15‐2229

In Re: Lehman Bros. Sec. and ERISA Litig.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

______________              

August Term, 2015

(Argued: January 14, 2016     Decided: March 18, 2016)

Docket No. 15‐2229

____________              

ALEX E. RINEHART, on behalf of himself and all others

similarly situated, JO ANNE BUZZO, MONIQUE MILLER

FONG, on behalf of herself and others similarly situated,

MARIA DESOUSA, LINDA DEMIZIO,  

Plaintiffs‐Appellants,

LOCALS 302 AND 612 OF THE INTERNATIONAL

UNION OF OPERATING ENGINEERS‐EMPLOYERS

CONSTRUCTION INDUSTRY RETIREMENT FUND, CITY

OF SOUTH SAN FRANCISCO, CITY OF LONG BEACH,

COUNTY OF TUOLUMNE, CITY OF FREMONT, NEW

JERSEY CARPENTERS HEALTH FUND, BOILERMAKER‐

BLACKSMITH NATIONAL PENSION TRUST, NEW

JERSEY CARPENTERS HEALTH FUND, on behalf of itself

and all others similarly situated, AMERICAN NATIONAL

INSURANCE COMPANY, AMERICAN NATIONAL LIFE
INSURANCE COMPANY OF TEXAS, COMPREHENSIVE

INVESTMENT SERVICES INC., THE MOODY

FOUNDATION, WASHINGTON STATE INVESTMENT

BOARD, CHRISTOPHER CORDARO, individually and on

behalf of all others similarly situated, SYLVIA REMER, ED

DAVIS, JUAN TOLOSA, ARTHUR SIMONS, RALPH

ROSATO, TRUSTEE J. HARRY PICKLE, ZENITH

INSURANCE CO., STATE OF NEW JERSEY,

DEPARTMENT OF TREASURY, DIVISION OF

INVESTMENT, LINDA HARRIS, An Individual, MARIA

LANE, Individually and as Trustee of the Lane Family

Trust UAD 2004, MICHAEL LANE, Individually and as

Trustee of the Lane Family Trust UAD 2004, STEPHEN P.

GOTT, MOHAN ANANDA, RICHARD BARRETT, NEEL

DUNCAN, NICK FOTINOS, FRED MANDELL, BARBARA

MOSKOWITZ, STACEY OYLER, RONALD PROFILI,

LAWRENCE ROSE, JOE ROTTMAN, ROY WIEGERT,

MIRIAM WOLF, ISLAND MEDICAL GROUP

RETIREMENT TRUST, f/b/o Irwin Ingwer, DAVID KOTZ,

CARLA LA GRASSA, STUART RATNOW, SYDNEY

RATNOW, STATE COMPENSATION INSURANCE

FUND, CITY OF CERRITOS, CITY OF AUBURN, CITY OF

BURBANK, CITY OF SAN BUENAVENTURA, CONTRA

COSTA WATER DISTRICT, SAN MATEO COUNTY

INVESTMENT POOL, VALLEJO SANITATION & FLOOD

CONTROL DISTRICT, MARY A. ZEEB, BEN JOSEPH

TRUST, EPSTEIN TRUST, STICHTING PENSIOENFONDS

ABP, ALISON CHARLES, RENAUD FOURNIER, LYDIA

LOSCHIAVO, ALAMEDA COUNTY EMPLOYEES’

RETIREMENT ASSOCIATION, AMERICAN EUROPEAN
INSURANCE COMPANY, GOVERNMENT OF GUAM

RETIREMENT FUND, INTER‐LOCAL PENSION FUND

GRAPHIC COMMUNICATIONS CONFERENCE OF THE

INTERNATIONAL BROTHERHOOD OF TEAMSTERS,

MARSHA KOSSEFF, NORTHERN IRELAND LOCAL

GOVERNMENT OFFICERS’ SUPERANNUATION

COMMITTEE, OPERATING ENGINEERS LOCAL 3

TRUST FUND, OPERATIVE PLASTERERS AND CEMENT

MASONS INTERNATIONAL ASSOCIATION LOCAL 262

ANNUITY FUND, Individually and on behalf of all others

similarly situated, POLICE AND FIRE RETIREMENT

SYSTEM OF THE CITY OF DETROIT, TEAMSTERS

ALLIED BENEFIT FUNDS, THE CITY OF EDINBURGH

COUNCIL AS ADMINISTERING AUTHORITY OF THE

LOTHIAN PENSION FUND, THE PENSION FUND

GROUP, BROCKTON CONTRIBUTORY RETIREMENT

SYSTEM, RICK FLEISCHMAN, STEPHEN GOTT, ISLAND

MEDICAL GROUP, KARIM KANO, MICHAEL

KARFUNKEL, ANN LEE, FRANCISCO PEREZ, RONALD

PROFILI, SHEA‐EDWARDS LIMITED PARTNERSHIP,

FRED TELLING, GRACE WANG, ZAHNISER TRUST,

ANTHONY PEYSER, On behalf of himself and all others

similarly situated, STEPHEN P. GOTT, On behalf of

himself, All others similarly situated, BELMONT

HOLDINGS CORP., individually and on behalf of all others

similarly situated, KATHY ROONEY, on behalf of

themselves and all others similarly situated, JEFFREY

STARK, on behalf of themselves and all others similarly

situated, STANLEY TOLIN, ENRIQUE AZPIAZU, STUART

BREGMAN, ROBERTA CIACCI, ROBERT FEINERMAN,
IRWIN INGWER, PHYLLIS INGWER, ISLAND MEDICAL

GROUP PENSION PLAN, f/b/o Irwin Ingwer, FRANKLIN

KASS, CHRISTOPHER LEWIS, on behalf of himself and

The Entertainment Group, AURORA PEREZ,

CUAUHTEMOC PEREZ, DIANA PEREZ, TRUSTEE J.

HARRY PICKLE, GASTROENTEROLOGY ASSOCIATES

PROFIT SHARING TRUST FBO CHARLES M. BROOKS

M.D., ALEJANDRO SILVA, DAVID SOSNA, MORTGAGE

TRUST 2007‐6, ALASKA ELECTRICAL PENSION FUND,

On behalf of itself and all others similarly situated,

FOUNDATION PROPERTY MANAGEMENT, INC., RHF

FOUNDATION INC., RETIREMENT HOUSING

FOUNDATION, COUNTY OF ALAMEDA, BERNICE

KAUFMAN, as trustee of the Irene Kaufman Trust, IRENE

KAUFMAN, as trustee of the Irene Kaufman Trust,

ARTHER N. ABBEY, FIFTH‐NINTH STREET INVESTORS

LLC, ADINA SCHRON, JTWROS, AVI SCHRON, JOSEPH

P. DANIS, RENA CALDWELL, on behalf of themselves and

all others similarly situated, GLEN DEATHROW, on behalf

of himself and all others similarly situated, MADELINE

DIMODICA, on behalf of herself and all other similarly

situated, BARBARA KATTELL, on behalf of himself and all

other similarly situated, CECIL MEASE, on behalf of

themselves and all others similarly situated, HENRY

NAPIRALA, LINDA NAPIRALA, MICHAEL SHIPLEY, on

behalf of themselves and all others similarly situated,  

Plaintiffs,

‐v.‐  
LEHMAN BROTHERS HOLDINGS INC., RICHARD S.

FULD, JR., MACOMBER, ERIN M. CALLAN, WENDY M.

UVINO, THE EMPLOYEE BENEFIT PLANS COMMITTEE,

JOHN DOE, 1‐10, MARY PAT ARCHER, AMITABH

ARORA, MICHAEL BRANCA, EVELYNE ESTEY, ADAM

FEINSTEIN, DAVID ROMHILT,

Defendants‐Appellees,

LEHMAN BROTHERS HOLDINGS INC., EMPLOYEE

BENEFIT PLANS COMMITTEE, BOARD OF DIRECTORS

LEHMAN BROTHERS HOLDINGS, INC., BENEFITS

COMMITTEE, MOODYʹS INVESTORS SERVICE, INC.,

MCGRAW‐HILL COMPANIES, INC., MOODYʹS

CORPORATION, ERNST & YOUNG, LLP, BRIAN M.

CLARKSON, MICHAEL KANEF, MOODYʹS INVESTORS

SERVICE, INC., FIDELITY MANAGEMENT TRUST

COMPANY, ANZ SECURITIES, INC., CITIGROUP

GLOBAL MARKETS INC., RBC CAPITAL MARKETS

CORPORATION, ABN AMRO INCORPORATED,

WILLIAMS CAPITAL GROUP L.P., BBVA SECURITIES

INC., GREENWICH CAPITAL MARKETS, INC.,

SUNTRUST CAPITAL MARKETS, INC., CIBC WORLD

MARKETS CORP., HSBC SECURITIES (USA) INC., HVB

CAPITAL MARKETS, INC., M.R. BEAL & COMPANY,

BNP PARIBAS S.A., ING FINANCIAL MARKETS LLC,

MELLON FINANCIAL MARKETS, LLC, NATIXIS

BLEICHROEDER INCORPORATED, SANTANDER

INVESTMENT SECURITIES INC., SG AMERICAS
SECURITIES HOLDINGS, LLC, WELLS FARGO

SECURITIES, LLC, NATIONAL AUSTRALIA CAPITAL

MARKETS, LLC, CAJA DE AHORROS Y MONTE DE

PIEDAD DE MADRID, HARRIS NESBITT CORP., DZ

FINANCIAL MARKETS LLC, FORTIS SECURITIES, LLC,

RBS GREENWICH CAPITAL, BMO CAPITAL MARKETS

CORP., MIZUHO SECURITIES USA, INC., MURIEL

SIEBERT & CO., INC., SCOTIA CAPITAL (USA) INC.,

SOVEREIGN SECURITIES CORPORATION, LLC,

UTENDAHL CAPITAL PARTNERS, L.P., BANK

DEFENDANTS, BANKIA, S.A., RAYMOND MCDANIEL,

JR., RBS WCS HOLDING COMPANY, DAIWA CAPITAL

MARKETS EUROPE LIMITED, BNY CAPITAL MARKETS,

INC., WACHOVIA CAPITAL MARKETS, LLC, BNY

MELLON CAPITAL MARKETS, LLC, MCGRAW‐HILL

COMPANIES, INC., A.G. EDWARDS & SONS, INC.,

BANC OF AMERICA SECURITIES LLC, BBVA

SECURITIES INC., COMMERZBANK CAPITAL

MARKETS CORP., FIDELITY CAPITAL MARKETS, LOOP

CAPITAL MARKETS, LLC, MORGAN STANLEY & CO.

LLC, RAYMOND JAMES & ASSOCIATES, INC., UBS

SECURITIES LLC, WACHOVIA SECURITIES, LLC, ZIONS

DIRECT, INC., CALYON SECURITIES (USA) INC.,

COUNTRYWIDE SECURITIES CORPORATION, HYPO

CAPITAL MARKETS, INC., LASALLE FINANCIAL

SERVICES, INC., EDWARD D. JONES & CO., L.P.,

NATIONAL AUSTRALIA BANK LIMITED, RBC DAIN

RAUSCHER INCORPORATED, BANK OF NEW YORK

CAPITAL MARKETS, INC., CIBC WORLD MARKETS

CORP., DNB NOR MARKETS INC., MERRILL LYNCH,
PIERCE, FENNER & SMITH INCORPORATED, SIEBERT

CAPITAL MARKETS, STANDARD CHARTERED BANK,

SUNTRUST ROBINSON HUMPHREY, INC., TD

SECURITIES (USA) LLC, J.P. MORGAN SECURITIES LLC,

CITIGROUP INC., RBS SECURITIES INC., HARRIS

NESBITT, SOCIETE GENERALE CORPORATE &

INVESTMENT BANKING, CITIGROUP GLOBAL

MARKETS REALTY CORP., BBVA SECURITIES INC.,

BANC OF AMERICA SECURITIES LLC, CABRERA

CAPITAL MARKETS, LLC, D.A. DAVIDSON & CO.,

DAVENPORT & COMPANY LLC, FERRIS, BAKER

WATTS, INC., FIFTH THIRD SECURITIES, INC., FIXED

INCOME SECURITIES, INC., H & R BLOCK FINANCIAL

ADVISORS, INC., JACKSON SECURITIES LLC, JANNEY

MONTGOMERY SCOTT LLC, KEEFE, BRUYETTE &

WOODS, INC., KEYBANC CAPITAL MARKETS, INC.,

MAXIM GROUP LLC, MESIROW FINANCIAL, INC.,

MORGAN KEEGAN & COMPANY, INC., NATIONAL

FINANCIAL SERVICES LLC, OPPENHEIMER & CO.,

INCORPORATED, ROBERT W. BAIRD & CO.

INCORPORATED, SMH CAPITAL INC., SCOTT &

STRINGFELLOW, INC., STIFEL, NICOLAUS &

COMPANY, INCORPORATED, STONE & YOUNGBERG

LLC, TD AMERITRADE HOLDING CORPORATION,

VINING SPARKS IBG, LP, ZIONS DIRECT, INC.,

WACHOVIA CAPITAL FINANCE, B.C. ZIEGLER AND

COMPANY, CREDIT SUISSE SECURITIES (USA) LLC,

PIPER JAFFRAY & CO., DZ FINANCIAL MARKETS LLC,

LANA FRANKS, EDWARD GRIEB, RICHARD

MCKINNEY, KRISTINE SMITH, JAMES J. SULLIVAN,
SAMIR TABET, MARK L. ZUSY, ABN AMRO HOLDING

N.V, CABRERA CAPITAL MARKETS LLC, CHARLES

SCHWAB & CO., INC., NABCAPITAL SECURITIES, LLC,

THE WILLIAMS CAPITAL GROUP, L.P., PIPER JAFFRAY

& CO., DAVID GOLDFARB, HERBERT H. MCDADE, III,

THOMAS RUSSO, MARK WALSH, JERRY GARCIA, An

Individual, BNP PARIBAS, KATHLEEN FULD, JOHN C.

ANDERSON, JAMES ESPOSITO, FINANCIAL ASSETS

SECURITIES CORPORATION, GREENWICH CAPITAL

ACCEPTANCE, INC., NOW KNOWN A RBS

ACCEPTANCE INC., GREENWICH CAPITAL

FINANCIAL PRODUCTS, INC., now known as RBS

Financial Products Inc., GREENWICH CAPITAL

MARKETS, INC., now known as RBS Securities Inc.,

CAROL P. MATHIS, ROBERT J. MCGINNIS, JOSEPH N.

WALSH, III, BANCA IMI, S.P.A., ARKANSAS ACTIONS

BANK DEFENDANTS, ARKANSAS ACTIONS

INDIVIDUAL DEFENDANTS, WSIB ACTION BANK

DEFENDANTS, ANICO ACTION BANK DEFENDANTS,

PEARSON PLAINTIFFSʹ ACTIONS BANK DEFENDANTS,

STATE FUND ACTION INDIVIDUAL DEFENDANTS,

RHF ACTION INDIVIDUAL DEFENDANTS, REMER

ACTION INDIVIDUAL DEFENDANTS, A/S ACTIONS

INDIVIDUAL DEFENDANTS, THE LEHMAN BROTHERS

SAVINGS PLAN, ERIN CALLAN, JOSEPH M. GREGORY,

IAN LOWITT, MIZUHO SECURITIES USA, INC., UBS

FINANCIAL SERVICES INC., CHRISTOPHER M.

OʹMEARA, MICHAEL L. AINSLIE, JOHN F. AKERS,

ROGER S. BERLIND, THOMAS H. CRUIKSHANK,

MARSHA JOHNSON EVANS, SIR CHRISTOPHER GENT,
JERRY A. GRUNDHOFER, RONALD A. HERNANDEZ,

HENRY KAUFMAN AND JOHN D. MACOMBER,

Defendants,

BNC MORTGAGE LOAN TRUST 2006‐1, BNC

MORTGAGE LOAN TRUST 2006‐2, FIRST FRANKLIN

MORTGAGE LOAN TRUST 2006‐FF12, FIRST FRANKLIN

MORTGAGE LOAN TRUST 2006‐FF2, FIRST FRANKLIN

MORTGAGE LOAN TRUST 2006‐FFA, FIRST FRANKLIN

MORTGAGE LOAN TRUST 2006‐FFB, GREENPOINT

MORTGAGE FUNDING TRUST SERIES 2006‐AR4,

GREENPOINT MORTGAGE FUNDING TRUST SERIES

2006‐AR5, GREENPOINT MORTGAGE FUNDING TRUST

SERIES 2006‐AR7, GREENPOINT MORTGAGE FUNDING

TRUST SERIES 2006‐HE1, GREENPOINT MORTGAGE

FUNDING TRUST SERIES 2006‐AR6, GREENPOINT

MORTGAGE FUNDING TRUST SERIES 2006‐AR8,

GREENPOINT MORTGAGE FUNDING TRUST, SERIES

2007‐AR1, GREENPOINT MORTGAGE FUNDING TRUST,

SERIES 2007‐AR3, LEHMAN MORTGAGE TRUST 2006‐2,

LEHMAN MORTGAGE TRUST 2006‐5, LEHMAN

MORTGAGE TRUST 2006‐6, LEHMAN MORTGAGE

TRUST 2006‐7, LEHMAN MORTGAGE TRUST 2006‐8,

LEHMAN MORTGAGE TRUST 2006‐9, LEHMAN

MORTGAGE TRUST 2007‐1, LEHMAN MORTGAGE

TRUST 2007‐2, LEHMAN MORTGAGE TRUST 2007‐3,

LEHMAN MORTGAGE TRUST 2007‐4, LEHMAN

MORTGAGE TRUST 2007‐5, LEHMAN XS TRUST 2005‐4,

LEHMAN XS TRUST 2005‐5N, LEHMAN XS TRUST 2005‐
6, LEHMAN XS TRUST 2005‐7N, LEHMAN XS TRUST

2005‐8, LEHMAN XS TRUST 2005‐9N, LEHMAN XS

TRUST 2006‐1, LEHMAN XS TRUST 2006‐11, LEHMAN XS

TRUST 2006‐13, LEHMAN XS TRUST 2006‐14N, LEHMAN

XS TRUST 2006‐15, LEHMAN XS TRUST 2006‐16N,

LEHMAN XS TRUST 2006‐17, LEHMAN XS TRUST 2006‐

18N, LEHMAN XS TRUST 2006‐19, LEHMAN XS TRUST

2006‐20, LEHMAN XS TRUST 2006‐2N, LEHMAN XS

TRUST 2006‐3, LEHMAN XS TRUST 2006‐4N, LEHMAN

XS TRUST 2006‐5, LEHMAN XS TRUST 2006‐GP1,

LEHMAN XS TRUST 2006‐GP2, LEHMAN XS TRUST 2007‐

1, LEHMAN XS TRUST 2007‐10H, LEHMAN XS TRUST

2007‐11, LEHMAN XS TRUST 2007‐12N, LEHMAN XS

TRUST 2007‐2N, LEHMAN XS TRUST 2007‐4N, LEHMAN

XS TRUST 2007‐5H, LEHMAN XS TRUST 2007‐6,

LEHMAN XS TRUST 2007‐7N, LEHMAN XS TRUST 2007‐

9, LEHMAN XS TRUST SERIES 2005‐5N, LEHMAN XS

TRUST SERIES 2005‐7N, LEHMAN XS TRUST SERIES

2005‐9N, LEHMAN XS TRUST SERIES 2006‐16N,

LEHMAN XS TRUST SERIES 2006‐2N, STRUCTURED

ADJUSTABLE RATE MORTGAGE LOAN TRUST 2006‐10,

STRUCTURED ADJUSTABLE RATE MORTGAGE LOAN

TRUST 2006‐11, STRUCTURED ADJUSTABLE RATE

MORTGAGE LOAN TRUST 2006‐12, STRUCTURED

ADJUSTABLE RATE MORTGAGE LOAN TRUST 2006‐2,

STRUCTURED ADJUSTABLE RATE MORTGAGE LOAN

TRUST 2006‐3, STRUCTURED ADJUSTABLE RATE

MORTGAGE LOAN TRUST 2006‐4, STRUCTURED

ADJUSTABLE RATE MORTGAGE LOAN TRUST 2006‐8,

STRUCTURED ADJUSTABLE RATE MORTGAGE LOAN
TRUST 2006‐9, STRUCTURED ADJUSTABLE RATE

MORTGAGE LOAN TRUST 2007‐1, STRUCTURED

ADJUSTABLE RATE MORTGAGE LOAN TRUST 2007‐2,

STRUCTURED ADJUSTABLE RATE MORTGAGE LOAN

TRUST 2007‐3, STRUCTURED ADJUSTABLE RATE

MORTGAGE LOAN TRUST 2007‐4, STRUCTURED

ADJUSTABLE RATE MORTGAGE LOAN TRUST 2007‐5,

STRUCTURED ADJUSTABLE RATE MORTGAGE LOAN

TRUST 2007‐6, STRUCTURED ASSET INVESTMENT

LOAN TRUST 2006‐2, STRUCTURED ASSET

INVESTMENT LOAN TRUST 2006‐BNC1, STRUCTURED

ASSET INVESTMENT LOAN TRUST 2006‐BNC3,

STRUCTURED ASSET SECURITIES CORPORATION,

STRUCTURED ASSET SECURITIES CORPORATION

MORTGAGE LOAN TRUST 2006‐BC1, STRUCTURED

ASSET SECURITIES CORPORATION MORTGAGE LOAN

TRUST 2006‐BC2, STRUCTURED ASSET SECURITIES

CORPORATION MORTGAGE LOAN TRUST 2006‐BC3,

STRUCTURED ASSET SECURITIES CORPORATION

MORTGAGE LOAN TRUST 2006‐BC4, STRUCTURED

ASSET SECURITIES CORPORATION MORTGAGE LOAN

TRUST 2006‐BC5, STRUCTURED ASSET SECURITIES

CORPORATION MORTGAGE LOAN TRUST 2006‐BC6,

STRUCTURED ASSET SECURITIES CORPORATION

MORTGAGE LOAN TRUST 2006‐S1, STRUCTURED

ASSET SECURITIES CORPORATION MORTGAGE LOAN

TRUST 2006‐S3, STRUCTURED ASSET SECURITIES

CORPORATION MORTGAGE LOAN TRUST 2006‐S4,

STRUCTURED ASSET SECURITIES CORPORATION

MORTGAGE LOAN TRUST 2006‐WF1, STRUCTURED
ASSET SECURITIES CORPORATION MORTGAGE LOAN

TRUST 2006‐WF3, STRUCTURED ASSET SECURITIES

CORPORATION MORTGAGE LOAN TRUST 2007‐BC1,

STRUCTURED ASSET SECURITIES CORPORATION

MORTGAGE LOAN TRUST 2007‐BC2, STRUCTURED

ASSET SECURITIES CORPORATION MORTGAGE LOAN

TRUST 2007‐BC3, STRUCTURED ASSET SECURITIES

CORPORATION MORTGAGE LOAN TRUST 2007‐EQ1,

STRUCTURED ASSET SECURITIES CORPORATION

MORTGAGE LOAN TRUST 2007‐OSI, STRUCTURED

ASSET SECURITIES CORPORATION MORTGAGE LOAN

TRUST 2007‐WF1, DOES 1‐20, GREENPOINT MORTGAGE

FUNDING GRANTOR TRUST 1‐A1A, SERIES 2006‐AR6,

GREENPOINT MORTGAGE FUNDING GRANTOR

TRUST 1‐A2A2, SERIES 2006‐AR5, GREENPOINT

MORTGAGE FUNDING GRANTOR TRUST 1‐A3A2,

SERIES 2006‐AR5, GREENPOINT MORTGAGE FUNDING

TRUST 1‐A2A2, SERIES 2006‐AR6, GREENPOINT

MORTGAGE FUNDING TRUST 1‐A2B, SERIES 2006‐AR6,

GREENPOINT MORTGAGE FUNDING TRUST 1‐A3B,

SERIES 2006‐AR6, GREENPOINT MORTGAGE FUNDING

TRUST 1‐A3B, SERIES 2006‐AR6, LEHMAN BROTHERS

INC., LEHMAN MORTGAGE TRUST 2007‐6, LEHMAN

MORTGAGE TRUST MORTGAGE PASS‐THROUGH

CERTIFICATES, SERIES 2007‐4,

Consolidated‐Defendants.

______________
Before:

JACOBS, WESLEY, and LIVINGSTON, Circuit Judges.

Plaintiffs‐Appellants appeal from the July 10, 2015

dismissal of their third consolidated amended complaint in the

United States District Court for the Southern District of New

York (Kaplan, Judge) alleging breach of duties by Defendants‐

Appellees, who were fiduciaries of an employee stock ownership

plan (“ESOP”) invested exclusively in the common stock of

Lehman Brothers Holdings, Inc. (“Lehman”). Plaintiffs‐

Appellants, all of whom participated in this plan and suffered

severe financial losses after Lehman declared bankruptcy in

September 2008, claimed that Defendants‐Appellees breached

their duty of prudence under the Employee Retirement Income

Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq., by

continuing to permit investment in Lehman stock throughout

the months leading up to its bankruptcy. The District Court

granted Defendants‐Appellees’ motion to dismiss pursuant to

Federal Rule of Civil Procedure 12(b)(6), finding that even

without applying the presumption of prudence rejected by the

Supreme Court in Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct.

2459 (2014), Plaintiffs‐Appellants failed to plead plausibly that

Defendants‐Appellees breached their ERISA duties. We AFFIRM

the judgment of the District Court.

__________

DANIEL W. KRASNER (Matthew M. Guiney, Wolf

Haldenstein Adler Freeman & Herz LLP, New

York, NY; Thomas J. McKenna, Gregory Egleston,
2

Gainey McKenna & Egleston, New York, NY, on

the brief), Wolf Haldenstein Adler Freeman & Herz

LLP, New York, NY, for Plaintiffs‐Appellants Alex E.

Rinehart, on behalf of himself and all others similarly

situated, Jo Anne Buzzo, Monique Miller Fong, on

behalf of herself and others similarly situated, Maria

DeSousa, and Linda DeMizio.  

JONATHAN K. YOUNGWOOD (Janet Gochman, Alexander Li,

on the brief), Simpson Thacher & Bartlett LLP, New

York, NY, for Defendants‐Appellees Mary Pat Archer,

Amitabh Arora, Michael Branca, Evelyne Estey, Adam

Feinstein, David Romhilt, and Wendy M. Uvino.

TODD S. FISHMAN, Allen & Overy LLP, New York, NY, for

Defendant‐Appellee Richard S. Fuld, Jr.

__________

PER CURIAM:

This case returns to the Court for the second time since

2013. After the September 2008 bankruptcy of Lehman Brothers

Holdings, Inc. (“Lehman”), Plaintiffs‐Appellants (“Plaintiffs”)

brought suit on behalf of a putative class of former participants

in an employee stock ownership plan (“ESOP”) invested

exclusively in Lehman’s common stock. Plaintiffs alleged that

Defendants‐Appellees (“Plan Committee Defendants” or

“Benefit Committee Defendants”), who were fiduciaries of this

ESOP, breached their duty of prudence under the Employee

Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C.

§§ 1001 et seq., by continuing to permit investment in Lehman

stock in the face of circumstances arguably foreshadowing its
3

eventual demise. Plaintiffs also alleged that Lehman’s former

directors, including Lehman’s former chairman and chief

executive officer, Defendant‐Appellee Richard S. Fuld

(“Defendant Fuld”), violated ERISA by failing to keep the Plan

Committee Defendants apprised of material, nonpublic

information that could have affected their evaluation of the

prudence of investing in Lehman stock.1

Applying the presumption of prudence articulated in

Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995), and adopted by

this Court in In re Citigroup ERISA Litigation, 662 F.3d 128 (2d

Cir. 2011), the United States District Court for the Southern

District of New York (Kaplan, Judge) dismissed Plaintiffs’

consolidated amended complaint (“CAC”) and second

consolidated amended complaint (“SCAC”) for failure to state a

claim under Federal Rule of Civil Procedure 12(b)(6). On July 15,

2013, we affirmed the District Court’s dismissal of both the CAC

and SCAC while also applying the Moench presumption,

concluding that Plaintiffs had failed to “plausibly allege[] that

the Benefit Committee Defendants knew or should have known

that Lehman was an imprudent investment given the mixed

signals with which the fiduciaries grappled.” Rinehart v. Akers,

722 F.3d 137, 151 (2d Cir. 2013).  

Nearly a year later, on June 25, 2014, the Supreme Court

of the United States held in Fifth Third Bancorp v. Dudenhoeffer

that ESOP fiduciaries are not entitled to any special presumption

of prudence. 134 S. Ct. 2459, 2463 (2014). On July 1, 2014, the

Supreme Court granted Plaintiffs’ petition for a writ of certiorari,

 

1 Our previous decision in this case provides a detailed recitation of

the facts, which have never been in dispute. See Rinehart v. Akers, 722

F.3d 137 (2d Cir. 2013), vacated and remanded, 134 S. Ct. 2900 (2014).
4

vacated the judgment in Rinehart, and remanded the case to our

Court for further consideration in light of Fifth Third. Rinehart v.

Akers, 134 S. Ct. 2900 (2014). We, in turn, remanded the case to

the District Court, and the District Court allowed Plaintiffs to

replace the SCAC with a third consolidated amended complaint

(“TCAC”) that narrowed their claims and shortened the class

period.

On July 10, 2015, the District Court dismissed the TCAC,

again holding that Plaintiffs had failed to state a claim under

Rule 12(b)(6). In re Lehman Bros. Sec. & ERISA Litig., 113 F. Supp.

3d 745, 769 (S.D.N.Y. 2015). Though recognizing that Fifth Third

abrogated the Moench presumption of prudence formerly

governing ESOP‐based ERISA claims in this Circuit, the District

Court nonetheless concluded that Plaintiffs failed to allege

sufficiently that the Plan Committee Defendants violated their

ERISA fiduciary duties as measured by the Twombly and Iqbal

pleading standards. Id. at 754–55.

We affirm.

DISCUSSION2

The central purpose of ERISA is “to protect beneficiaries

of employee benefit plans.” Slupinski v. First Unum Life Ins. Co.,

554 F.3d 38, 47 (2d Cir. 2009). To further this purpose, ERISA

imposes on fiduciaries a duty to “act in a prudent manner ‘under

the circumstances then prevailing.’” Pension Benefit Guar. Corp. ex

 

2 We review de novo a district court’s dismissal for failure to state a

claim under Rule 12(b)(6). Wurtz v. Rawlings Co., 761 F.3d 232, 237 (2d

Cir. 2014). “To survive a motion to dismiss, a complaint must contain

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

is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
5

rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v. Morgan Stanley Inv.

Mgmt. Inc., 712 F.3d 705, 716 (2d Cir. 2013) (quoting 29 U.S.C.

§ 1104(a)(1)(B)). We have long measured this duty “according to

the objective prudent person standard developed in the common

law of trusts,” Katsaros v. Cody, 744 F.2d 270, 279 (2d Cir. 1984)

(internal quotation marks omitted), and have emphasized that

ERISA’s “fiduciary duty of care . . . requires prudence, not

prescience,” Pension Benefit Guar. Corp., 712 F.3d at 716

(alteration in original) (internal quotation marks omitted).  

In Fifth Third, the Supreme Court rejected the

presumption that we previously applied when analyzing the

prudence of an ESOP fiduciary’s decision to buy or hold an

employer’s stock. 134 S. Ct. at 2463. Prior to Fifth Third, we held

that “an ESOP fiduciary who invests the [ESOP’s] assets in

employer stock is entitled to a presumption that it acted

consistently with ERISA” in doing so. Moench v. Robertson, 62

F.3d 553, 571 (3d Cir. 1995); see also In re Citigroup ERISA Litig.,

662 F.3d 128, 138 (2d Cir. 2011) (adopting the Moench

presumption in the Second Circuit because “it provides the best

accommodation between the competing ERISA values of

protecting retirement assets and encouraging investment in

employer stock”). Fifth Third, however, held unequivocally that

“the law does not create a special presumption favoring ESOP

fiduciaries.” Fifth Third, 134 S. Ct. at 2467. Instead, “the same

standard of prudence applies to all ERISA fiduciaries, including

ESOP fiduciaries, except that an ESOP fiduciary is under no duty

to diversify the ESOP’s holdings.” Id.  

Despite rejecting any special presumption of prudence for

ESOP fiduciaries, Fifth Third made clear that “where a stock is

publicly traded, 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
6

general rule, at least in the absence of special circumstances.” Id.

at 2471. The Court emphasized that ERISA fiduciaries, who

“could reasonably see ‘little hope of outperforming the

market . . . based solely on their analysis of publicly available

information’ may, as a general matter, . . . prudently rely on the

market price.” Id. (first alteration in original) (quoting Halliburton

Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398, 2411 (2014)). The

Court specifically declined to consider “whether a plaintiff could

nonetheless plausibly allege imprudence on the basis of publicly

available information by pointing to a special circumstance

affecting 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. at 2472 (quoting Halliburton, 134 S. Ct. at 2411).  

For claims alleging breach of the duty of prudence on the

basis of nonpublic information, Fifth Third held that “a plaintiff

must plausibly allege an alternative action that the defendant

could have taken that would have been consistent with the

securities laws and that a prudent fiduciary in the same

circumstances would not have viewed as more likely to harm the

fund than to help it.” Id. The Court identified three

considerations pertinent to this analysis:  

[1] [C]ourts must bear in mind that the duty

of prudence, under ERISA as under the

common law of trusts, does not require a

fiduciary to break the law. . . .

[2] [C]ourts should consider the extent to

which an ERISA‐based obligation either to

refrain on the basis of inside information

from making a planned trade or to disclose

inside information to the public could

conflict with the complex insider trading
7

and corporate disclosure requirements

imposed by the federal securities laws or

with the objectives of those laws. . . .

[3] [C]ourts . . . should also consider

whether the complaint has plausibly alleged

that a prudent fiduciary in the defendant’s

position could not have concluded that

stopping purchases—which the market

might take as a sign that insider fiduciaries

viewed the employer’s stock as a bad

investment—or publicly disclosing negative

information would do more harm than good

to the fund by causing a drop in the stock

price and a concomitant drop in the value of

the stock already held by the fund.  

Id. at 2472–73.

It did not take long for a post‐Fifth Third case to reach the

High Court. Harris v. Amgen, Inc. was a class action brought by

participants in an employee benefit plan alleging breaches of

fiduciary duties under ERISA when the trustees of the Plan

allowed continued investment in the employer’s stock despite

allegedly knowing that its price was artificially inflated as a

result of improper off‐label drug marketing and sales. 788 F.3d

916 (9th Cir. 2015), rev’d, 136 S. Ct. 758 (2016) (per curiam). On

remand from the Supreme Court, the Ninth Circuit reasoned

that the plaintiffs’ complaint adequately alleged claims under

Fifth Third because, in light of the fact that “the federal securities

laws require disclosure of material information,” it is “quite

plausible . . . that defendants could remove the [Amgen

Common Stock Fund] from the list of investment options

without causing undue harm to plan participants.” Id. at 937–38.
8

The Supreme Court accepted the possibility that

“removing the Amgen Common Stock Fund from the list of

investment options” might be “an alternative action that could

plausibly have satisfied Fifth Third’s standards.” Amgen Inc., 136

S. Ct. at 760. Nevertheless, the Court reversed the Ninth Circuit

because plaintiffs failed to plead “facts and allegations

supporting that proposition.” Id. Though it faulted the Ninth

Circuit for “fail[ing] to assess whether the complaint in its

current form ‘has plausibly alleged’ that a prudent fiduciary in

the same position ‘could not have concluded’ that the alternative

action ‘would do more harm than good,’” the Court concluded

ultimately that “the stockholders are the masters of their

complaint” and the complaint did not contain “sufficient facts

and allegations to state a claim for breach of the duty of

prudence.” Id. (quoting Fifth Third, 134 S. Ct. at 2473).

Plaintiffs here allege in Count I of the TCAC that the Plan

Committee Defendants knew or should have known, based on

publicly available information, that investment in Lehman had

become increasingly risky throughout 2008, and that failing to

consider the wisdom of continuing to invest in Lehman during

this period constituted a breach of fiduciary duty. See J.A. 684–88

(TCAC ¶¶ 412–26). The District Court found—and we agree—

that neither Fifth Third nor the substitution of one amended

complaint for another changes our previous conclusion that

Plaintiffs have failed to plausibly allege a breach of duty claim.

As the District Court observed, the TCAC’s updated descriptions

of “allegedly ominous news articles, volatility of Lehman’s stock

price, increased trading volumes, rising costs of Lehman credit

default swaps and other investment instruments, downgrades

from various ratings agencies, and criticism from investment

analysts . . . do no more than add marginally to the cacophony of

‘mixed signals’ described in the SCAC.” In re Lehman Bros. Sec. &
9

ERISA Litig., 113 F. Supp. 3d at 755 (quoting Rinehart, 722 F.3d at

151). These additions and refinements “do not nudge the

allegations of the TCAC across the plausibility threshold.” Id.

Plaintiffs attempt to plead around Fifth Third by saying

that their claims concern “excessive risk” and therefore are not

covered by Fifth Third, which Plaintiffs argue dealt only with

claims concerning “market value.”3 For purposes of this analysis,

we agree with the District Court that the purported distinction

between claims involving “excessive risk” and claims involving

“market value” is illusory. Fifth Third “foreclose[s] 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.” In re Lehman Bros., 113 F. Supp. 3d

at 756 (emphasis added). Although the language of Fifth Third

refers primarily to “over‐ or undervaluing” stock, the Fifth Third

Court applied this rule to the plaintiffs’ risk‐based claims in that

case. See 134 S. Ct. at 2471–72.   Moreover, viewing this rule as

applicable to all allegations of imprudence based upon public

information—regardless of whether the allegations are framed in

 

3 See Appellants’ Br. 39 (“[T]he gravamen of Count I is not that the

market was overvaluing the price of Lehman Stock, but that the

Benefit Committee Defendants failed to investigate whether Lehman

Stock remained a prudent retirement investment for the Plan in light

of the escalating risks surrounding Lehman.”); Appellants’ Br. 40

(“[N]o court has ever held that a security’s price is the sole benchmark

by which a fiduciary should be guided, and that plan fiduciaries are

entitled to ignore adverse changed circumstances pertaining to a plan

investment simply because the investment is priced accurately.”). As

support for this argument, Plaintiffs rely in part on Gedek v. Perez, 66 F.

Supp. 3d 368 (W.D.N.Y. 2014), and Tibble v. Edison Intern., 135 S. Ct.

1823 (2015). For the reasons stated by the District Court, we agree that

Plaintiffs’ reliance on these cases is misplaced.
10

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. See id.; see also Halliburton Co., 134 S.

Ct. at 2411(“[I]t is reasonable to presume that most investors . . .

will rely on the security’s market price as an unbiased

assessment of the security’s value in light of all public

information.” (internal quotation marks omitted)).

Plaintiffs, picking up on the language of Fifth Third, assert

that “special circumstances affect[ed] the reliability of the market

price as an unbiased assessment of [Lehman’s] value.” J.A. 688

(TCAC ¶ 429). See Fifth Third, 134 S. Ct. at 2472 (“We do not here

consider whether a plaintiff could . . . plausibly allege

imprudence on the basis of publicly available information by

pointing to a special circumstance affecting 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.’”). As support for their claim

that “the market for Lehman stock faced unusual and

extraordinary circumstances,” J.A. 659 (TCAC ¶ 315) (internal

quotation marks omitted), Plaintiffs point to orders issued by the

Securities and Exchange Commission (“SEC”) in July 2008

prohibiting the short‐selling of securities of certain financial

services firms, including Lehman.    Plaintiffs allege in Count II

that: (1) these SEC orders describe market conditions

constituting “special circumstances;” and (2) the orders

themselves created special circumstances by excluding naked

short sales of certain securities, including Lehman.

Under their first theory, Plaintiffs claim that the Plan

Committee Defendants “imprudently relied on the market’s

valuation of [Lehman] Stock during the Class Period,” J.A. 659

(TCAC ¶ 318), because the SEC’s orders warned, among other

things, that “there now exists a substantial threat of sudden and
11

excessive fluctuations of securities prices generally and

disruption in the functioning of the securities markets that could

threaten fair and orderly markets.” U.S. Sec. & Exchange

Comm’n, Emergency Order Pursuant to Section 12(k)(2) of the

Securities Exchange Act of 1934 Taking Temporary Action to Respond

to Market Developments at 2, Release No. 58166 (July 15, 2008),

available at http://www.sec.gov/rules/other/2008/34‐58166.pdf

(hereinafter “July 15 Order”). But the SEC orders speak only

conditionally about potential market effects resulting from so‐

called naked short sales;4 they do not purport to describe then‐

existing market conditions. Moreover, as the District Court

observed, “the only plausible inference supported by the TCAC

is that the market processed any risks identified in the SEC’s

orders as it would have processed any other public information

about Lehman.” In re Lehman Bros., 113 F. Supp. 3d 745, 759

(S.D.N.Y. 2015). Plaintiffs therefore cannot establish “special

circumstances” under this first theory.  

As to their second theory, Plaintiffs’ conclusory assertions

do not give rise to a plausible inference that the SEC orders

“affect[ed] the reliability of the market price as ‘an unbiased

assessment of [Lehman’s] value in light of all public

information.’” Fifth Third, 134 S. Ct. at 2472. The TCAC parrots

language from Fifth Third, but “we are not bound to accept as

true a legal conclusion couched as a factual allegation.” Ashcroft

v. Iqbal, 556 U.S. 662, 678 (2009). Given this defective pleading,

 

4 “In a ‘naked’ short sale, the seller does not borrow or arrange to

borrow the securities in time to make delivery to the buyer within the

standard three‐day settlement period. As a result, the seller fails to

deliver securities to the buyer when delivery is due.” “Naked Short

Sales,” Investor Information, U.S. SEC. & EXCHANGE COMM’N, SEC,

http://www.sec.gov/answers/nakedshortsale.htm (last modified April

13, 2015).
12

we need not decide whether the July 2008 SEC orders constitute

“special circumstances” within the meaning of Fifth Third.  

The final two counts of the TCAC are alleged in the

alternative. Count III alleges that the Plan Committee

Defendants breached their fiduciary duties by failing to

investigate nonpublic information regarding the risks of

Lehman. See J.A. 689–94 (TCAC ¶¶ 433–47). Plaintiffs claim that

had the Plan Committee Defendants honored their fiduciary

obligation to conduct “an appropriate independent

investigation” into the riskiness of Lehman stock during the

class period, they would have uncovered nonpublic information

revealing the imprudence of continuing to invest in that stock.

J.A. 690–91 (TCAC ¶ 436). Count IV alleges that Defendant Fuld

inadequately monitored the Plan Committee Defendants and

breached his fiduciary duty by failing to share with those

Defendants nonpublic information he possessed regarding the

risks facing Lehman. See J.A. 694–97 (TCAC ¶ 448–59).

We agree with the District Court that Count III fails

because “the TCAC nowhere explains in a non‐conclusory

fashion how plaintiffs’ hypothetical investigation would have

uncovered the alleged inside information.” In re Lehman Bros.,

113 F. Supp. 3d at 762. Even without the Moench presumption

rejected by Fifth Third, it remains our standard that, to plead

plausibly a breach of the duty of prudence for failure to

investigate, “plaintiffs must allege facts that, if proved, would

show that an ‘adequate investigation would have revealed to a

reasonable fiduciary that the investment at issue was

improvident.’” In re Citigroup ERISA Litig., 662 F.3d at 141

(quoting Kuper v. Iovenko, 66 F.3d 1447, 1460 (6th Cir. 1995)). The

TCAC in this case includes “no specific allegations about what

lines of inquiry would have revealed this information or who, if
13

pressed, in fact would have disclosed it to the Plan Committee

Defendants.” In re Lehman Bros., 113 F. Supp. 3d at 762.  

Moreover, as the District Court recognized, see Lehman,

113 F. Supp. 3d, at 763, the TCAC does not plausibly plead facts

and allegations showing that a prudent fiduciary during the

class period “would not have viewed [disclosure of material

nonpublic information regarding Lehman or ceasing to buy

Lehman stock] as more likely to harm the fund than to help it.”

Amgen, 136 S. Ct. at 759 (2016) (quoting Fifth Third, 134 S. Ct. at

2472). Amgen reinforces this conclusion. A prudent fiduciary

could have concluded that divesting Lehman stock, or simply

holding it without purchasing more, “‘would do more harm

than good.’” Amgen, 136 S. Ct. at 760 (quoting Fifth Third, 134 S.

Ct. at 2473). Such an alternative action in the summer of 2008

could have had dire consequences. Like the Plaintiffs in Amgen,

Plaintiffs here simply have not met the Fifth Third standard for

making out “sufficient facts and allegations to state a claim for

breach of the duty of prudence.” Id.

With regard to Defendant Fuld, the District Court

correctly observed that nothing in Fifth Third changes our

previous analysis dismissing Plaintiffs’ duty to monitor and

duty to inform claims. As we held previously, “Plaintiffs cannot

maintain a claim for breach of the duty to monitor . . . absent an

underlying breach of the duties imposed under ERISA” by the

Plan Committee Defendants. Rinehart, 722 F.3d at 154. Further,

the District Court correctly concluded that “ERISA does not

impose a duty on appointing fiduciaries to keep their appointees

apprised of nonpublic information.” In re Lehman Bros., 113 F.

Supp. 3d at 765. Though this Court has not yet squarely

addressed the issue, nothing in Fifth Third gives us reason to

alter our previous view that, “even if we determined that

Plaintiffs adequately alleged that the [Plan] Committee
14

Defendants had violated their duty of prudence, we would be

unlikely to conclude that the Director Defendants [including

Defendant Fuld] had a duty to keep the plan managers apprised

of material, nonpublic information regarding the soundness of

Lehman as an investment.” Rinehart, 722 F.3d at 154.

CONCLUSION

We agree with the District Court that, even without the

presumption of prudence rejected in Fifth Third, Plaintiffs have

failed to plead plausibly that the Plan Committee Defendants

breached their fiduciary duties under ERISA by failing to

recognize the imminence of Lehman’s collapse. We conclude

now, as before, that Plaintiffs have not adequately shown that

the Plan Committee Defendants should be held liable for their

actions in attempting to meet their fiduciary duties under ERISA

while simultaneously offering an undiversified investment

option for employees’ retirement savings. Accordingly, we

AFFIRM the judgment of the District Court.