FI L ED U.S. COURT OF APPEAL S EL EVENTHCI RCUI T MAY 8, 2012 J OHN L EY CL ERK [PUBLISH]

IN THE UN ITED STATES COURT OF APPEALS FOR THE ELE VENTH CIRCUIT

__ __ __ __ __ __ __ __ __ __ __ __ No. 1 0- 13 00 2

__ __ __ __ __ __ __ __ __ __ __ __ D.C. Dock etNo. 1 :0 7- cv -0 01 97 -ODE RAYMOND A. LANFEAR RANDALL W . CLARK, ANTONIO FIERROS, ll ll ll ll ll ll ll ll ll ll l Plai nt iff s - Ap pe ll an ts , TERRY CLARK, etal., ll ll ll ll ll ll ll ll ll ll l Plai nt iff s, ll ll ll ll ll l ver su s HOME DEPOT, INC., ROBERT L. NARDELLI, JOHN I. CLENDENIN, MILLEDGE A. H ART, III, KENNET H G. LA

NGONE, etal., ll ll ll ll ll ll ll ll ll ll l Defen da nt s - Ap pe ll ees , LARRY M. MERC ER, et a l., ll ll ll ll ll ll ll ll ll ll l Defen da nt .__ __ __ __ __ __ __ __ __ __ __ __ App eal fro m

th e Uni te d S ta te s Di st ric t Co urt forth e North ern Dis tri ctof Ge or gi a

__ __ __ __ __ __ __ __ __ __ __ __ (Ma y 8, 2 01 2)

Befo re TJ OFLAT, CARNES, andANDERSON, Circu itJu dg es . CARNES, Ci rcu itJu dg e: Peo pl e b ui ldm an y

th in gs ov er the co ur se of t he ir l iv es . Thro ug ho utth e ti m e al lo tt edth em , th ey

bu il d h ou se s an d h om es , charact er an d c aree rs , rel at io ns hi ps an d re pu ta ti on s. An d i f th ey ’re wise li ke Aeso p’s an t, dur in g t he
su m m er an d autum

n o f th ei r li ve s t he y

st or e up s om ethi ng for

th e win te r. 1 Alt ho ug h t he an t i n t he fab le di d wel l en ou gh wit ho utit s s av in gs pl anbe in g pr ot ect edby E RISA, the pl ai nt iff s i n t hi s ca se see k t he pro te ct io ns of t ha t s ta tu te . The y cla im th atth e fi du ci ari es of t he ir r et ire m en t p lan v io la te d ERI SA in way s th atda m ag edth ei r effo rts to st oc kp il e sa vi ng s fo r th ei r win te r y ears . The pl ai nt iff

s p la nn edfor

th ei r ret ire m en t b y

in ve st in g i n asi ng le ret ire m en t pl anth atis bo th an“ el ig ib le in di vi du al acco un t p la n” (“ EIAP”) an d a n “ em pl oyee

See Ae sop, “The Ant and the Gr asshopper ,” in Aesop’ s Fa bles Tog ether

with the L ife of 1 Aesop 115 (Ra

nd McNa lly

1897). 2st oc k o wne rs hi p p la n” (“ ESOP”). The ir e m pl oyer, The Ho m e Dep ot , Inc ., offe red th atret ire m en t p la n a s an em pl oyee be ne fit . The p la in ti ffs cla im th atth e fiduc ia rie s o f th e Pl an , who are t he de fen da nt s i n t hi s ca se , bre ach edth ei r 2 fiduc ia ry res po ns ib il it ie s u nd er t he Em pl oyee Ret ire m en t In co m e Sec ur it y Act, 2 9 U.S.C. § 1 00 1 e t s eq . The co m pl ai nt , as l as t am en de d, al le ge s t ha t t he de fen da nt s: (1 ) co nt in ue d t o p ur ch as e an d fa il edto sel l Ho m e Dep otst oc k e ve n t ho ug h t he y kn ew ba se d o n n on publ ic in fo rm at io n t ha t the st oc k p ric e p ro babl y was i nf la te d; (2 ) pr ov id edin accu rat e in fo rm at io n t o the Pla n p art ic ip an ts infiduc ia ry co m m un ic at io ns ; an d (3 ) di d n otdi sc lo se to th e Pl anpa rti ci pa nt s ce rta in Hom e Dep otbu si ne ss pra ct ic es th atha d i nf la te d Ho m e Dep ot ’s st oc k p ric e. The pl ai nt iff s ar gu e th atth os e al le ge d b reac he s o f th e d efen da nt s’ fiduc ia ry du ti es , whi chERISA im

po se s, d im in is he d t he ir r et ire m en t fu nd s. On e o f Hom e Dep ot ’s ad ve rti si ng sl og an s was : “ YouCan Do It . W e Can Help .” Fro m th e p la in ti ffs ’ 3 pe rs pe ct iv e, whe n i t ca m e to ov ers eei ng th ei r ret ire m en t p la ns , a m or e acc ur at e sl og anforth e co m

pa ny woul d h av e b een : “ YouCan ’t Do ItBecaus e We W on ’t

The de fenda

nts are T he Home D epot, Inc., Home D epot’s boar d of direc tors, two 2 committees that oversa

w the administration and investments of the Plan, and var ious Home Depot dire ctors and of

fice rs. See Rac hel Tobin Ramos, Home De pot Shifts S trategy to Push Barg ain: New A ds 3 Foc us on Value, Chain’ s No-fr ills S tyle, Atlanta J. Cons t., Mar. 24, 2009, http:// www.a g c.com/ser

vices/conte nt/printedition/ 2009/03/24/homedepot0324.html.

3Help .” I. A. Lik e m an y

ot he r co m

pa ni es , Hom e Dep otpro vi de s s om e o f it s emplo y ees wit h re ti rem en t b en efi ts . It d oe s s o b y sp on so rin g the Hom e Dep otFu tu reBu il de r 4 Pl an(“ th e Pl an ”), wh ic h i s b ot h an EIAP a ndanESOP. Bo th of tho se types of pl an s ar e g ov ern edby E RISA. See 29 U.S.C. § 1 10 7( d) (3 ), (d )(6 ). Hom e Dep ot ’s Pl anis a “ de fin edco nt rib ut io n p la n,” wit h a cco un ts foreach parti ci pa ntan d wi th be ne fit s b as edso le ly on the am ou ntco nt rib ut edto th e p art ic ip an t’s i nd iv idua l
acco un t b y

th e p art ic ip an t an d Ho m e Dep ot . See i d. § 10 02 (3 4) . The Pl an ’s ass et s are i nv es te d i n atru st , whi chis m an ag edby a tru st ee wh o i s re sp on si bl e fo r in ve st in g t he tru st ’s ass et s ac co rd in g t o t he Pla n’s t erm s an d t he parti ci pa nt s’ di rect io ns . The Tru st ee i s s ub ject t o t he di rect io ns of Ho m e Dep ot , an I nv es tm en t

Be cause this is an appeal f rom a F eder al Rule of Civil P roce dure 12(b)(6) dismiss al, we 4 draw the fa cts from the a lleg ations in the complaint, which we acc ept as true and construe in the light most favor able to the plaintiffs. See Powell v. Thomas, 643 F.3d 1300, 1302 ( 11th Cir. 2011). 4Co m

m it te e, an d a n Ad m in is tra ti ve Co m m it te e. Bot h t he Inv es tm en t an d 5 6 Adm in is tra ti ve Co m

m it te es , andth ei r m em

be rs , are fi du ci ari es of t he Pla n. Se e id
. § 1 10 2( a)(2 ). The Pla n a ll ows forth ree t y pe s o f co nt rib ut io ns to a pa rti ci pa nt ’s acco un t: (1 ) vo lu nt ary, pre -ta x c on tri bu ti on s b y th e p art ic ip an t fr om

hi s p ay ; (2 ) co m

pa ny
m at ch in g c on tri bu ti on s eq ua l t o acert ai n p erce nt ag e o f th e p art ic ip an t’s
co nt rib ut io ns ; an d (3 ) di rectco m pa ny con tri bu ti on s, wh ic h a re n otm at ch in g fu nd s
an d wh ic h a re m ad e so le ly at th e d is cret io n o f Hom e Dep ot ’s bo ardof d ire ct or s. A parti ci pantch oo se s h ow the am ou ntin hi s i nd iv idua l ac co un t wi ll be all oc at ed
am on g e ig htdi ffer en t i nv es tm en t fu nd s, wh ic h v ary in ris k a ndpo te nt ia l re ward
. The lan gu ag e o f th e Pl anrequi res th aton e o f th e av ai labl e in ve st m en t fu nd s be a “ Co m

pa ny Sto ckFu nd .” The “ Co m pany Sto ck

Fu nd ” is “ th e In ve st m en t Fu ndin ve st edpri m ari ly in s ha res of [ Hom e Dep ot ] st oc k.” The Pla n re qu ire s t ha t al l d ire ctco m

pa ny con tri bu ti on s b e in ve st edin it ia ll y inth e “ Co m

pa ny Sto ck
The Investment Commit tee is re sponsible for, amongother thing s, ensuringthat the 5 Plan’s assets ar e invested f or the e x clusive purpose of providingbenef its to t he par

ticipants, defr aying r easona

ble expenses of a dminist ering the Plan, and employing pe ople to advise it about its responsibilit ies and duties. The committee may also provide the tr

ustee with investment policy guidelines and dire ction about investments made unde r the Plan’s ter ms. The Administrative Committee is responsible for c onstruing a nd answe ringquestions 6 about the Plan, dec iding e ligibility issues, resolvingclaims for be nefits, and pr eparing a nd furnishingto participants and othe rs all re ports and information required by law. It may

also direc t the trustee on matter s of trust administration. 5Fu nd ,” bu t v ol un ta ry co nt rib ut io ns by Plan parti ci pa nt s an d c om pa ny m at ch in g fu nd s m ay

als o b e in ve st edin th atfun d. One of t he eig htin ve st m en t fu nd s, t he

“ Hom e Dep ot , Inc . Comm on Sto ckFu nd ,” qu al ifi es as t he “ Co m pa ny Sto ckFu nd ”
un de r th e Pl an , anditis th e fu ndat i ss ue in th is cas e. The S umm ary Pl an Des cri pt io n s ta te s t ha t “ [t]he ob jecti ve of [ th e Co m

m on Sto ckFu nd ] is to all ow pa rti ci pa nt s t o s hare i n o wne rs hi p o f [Ho m e Dep ot ]. ” The Pla n d es cri pt io n co nt ai ns di sc lo su res ab ou t t he ris k o f in ve st m en t an d i nc lu de s a g rap h re fle ct in g th e rel at iv e ri sk s o f th e d iff eren t fu nd s, wh ic h s ho ws tha t t he Co m m on Sto ckFu nd is th e ri sk ie ston e. The P lan d es cri pt io n a ls o p ro vi de s: “ Si nc e [t he Co m m on St oc k F un d] in ve st s i n o nl y on e st oc k, t hi s fu ndis subjec t t o g reat er ri skth anot he r fu nd s i n t he pl an .” Alt ho ug h Ho m e Dep otm at ch in g a nddi rectco nt rib ut io ns are 7 in it ia ll y in ve st edin th e Co m

m onSto ck

Fu nd , th e p art ic ip an ts m ay th erea fte r tra ns fer the m

to a di ffer en t fu nd
. B. The pl ai nt iff

s al le ge th atHom e Dep otst oc k b ecame an i m prud en t in ve st m en t wh en , un kn own to th e p ub li c, so m e o ffi ci al s an d e m pl oyees o f th e

The Plan itself re quires only that the Company

Stock Fund be inve sted primarily in 7 Home De pot stock, but it appears that the prac tice of the Plan fiduciarie s was to invest the Common S tock Fund e x clusively in Home Depot stock. N o issue is made of that diff ere nce in this case. 6co m

pa ny eng ag edin m is co nduc t t ha t i nf la te d t he co m

pa ny’ s s to ckpri ce. Home Dep otha d a gr eem en ts wit h i ts ve nd or s t o a ll ow re tu rn -to -v en do r ch arg eb ack s, whi chga ve th e co m

pany acco un t cr ed it s fo r de fect iv e m erch an di se . Som et im es ve nd or s p erm it te d Ho m e Dep otst or es to de st ro y de fect iv e m erch an di se in st eadof returni ng it
. The st or es wou ldth enm ak e an acco un ti ng ad jus tm en t t o t he ir “ co st 8 of go od s s ol d” in anam ou ntth atoff se t t he ori gi na l co stof t he it em . So m e Hom e Dep otst or es , ho wev er, i m pr op erl y us edreturn- to -v en do r ch arg eb ack s. Th ey

ch arg edba ckto ve nd or s n oton ly defec ti ve m erch an di se bu t al so m erch an di se th atha d b een us edor d am ag edin th e st or es or t ha t h adbe en st ol enfro m

th em . All of t he se lo ss es sh ou ldha ve be enbo rn e b y Hom e Dep ot , no t by the ve nd or s. W or se , so m e st or es als o p ro ces se d re tu rn -to -v en do r ch arg eb ack s fo r m erch an di se th atwas s ti ll in in ve nt ory an d t he n s ol d tha t s am e m erch an di se to
cu st om ers . The se frau du le ntreturn- to -v en do r ch arg eb ack s i nf la te d Ho m e Dep ot ’s
earn in gs an d p ro fitm arg in s. The pl ai nt iff s al le ge th atth e wid es pr eadus e o f return- to -v en do r ch arg eb ack s t o i m pr op erl y im pr ov e Hom e Dep ot ’s bo tt om li ne be ga n a fte r a Ho m e Dep otex ecu ti ve is su eda m em or an du m in Apri l 2 00 2 di sc us si ng “ m is se d [r eturn- to -v en do r] dol la rs ” an d p inpo in ti ng de pa rtments wit h

Whether Home D epot was pe rmitted to destroy a def ective item or

was re quired to 8 return it to the vendor

usually depende d on its value.

7th e b es t o pp ortu ni ty to “ bo os t ch arg eb ack s.” See Mi zzar o v . Hom e Dep ot , Inc ., 9 54 4 F .3d12 30 , 12 43 (11 th Cir . 20 08 ). The pl ai nt iff s al le ge th atth e d efen da nt s
were awa re o f th e il li ci t re tu rn -to -v en do r ch arg eb ack s as earl y as J ul y 20 02
. InOcto be r 20 04 Hom e Dep otst op pe d i m pr op erl y pro ces si ng return- to ve nd or ch arg eb ack s, wh ic h i m

m ed ia te ly hurt i ts bo tt om li ne . The fo urth qu art er o f 20 04 was t he fir stti m e in tenqu art ers th atHom e Dep otdi d n otex ceedan al y st s’
earn in gs -p er-s ha re ex pe ct at io ns , andit s re ve nu e an d e arn in gs gro wth fel l s ho rt o f hi st or ic al lev el s. The effe cton it s s to ckwas p red ic tabl e. On Fe brua ry 18 , 20 05 , th e la sttra di ng da y

be fo re Ho m e Dep otan no un cedit s fo urth qu art er 2 00 4 re su lt s, th e co m pany’ s s to ckpri ce cl os edat $ 42 .02 pe r sh are; on th e d ay th e co m pa ny
an no un cedth os e res ul ts , th e st oc k p ric e fel l, cl os in g a t $ 40 .28 . Anditke pt fal li ng . By

th e cl os e o f tr ad in g o n Ap ril 28 , 20 05 , th e st oc k was tra di ng at $ 35 .09 pe r sh are. The in fla ti on of Ho m e Dep ot ’s earn in gs th ro ug h i m pr op er re tu rn -to -v en do r ch arg eb ack s al so ledso m e o f th e d efen da nt s t o m ak e a n um be r of in accu rat e The improper

use of r eturn-to- vendor c harg ebac ks by Home De pot stores eve ntually led 9 to a serie s of ar

ticles in the NewYork Post expos ing the prac tice, a Sar banes- Oxl ey whistleblower c omplaint, an SEC inqui ry , and a se curities fr aud cla ss action brought by investors in Home Depot stock. See Miz zaro v. Home De pot, Inc., 544 F .3d 1230, 1235, 1243–46 (11th Cir. 2008). In Miz zaro, we c oncluded that the c lass complaint failed unde r the Private Sec urities L itigation Refor

m Act bec ause it did not alleg e suff icient fa cts to support a stronginfere nce that the named c orporate offic er de fenda nts acted w ith the require d scienter . See id. at 1236–37, 1247. 8st at em en ts an d m at eri al om is si on s i n fi li ng s wi th th e Sec ur it ie s an d Ex ch an ge

Co m m is si on . Fro m

th e fi rs t qua rte r of

20 01 to th e th irdqu art er o f 20 04 , Hom e Dep otfil edFo rm

10 -Qs a ndFo rm

10 -Ks refl ect in g the im pr op erl y lo wer co st s 1 0
an d h ig he r pr of

it s t ha t re su lt edfro m

th e il li ci t re tu rn -to -v en do r ch arg eb ack s. Dur in g t ha t s am e p eri od , Hom e Dep otals o fi le d wi th th e SEC Fo rm S-8 reg is tra ti on st at em en ts forth e Pl an , anditsen t t o P la n p art ic ip an ts st oc k 1 1 pr os pe ctus es , all of wh ic h i nc or po rat edby referen ce t ho se fau lt y Fo rm 10 -Q an d Fo rm 10 -K fil in gs . The n i n J un e 2 00 6 Ho m e Dep otan no un cedth atit s t op ex ecu ti ve s h ad ba ck da te d t he ir s to ck

op ti on gra nt s “ in at l eas t fi ve in st an ces ” b efo re Dece m be r 20 01 . Sto ckop ti on ho ld ers ha d b een all owe d t o c ha ng e th e d at e o f st oc k o pt io ns to earl ie r da te s an d e xe rci se th em at t he adva nt ag eo us , lo wer m ark etpri ces th at ha d e xi st edon th os e ear li er o ccas io ns , in st eadof e xe rci si ng th em at t he m ark et pr ic e o n t he da te th e o pt io ns were ac tu al ly iss ue d. Hom e Dep otdi d n otpro pe rly
“Publicly trade d corpor ations must file the Form 10- Q quar terly and the F orm 10-K 1 0 annually with the SEC, pursuant to the Securities Exchang e Ac t of 1934, 15 U.S.C. § 78m, and 17 C.F.R. §§ 240.13a-1, 240.13a -13.” United States v. McVay , 447 F.3d 1348, 1349 ( 11th Cir. 2006). For

m S-8 is used to reg ister “[s] ecurities of the re g istrant to be offe red unde r any 1 1 employ ee be nefit plan to its employ ees or employ ees of

its subsi diaries or

pare nts.” SEC, Form S-8: Registration St atement Unde r the Sec urities Act of 1933, O MB No. 3235- 0066, available at http:// www.se c.g ov/about/forms/forms-8.pdf ( last visited May 4, 2012). 9ex pe ns e th is co m pe ns at io n. Th e p la in ti ffs all eg e th atth e d efen da nt s kne w abo ut th e b ack da ti ng of s to ckop ti on s al l al on g b ecau se m an y of t he m were d ire ct ly in vo lv edinis su in g t he st oc k o pt io ns , andso m e o f th em rece iv edba ck da te d s to ck op ti on s. A Decem

be r 20 06 Hom e Dep otne ws re le as e rev eal edth atanin te rn al in ve st ig at io n h addi sc ov eredrou ti ne ba ck da ti ng at “ al l l ev el s o f th e co m pa ny” be gi nn in g a s ea rly as 1 98 1. Th e res ul ti ng co rrec ti on ledto a $2 27 m il li on lo ss in th e co m pany’ s co ns ol id at edfin an ci al st at em en ts . Bu t s ee i nf ra n ot e 1 8. C. The pu ta ti ve cla ss act io n i n t hi s ca se be ga n a s t hr ee s ep arat e cl as s ac ti on s, wit h t wo fi le d i n New Yo rk an d o ne fil edinGeor gi a. All th ree c la im edth atth e de fen da nt s v io la te d ERI SA. See 2 9 U.S.C. § § 1 10 9, 1 13 2( a)(2 ). The t wo New York c as es were t ran sf

erre d t o Geo rg ia , wher e th e p la in ti ffs in th os e two cas es vo lu nt ari ly dis m is se d t he ir l aws ui ts an d jo in edth e o ne th atha d b een fil edin Geo rg iaall alo ng . Afte r th e p la in ti ffs fil edtwo am en de d c om pl ai nt s, t he di st ric t
co urt d is m is se d t he ir s ui t wi th pre jud ic e fo r la ck

of s ta nd in g a nd , alt ern at iv el y , be cau se th e p la in ti ffs ha d n otex haus te d t he ir a dm in is tra ti ve rem ed ie s. Th e pl ai nt iff s ap pe al ed
. W e h el d t ha t t he pl ai nt iff s d idha ve st an di ng , bu t we ag reed wit h t he di stric t co urt t ha t t he y ha d n otex haus te d the ir a dm in is tra ti ve rem ed ie s. Lan fear v. Ho m e Dep ot , Inc ., 53 6 F .3d12 17 , 12 21 –2 4 (1 1t h C ir. 2 00 8) . W e 10rev ers edth e d is m is sa l an d re m an de d the cas e to th e d is tri ctco urt t o a ll ow i t t o

de te rm in e whe th er t he pro ceed in gs sh ou ldbe st ay edto all ow t he pl ai nt iff s t o pu rs ue adm in is tra ti ve rel ie f. Id. at12 25 . The p la in ti ffs th enfil edin th e d is tri ct
co urt a m ot io n fo r a s ta y

to all ow ex haus ti on , whi ch th atco urt g ran te d. Afte r ex haus ti ng th ei r ad m in is tra ti ve rem ed ie s, t he pl ai nt iff s fi le d ath ird
am en de d c om

pl ai nt , ass ert in g s ix ERISA b reac h o f fi du ci ary du ty clai m s, t wo o f whi chare re le vantto th is ap pe al
. Fi rs t, t he pl ai nt iff s cl ai m edth atth e d efen da nt s br each edth ei r du ty of prud en ce b y “ co nt in u[ in g] to off

er an d app ro ve th e Hom e Dep otSto ckas an i nv es tm en t o pt io n fo r th e Pl an ,” an d b y “pe rm it t[i ng ] Co m

pa ny co nt rib ut io ns to be m ad e in Hom e Dep otSto ckrat he r th anin cas h o r in ot he r in ve st m en ts .” Seco nd , th e p la in ti ffs cla im edth atth e d efen da nt s v io la te d t he ir du ty of lo y al ty by

in co rp or at in g b y

refer en ce i nt o “ Pl ando cu m en ts ”—F orm S-8 s
an d s to ckpro sp ectus es —“ m at eri al ly mis le ad in g andin accu rat e SEC fi li ng s an d rep orts ” an d “ fai l[i ng ] to di sc lo se an y in fo rm at io n t o [t he Pla n p art ic ip an ts ] reg ard in g Ho m e Dep ot ’s dec ei tfu l b us in es s p ract ic es an d h ow t he se act iv it ie s ad ve rs el y affe ct edCo m

pa ny sto ckas apru de ntin ve st m en t o pt io n u nd er t he Pla n.” The de fen da nt s fi le d am ot io n t o d is m is s u nd er Fe de ral Ru le of C iv il Pro cedur e 1 2( b) (6 ) fo r fai lu re t o s ta te a cl ai m . The y co nt en de d t ha t t he pru de nc e cl ai m was a ctua ll y

a fai lu re t o d iv ers ify clai m dre ss edup as apru de nc e cl ai m —a 11wol f insh eep ’s clo th in g —an d n ot edth atcla im s fo r fai lu re t o d iv ers ify are ba rred 1 2 by 29 U.S.C. § 1 10 4( a)(2 ). Alt ern at iv el y , th e d efen da nt s ar gu edth at§ 1 10 4( a)(2 )
crea te s a p res um

pt io n o f prud en ce t ha t t he all eg at io ns in th e co m pl ai ntco ul d n ot reb ut . See M oe nc h v . Rob ert so n, 6 2 F .3d55 3 (3 d C ir. 1 99 5) . The d efen da nt s al so arg ue d t ha t t he re co ul d b e n o b reac h o f th e dut y of l oyalt y

be cau se th e d oc um en ts
on whi ch th e co m

pl ai ntwas b as edwere n otfiduc ia ry co m m un ic at io ns . Fin al ly, th ey arg ue d t ha t t he re was no ge ne ral du ty und er ERIS A to in fo rm th e Pl an pa rti ci pa nt s o f no np ub li c co rp or at e in fo rm at io n. The pl ai nt iff

s re sp on de d t ha t, u nd er the Thi rdCir cu it ’s dec is io n i n M oe nc h, th e p res um

pt io n t ha t fi du ci ari es are p ru de ntis reb ut tabl e, an d t he all eg at io ns in th ei r co m pl ai ntare s uf

fic ie ntto reb utth atpre su m pt io n. And , th e p la in ti ffs arg ue d, th e d efen da nt s wer e act in g i n t he ir f iduc ia ry cap aci ty whe n t he y

sen t t he do cu m en ts th atin co rp or at edby referen ce t he in accu rat e SEC fi li ng s, an d t he y were re qu ire d t o re ve al to th e p la in ti ffs “ cri ti cal in fo rm at io n” reg ard in g t he Hom e Dep otst oc k e ve n t ho ug h i t was no np ub li c in fo rm at io n. The di stric t co urt g ran te d the de fen dant s’ m ot io n t o d is m is s al l o f th e cl ai m s. Indo in g s o, t he co urt d et erm in edth atth e p ru de nc e cl ai m was “ atit s co re a d iv ers ifi cat io n c la im ” b arre d b y § 1 10 4( a)(2 ). In t he alt ern at iv e, th e co urt
See Ae sop, “The Wolf in Sheep’s Clothing,” in Aesop’s F ables, supra note 1, at 125. 1 2 12co nc lu de d t ha t, b ecau se th e Pl anrequi redin ve st m en t i n Ho m e Dep otst oc k, t he

de fen da nt s’ dec is io n t o i nv es t i n Ho m e Dep otst oc k was im m un e fro m jud ic ia l
rev ie w. The co urt al so co nc lu de d t ha t, ev enif t he de fen dant s h addi sc ret io n n otto in ve stin Hom e Dep otst oc k, t he pl ai nt iff s’ all eg at io ns were i ns uf

fic ie ntto reb ut th e Mo en ch pre su m

pt io n o f prud en ce; th ey

fel l s ho rt b y

no t al le gi ng th atHom e Dep otwas o n t he “br in k o f fi na nc ia l co ll ap se ,” whi ch wou ldha ve requi redth e de fen da nt s t o d ev ia te fro m th e Pl an . Abo utth e b reac h o f th e dut y of l oyalty

cla im , th e d is tri ctco urt co nc lu de d t ha t t he Hom e Dep otoff ic ers di d n otm ak e th e SEC fil in gs in th ei r cap aci ty as Pl anfiduc ia rie s an d t ha t i nc or po rat io n o f th e SEC fil in gs in to th e Fo rm

S-8 s an d s to ckpro sp ectus es di d n otgi ve ris e to ERISA li ab il it y . It a ls o c on cl ud edth ere was no ERISA-i m po se d dut y

to di sc lo se
no np ub li c co rp or at e in fo rm at io n. The di stric t co urt d is m is se d t he rem ai ni ng cl ai m s as de riv at iv e o f th e p ru de nc e an d l oyalt y cla im s o r be cau se th ey

were wit ho utm eri t fo r so m e o th er re as on . Thi s i s the pl ai nt iff

s’ app eal
. II.

“ W e rev ie w de n ov o t he di st ric t co urt’s g ran t o f a m ot io n t o d is m is s u nd er 12 (b )(6 ) fo r fai lu re t o s ta te a cl ai m , acce pt in g t he all eg at io ns in th e co m pl ai ntas tru e an d c on st ru in g t he m in th e li gh t m os t fa vo rab le to th e p la in ti ff.” Iro nwo rk ers

13Loc al Uni on 68 v. As tra Zen eca P ha rm ., LP, 63 4 F .3d13 52 , 13 59 (11 th Cir . 20 11 )

(quo ta ti onm ark s o m it te d) . “ Inass es si ng th e su ffi ci en cy of t he co m

pl ai nt ’s al le ga ti on s, we ar e b ou ndto ap pl y th e p le ad in g s ta nd ardart ic ul at edin Bel l Atl an ti c Co rp . v. Twom

bl y , 55 0 U.S. 5 44 , 12 7 S .Ct. 1 95 5 (2 00 7) , andAsh cro ft v
. Iqba l, 5 56 U.S. 66 2, 1 29 S.Ct . 19 37 (20 09 ).” Id . The “ al le ga ti on s m us t b e en ou gh to rai se a ri gh t t o re li ef ab ov e th e sp ecu la ti ve lev el , on th e as su m pt io n t ha t al l t he al le ga ti on s i n t he co m

pl ai ntare t ru e (ev enif d oubt fu l i n fa ct ).” Twom bl y , 55 0 U.S. at 5 55 , 12 7 S .Ct. at19 65 (ci ta ti on om it te d) . As a res ul t, t he pl ai nt iff m us t pl ead“ a cl ai m

to rel ie f th atis pl au si bl e o n i ts face .” Id . at 5 70 , 12 7 S .Ct. at19 74
. And“ we m ay

affi rm th e d is tri ctco urt’s jud gm en t o n a ny gro un d tha t ap pe ars in th e rec or d, wh ethe r orno t t ha t g ro un d was rel ie d upo n o r ev enco ns id eredby the
co urt b el ow.” Harris v. Un it edAut o In s. Grp ., Inc ., 57 9 F .3d12 27 , 12 32 (11 th Ci r. 20 09 ) (al te rat io n a ndqu ot at io n m ark s o m it te d)
. III. A. The pl ai nt iff

s co nt en d t ha t t he di stric t co urt erredby dis m is si ng th ei r cl ai m th atth e d efen dant s v io la te d t he fiduc iary du ty of prud en ce. The y

arg ue th atth e di st ric t co urt was wron g t o c on cl ud e th atth ei r prud en ce cl ai m was acam ou fla ge d di ve rs ifi cat io n c la im
. 14ERISA fi du ci ari es op erat e u nd er a “ [p ]rud en t m anst an dardof c are,” whi ch

requi res th at : (1 ) . . . [A] fiduc ia ry

sh al l d is ch arg e h is du ti es with re sp ectto a pl an so le ly in the in te res t o f th e p art ic ip an ts an d b en efi ci ari es an d—

. . . . (B) wi th th e car e, sk il l, p ru de nc e, an d d il ig en ce u nd er th e ci rcu m st an ces th enpre va il in g t ha t a p ru de ntm an act in g i n ali ke cap aci ty andfam il ia r wit h s uc h m at te rs wou ldus e in th e co nduc t o f an en te rp ris e o f a l ik e ch arac te r an d wi th li ke aim s; [an d] (C) b y di ve rs ifyin g t he in ve st m en ts of t he pl anso as t o m in im iz e th e ri skof l arg e lo ss es , un le ss un de r th e ci rcu m st an ces itis cle arl y pru de ntno t t o d o s o. 29 U.S.C. § 1 10 4( a)(1 ). Sect io n 1 10 4( a)(2 ) pr ov id es anex em pt io n fr om

th e di ve rs ifi cat io n re qu ire m en t o f pa rag rap h (C ) fo r pl an s s tru ctur edas EIAP s, s uc h a s th e Pl anin th is cas e. “ Inth e cas e o f an [EIAP], the d iv ers ifi cat io n re qu ire m en t o f pa rag rap h (1 )(C) an d t he pru de nc e requi rem en t (o nl y to th e ex te ntth atitrequi res di ve rs ifi cat io n) of p arag rap h (1 )(B) is no t v io la te d b y acqui si ti on or h ol di ng of
em pl oyer sec ur it ie s . . . .” Id. § 11 04 (a)( 2) . The d is tri ctco urt co nc lu de d t ha t t he pl ai nt iff s’ pru de nc e cl ai m

was a ctua ll y , at i ts co re, a cl ai m th atth e d efen dant s

“ sh ou ldha ve di ve rs ifi edth e Pl an ’s in ve st m en ts .” Bas edon th atco nc lu si on , th e
co urt d is m is se d t he cla im be cau se itfitwit hi n t he § 1 10 4( a)(2 ) ex em pt io n.

15Alt ho ug h we a gr ee t ha t co urts m us t k eep aney e o utfora wol f in sh eep ’s cl ot hi ng , we are co nv in cedth atth e p la in ti ffs ’ pr ud en ce cl ai m

is in st eada sh eep in sh eep ’s clo th in g. Th e p la in ti ffs all eg e th atth e d efen da nt s “ kn ew or sh ou ldha ve kn own th at. . . Hom e Dep otSto ckwas n ota su it ab le an d app ro pr ia te in ve st m en t fo r th e Pl an ,” th atth ey

fai le d t o “ di ve st [] the Pla n o f Hom e Dep otSto ck ,” th at th ey sh ou ldno t h av e “pe rm it te d C om pa ny m at ch in g c on tri bu ti on s t o b e m ad e in Hom e Dep otSto ck ,” an d t ha t t he y sh ou ldno t h av e “ co nt in ue d t o o fferan d ap pr ov e th e Hom e Dep otSto ckas a n i nv es tm en t o pt io n fo r th e Pl an .” So th e pl ai nt iff s’ cla im , at l eas t i n p art , is : (1 ) th e d efen da nt s kne w, bas edon no np ub li c in fo rm at io n, ab ou t t he im pr op er u se of r eturn- to -v en do r ch arg eb ack s an d s to ck op ti on ba ck da ti ng ; (2 ) be cau se of t ha t n on publ ic in fo rm at io n, t he de fen da nt s kne w th atHom e Dep ot ’s st oc k p ric e was li ke ly infl at ed ; (3 ) de sp it e th atkn owl ed ge th e de fen da nt s d idno t d iv es t t he Pla n o f Hom e Dep otst oc k; an d (4 ) th ey co nt in ue d t o of fer Ho m e Dep otst oc k t o t he Pla n p art ic ip an ts an d i nv es t m at ch in g fu nd s an d di rectco nt rib ut io ns in Hom e Dep otst oc k. Tha t i s n ota cl ai m

th atth e Pl andi d n otha ve en ou gh di ffer en t k in ds of f ru it in it s i nv es tm en t b as ke t o r ha d o nl y ap pl es . The p la in ti ffs reco gn iz e th atth e Pl an or di na ril y all ows th e d efen da nt s t o fi ll th e b as ke t wi th no th in g b utap pl es . Thei r cl ai m is th atth e d efen da nt s, kno win g t ha t ap pl es were s el li ng form or e th anth ey 16were wo rth , no t o nl y lef t t he m in th e b as ke t b utke ptad di ng th em to th e b as ke t. In sh ort, t he pl ai nt iff

s al le ge th atth e d efen da nt s ac te d i m prud en tl y be cau se th ey kn ew th atHom e Dep otst oc k was ov erp ric ed , no t m erel y be cau se itm ad e up t oo la rg e a p erce nt ag e o f th e Co m pany Sto ckFu nd
. The Fif th Cir cu itco nc lu de d i n Ki rs chbaum v. Re li an t En erg y , Inc ., 52 6 F .3d 24 3, 2 49 (5t h C ir. 2 00 8) , th atsi m il ar al le ga ti on s s ta te a cl ai m forvi ol at io n o f th e du ty of prud en ce. The re t he pl ai nt iff all eg edth atth e d efen da nt s s ho ul d h av e co nc lu de d, b as edon publ ic ly avai labl e in fo rm at io n, t ha t i t was im prud en t t o i nv es t

“ su ch m as si ve am ou nt s o r su ch a la rg e p erce nt ag e o f [the pl an ’s] ass et s” in th e co m pa ny’ s o wn s to ck . Id. at24 8– 49 . The Fi fth Cir cu ithe ldth atwas a di ve rs ifi cat io n c la im

withi n the § 1 10 4( a)(2 ) st atut ory ex em pt io n. Id . at 2 49 . But th e p la in ti ff al so all eg edth atth e d efen da nt s s ho ul d h av e co nc lu de d, b as edon no np ub li c in fo rm at io n, t ha t “ itwas i m prud en t fo r th e p la n t o h ol d e ve n o ne sh are of [th e co m pa ny’ s] st oc k,” an d t ha t t he “ de fen da nt s h ada fi du ci ary du ty to h al t fu rth er p ur ch as es of [ th e co m pa ny’ s] comm on st oc k, s el l t he [p]la n’s h ol di ng s i n th e [c]omm on [s]to ck

[f]un d, an d t erm in at e th e [f]un d.” Id. Th e Fi fth Cir cu it
co nc lu de d t ha t was no t a d iv ers ifi cat io n c la im an d fo r th atreas on di d n otfal l wit hi n t he § 1 10 4( a)(2 ) ex em pt io n. Id
. Lik e th e p la in ti ff i n Ki rs chbaum , th e p la in ti ffs he re al le ge th at , eve n p ut ti ng 17as id e d iv ers ifi cat io n c on cern s, Ho m e Dep otst oc k was anim prud en t i nv es tm en t
an d fo r th atreas on th e d efen da nt s h ada du ty to d iv es t t he Pla n o f th e st oc k a nd st op pu rch as in g i t. Tha t i s n ota wol f in a woo l s weat er; itis a su re-e no ug h s he ep . It d oe s n otho wl “ di ve rs ify”; i t b le at s “ prud en ce.” Be cau se th e p la in ti ffs ’ cl ai m is
no t a d iv ers ifi cat io n c la im , itdo es no t fa ll wit hi n t he § 1 10 4( a)(2 ) ex em pt io n.

B. The di stric t co urt al te rn at iv el y co nc lu de d tha t t he de fen da nt s h adno di sc ret io n n otto in ve stin Hom e Dep otst oc k. Re lying on th e Thi rdCir cu it ’s de ci si on in Mo en ch , itco nc lu de d t ha t ev enif t he pru de nc e cl ai m actua ll y was a prud en ce cl ai m , th e d efen da nt s’ lac k o f di sc ret io n s hi el de d t he m fro m jud ic ia l
rev ie w. See Mo en ch , 62 F.3dat 5 67 n.4 , 57 1. Th e p la in ti ffs co un te r th atth e de fen da nt s h adat l eas t s om e d is cret io n t o s to p b uyin g andst artsel li ng Hom e Dep otst oc k, an d a s a r es ul t the ir a ct io ns are n otim m un e fro m jud ic ia l re vi ew. The Pla n d idpro vi de th e d efen da nt s wi th so m e d is cret io n. Al th ou gh it requi reda Co m

pa ny Sto ckFundas a n i nv es tm en t o pt io n, i t d idno t re qu ire th at fu ndto be in ve st edex cl us iv el y in Hom e Dep otst oc k. Th e Pl ande fin edth e Co m pa ny Sto ckFu ndas “ th e In ve st m en t Fu ndin ve st edpri m ari ly in s ha res of Co m pa ny Sto ck .” (Em

ph as is ad de d.) Inan ot he r pa rt, i t al so pro vi de d t ha t,

18“ [n ]otwi th st an di ng an yth in g i n t he Pla n t o t he co ntrary, the P la n s ha ll be in ve st ed

pr im ari ly in Co m

pa ny sto ck .” (Em

ph as is ad de d.) Pri m ari ly doe s n otm ean
ex cl us iv el y ; p rimaril y

ex cl us iv el y

m ean s p rimaril y . Bec au se th e Pl andi d n otrequi re t he de fen da nt s t o i nv es t ex cl us iv el y in Hom e Dep otst oc k, “ th ey ret ai ne d l im it eddi sc ret io n o ve r in ve st m en t d eci si on s.” Edg ar v . Avaya, Inc., 5 03 F.3d34 0, 3 45 (3dCir . 20 07 ) (ci ti ng Mo en ch , 62 F.3dat 56 8) ; s ee al so Pfei l v . Sta te St. Ba nk& Tru stCo ., 67 1 F .3d58 5, 5 91 (6t h C ir. 20 12 ) (“ [A]n ESOP fiduc ia ry m ay be li ab le forfai li ng to di ve rs ify plan a ss et s ev en whe re the pl anrequi redth atanESOP in ve stpri m ari ly in co m pa ny sto ck .” (em ph as is ad de d) ); Ed ga r, 50 3 F .3dat 3 43 , 34 5 & n.8 . The l im it at io n o n t he ir di sc ret io n was th e Pl an ’s requi rem en t t ha t t he fun d’s p rimary in ve st m en t b e Hom e Dep otst oc k. So lo ng as tha t re qu ire m en t was m et , th e d efen da nt s h addi sc ret io n to sel l Ho m e Dep otst oc k o r to st op in ve st in g i n i t. The ir e xe rci se of t ha t di sc ret io n, o r fai lu re t o e xe rci se it , is subjec t t o ju di ci al rev ie w to de te rm in e if th ey vi ol at edth ei r du ty of prud en ce. 1 3 One might argue that eve n wher e the plan r equire s fiduciar ies to buy and hold company 1 3 stock, they

still have disc retion not to do so where it is pl ain that it would be imprudent to follow the plan’s dire ctions. See 29 U.S.C. § 1104(a)( 1)(B ); id. § 1104(a) (1)( D) (“ [A] fiduciar y shall discharg e his duties in acc ordanc e with the docume nts and instruments gove rningthe plan insofar a s such documents a nd instruments are c onsistent with the provisions of [ ERI SA] .”); see also Pfeil, 671 F.3d at 591 (“[A]n ES OP fiduciary must follow the plan documents but only insofar a s such documents a nd instruments are c onsistent with the provisions of ERI SA.”). We need not de cide that issue in this case , which pre sents a diffe rent que stion: whether, under the 19C.

W e n ow re ach th e d is tri ctco urt’s s eco ndalt ern at iv e h ol di ng : ev enif t he de fen da nt s’ dec is io ns were s ub ject t o ju di ci al rev ie w, th e p la in ti ffs ’ al le ga ti on s were i ns uf

fic ie ntto reb utth e Mo en ch pre su m pt io n o f prud en ce b ecau se th e pl ai nt iff s d idno t an d c ou ldno t al le ge th atHom e Dep otwas o n t he “br in k o f fin an ci al co ll ap se .” If th atis rig ht , th e co m pl ai ntdo es no t s ta te a cl ai m forbre ach of th e dut y of p ru de nc e. The p la in ti ffs att ackth atreas on in g o n t hr ee fr on ts . They arg ue th atwe sh ou ldno t ad op t the pre su m pt io n o f prud en ce an al y si s fr om Mo en ch ; t he y

arg ue th at“br in k o f fi na nc ia l co ll ap se ” is th e wro ng st an da rdfor
ov erco m in g t he pre su m

pt io n o f prud en ce; an d t he y arg ue th atth e pr es um pt io n o f prud en ce s ho ul d n ot , in an y ev en t, b e ap pl ie d a t the m ot io n t o di sm is s s ta ge of l it ig at io n. 1. Abo utth e Thi rdCir cu it ’s Mo en ch ap pr oa ch , th e p la in ti ffs arg ue th atan y di rect io n t he Pla n g iv es th e fi du ci ari es to in ve stin Hom e Dep otst oc k i s “ faci al ly
subs erv ie nt ” to th e g en eral du ty of prud en ce t ha t § 11 04 (a)( 1) (D) im po se s an d, fo r th atreas on , we sh ou ldno t p res um e p ru de nc e fro m co m pl ianc e wit h t he term s o f

circ umstances, the de fenda nt fiduciarie s abused the disc retion they had under

the plan to continue buying a nd holding c ompany

stock. 20th e Pl an . W e d is ag ree.

The go al s o f ERISA an d t he ESOP pl an s i t p erm it s co nf li ctto so m e ex te nt . 1 4 On o ne ha nd , “ Co ng res s en act edERISA to ‘ pr ot ect [] em pl oyee pe ns io ns an d o th er be ne fit s.’” In re Cit ig ro up ERISA Lit ig ., 66 2 F .3d12 8, 1 36 –3 7 (2 d C ir. 2 01 1) (quo ti ng Vari ty Corp v. Ho we, 51 6 U.S. 4 89 , 49 6, 1 16 S.Ct . 10 65 , 10 70 (19 96 )). Andth e dut y

of p ru de nc e th e st atut e im po se s re qu ire s d iv ers ifi cat io n o f in ve st m en ts to lo wer ri sk . On th e o th er h an d, ESOP p la ns are “ de si gn edto in ve st pr im ari ly in qua li fy in g e m pl oyer sec ur it ie s” in ord er t o g iv e em pl oyees a n own ers hi p s ta ke in th e co m pa ny. 29 U.S.C. § 1 10 7( d) (6 )(A). Andth e no nd iv ers ifi cat io n t ha t i s a n eces sary pa rt o f ESOP p la ns pl aces “ ‘em pl oyee ret ire m en t as se ts at m

uc h g reat er ri skth ando es th e typi cal di ve rs ifi edERISA pl an .’ ” Inre Ci ti gr oup, 6 62 F.3dat 1 37 (qu ot in g M art in v. Fe il en , 96 5 F .2d66 0, 66 4 (8 th Cir . 19 92 )). So , ERISA requi res di ve rs ifi cat io n t o fu rth er t he go al of pr ot ect in g e m

pl oyee be ne fit s wh il e atth e sa m e ti m e p erm it ti ng co nc en tra ti on in th e em pl oyer’s st oc k i n o rd er t o fu rth er t he go al of e m pl oyee own ers hi p. As th e Fi fth Cir cu itpu t i t, “ Co ng res s h as expr es se d ast ro ng pre fere nc e fo r pl an in ve st m en t i n the em

pl oyer’s st oc k, al th ou gh th is pre fere nc e m ay be in ten si on
Although w e sing le out ESOP plans, our analy sis also applies to EIAPs that encoura g e 1 4 or re quire investment in employer stock a nd to the fiduciar ies of those plans. 21wit h ERI SA’s ge ne ral fiduc ia ry du ti es .” Kirs chbaum , 52 6 F .3dat 2 53
. Wha t t hi s m ean s fo r ESOP fi du ci ari es is th atth ey st il l m us t “ actin
acco rd an ce wi th th e dut ie s o f lo y al ty andcare th atap pl y to fiduc ia rie s o f typic al ERISA p la ns ,” bu t t he y

als o m us t ca rry ou t t he ir dut ie s “ ari s[ in g] ou t o f th e n atur e
an d p ur po se of ESOP s t he m se lv es .” Edg ar, 5 03 F.3dat 3 46 (qu ot at io n m ark s om it te d) . ESOP fiduc ia rie s ar e ex em ptfro m th e dut y to di ve rs ify; in de ed , th ey ha ve a du ty notto di ve rs ify. E SOP fi du ci ari es are n otrequi redto pru de nt ly di ve rs ify inv es tm en ts ; t he y are re qu ire d n otto di ve rs ify, whic h m ay be im prud en t. The y are al so ex em

ptfro m an y du ty notto de al with apa rty in i nt eres t t o t he
ex te ntth atth ey

m us t d eal wit h t he co m

pa ny. See i d. (c it in g M oe nc h, 6 2 F .3dat 56 8) ; s ee al so 29 U.S.C. § 1 10 6( b) (1 ); P fei l, 6 71 F.3dat 5 91 (“ An ESOP p ro m ot es a p ol ic y of e m pl oyee own ers hi p b y

m od ifyin g t he fiduc ia ry

du ty to d iv ers ify pla n in ve st m en ts an d t he pru de nc e requi rem en t t o t he ex te ntth atitrequi res di ve rs ifi cat io n.” (ci ta ti on om it te d) ). “ Inot he r wor ds , ‘ Co ng res s ex pr es sl y in te nd edth atth e ESOP wou ldbe bo th anem pl oyee ret ire m en t b en efi t p lan a nda

“ te ch ni qu e o f co rp or at e fi na nc e” t ha t wo ul d e nc ou rag e em pl oyee own ers hi p.’” Mo en ch , 62 F.3dat 5 69 (qu ot in g M art in , 96 5 F .2dat 6 64 ). Co ng res s co m m an de d th e co nf li ct , or a t l eas t p erm it te d i t. Not in g t hi s co nf

li ctan d t he sp eci al na tu re o f ESOP fi du ci ari es , th e Thi rd

22Ci rcu itin Mo en chad dr es se d t he qu es ti onof h ow co urts sh ou ldrev ie w th e

de ci si on s o f ESOP fi du ci ari es to de te rm in e whe th er t he y co m pl ie d wi th th e ERISA dut y

of p ru de nc e. It re as on edth at“ co urts m us t fi nda way

for th e co m pe ti ng co nc ern s t o c oe xi st .” Mo en ch , 62 F.3dat 5 70 . Borro win g h eav il y fro m tru stlaw, t he Thi rdCir cu itco nc lu de d t ha t wh ere “ th e fi du ci ary is no t ab so lu te ly requ ire d t o i nv es t i n e m pl oyer sec ur it ie s b utis m or e th ansi m pl y pe rm it te d” to do so , th e fi du ci ary “ sh ou ldno t b e imm un e fro m jud ic ia l i nqui ry , as a d ire ct edtru st ee es se nt ia ll y is , bu t al so sh ou ldno t b e subjec t t o t he st ric t s cru ti ny th atwou ldbe ex erci se d o ve r a tru st ee o nl y au th or iz edto m ak e a p art ic ul ar in ve st m en t.” Id . at 5 71 . It co nc lu de d, t he refo re, tha t t he fiduc ia ry ’s “ de ci si on to
co nt in ue in ve st in g i n e m

pl oyer sec ur it ie s s ho ul d b e rev ie wed[on ly] for anab us e of di sc ret io n.” Id. Itterm edth is for gi vi ng st an dardof r ev ie w a “pr es um pt io n,” wit h a n ESOP f

iduc ia ry to be pre su m edpru de ntforin ve st in g i n, o r co nt in ui ng to ho ld , em pl oyer sec ur it ie s co ns is te nt ly w it h the term s o f th e p la n. Id . A pla in ti ff
can ov erco m e th atpre su m pt io n o nl y

by sho win g t ha t t he “ fiduc ia ry ab us edit s di sc ret io n b y

in ve st in g i n e m

pl oyer sec ur it ie s” or c on ti nu in g t o h ol d t he m . Id. The Seco nd , Nin th , Fift h, an d S ix th Cir cu it s h av e al l ad op te d t he Thi rd Ci rcu it ’s Mo en ch pre su m pt io n o f prud en ce o r ab us e o f di sc ret io n s ta nd ard . See In re Ci ti gr oup, 6 62 F.3dat 1 38 ; Qu anv. Co m pu te r Sci s. Co rp ., 62 3 F .3d87 0, 8 81
23(9 th Cir . 20 10 ); Ki rs chbaum , 52 6 F .3dat 2 53 –5 6; Kup er v . Iov en ko , 66 F.3d

14 47 , 14 59 (6t h C ir. 1 99 5) . In d oi ng so , th ree o f th os e fo urcir cu it s n ot edth ata le ss for gi vi ng st an da rdof ju di ci al rev ie w cou ldsubjec t fi du ci ari es to li ab il it y if th ey adhe redto th e p la n’s t erm s an d t he st oc k p ric e fel l o r if th ey de vi at edfro m th e p la n a ndth e st oc k p ric e ro se . See In re Ci ti gr oup, 6 62 F.3dat 1 38 ; Qu an , 62 3 F.3 d a t 8 81 ; Ki rs chbaum , 52 6 F .3dat 2 56 n.1 3. Cl os er jud ic ia l s cru ti ny woul d fo rce ESOP f

iduc iarie s t o c ho os e b etween th e d ev il an d the de ep bl ue sea . W e joi n o urfiv e si st er ci rcu it s i n n otpu tt in g ESOP f iduc ia rie s t o t ha t ch oi ce. We will
rev ie w on ly for an ab us e o f di sc ret io n t he de fen da nt s’ dec is io n t o c on ti nu e in ve st in g i n a ndho ld in g Ho m e Dep otst oc k i n c om pl ia nc e with t he di rect io ns of th e Pl an . 1 5 The plaintiffs c ontend that the Secr etar y of L abor’ s contention in her amicus brief that a 1 5 presumption of prude nce “ should not apply to a fiducia

ry ’s knowingpurcha ses of imprudently overpr iced investments” is somehow due defe renc e under Chevron U.S.A. v. Natural Resourc es Def ense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778 (1984). But an a g ency ’s interpre tation of a statute in an amicus br ief is entitled to, at most, Ski dmore de fer ence . See Pug liese v. Pukka Dev., Inc., 550 F .3d 1299, 1305 (11th Cir. 2005); see a lso Riege l v. Medtronic, I nc., 552 U.S. 312, 338 n.8, 128 S.Ct . 999, 1016 n.8 (2008) ( Ginsburg , J ., dissenting) (“An amicus brief interpre ting a

statute is entitled to, at most, defere nce unde r Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct . 161 (1944).” ). Unde r Skidmore, the we ight g iven to an ag ency ’s position “depe nd[s] upon the thoroughness evident in its consideration, the validity of its rea soning, its consistency

with ear lier and later pronounc ements, and a ll those factor s which g ive it power to persua de, if lac king pow er to c ontrol.” 323 U.S. at 140, 65 S.Ct. at 164. The plaintiffs make no argument as to why

any of those fa ctors should lead us to def er, a nd we a re not pe rsuade d that we should. Alternatively , even if the district court’s a

pplication of the pre sumption of prudence with its abuse of discr etion standard of scrutiny was e rror in this case, it was invited er ror. In the 242.

App lying th atst an da rd , th e d is tri ctco urt co nc lu de d t ha t the pre su m pt io n o f prud en ce h adno t b een ov erco m e, th atno ab us e o f fi du ci ary di sc ret io n h adbe en sh own . It b as edth atco nc lu si on on th e ab se nc e o f an y all eg at io n t ha t Ho m e Dep ot ha d b een on th e “br in k o f fi na nc ia l co ll ap se ” atth e ti m e th e d efen da nt s b ou gh t an d
co nt in ue d t o h ol d i ts st oc k. The pl ai nt iff s ch al le ng e th e co urt’s p rem is e th at fiduc ia rie s ab us e th ei r di sc ret io n i n b uyin g o r ho ld in g c om pa ny sto ckon ly if th e co m pa ny is ab ou t t o c ol laps e an d t he fiduc ia rie s kno w it . There is m eri t t o t ha t ch al le ng e. The di stric t co urt d rew i ts “br in k o f fi na nc ia l co ll ap se ” ru le fro m so m e o f it s own de ci si on s t ha t h adin te rp ret edMo en ch an d c as es ap pl y in g i t. See , e.g., Ped razav. Co ca-C ol a Co ., 45 6 F . Sup p. 2 d 1 26 2, 1 27 4– 76 (N.D. Ga. 20 06 ). In Ped raza , th e d is tri ctco urt co nc lu de d tha t t he Mo en ch pre su m pt io n c ou ldbe
ov erco m e o nl y

by alle ga ti on s t ha t t he fiduc ia ry co nt in ue d t o c om

pl y wit h apl an ’s in st ru ct io ns to pu rch as e o r ho ldem pl oyer sec ur it ie s d es pi te kn owl ed ge th atth e em pl oyer was o n the bri nkof c ol laps e. Id . at 1 27 5– 76 . The d is tri ctco urt an d t he plaintiffs’ re sponse to the def endants’ motion to dismiss , that was the only standard the plaintiffs put forth in support of their position that they had stated a

claim. The district c ourt, in rea ching its alternative holding , acc epted the pla intiffs’ invitation to apply that standard. “ It is a car dinal rule of a ppellate r eview that a par ty may not challeng e as e rror

a rulingor other tr ial proce eding invited by that party .” F ord ex rel. Estate of For d v. Gar cia, 289 F .3d 1283, 1293–94 (11th Cir. 2002) (quotation mar

ks omitt ed). 25de ci si on s i t re li edon for th atrul e m is in te rp ret edth e Mo en ch st an da rd
. InMo en ch it se lf, t he Thi rdCir cu itex am in edanESOP pl ansi m il ar t o t he
on e in th is cas e. The c ou rt n ot edth atth e p la in ti ff i n M oe nc h h adarg ue d “ th atth e pr eci pi to us de cl in e in th e p ric e o f [h is em pl oyer’s] st oc k, as well as t he [fi du ci ary’ s] kn owl ed ge of [ hi s emplo y er’s] im pe nd in g c ol laps e an d [t he fiduc ia ry ’s] own co nf

li ct edst atus ” h adm ad e d is ob ey in g t he pl an ’s di rect io ns th e on ly pru de ntch oi ce fo r th e fi du ci ary. 62 F.3dat 5 72 . Thatwas ade sc rip ti on of th e p la in ti ff’s al le ga ti on s an d a rg um en t, n ota ho ld in g o f th e co urt. The Thi rd Ci rcu itne ve r sa idth atth e o nl y cir cu m st an ce i n wh ic h afiduc ia ry co ul d abu se it s di sc ret io n b y

fol lo win g a n ESOP p la n’s d ire ct io ns ab ou t co m pa ny sto ckwas wh en th e fi du ci ary kn ew th atth e co m pa ny was p eeri ng ov er t he pre ci pi ce i nt o a fin an ci al ab y ss . Ins te ad , th e Mo en ch co urt b orro wedfro m tru stlaw t o h ol d t ha t a pl ai nt iff ha d t o “ sh ow tha t t he ERISA fi du ci ary co ul d n otha ve be li ev ed
reas on ab ly tha t co nt in ue d a dh eren ce t o t he ESOP’s di rect io n was in ke ep in g wi th th e se tt lo r’s ex pe ct at io ns of h ow a p ru de nttru st ee wo ul d o pe rat e.” Id . at 5 71
. Oth er co urts ha ve ad op te d m uc h t he same tes t. See , e.g., In re Ci ti gr oup, 66 2 F .3dat 1 40 ; Ki rs chbaum , 52 6 F .3dat 2 56 ; Pu gh v. Tri bu ne Co ., 52 1 F .3d68 6, 70 1 (7 th Cir . 20 08 ) (“ [T]he p la in ti ff m us t s ho w th atth e ERISA fi du ci ary co ul d n ot ha ve reas on ab ly bel ie ve d tha t t he pl an ’s dra fte rs wou ldha ve in te nd edun de r th e 26ci rcu m st an ces th athe co nt in ue to co m pl y wit h t he ESOP’s di rect io n tha t h e in ve st
ex cl us iv el y

in em pl oyer sec ur it ie s.” ( qu ot at io n m ark s o m it te d) ); S umm ers v. St at e St . Ban k & Trus t Co ., 45 3 F .3d40 4, 4 10 (7t h C ir. 2 00 6) (sa m e); see als o In re Sync orERISA Lit ig ., 51 6 F .3d10 95 , 11 02 (9t h C ir. 2 00 8) (“ Whi le fin an ci al vi ab il it y is a fact orto be co ns id ered , itis no t d et erm in at iv e o f whe th er the fiduc ia rie s fa il edto actwit h c are, s ki ll , pru de nc e, or di li ge nc e.”); Edg ar, 5 03 F.3d at34 8, 3 49 n.1 3 (q uo ti ng th e st an da rdfro m Mo en ch an d n ot in g tha t i t d id“ no t in te rp retMo en ch as r equi rin g aco m pa ny to b e o n t he bri nkof b an krup tc y ” b efo re th e fi du ci ary is requi redto de vi at e fro m th e p la n)
. W e ag ree wi th th os e co urts an d a do ptth attes t. ERISA’s “ fiduc ia ry res po ns ib il it ie s p ro vi si on s co di fy an d m ak e ap pl ic ab le to ERISA fi du ci ari es cert ai n p rin ci pl es de ve lo pe d i n t he ev ol ut io n o f th e la w of t ru st s.” Fi res to ne Tire & Rubb er Co . v. Bru ch , 48 9 U.S. 1 01 , 11 0, 1 09 S.Ct . 94 8, 9 54 (19 89 ) (al te rat io ns , ci ta ti on s, an d quo ta ti on m ark s o m it te d) . So, i n ERI SA cas es , “ we are g ui de d b y pr in ci pl es of t ru stlaw.” Id . at 1 10 , 10 9 S .Ct. at95 4. Un de r th e la w of t ru st s, a tru st ee h as a ge ne ral “ du ty to co nf orm to th e te rm s o f th e trus t d ire ct in g o r res tri ct in g i nv es tm en ts by the tru st ee.” Re st at em en t (Th ird ) of Trus ts § 9 1( b) ; s ee al so Res ta te m en t (S eco nd ) of Trus ts § 2 27 (c). Bu t a t ru st ee s ho ul d d ev ia te fro m th e te rm s o f th e trus t “ whe re[,] owi ng to cir cu m st an ces no t kno wn t o t he set tl or 27an d n otan ti ci pa te d b y hi m [,] co m

pl ia nc e wou ldde feator s ub st an ti al ly im pa ir t he
acco m pl is hm en t o f th e p ur

po se s o f th e trus t.” Re st at em en t (S eco nd ) of Trus ts §§ 16 7( 1) , 22 7 c m

t. q . Alt ho ug h afiduc ia ry

is ge ne ral ly requ ire d t o i nv es t ac co rd in g t o t he term s of th e p la n, wh encir cu m st an ces ari se su ch th atco nt in ui ng to do so wou ldde feat
orsubs ta nt ia ll y

im pa ir t he pu rp os e o f th e p la n, a p ru de ntfiduc ia ry sh ou ldde vi at e fro m th os e te rm s t o t he ex te ntne ces sary . Becau se th e p ur po se of apl anis setby it s s et tl or s (t ho se who crea te d i t), t ha t i s the same thi ng as s ay in g t ha t a f iduc ia ry ab us es hi s d is cret io n b y

act in g i n c om

pl ia nc e wit h t he di rect io ns of t he pl anon ly whe n the fiduc ia ry

co ul d n otha ve reas on ab ly bel ie ve d t ha t the set tl or s wo ul d h av e in te nd edforhi m

to do so un de r th e ci rcu m st an ces . Thatis th e te st .

3. The pl ai nt iff

s al so co nt en d t ha t t he pre su m pt io n o f pr

ud en ce an al y si s an d th e te stitin cl ud es can no t b e ap pl ie d t o d is m is s a c la im un de r Ru le 12 (b )(6 ). They arg ue th atpre su m

pt io ns are ev id en ti ary an d e vi de nc e h as no pl ace i n d et erm in in g whe th er a co m

pl ai ntst at es a va li d c la im
. The pl ai nt iff s’ arg um en t i s b as edon th e Mo en ch co urt’s u nf

ortu na te us e o f th e wor d “ pr es um pt io n.” The Th irdCir cu itdi d
no t i nt en d t o u se , andwe di sa vo w any int en ti on of u si ng , th e wor d “pr es um pt io n” in a se ns e th atha s an y

ev id en ti ary weig ht . Ins te ad , in th is co nt ex t t he term

28em

bo di es th e n ot io n o f an ou tc om e fav or edby the law; itpre sc rib es who is to win in alm os t al l o f th e ci rcu m st an ces th atcan be en vi si on ed —n otall , bu t al m os t al l. See I n re Cit ig ro up , 66 2 F .3dat 1 39 (“ The ‘ pr es um pt io n’ is no t an ev id en ti ary pr es um pt io n; itis a st an da rdof r ev ie w app li edto a de ci si on m ad e b y anERISA fiduc ia ry .”); Edg ar, 5 03 F.3dat 3 49 . The Mo en ch st an da rdof r ev ie w of fi du ci ary act io n i s ju stth at , a st an da rdof r ev ie w; i t i s n otanev id en ti ary pr es um pt io n. It ap pl ie s atth e m ot io n t o d is m is s s ta ge as we ll as t he reaf te r. 1 6 Bec au se we ap pl y

anab us e o f di sc ret io n s ta nd ardto a fi du ci ary’ s d eci si on to co nt in ue to in ve stor t o re m ai n i nv es te d i n c om pa ny sto ckin ob ed ie nc e to th e pl an ’s di rect io ns , an abu se of d is cret io n i s an ele m en t o f a cl ai m th atth e fiduc ia ry ’s dec is io n was im prud en t. Cf. Ed ga r, 50 3 F .3dat 3 49 . Unl es s a p la in ti ff pl ead s fa ct s s uf

fic ie ntto rai se a pl au si bl e in fere nc e th atth e fi du ci ary ab us edit s di sc ret io n b y

fol lo win g t he pl an ’s di rect io ns , th e co m pl ai ntfai ls to st at e a v al id cl ai m an d am ot io n t o d is m is s s ho ul d b e g ran te d. Se e Edg ar, 5 03 F.3dat 3 49 ; In

The Six th Circuit has conclude d to the contra ry , stating that “the pre sumption of 1 6 rea sonablene ss . . . is not an additional pleadingrequire ment and thus does not apply at the motion to di smiss st ag e.” Pfe il, 671 F.3d at 592; see also id. at 593 (cla ssifying the Moench presumption as “a

n evidentiar

y presumption, and not a plea ding r equire ment”). It also puts less defe renc e behind the pr esumption than the Second or T hird Circuits do. Compare Pfeil, 671 F.3d at 591, with In re Citigr oup, 662 F.3d at 140, and Edg ar, 503 F .3d at 348. We think that the rea soning of

those other two c ircuits is more per suasive than the Sixt h Circuit’s, and we alig n ourselves w ith them. 29re Ci ti gr oup, 6 62 F.3dat 1 39
. D.

All th atrem ai ns is to ap pl y th atst an da rdto th e p la in ti ffs ’ co m pl ai nt . The pl ai nt iff s b as e th ei r al le ga ti on th atHom e Dep otst oc k was anim prud en t in ve st m en t dur in g t he rel ev an t p eri odon th e ch an ge in it s m ark etpri ce af te r th e co m pa ny relea se d t he earn in gs rep ort re fle ct in g t he effe ctof t he il li ci t re tu rn -to ve nd or ch arg eb ack s. OnFeb ru ary 18 , 20 05 , th e d ay be fo re i t re le as edearn in gs da tarefl ect in g t he im

pr op er re tu rn -to -v en do r ch arg eb ack s, Ho m e Dep otst oc k tra de d a t $ 42 .02 pe r sh are. By April 28 , 20 05 , itha d fa ll enby abo ut16 .5% t o $3 5.0 9. By

Ju ly 22, 2 00 5, h owe ve r, th e p ric e h adris ento $4 3.4 7, anin crea se of 1 7
ne arl y 3.5 % ov er t he pri ce o f th e st oc k b efo re t he return- to -v en do r ch arg eb ack frau d n eg at iv el y

affe ct edHom e Dep ot ’s rep orte d e arn in gs . 1 8

“ Mer e st oc k fl uc tu at io ns , eve n t ho se th attre nddo wnwar d s ig ni fic an tl y , are in su ffi ci en t t o e st ab li sh ” th ata fi du ci ary ab us edit s d is cret io n b y co nt in ui ng to
Not all of these stoc k price s are in the complaint, but under F eder al Rule of Evidenc e 1 7 201(b), we can ta

ke judicial notice of

the price of a stock on a

ny g iven day . See L a Gr asta v. First Union Sec., I

nc., 358 F .3d 840, 842 (11th Cir. 2004). The plaintiffs have neve r alleg ed that the r elea se of infor mation about the bac kdatingof 1 8 stock options led to a drop in Home De pot’s stock price . The stock c losed at $39.37 on Dec ember

5, 2006, the day

befor e it rele ased infor

mation about the bac kdated stock options. The price did fall by

about 1% to $38.93 on De cembe r 7, 2006, but that drop wa s close to the one in the broa der ma

rket on that da

y . By Dec ember

14, 2006, the stock price closed at $39.97, which is about 1% hig her tha

n its Dece mber 5, 2006, c losing pric e. 30in ve stin or h ol d e m pl oyer sec ur it ie s i n c om

pl ia nc e wit h t he term s o f th e p lan. Wrig htv. Or. Me ta ll ur gi cal Co rp ., 36 0 F .3d10 90 , 10 99 (9t h C ir. 2 00 4) . A 16 .5% de crea se in st oc k p ric e o ve r a p eri odof m or e th antwo m on th s, fo ll owe d b y a reb ou ndin th e p ric e a few m on th s l at er, d oe s n otin di cat e th atth e u nd is cl os ed pr ob le m was t he “ type o f di re s itua ti on whi ch wou ldrequi re d efen da nt s t o d is ob ey th e te rm s o f th e Pl an [] by no t o ffer in g t he [Co m

pa ny Sto ckFu nd ] as anin ve st m en t op ti on , or b y

di ve st in g t he Pla n[ ] of

[Hom e Dep ot ] se cu rit ie s.” Ed ga r, 50 3 F .3dat 34 8. Th e d efen da nt s wer e n otrequi redto de pa rt f ro m th e Pl an ’s di rect iv es reg ard in g Ho m e Dep otst oc k ju stbe cau se th ey were awar e th atth e st oc k p ric e li ke ly w ou ldfal l. See Kirs chbaum , 52 6 F .3dat 2 56 (“ One can no t s ay th at whe ne ve r pl anfiduc iarie s ar e aware of c irc um st an ces th atm ay im pa ir t he va lu e o f
co m pa ny sto ck , th ey

ha ve a fi du ci ary du ty to d ep artfro m ESOP orEIAP pl an pr ov is io ns .”). Eve n a ccep ti ng all of t he all eg at io ns in th e co m pl ai ntas t ru e an d v ie win g a ll of th e fac ts in th e li gh t m os t fa vo rab le to th e p la in ti ffs , th e d efen da nt s co ul d h av e reas on ab ly bel ie ve d tha t the Plan’s s et tl or s wo ul d h av e in te nd edth atth ei r in st ru ct io ns be fol lo wedin th e ci rcu m st an ces in vo lv edin th is cas e. Set tl or di rect io ns in ret ire m en t p lans , li ke th os e in tru stin stru m en ts , are u su al ly des ig ne d fo r th e lo ng haul . Mark etti m in g i s n otho w pru de ntpe ns io n fu ndin ve st in g 31us ua ll y

work s, an d t he re i s n ot hi ng in th is Plan t o i nd ic at e th atth os e who crea te d itin te nd edforfiduc ia rie s t o d is reg ardth ei r in st ru ct io ns ba se d o n s ho rt- te rm ev en ts
an d fl uc tu at io ns in th e m ark et . The res ul t we re achdo es no t d is ad va nt ag e p lan p art ic ip an ts co m paredto sh areh ol de rs ge ne ral ly. Ins te ad , itrefu se s t o p ro vi de pa rti ci pa nt s wi th anun fai r ad va nt ag e o ve r ot he r sh areh ol de rs . Ju stas p la n p art ic ip an ts ha ve no rig htto in si st th atfiduc ia rie s b e co rp or at e in si de rs , th ey ha ve no rig htto in si stth atfiduc ia rie s who are co rp or at e in si de rs us e in si de in fo rm at io n t o t he adva nt ag e o f th e pa rti ci pa nt s. Bec au se th e p la in ti ffs ha ve no t p le ad edfact s es tabl is hi ng th atth e de fen da nt s ab us edth ei r di sc ret io n b y fol lo win g t he Pla n’s d ire ct io ns , th ey ha ve no t s ta te d ava li d c la im

forbre ach of t he du ty of prud en ce. See Edg ar, 5 03 F.3dat 34 8. IV. The pl ai nt iff

s’ fin al co nt en ti on is th atth e d is tri ctco urt erredby dis m is si ng th ei r cl ai m

th atth e d efen da nt s v io la te d t he ir f iduc ia ry du ty of lo y al ty. They argu e th atth ey st at eda br each of l oyalt y cla im in two way s. On e way

is by alle gi ng th at th e d efen da nt s m ad e m is rep res en ta ti on s i n t he ir S EC fil in gs th atwere s en t t o, o r were ac ces si bl e to , Pla n p art ic ip an ts . The o th er way is by alle gi ng th atth e 32de fen da nt s wer e requi redto , andfai le d t o, i nf orm th e Pl anpa rti ci pa nt s o f Hom e Dep ot ’s bu si ne ss pra ct ic es an d t he effec t t ho se pra ct ic es wou ldli ke ly hav e o n i ts st oc k p ric e whe n t he y

be cam e p ub li c. W e are no t co nv in ced
.

A. As t o t he pl ai nt iff

s’ firs t ar gu m en t, t he ir p os it io n i s t ha t wh enth e d efen da nt s to okth e in accu rat e st at em en ts inth e Fo rm 10 -K an nu al rep orts an d i n t he Fo rm 10 -Q qu art erl y

rep orts an d p utth em

in to th e Fo rm

S-8 s an d i nt o t he st oc k pr os pe ctus es , th os e in accu rat e st at em en ts were t ran sf orm edfro m
m is rep res en ta ti on s i n a n S EC fil in g i nt o “ fiduc iary co m m un ic at io ns .” As we h av e po in te d o ut , ho wev er, “ ERISA rec og ni zes th ata pe rs on m ay be a fi du ci ary fo r so m e p ur po se s an d n otot he rs .” Loca l Un io n 2 13 4 v . Powh at anFu el , Inc ., 82 8 F.2 d 7 10 , 71 4 (1 1t h C ir. 1 98 7) (qu ot at io n m ark s o m it te d) . The d efen da nt s

“ as su m e[d ] fiduc ia ry

st atus on ly whe n a ndto th e ex te ntth atth ey fun ct io n[ ed ] in th ei r cap aci ty as . . . pla n fi du ci ari es , no t wh enth ey co nduc t[e d] bu si ne ss th atis
no t re gu la te d b y

ERISA.” Id . (qu ot at io n m ark s o m it te d) ; s ee al so Barn es v. Lacy, 92 7 F .2d53 9, 5 44 (11 th Cir . 19 91 ) (“ [P]lan adm in is tra to rs ass um e fi du ci ary st atus on ly whe n a ndto th e ex te ntth atth ey fun ct io n i n t he ir c ap aci ty as pl an ad m in is tra to rs , no t wh enth ey co nduc t b us in es s t ha t i s n otreg ul at edby E RISA.” (quo ta ti onm ark s o m it te d) ).
33It i s s ecu rit ie s l aw, no t ERIS A, th atrequi res reg is tra ti onof s ecu rit ie s

in cl ud in g t he fil in g o f a reg is tra ti on st at em en t. See 15 U.S.C. §§ 77 e– 77 h. An
em pl oyer m ay

us e th e Fo rm

S-8 reg is tra ti on st at em en t fo r it s s ecu rit ie s tha t ar e

“ of fere d t o i ts em

pl oyees o r em

pl oyees o f it s s ub si di ari es or p aren ts un de r an y em pl oyee be ne fitpl an .” 17 C.F.R. § 23 9.1 6b (a)( 1) . Securit ie s l aw al so requi res
anem pl oyer to crea te st oc k p ro sp ectus es an d g iv e th em to it s emplo y ees if i t in te nd s t o o fferth e em

pl oyees i ts sec ur it ie s u nd er an y em pl oyee be ne fitpl an . See 15 U.S.C. § 7 7j; 17 C.F.R. § § 2 30 .42 8, 2 39 .16 b( a)(1 ). So wh enfil in g t he Fo rmS8 re gi st rat io n s ta te m en ts , andwhen crea ti ng th e st oc k p ro sp ectus es an d g iv in g th em to em pl oyees, t he de fen da nt s wer e n otact in g “ in th ei r cap aci ty as . . . pla n fiduc ia rie s” be cau se th ey were “ co nduc t[i ng ] bu si ne ss th atis no t re gu la te d b y ERISA.” Lo cal Uni on 21 34 , 82 8 F .2dat 7 14 ; s ee al so Barn es , 92 7 F .2dat 5 44 ; Kirs chbaum , 52 6 F .3dat 2 57 (“ Whe n i t i nc or po rat edit s SEC fil in gs in to th e Fo rm S-8 an d 1 0aPro sp ectus , [th e d efen da nt ] was di sc ha rg in g i ts co rp or at e dut ie s u nd er th e se cu rit ie s l aws , andwas n otact in g a s an ERISA fi du ci ary. ”). InKirs chbaum

th e Fi fth Cir cu itreject edth e sa m e “ in co rp or at io n b y refe ren ce” arg um en t t ha t t he pl ai nt iff s m ak e h ere. In th atcas e, th e p la in ti ff br ou gh t an ERISA cl ai m

ba se d o n a ll eg edm is rep res en ta ti on s tha t t he co rp or at io n
an d i ts off

ic ers , who were the pl anfiduc iarie s, m ad e in Fo rm 10 -K an d F orm

10 -Q
34fil in gs wit h t he SEC. Kirs chbaum , 52 6 F .3dat 2 56 –5 7. Th e p la in ti ff arg ue d t ha t

th os e m is rep res en ta ti on s b ecame fiduc ia ry co m m un ic at io ns when th e d efen da nt s in co rp or at edth em

by referen ce i nt o aFo rm S-8 reg is tra ti on st at em en t t ha t was fil edwith the SEC an d a ga in in to a st oc k p ro sp ectus sen t t o e m pl oyees. Id . at 2 57
. The Fif th Cir cu itreject edth e p la in ti ff’s in co rp or at io n b y refe ren ce ar gu m en t be cau se whenth e d efen da nt s i nc or po rat edth e al le ge d m is rep res en ta ti on s i nt o t he Fo rm S-8 an d p ro sp ectus , th ey were ac ti ng on be ha lf o f th e co rp or at io n a ndno t as ERISA fi du ci ari es . Id. No ti ng th atth e requi rem en ts to fil e th e Fo rm S-8 an d t o crea te an d d is tri bu te th e st oc k p ro sp ectus es aro se un de r se cu rit ie s l aw, th e Fi fth Ci rcu itreas on edth at“ [t]ho se who pre pa re an d s ig n [t he m ] do no t b eco m e ERISA fiduc ia rie s t hr ou gh th os e act s, an d c on se qu en tl y , do no t v io la te ERISA if th e fil in gs co nt ai n m is rep res en ta ti on s.” Id . (qu ot at io n m ark s o m it te d)
. W e rea ch th e sa m e co nc lu si on forth e sa m e rea so n. When th e d efen da nt s i n th is cas e fi le d t he Fo rm

S-8 s an d c reat edan d d is tri bu te d the st oc k p ro sp ectus es , th ey were ac ti ng in th ei r co rp or at e cap aci ty andno t i n t he ir c ap aci ty as ERISA fiduc ia rie s, s ee i d.; th ey

were co nduc ti ng bu si ne ss th atwas re gu la te d b y sec ur it ie s la w andno t b y

ERISA, se e Loc al Uni on23 14 , 82 8 F .2dat 7 14 . Becau se th ey were n otact in g a s fi du ci ari es when th ey to okth os e act io ns , any
m is rep res en ta ti on s i n t ho se do cu m en ts di d n otvi ol at e ERISA. See Kirs chbaum , 3552 6 F .3dat 2 57
. B.

As t o t he pl ai nt iff

s’ sec on d b reac h o f du ty of lo y al ty argu m en t, t he ir po si ti onis th atth e d efen da nt s h ada du ty to “ di sc lo se pro bl em s wh ic h a ffec te d Pl anbe ne fit s, i nc lu di ng m at eri al in fo rm at io n t ha t wo ul d a ffec t t he Fu nd ’s val ue .” The y arg ue th atth ere i s a “ du ty to i nf orm when th e trus te e kno ws t ha t s il en ce
m ig htbe harm fu l.” Bi xl er v . Cen t. Pa . Team st ers Heal th & W el fare Fund , 12 F.3d 12 92 , 13 00 (3dCir . 19 93 ). The p la in ti ffs arg ue th atth e d efen da nt s b reac he d t ha t du ty by no t d is cl os in g i nf

orm at io n abo utHom e Dep ot ’s “ de cei tfu l b us in es s pr act ic es ” an d t he effe ctth os e p ract ic es ha d o n t he qu es ti on of wh ethe r itwas prud en t t o b uy or h ol d Ho m e Dep otst oc k. W e h av e rec og ni zedth atanERISA fi du ci ary m ay be li ab le forwit hh ol di ng in fo rm at io n fr om

pl anpa rti ci pa nt s. See Jo ne s v . Am . Gen. Li fe In s. & Acc id en t Co ., 37 0 F .3d10 65 , 10 72 (11 th Cir . 20 04 ) (“ [A]n ERISA p la n a dm in is tra to r’s wit hh ol di ng of i nf

orm at io n m ay

gi ve ris e to a cau se of a ct io n fo r br each of fiduc ia ry du ty.”); Erv as t v . Fle xi bl e Pro ds . Co., 3 46 F.3d10 07 , 10 16 n.1 0 (1 1t h Ci r. 20 03 ) (n ot in g i n d ic tath at“ anERISA p art ic ip an t h as a ri gh t t o i nf orm at io n
an d . . . a fai lu re-t o- in fo rm cla im m ay li e ag ai ns t an ERISA ad m in is tra to r”). We
are r el uc tant , ho wev er, “ to bro ad enth e ap pl ic at io n o f th es e cas es to crea te a du ty 36to pro vi de pa rti ci pa nt s wi th no np ub li c in fo rm at io n p ert ai ni ng to sp eci fic

in ve st m en t o pt io ns .” Inre Ci ti gr oup, 6 62 F.3dat 1 43 . Andev enth ou gh it
co nt ai ns “ de ta il eddi sc lo su re ru le s b y whi ch em

pl oyers an d p la n a dm in is tra to rs
m us t ab id e,” Ba rn es , 92 7 F .2dat 5 43 , ERISA do es no t ex pl ic it ly im po se a du ty to pr ov id e p art ic ip an ts wit h n on publ ic in fo rm at io n a ffec ti ng th e v al ue of t he
co m pa ny’ s s to ck , see ge ne ral ly 29 U.S.C. § § 1 02 1– 10 30
. InEdg ar, the Thi rdCir cu itreject eda di sc lo su re cl ai m si m il ar t o t he on e th e pl ai nt iff s m ak e h ere. 5 03 F.3dat 3 49 –5 0. Indo in g s o, t he co urt p oi nt edou t t ha t ERISA req ui redth atsu m m ary pl ande sc rip ti on s, wh ic h a re p ro vi de d t o p la n pa rti ci pa nt s, co nt ai n anu m be r of di sc lo su res . Id. at35 0; see als o 2 9 U.S.C. §§ 10 21 –1 02 2. Am on g o th er t hi ng s, t ho se do cu m en ts in fo rm pa rti ci pa nt s “ th at th ei r in ve st m en ts are t ie d t o t he m ark etpe rfo rm an ce o f th e fu nd s; th ateach fun d
carr ie s d iff

eren t ri sk s an d p ot en ti al returns ; . . . [an d] th atth ere a re p art ic ul ar ri sk s as so ci at edwith i nv es ti ng ina no n- di ve rs ifi edfun d.” Edg ar, 5 03 F.3dat 3 50 . The
co urt re as on edth atth os e “ di sc lo su res were s uf fic ie ntto sat is fy

de fen da nt s’ ob li ga ti on no t t o m is in fo rm pa rti ci pa nt s . . . . [and ] pr ov id edPla n p art ic ip an ts th e op po rtu ni ty to m ak e th ei r own in fo rm edin ve st m en t ch oi ce.” Id . (ci ta ti on om it te d) . As a res ul t, p la n fi du ci ari es do “ no t h av e a dut y to gi ve in ve st m en t ad vi ce o r to op in e o n t he st oc k’s co nd it io n.” Id. (q uo ta ti on m ark s o m it te d)
. 37The Seco ndCir cu itreac he d t he same resu ltin In r e Ci ti gr oup, co nc lu di ng

th atth ere was no ge ne ral du ty to d is cl os e n on publ ic in fo rm at io n abo ut“ sp eci fic in ve st m en t o pt io ns ” b ecau se do in g s o “ wou ldim pr op erl y tra ns fo rm

fiduc ia rie s in to in ve st m en t ad vi so rs .” 66 2 F .3dat 1 43 (qu ot at io n m ark s o m it te d) . The co urt
ex pl ai ne d t ha t fi du ci ari es ha d (app aren tl y inth e su m

m ary pl ande sc rip ti on )

“pr ov id edad equa te warn in g tha t t he Sto ckFu ndwas a n u nd iv ers ifi edin ve st m en t
subjec t t o v ol at il it y

an d t ha t Pl anpa rti ci pant s wo ul d b e wel l ad vi se d t o d iv ers ify th ei r ret ire m en t s av in gs .” Id . The fi du ci ari es ha d n o dut y to go be y on d t ha t
warn in g andpro vi de th e p art ic ip an ts wit h n on publ ic in fo rm at io n tha t m ig ht

“ m an ife stit se lf i n ash arp de cl in e in st oc k p ric e.” Id
. W e ag ree wi th th e Thi rdan d S eco ndCir cu it s. As we m en ti on edearl ie r in th is op in io n, the su m

m ary pl ande sc rip ti on sen t t o a ll of t he Pla n p art ic ip an ts
co nt ai ne d s ta te m en ts ab ou t the ris k t ha t p art ic ip an ts face d fr om in ve st in g i n t he Co m m on Sto ckFu nd . Thatdo cu m en t co nt ai ne d t he fol lo win g warni ng : “ Keep in
m in d t ha t the di ffer en t i nv es tm en t o pt io ns off eredcarry di ffer en t l ev el s o f ri sk
. Hig he r ri skin ve st m en ts m ay pro vi de hi gh er re tu rn s o ve r th e lo ng term , bu t t he re’s al so a gr eat er ch an ce tha t you m ig htlo se a po rti on of you r in ve st m en t.” The
su m m ary pl ande sc rip ti on als o c on ta in eda gr ap h re fle ct in g t he rel at iv e ri skof t he di ffer en t fu nd s, wh ic h e m ph as iz edth atth e Co m

m on Sto ckFu ndwas t he ris ki es t 38on e. Tha t g rap h d es cri be d t he fun d wi th th es e te rm s: “ Mo stAgg res si ve ,” “ Hig he r

Po te nt ia l Re tu rn ,” “ Hig he r Ri sk ,” “ Hig he r Po te nt ia l Vo la ti li ty.” T he tex t o f th e su m m ary pl ande sc rip ti on als o a dd edth is warn in g: “ Si nc e [t he Co m m on Sto ck Fu nd ] in ve st s i n o nl y

on e st oc k, t hi s fu ndis subjec t t o g reat er ri skth anth e o th er fu nd s i n t he pl an .” All of t ho se warn in gs ad equa te ly info rm edth e p art ic ip an ts ab ou t the ris ks of i nv es ti ng inth e Co m m onSto ck

Fu ndwit h i ts co nc en tra ti on in Hom e Dep otst oc k. 1 9 W e wil l n otcrea te a ru le th atco nv ert s fi du ci ari es in to in ve st m en t ad vi so rs . Su ch a ru le wou ldfor ce t he m to gu es s wh ethe r, an d i f so to whatex te nt , adv ers e no np ub li c in fo rm at io n wi ll affe ctth e p ric e o f em pl oyer st oc k, an d the n wo ul d requi re t he m

to di sc lo se th atin fo rm at io n t o t he pl anpa rti ci pa nt s i f th ey be li ev e th atth e in fo rm at io n wi ll ha ve a m at eri al ly adv ers e eff ecton th e v al ue of t he in ve st m en t fu nd . There are, o f co ur se , als o p ract ic al pro bl em s wi th su ch a ru le . It
wou ldbe di ffi cu lt , if n otim po ss ib le , to whi sp er n onpubl ic in fo rm at io n i nt o the

One of the risks of a nondive rse investment is, of c ourse, the risk that the company will 1 9 eng ag e in fra

udulent activity , a risk that ca n be minimiz ed through diversification. See Richard A. Posner, Ec onomic Analy sis of the L aw 473 ( 5th ed. 1998) (notingthat unsy stematic risk—the risk uncorr elated w ith the market a s a whole—“ can be diversified a way”); Houma

n B. Shada

b, The L aw a

nd Economics of H edg e F unds: Financ ial Innovation and Investor Protec tion, 6 Be rkele y Bus. L .J . 240, 286 (2009) ( “[F]raud is a ty pe of idiosy

ncratic risk that can be minimi zed throug h diversification . . . .”); Ralph K. Winter, On ‘Protec ting the O rdinary Investor’, 63 Wash. L . Rev. 881, 891 (1988) ( “F raud is a spe cies of unsy stematic risk ag ainst which diversific ation provides prote ction . . . .”). 39ears of t en s o f th ou sand s o f pl anpa rti ci pa nt s wi th ou t i t b eco m in g i m m ed ia te ly
av ai labl e to th e m ark etas awho le , th us bl owi ng an y be ne fitto th e p art ic ip an ts . Andev enif i t wer e p os si bl e to di sc lo se no np ub li c in fo rm at io n t o a ll pl an pa rti ci pa nt s wi th ou t t ha t i nf orm at io n b eco m in g g en eral ly kno wn, t he pa rti ci pa nt s ha ve no leg al cla im

to it . The o nl y

way sel ect iv e d is cl os ur e co ul d b en efi t t he m wou ldbe if i t g av e p art ic ip an ts anadva nt ag e inth e m ark etov er n on -p art ic ip an ts , an d t he y are n oten ti tl edto th atadva nt ag e. ERISA d oe s n otrequi re t ha t fiduc ia rie s b e co rp or at e in si de rs , andth e ru le we ad op t p ut s p lan p art ic ip an ts in th e sa m e p os it io n t he y

wou ldbe in if o ut si de fiduc iarie s wer e u se d. Fo r th es e rea so ns , th e p la in ti ffs ha ve fai le d t o s ta te a vi ab le bre achof lo y al ty clai m , andth e d is tri ctco urt d idno t err in di sm is si ng th atpa rt o f th ei r co m pl ai nt . 2 0 V. The di stric t co urt’s jud gm en t d is m is si ng th e p la in ti ffs ’ th irdan d l as t
am en de d c om

pl ai ntis AFFIRMED
.
The district cour

t dismi ssed the thre e cla ims in C ounts 3, 5, and 6 bec ause the y are 2 0 derivative of the plaintiffs’ claims that the def endants bre ache d their duties of prude nce a nd loy alty . The plaintiffs do not deny that those claims ar e derivative, and our decision to aff

irm the dismiss al of the pr imary

claims means that the dismissal of those c laims is also due to be aff irmed. The district c ourt dismissed Count4 for its own lac k of merit, and be cause the plaintiffs have not contested that dismissal in this appea l, it is also aff irmed. See N orelus v. Denny ’s Inc., 628 F .3d 1270, 1297 (11th Cir. 2010). 40