was invested "primarily" in such cash 

equivalents. (Galliard allocated the balance of the CVS stable 

value fund to intermediate-term investments.) This asset 

allocation, according to the complaint, predictably both resulted 

in unnecessary liquidity and "acted as an enormous drag on the 

duration of the overall Stable Value Fund portfolio, which 

depressed returns." 

The complaint further alleged that this asset allocation 

was a "severe outlier" when compared to allocation averages for 

the stable value industry.2 And, to identify those averages, the 

 2 In addition, the complaint made a related allegation that 

Galliard's parent company managed a different stable value fund 

that, between 2010 and 2013, invested all of its assets in yet 

another fund that, in turn, invested less than ten percent of the 

fund in "interest-bearing cash or cash equivalents." The complaint 

then purported to infer from these allegations that "Galliard well 
- 8 - 

complaint incorporated a survey of industry data from 2011 and 

2012.3 That survey was released by the Stable Value Investment 

Association, which the complaint described as a trade association 

for the stable value industry. The complaint alleged that, 

according to the survey, the average mean allocation of assets to 

cash or cash-equivalent investments by stable value funds surveyed 

was between only five and ten percent for the years 2011 and 2012.4

Finally, the complaint alleged that Galliard's 

relatively high allocation of investments in short-term, cashequivalents was at odds with "well-established principles of 

stable value investing." The complaint explained that investors 

in stable value funds generally agree to contractual provisions 

that restrict the liquidity of their investments in exchange for 

relatively stable returns from longer-term investments. Yet, the 

 

understood . . . that it was not necessary to maintain such a large 

percentage of cash or cash equivalents in a stable value fund." 

However, the plaintiffs have abandoned this argument on appeal. 

3 The complaint stated that the survey was attached as an 

exhibit, although it appears not to have actually been attached. 

However, the defendants subsequently filed the survey in the 

District Court as an exhibit attached to a declaration by one of 

their attorneys, and the plaintiffs did not oppose that filing. 

4 The complaint also alleged that, due to the CVS stable value 

fund's relatively high investment in cash equivalents, the 

"average duration of [the fund's] investments" (presumably 

excluding its pure cash holdings) between 2010 and 2012 was 

approximately one year, whereas the average duration of 

investments by stable value funds participating in the survey 

during 2011 and 2012 was approximately three years. 
- 9 - 

complaint alleged, Galliard's excessive allocation of the CVS 

stable value fund's assets to short-term, cash-equivalent 

investments resulted in liquidity that the investors did not want 

and for which the plaintiffs paid a premium by losing out on the 

higher returns generally associated with longer-term investments. 

And, the complaint asserted, that allocation decision cannot be 

justified in terms of reducing risk because stable value funds, as 

conventionally structured, have historically outperformed money 

market funds -- which invest in cash equivalents -- in terms of 

both return and volatility. To support that last proposition, the 

complaint cited an academic study from 2007 and an updated version 

of that study from 2011. See David F. Babbel & Miguel A. Herce, 

A Closer Look at Stable Value Funds Performance (Wharton Financial 

Institutions Center Working Paper No. 07-21, 2007); David F. Babbel 

& Miguel A. Herce, Stable Value Funds: Performance to Date (Wharton 

Financial Institutions Center Working Paper No. 11-01, 2011). 

As for the other two defendants -- CVS and the Benefits 

Plan Committee -- the complaint alleged that they had breached 

their duty of prudence by inadequately monitoring Galliard. The 

complaint asserted that, had they been prudent, they "would have 

immediately discovered that the reason for the [CVS stable value 

fund's] poor performance was because an unreasonably high 

percentage of the . . . assets were invested in cash-equivalent 

accounts that produced abysmal investment returns and that this 
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allocation strategy was highly anomalous by industry standards." 

Yet, the complaint alleged, neither CVS defendant "took any action" 

to change Galliard's investment strategy. 

The plaintiffs sought declaratory and injunctive relief, 

as well as reimbursement for losses from reduced investment return, 

damages, and attorney's fees. The plaintiffs also requested class 

certification on behalf of all participants in the CVS retirement 

plan who invested in the plan's stable value fund.

The defendants moved to dismiss the complaint under Rule 

12(b)(6) of the Federal Rules of Civil Procedure for failure to 

state a claim under ERISA. The defendants did not dispute that 

they were ERISA fiduciaries. However, they contended that the 

complaint did not state a claim that was cognizable under ERISA 

because the allegation that Galliard allocated a relatively high 

proportion of the fund's assets to short-term, cash-equivalent 

investments could not alone support a claim of imprudence. The 

defendants also contended that, to the extent that the complaint 

was simply alleging that Galliard should have taken more risk with 

the fund's investments in order to achieve higher returns, the 

plaintiffs were merely criticizing the performance of the fund 

with the benefit of hindsight and that such second-guessing could 

not support a claim under ERISA for breach of the duty of prudence. 

Finally, the defendants contended that the failure to state a claim 

against Galliard necessarily meant that the complaint failed to 
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state a claim against the CVS defendants for imprudently monitoring 

Galliard.

C. 

The District Court assigned the case to a Magistrate 

Judge. The Magistrate Judge recommended dismissing the complaint 

on the grounds specified by the defendants. The District Court 

agreed, and it dismissed the complaint and entered judgment in 

favor of the defendants. 

The District Court reasoned that the plaintiffs' claims 

were not focused on the prudence of the decisions that Galliard 

made when evaluated in light of the circumstances prevailing at 

the time that Galliard made those decisions. Rather, in the 

District Court's view, the plaintiffs were merely alleging that, 

if the fund's investments in cash-equivalents had instead been 

invested in the same manner as the fund's other assets, then the 

fund would have earned higher returns. The District Court 

therefore determined that the complaint failed to state a claim 

under ERISA, as the claim did not even purport to account for the 

specific context in which the challenged investment decisions were 

made and instead focused only on how poorly those decisions turned 

out. In short, the District Court concluded, the complaint was 

making an impermissible "hindsight" critique of Galliard's 

management of the fund. 
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The plaintiffs then filed this appeal challenging the 

District Court's dismissal of the complaint under Rule 12(b)(6) 

for failure to state a claim. Our review is de novo. SEC v. 

Tambone, 597 F.3d 436, 441 (1st Cir. 2010) (en banc). We take the 

complaint's well-pleaded facts as true, and we draw all reasonable 

inferences in the plaintiffs' favor. Id. Well-pleaded facts must 

be "non-conclusory" and "non-speculative." Schatz v. Republican 

State Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012). As part 

of our review, we may consider "implications from documents 

attached to or fairly incorporated into the complaint." Id. 

(internal quotation marks omitted) (quoting Arturet-Vélez v. R.J. 

Reynolds Tobacco Co., 429 F.3d 10, 13 n.2 (1st Cir. 2005)). To 

survive dismissal, however, the complaint must "contain sufficient 

factual matter, accepted as true, to state a claim to relief that 

is plausible on its face." Tambone, 597 F.3d at 437 (quoting 

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "If the factual 

allegations in the complaint are too meager, vague, or conclusory 

to remove the possibility of relief from the realm of mere 

conjecture, the complaint is open to dismissal." Id. (citing Bell 

Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). 

II. 

With respect to the claim of imprudence against 

Galliard, the plaintiffs insist that, contrary to the ruling below, 

their complaint's allegation of imprudent investment is not based 
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merely on the fact that the CVS stable value fund turned out to 

have performed poorly. For that reason, the plaintiffs insist 

their imprudence claim against Galliard is "not based on mere 

hindsight criticism" of its investment strategy. 

In pressing this contention, the plaintiffs appear to be 

asserting that, with respect to ERISA's requirement that a 

fiduciary exercise the prudence that "a prudent man" would use "in 

the conduct of an enterprise of a like character and with like 

aims," 29 U.S.C. § 1104(a)(1)(B), the management of a fund labeled 

as a stable value fund constitutes the relevant "enterprise" of 

comparison. From that implicit premise,5 the plaintiffs then 

contend that Galliard -- by allocating twenty-seven to fifty-five 

percent of the CVS stable value fund's assets to an investment 

fund primarily holding short-term, cash-equivalent investments 

-- "departed radically" from the investment standards and logic 

 5 Given that the plaintiffs are not bringing a 

misrepresentation claim, it is not clear why the relevant 

comparative enterprise under ERISA here should be the management 

of funds labeled as stable value funds, as opposed to a more 

general or a more specific category of retirement funds. After 

all, the CVS fund stated its investment objective in more general 

terms, while the funds that participated in the stable value fund 

survey incorporated in the plaintiffs' complaint were not all 

similarly structured, as some were "individually managed singleplan accounts," others were "bank and investment company 

commingled pooled funds," and still others were "life insurance 

company accounts attached to full service products." But, rather 

than affirmatively argue that, for purposes of evaluating whether 

Galliard's investment strategy was an imprudent one, the proper 

"enterprise" is the management of a fund labeled as a stable value 

fund, the plaintiffs just assert that it is the proper one to use. 
- 14 - 

then prevailing for the management of such funds. And, in the 

plaintiffs' view, we can reasonably infer that Galliard 

imprudently invested the fund's assets solely from the fact that 

Galliard's "cash"-focused strategy "departed radically" from the 

practices and logic guiding the management of such funds. Thus, 

the plaintiffs contend, they did not need to allege anything more 

about the specific context in which Galliard made particular 

investment decisions in order to state a claim of imprudence. 

The defendants counter that the plaintiffs have failed 

to state a plausible claim of imprudent investment management 

against Galliard under ERISA for the following reasons. The 

defendants point out that the complaint itself alleges that CVS 

offered the stable value fund as part of its more conservative 

retirement plan options and that the fund's stated objective was 

"to preserve capital while generating a steady rate of return 

higher than money market funds provide." And, the defendants 

contend, it is clear from the face of the complaint that Galliard 

then fulfilled that conservative investment objective that had 

been disclosed to the plan participants.

In addition, the defendants note, the plaintiffs "do not 

directly criticize the process by which the Fund's investment 

allocation was selected in pursuit of that objective." In that 

regard, the defendants point out that the plaintiffs have abandoned 

their complaint's assertion that Galliard was a sleeping manager 
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who took a "fire-and-forget" approach to asset allocation, in light 

of the complaint's contrary allegations that Galliard actively 

managed the CVS stable value fund. Nor, the defendants point out, 

have the plaintiffs "suggested that defendants had something to 

gain from managing the fund conservatively," which could raise 

doubts about the prudence of Galliard's investment process.

As a result, the defendants contend that the mere fact 

that the complaint alleges that Galliard pursued a relatively more 

"cash"-focused investment strategy than most funds that 

participated in the industry survey that the complaint 

incorporates is insufficient to state a claim of imprudence. In 

their view, such a complaint necessarily fails to provide the kind 

of context for evaluating Galliard's investment choices that Fifth 

Third Bancorp and Bunch demand. 

The plaintiffs do not dispute the defendants' 

characterization of what their complaint does and does not allege. 

Thus, they do not dispute that Galliard met the CVS stable value 

fund's stated objective of preserving capital while outperforming 

money market funds, which are, as indicated above, "cash"-based. 

In addition, the plaintiffs clarified at oral argument that they 

are not arguing that offering money market funds as a retirement 

plan would in and of itself be a breach of the duty of prudence 

under ERISA. Nor, the plaintiffs also clarified at oral argument, 

is their theory that the defendants should be liable for 
- 16 - 

misrepresenting the investment vehicle in which the plaintiffs 

invested as a stable value fund when it was, in the plaintiffs' 

view, managed more like a money market fund. 

Thus, on the plaintiffs' own account, we are left with 

the following allegation. Given what the plaintiffs contend was 

then-prevailing stable value management practice and logic, 

Galliard was imprudent in managing the CVS stable value fund, 

despite meeting the fund's stated investment objective of 

outperforming money market funds, solely because the CVS fund was 

managed "too much" like a money market fund. And we are left with 

that allegation even though, on the plaintiffs' theory, a money 

market fund itself is a prudent retirement investment vehicle to 

offer and the CVS fund was not misrepresented to plan participants 

as something that it was not.

We have -- just recently -- rejected a claim that an 

ERISA fiduciary imprudently managed a stable value fund by, among 

other things, establishing too conservative of a benchmark 

(despite disclosing and then exceeding that benchmark) and not 

investing in higher-risk, higher-return instruments. Ellis v. 

Fidelity Mgmt. Tr. Co., No. 17-1693, 2018 WL 991515, at *6-8 (1st 

Cir. Feb. 21, 2018). And, in doing so, we indicated that 

conservativism in the management of a stable value fund -- when 

consistent with the fund's objectives disclosed to the plan 

participants -- is no vice. "Were this case to proceed to trial," 
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we observed in Ellis, "it is completely unclear by what standard 

a jury could find a disclosed choice of benchmark to be imprudent 

as 'too conservative,' particularly where plaintiffs make no 

argument that offering more conservative investments (such as 

money market funds) would constitute an ERISA violation." Id. at 

*7. In this regard, we explained elsewhere in the opinion, 

"[u]nless we are to say that ERISA plans may not offer very 

conservative investment options (such as money market funds or 

treasury bond funds), then we cannot say that plans may not offer 

different types of stable value funds, including those that are 

intentionally and openly designed to be conservative." Id. at *6. 

Our analysis in Ellis clearly casts doubt on the 

viability of the plaintiffs' imprudence claim here. But, we have 

not previously had occasion to address whether the allegation here 

that an ERISA fiduciary "departed radically" from the practices 

and financial logic of like funds could -- on its own -- provide 

a standard for how conservative is "too conservative" and thus 

suffice to state a claim of imprudence under ERISA. And the 

plaintiffs contend that such an allegation can suffice both because 

a substantial body of out-of-circuit precedent supports that 

conclusion and because the logic of the statutory provision that 

imposes the duty of prudence does as well. And so we now consider 

each of those arguments. 
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A. 

We begin with the plaintiffs' contention that out-ofcircuit precedent supports their position. But, as we will 

explain, none of the cases on which the plaintiffs rely passed on 

the question presented here: whether allegations that a stable 

value fund invested a relatively high proportion of its assets in 

cash or cash-equivalents, and that such a "cash" allocation 

departed radically from the logic and practices of such funds, 

suffice in combination to state a claim of imprudence under ERISA. 

Several of the cases cited by the plaintiffs hold merely 

that alleged differences between a challenged fund's performance 

or characteristics and those of comparable funds suffice to state 

a claim of imprudence under ERISA where a flaw in the fiduciary's 

decision-making process could be reasonably inferred from 

allegations of self-dealing.6 The plaintiffs also cite cases 

 6 See Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 595-96 

(8th Cir. 2009) (allegation that ERISA fiduciary invested in funds 

with higher management fees as "a quid pro quo" in return for 

kickbacks); Krueger v. Ameriprise Fin., Inc., No. 11-02781, 2012 

WL 5873825, at *10-11 (D. Minn. Nov. 20, 2012) (allegation that 

ERISA fiduciary invested in its own affiliated funds that charged 

higher management fees because doing so generated additional 

profits for the fiduciary). The only other case to which the 

plaintiffs point in which an imprudence claim was allowed to go 

forward at the motion-to-dismiss stage included allegations, not 

present in our case, that ERISA fiduciaries selected a "relatively 

new, expensive, underperforming investment option" because the 

funds in which they invested were managed by a firm affiliated 

with the retirement plan's record-keeper and trustee, that these 

funds charged higher management fees than comparable funds, and 

that the funds "had no meaningful record of performance so as to 
- 19 - 

-- involving rulings after bench trials, rather than at the motionto-dismiss stage -- in which findings of imprudence under ERISA 

did not rest on allegations of self-dealing. But, in each of those 

cases, the finding that an ERISA fiduciary had violated the duty 

of prudence rested on evidence that, in managing investments for 

ERISA plan participants, the fiduciary took on more risk than the 

fiduciary had disclosed to the participants.7

Finally, the plaintiffs also rely on an unreported 

district court decision in the Abbott litigation, which is the 

same litigation that produced the Seventh Circuit's decision 

permitting class certification, 725 F.3d 803, from which the 

plaintiffs' complaint quotes in order to describe what stable value 

funds are. In that litigation, the district court denied the 

defendants' motion for summary judgment with respect to a claim 

that the manager of a stable value fund breached its duty of 

 

indicate that higher performance would offset this difference in 

fees." Lorenz v. Safeway, Inc., 241 F. Supp. 3d 1005, 1019 (N.D. 

Cal. 2017). 

7 See Cal. Ironworkers Field Pension Tr. v. Loomis Sayles & 

Co., 259 F.3d 1036, 1045 (9th Cir. 2001) (overinvestment in 

collateralized mortgage obligations was imprudent, "given evidence 

that [collateralized mortgage obligations] could be highly risky 

investments" and "that the [ERISA-governed trust fund] had very 

conservative investment guidelines"); Prudential Ret. Ins. & 

Annuity Co. v. State St. Bank & Tr. Co. (In re State St. Bank & 

Tr. Co. Fixed Income Funds Inv. Litig.), 842 F. Supp. 2d 614, 646 

(S.D.N.Y. 2012) ("enhanced index funds" were imprudently managed 

to accept twice as much risk than disclosed to investment adviser 

for ERISA retirement plans that had invested in those funds). 
- 20 - 

prudent investment under ERISA. Abbott v. Lockheed Martin Corp., 

No. 06-0701, 2009 WL 839099, at *9-11 (S.D. Ill. Mar. 31, 2009). 

The plaintiffs here contend that their imprudence claim 

"fit[s] squarely within the claims and rulings in Abbott." In 

particular, the plaintiffs represent that the "fundamental 

allegation" in Abbott was that the fund was imprudently invested 

in short-term, cash-equivalent investments because between fifty 

and ninety-nine percent of the fund's assets were invested in cashequivalents. See id. at *9. Thus, the plaintiffs contend that 

the district court's summary judgment decision in Abbott supports 

their contention that their complaint has stated an imprudence 

claim against Galliard by alleging that Galliard invested between 

twenty-seven and fifty-five percent of the CVS stable value fund's 

assets in an investment fund that was primarily invested in cashequivalents. 

However, we do not see how the district court's summary 

judgment ruling in Abbott shows that the imprudence claim that the 

plaintiffs bring here is cognizable. To be sure, at oral argument, 

the defendants were willing to assume that it might be possible to 

infer imprudent stable value management from an extreme allocation 

of assets to cash or cash-equivalents -- perhaps, in their 

counsel's words, if "nearly 100 percent" of a fund's assets are so 

allocated, like the alleged ninety-nine percent cash-equivalent 

allocation in Abbott. But, as the defendants point out, the high 
- 21 - 

end of the alleged cash-equivalent allocation of the stable value 

fund in Abbott was much higher than that of the CVS stable value 

fund here.8 And, more importantly, it is clear from the district 

court's summary judgment ruling that the plaintiffs in Abbott did 

not allege that the fund there was imprudently managed solely 

because a relatively high proportion of the fund's assets were 

invested in cash-equivalents. See id. at *9-11. 

Thus, the precedents on which the plaintiffs rely do not 

help their cause. Those precedents simply did not have occasion 

to pass on a theory akin to that of the plaintiffs -- namely, that 

imprudence can be inferred solely from their complaint's charge 

that Galliard's cash-equivalent allocation "departed radically" 

from both industry averages and the underlying financial logic of 

stable value management. 

B. 

In evaluating whether the plaintiffs' novel theory 

nonetheless has force, it is important to keep in mind that the 

complaint does not allege anything about the particular 

circumstances that Galliard faced in managing the fund beyond the 

facts that there was a financial crisis in 2008 during which money 

 8 In fact, the complaint does not actually allege what the 

precise cash-equivalent allocation here was. The complaint 

alleges merely that twenty-seven to fifty-five percent of the CVS 

stable value fund's assets -- depending on the year at issue 

-- were allocated to a separate investment fund that was, in turn, 

invested "primarily" in cash equivalents. 
- 22 - 

market yields declined and that the fund's stated objective was 

"to preserve capital while generating a steady rate of return 

higher than money market funds provide." To supply the required 

context for the plaintiffs' imprudence claim, the complaint 

instead relies on the extent to which Galliard's cash-equivalent 

allocations deviated from allocation averages in the stable value 

industry as well as from what the plaintiffs contend is the 

inherent logic of stable value funds. 

A claim resting on such evidence, however, runs into the 

concern that we recently set forth in Ellis. For it is hard to 

see how the fact that a stable value fund was run conservatively 

indicates that it was being run imprudently, where "plaintiffs 

make no argument that offering more conservative investments (such 

as money market funds) would constitute an ERISA violation." 

Ellis, 2018 WL 991515, at *7. We see no daylight between the 

prudence claim rejected in Ellis and that presented here. Even if 

we grant plaintiffs' premise and assume that evidence showing a 

"radical[]" deviation from standard stable value management 

practice could on its own supply the necessary context to state a 

claim of imprudence, we do not see how the evidence that the 

plaintiffs have put forward on that score could suffice. 

The plaintiffs emphasize the data contained in the 

industry survey that their complaint incorporates. But, that 

survey sets forth the arithmetic mean of cash-equivalent 
- 23 - 

allocations by all of the stable value funds participating in the 

survey for each year. Neither the survey nor the complaint reveals 

the distribution of cash-equivalent allocations by the funds 

participating in the survey that results in the industry-wide 

arithmetic means that the survey sets forth. And, without such 

distribution information, it is unreasonable to infer solely from 

the complaint's allegation that Galliard "departed radically" from 

the annual arithmetic means of cash-equivalent allocations by like 

funds that Galliard was a "severe outlier" from all other such 

funds when it came to asset allocation decisions -- at least given 

the large number of stable value funds that existed.9

In fact, the industry survey incorporated by the 

complaint indicates that the cash-equivalent allocations in the 

surveyed funds ranged widely -- from 0.3 to 36.5 percent in 2011 

 9 The large number of stable value funds is apparent from the 

complaint. The industry survey incorporated by the complaint 

indicates that forty-three firms participated in the survey, with 

over $700 billion in combined stable value assets under management. 

It appears, however, that those forty-three firms managed assets 

held by many different defined contribution retirement plans. The 

survey itself does not say how many plans were covered or what the 

variation in the asset allocations of their stable value fund 

investments was. But, in this regard, the academic study of stable 

value funds on which the complaint relies indicates that there 

were over $800 billion invested in stable value funds through 

almost half of all defined contribution plans. Babbel & Herce, 

Stable Value Funds: Performance to Date, 1. And the study states 

that $561 billion of those assets were held by as many as 173,050 

plans. Id. at 1 n.4. 
- 24 - 

and from 0.44 percent to 48.2 percent in 2012.10 And the complaint 

alleges that the CVS stable value fund's allocation to a fund 

primarily invested in cash-equivalents was 44 percent in 2011 and 

48 percent in 2012. That means, with respect to the two years for 

which the survey provides data, that the CVS stable value fund's 

cash-equivalent allocation was potentially outside the range of 

allocations made by the surveyed funds in 2011 but then was 

necessarily within the range of allocations made by the surveyed 

funds in 2012. 

In the absence of any additional context, these survey 

statistics thus show merely that Galliard charted a relatively 

more "cash"-focused course than most of the funds that were 

surveyed, while taking the most "cash"-focused course in one year 

but not in the next year. But, consistent with our reasoning in 

Ellis, we do not see how those facts alone can suffice to support 

a plausible claim that such decision-making was imprudent. 

Given the paucity of allegations that the complaint 

makes about the circumstances facing the CVS stable value fund at 

the time, it would be pure speculation to infer that Galliard did 

 10 The defendants suggest that the low end of the range was 

never below two percent. Their estimation of the range apparently 

excludes the survey's data from stable value funds offered by life 

insurance companies that commingled the assets of unrelated 

retirement plans. We instead consider the range that is most 

favorable to the plaintiffs, but the difference ultimately has no 

bearing on our analysis. 
- 25 - 

not have a good reason to make those "cash"-heavy decisions.11 

After all, we see no reason to accept the plaintiffs' implicit 

assertion that, in managing a stable value fund, a decision to 

take the path less traveled is for that reason imprudent. 

To be sure, the complaint does allege that Galliard's 

management of the CVS stable value fund was imprudent in 2010 and 

2013 as well. But the survey incorporated by the complaint does 

not even encompass those years, and the complaint contains no data 

about how other funds in the industry allocated their investments 

in either of those years. Thus, the complaint does not provide 

any direct allegation that the CVS fund was unique in being 

invested so substantially in cash-equivalents in 2010, the sole 

year when its cash-equivalent allocation reached potentially as 

high as fifty-five percent, or 2013, when its cash-equivalent 

allocation was no more than twenty-seven percent.

Nor does the complaint allege that stable value funds' 

average asset allocations in the years not covered by the survey 

(2010 and 2013) were similar to the industry average allocations 

for the intervening years (2011 and 2012) that the survey does 

cover. And, in any event, the CVS fund's potential cash-equivalent 

 11 It is true that the complaint alleges that money market 

yields declined during the crisis. But that additional allegation, 

without any additional context, does not make it plausible that a 

decision to increase money market investments immediately 

following the crisis was imprudent, even if in hindsight it proved 

to have been relatively costly. 
- 26 - 

allocation in 2013 (twenty-seven percent) was well within the range 

for each year that the survey covers. 

Moreover, 2010, which is when Galliard's "cash" 

allocation was at its height, was the year closest to the "2008 

financial crisis" referenced in the complaint. That fact may or 

not make stable value funds' asset allocations in 2010 distinct 

from subsequent years. But, in light of the allegations in the 

complaint, it would be pure speculation to infer that average 

industry allocations in that year -- for which the complaint 

provides no survey data -- would have been no different from the 

averages derived from the survey data for the subsequent years. 

See, e.g., Ellis, 2018 WL 991515, at *6-8 (granting summary 

judgment against a claim that an ERISA fiduciary was imprudent 

"[i]n the wake of the 2007-2008 financial crisis" by allocating a 

stable value fund's assets "away from higher-return, but higherrisk sectors . . . and toward treasuries and other cash-like or 

shorter duration investments," id. at *2). 

Given the evident problem with resting a claim of 

imprudence solely on these survey data, the plaintiffs' claim needs 

to rest on something more in order to be plausible. The plaintiffs 

contend that the complaint contains that "something more" because 

it alleges that the "underlying financial logic" of stable value 

funds renders reasonable an inference that Galliard's relatively 
- 27 - 

more money-market-fund-like choices (as the survey data reveal 

them to have been) were not just cautious but imprudent. 

The complaint alleges in this regard that stable value 

funds have historically outperformed money market funds without 

increased volatility. And the complaint relies for that allegation 

on an academic study whose results, at least in part, were 

available at the time of Galliard's investment decisions.12 The 

plaintiffs then argue that the study suggests that investing in 

the types of short-term debt obligations that compose money market 

funds is imprudent if an alternative option to invest in longerterm investments is available and -- as the complaint alleges was 

true of stable value fund investors -- anticipated liquidity needs 

are reduced.

The academic study on which the plaintiffs rely, 

however, does not itself suggest that a stable value fund should 

refrain from holding any particular proportion of its assets in 

cash or cash equivalents, such that imprudence could be inferred 

from Galliard's allocations. Rather, with respect to the 

composition of stable value funds, the study states only that they 

 12 As the complaint points out, the updated version of the 

2007 study, which was released in 2011, indicated that this trend 

generally continued during the financial crisis preceding 

Galliard's decisions. However, that version of the study was not 

available at the time that Galliard decided to allocate fifty-five 

percent of the CVS stable value fund during 2010 to an investment 

fund primarily holding cash-equivalents. 
- 28 - 

are "typically comprised of high quality, short maturity (usually 

well under five years) corporate and government bonds, mortgagebacked securities, and asset-backed securities," without 

addressing the extent to which they might also hold cash or cashequivalents. Babbel & Herce, Stable Value Funds: Performance to 

Date, 3. And the study then simply makes a retrospective claim 

that stable value funds, however their assets happened to have 

been constituted in the past, have historically outperformed money 

market funds. Id. at 16. 

Moreover, at oral argument, the plaintiffs' counsel 

emphasized that their theory is not that any investment in cash 

equivalents by an ERISA fiduciary is by itself a breach of the 

duty of prudence. Thus, the argument that the plaintiffs 

necessarily must press is that the underlying financial logic of 

stable value funds dictates not that any investment in cash or 

cash equivalents is imprudent but rather that the specific cashequivalent allocation here was.

The plaintiffs, however, have failed to offer a theory 

for determining, based on the underlying financial logic of stable 

value funds, how much liquidity is "too much," such that imprudence 

may be reasonably inferred. And they certainly do not offer a 

theory that would make plausible the notion that the cashequivalent allocations of a fund labeled as a stable value fund 

are imprudent simply because those allocations are consistently 
- 29 - 

larger for a certain number of years than the mean allocations of 

five to ten percent derived from all funds (whatever their 

particularities) participating in a survey conducted by a trade 

association for the stable value industry. 

After all, the plaintiffs have not explained why 

financial logic makes it plausible to conclude -- without knowing 

anything more about the particular circumstances affecting an 

ERISA fiduciary's choices regarding asset allocations -- that what 

the plaintiffs call a five to ten percent "cash buffer" is prudent, 

but that a buffer closer to twenty-seven to fifty-five percent 

"cash" is not. Rather, as far as the complaint reveals, the 

plaintiffs' only basis for setting the maximum threshold for a 

prudent "cash buffer" at ten percent is the allegation that the 

annual arithmetic means of the surveyed funds' cash-equivalent 

allocations were no higher than ten percent. The plaintiffs 

themselves acknowledge, however, that they need to point to 

something more than merely that the CVS fund's cash-equivalent 

allocations were higher than those means in order to state a claim 

of imprudence under ERISA. Otherwise, in the plaintiffs' words, 

we are left with "just cavils about deviation from industry 

standards." 

III. 

That still leaves the question whether the complaint 

nevertheless states a claim against the CVS defendants for 
- 30 - 

imprudently monitoring Galliard. However, the complaint alleges 

no harm other than the stable value fund's underperformance as a 

result of Galliard's alleged misallocation of the fund's assets. 

Because of our determination that this alleged harm is not 

cognizable under ERISA, there remains no basis for supporting a 

claim against the CVS defendants. Accordingly, we conclude that 

the complaint also fails to state a plausible claim against the 

CVS defendants. 

IV. 

For these reasons, the judgment of the District Court is 

affirmed.