UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF ILLINOIS 

 

Case No. 1:20-cv-02256 

Honorable Robert M. Dow, Jr. 

JOHN OSBORNE, BRIAN COLEMAN, EVE 

COLEMAN, HELEN MILLHOUSE, and 

MATTHEW D. BROWN, as participants in and 

on behalf of the Kraft Heinz Savings Plan, and on 

behalf of all others similarly situated, 

Plaintiffs, 

v. 

EMPLOYEE BENEFITS ADMINISTRATION 

BOARD OF KRAFT HEINZ, BERNARDO 

HEES, PAULO BASILIO, DAVID KNOPF, 

ANDREW STONER, RISHI NATARAJAN, 

YANG XU, JAMES LIU, GREG GUIDOTTI, 

CHRISTOPHER SKINGER, and VINCE 

GARLATI, 

Defendants. 

DEFENDANTS’ OPENING BRIEF IN SUPPORT OF THEIR 

MOTION TO DISMISS THE FIRST AMENDED COMPLAINT

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TABLE OF CONTENTS 

Page 

TABLE OF AUTHORITIES .......................................................................................................... ii

INTRODUCTION AND SUMMARY OF ARGUMENT ............................................................. 1

BACKGROUND ............................................................................................................................ 4

A. The Kraft Heinz Savings Plan ...................................................................................... 4

B. Defendants and their roles with respect to the Plan ...................................................... 5

C. Plaintiffs and their claims ............................................................................................. 5

ARGUMENT .................................................................................................................................. 7

I. Count I Fails to State a Claim for Breach of Fiduciary Duty under ERISA against 

the EBAB Defendants. ........................................................................................................ 7

A. Plaintiffs have failed to plausibly allege that a prudent fiduciary in the EBAB 

Defendants’ position could not have concluded that earlier disclosure would 

do more harm than good. ........................................................................................ 9

B. Plaintiffs have also failed to plausibly allege that Defendants actually possessed 

the alleged inside information prior to the February 2019 disclosure. ................. 13

C. Plaintiffs’ claim that ERISA required the EBAB Defendants to make disclosures 

that were not required by the securities laws conflicts with the objectives of 

those laws. ............................................................................................................. 15

D. Plaintiffs’ claim also fails because ERISA’s fiduciary duties apply only when a 

fiduciary acts in his fiduciary capacity, not when he acts in his corporate 

capacity. ................................................................................................................ 19

II. Plaintiffs have failed to state a claim for breach of the duty to monitor (Count II). ......... 22

CONCLUSION ............................................................................................................................. 23

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TABLE OF AUTHORITIES 

Page(s) 

CASES

Amgen Inc. v. Harris, 

136 S. Ct. 758 (2016) .............................................................................................................1, 9 

Ashcroft v. Iqbal, 

556 U.S. 662 (2009) .................................................................................................7, 12, 14, 15 

Bateman Eichler, Hill Richards, Inc. v. Berner, 

472 U.S. 299 (1985) .................................................................................................................16 

Bell Atl. Corp. v. Twombly, 

550 U.S. 544 (2007) ...................................................................................................................7 

Brosted v. Unum Life Ins. Co. of Am., 

421 F.3d 459 (7th Cir. 2005) ...................................................................................................18 

In re Burlington Coat Factory Sec. Litig., 

114 F.3d 1410 (3d Cir. 1997) (Alito, J.) ..................................................................................17 

In re Calpine Corp. ERISA Litig., 

No. 03-1685, 2005 WL 1431506 (N.D. Cal. Mar. 31, 2005) ..................................................23 

Catalfamo v. Sears Holding Corp., 

No. 17-5230, 2018 WL 10560956 (N.D. Ill. Aug. 21, 2018) ..................................................23 

Chiarella v. United States, 

445 U.S. 222 (1980) ...........................................................................................................17, 18 

Coulter v. Morgan Stanley & Co., Inc., 

753 F.3d 361 (2d Cir. 2014).....................................................................................................19 

Fifth Third Bancorp v. Dudenhoeffer, 

573 U.S. 409 (2014) ......................................................................................................... passim 

Flamm v. Eberstadt, 

814 F.2d 1169 (7th Cir. 1987) .................................................................................................17 

Gearren v. McGraw-Hill Cos., Inc., 

690 F. Supp. 2d 254 (S.D.N.Y. 2010), aff’d sub nom. Slaymon v. SLM Corp., 

506 F. App’x 61 (2d Cir. 2012) ...............................................................................................21 

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Graham v. Fearon, 

No. 16-2366, 2017 WL 1113358 (N.D. Ohio Mar. 24, 2017), aff’d, 721 F. 

App’x 429 (6th Cir. 2018) ...........................................................................................10, 12, 13 

Houssain v. Chenault, 

No. 15-08184 (S.D.N.Y. Sept. 28, 2017) (ORDER) ..............................................................3, 14 

Howell v. Motorola, Inc., 

633 F.3d 552 (7th Cir. 2011) .............................................................................................16, 19 

Jander v. Ret. Plans Comm. of IBM, 

No. 17-3518, 2020 WL 3412115 (2d Cir. June 22, 2020) .............................................9, 16, 19 

Jander v. Retirement Plans Committee of IBM, 

910 F.3d 620 (2d Cir. 2018)...........................................................................................9, 10, 12 

In re JPMorgan Chase & Co. ERISA Litig., 

No. 12-4027, 2016 WL 110521 (S.D.N.Y. Jan. 8, 2016), aff’d sub nom. Loeza 

v. John Does 1-10, 659 F. App’x 44 (2d Cir. 2016) ................................................................10 

Kirschbaum v. Reliant Energy, Inc., 

526 F.3d 243 (5th Cir. 2008) ...................................................................................................21 

Larson v. United Healthcare Ins. Co., 

723 F.3d 905 (7th Cir. 2013) ...................................................................................................19 

In re Lehman Bros. Sec. & ERISA Litig., 

113 F. Supp. 3d 745 (S.D.N.Y. 2015), aff’d sub nom. Rinehart v. Lehman 

Bros. Holdings Inc., 817 F.3d 56 (2d Cir. 2016) ...............................................................14, 22 

Lingis v. Motorola, Inc., 

649 F. Supp. 2d 861 (N.D. Ill. 2009), aff’d sub nom. Howell v. Motorola, Inc., 

633 F.3d 552 (7th Cir. 2011) ...................................................................................................21 

Loeza v. John Does 1-10, 

659 F. App’x 44 (2d Cir. 2016) .........................................................................................10, 13

Martone v. Robb, 

902 F.3d 519 (5th Cir. 2018) ...................................................................................................10 

SEC v. Materia, 

745 F.2d 197 (2d Cir. 1984).....................................................................................................17 

Matrixx Initiatives, Inc. v. Siracusano, 

563 U.S. 27 (2011) ...................................................................................................................17 

O’Day v. Chatila, 

774 F. App’x 708 (2d Cir. 2019) .......................................................................................10, 12 

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Pegram v. Herdrich, 

530 U.S. 211 (2000) .............................................................................................................3, 20 

Perrone v. Johnson & Johnson, 

No. 19-00923 (FLW), 2020 WL 2060324 (D.N.J. April 29, 2020) .......................10, 12, 20, 22 

Priddy v. Health Care Serv. Corp., 

870 F.3d 657 (7th Cir. 2017) ...................................................................................................20 

Ret. Plans Comm. of IBM v. Jander, 

140 S. Ct. 592 (2020) .................................................................................................2, 9, 17, 21 

Ret. Plans Comm. of IBM v. Jander, 

No. 18-1165, 2019 WL 3824687 (U.S. Aug. 13, 2019) ..........................................................16 

Rinehart v. Lehman Bros. Holdings Inc., 

817 F.3d 56 (2d Cir. 2016).................................................................................................11, 23 

Rogers v. Baxter Int’l Inc., 

710 F. Supp. 2d 722 (N.D. Ill. 2010) .......................................................................................21

Saumer v. Cliffs Nat. Res. Inc., 

853 F.3d 855 (6th Cir. 2017) .............................................................................................11, 13 

Singh v. RadioShack Corp., 

882 F.3d 137 (5th Cir. 2018) ...................................................................................................13 

In re SLM Corp. ERISA Litig., 

No. 08-4334, 2010 WL 3910566 (S.D.N.Y. Sept. 24, 2010 2010) .........................................21 

In re Target Corp. Sec. Litig., 

275 F. Supp. 3d 1063 (D. Minn. 2017) ....................................................................................10 

Varity Corp. v. Howe, 

516 U.S. 489 (1996) .................................................................................................................19 

White v. Marshall & Ilsley Corp., 

No. 10-311, 2011 WL 2471736 (E.D. Wis. June 21, 2011), aff’d, 714 F.3d 980 

(7th Cir. 2013) ..........................................................................................................................23 

Whitley v. BP, P.L.C., 

838 F.3d 523 (5th Cir. 2016) ........................................................................................... passim 

Wilson v. Edison Int’l, Inc., 

315 F. Supp. 3d 1177 (C.D. Cal. 2018) ...................................................................................10 

Yeftich v. Navistar, Inc., 

722 F.3d 911 (7th Cir. 2013) .....................................................................................................7 

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STATUTES

ERISA § 3(16)(A), 29 U.S.C. § 1002(16)(A) ..................................................................................5 

ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A) ..................................................................................5 

ERISA § 3(34), 29 U.S.C. § 1002(34) .............................................................................................4 

ERISA § 404(a)(1), 29 U.S.C. § 1104(a)(1) ....................................................................................7 

ERISA § 404(c), 29 U.S.C. § 1104(c) .............................................................................................4 

ERISA § 407(d)(3), 29 U.S.C. § 1107(d)(3) ....................................................................................4 

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1 

INTRODUCTION AND SUMMARY OF ARGUMENT 

This employer stock drop case is yet another misguided attempt to impose liability under 

the Employee Retirement Income Security Act (“ERISA”) on plan fiduciaries for allegedly failing 

to act on alleged inside corporate information to protect plan participants from market losses on 

employer stock held in their individual account retirement plans. While once in vogue, only one 

inapposite lower court ruling has allowed an ERISA stock drop case to proceed beyond a motion 

to dismiss since the Supreme Court unanimously established stringent pleading standards for such 

claims in Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (2014), and then confirmed those 

standards shortly thereafter in Amgen Inc. v. Harris, 136 S. Ct. 758 (2016). Plaintiffs’ complaint 

plainly fails to satisfy the stringent Dudenhoeffer standard and should be dismissed consistent with 

the overwhelming weight of authority. 

Like many employers, Kraft Heinz offers employees the option of investing in its stock 

through an “employee stock ownership plan” (ESOP), a retirement plan which can either stand 

alone, or, as here, is part of another individual account plan, such as a 401(k) plan. As the Supreme 

Court has explained, “Congress sought to encourage the creation of ESOPs,” which promote the 

dual ends of securing capital for American businesses and giving workers an ownership stake in 

their companies. Dudenhoeffer, 573 U.S. at 424-25. 

In February 2019, the market price of Kraft Heinz stock fell following the Company’s 

public disclosure of certain negative financial information. FAC ¶ 2. Like many of the earlier 

ERISA stock drop cases, Plaintiffs brought this putative class action alleging that the Defendants 

– all of whom are corporate officers or hold other high-ranking positions – violated ERISA’s 

fiduciary responsibility provisions by failing to act on the basis of alleged inside corporate 

information to protect participants from that stock decline. Plaintiffs assert that the market value 

of Kraft Heinz stock was “artificially inflated” prior to disclosure of such information and that 

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Defendants had an ERISA fiduciary obligation to cause Kraft Heinz to publicly disclose that 

negative information earlier and thereby “deflate” the Company’s stock price to its “true” value 

and prevent plan participants from continuing to buy at allegedly inflated prices. FAC ¶¶ 89, 101-

02. Such an earlier disclosure, of course, would not have protected plan participants from the 

market decline that ultimately occurred; Plaintiffs acknowledge that such disclosure would have 

resulted in a significant decrease in the company’s stock price, and thus a decline in value of the 

Plan’s pre-existing Kraft Heinz stock holdings. Nor do they maintain that Kraft Heinz had any 

obligation under the federal securities laws to disclose the alleged inside information earlier than 

the disclosure that was made in February 2019. Nonetheless, they assert that Defendants had an 

ERISA-based fiduciary disclosure duty to, in effect, correct the market value of the Company’s 

stock without regard to the disclosure requirements of the federal securities laws. 

Plaintiffs’ primary claim (Count I) fails on multiple grounds. First, Plaintiffs’ disclosure 

claim fails to meet the pleading requirements Dudenhoeffer and its progeny established for such 

claims. To state an actionable claim for relief, a plaintiff must “plausibly allege[] that a prudent 

fiduciary in the defendant’s position could not have concluded that ... publicly disclosing negative 

information would do more harm than good to the fund,” and also establish that “an ERISA-based 

obligation ... to disclose inside information to the public” does not “conflict with the complex 

insider trading and corporate disclosure requirements imposed by the federal securities laws or 

with the objectives of those laws.” Ret. Plans Comm. of IBM v. Jander, 140 S. Ct. 592, 594 (2020) 

(quoting Dudenhoeffer, 573 U.S. at 429-30) (emphasis added). Given the Plan’s pre-existing Kraft 

Heinz stock holdings and Plaintiffs’ acknowledgement that public disclosure would have caused 

the value of that stock to decline, “a prudent fiduciary could very easily conclude that”1 disclosing 

 1 Whitley v. BP, P.L.C., 838 F.3d 523, 529 (5th Cir. 2016) 

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3 

the negative news earlier “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.” 

Dudenhoeffer, 573 U.S. at 430. Thus, as virtually all complaints before it, Plaintiffs’ Complaint 

fails the “more harm than good” prong of the Dudenhoeffer test. 

Second, even if earlier disclosure theoretically could satisfy the “more harm than good” 

standard here (and it cannot), Plaintiffs’ Complaint fails to plausibly allege that the Defendants 

who allegedly failed to cause that early disclosure – the Employee Benefits Administration Board 

(“EBAB”) and its Members – actually possessed any alleged inside information before it was 

disclosed. Without such knowledge, the EBAB Defendants cannot be held liable for failing to 

disclose it, and Plaintiffs’ claim fails at the threshold. See Order at *11-12, Houssain v. Chenault, 

No. 15-08184 (S.D.N.Y. Sept. 28, 2017) (dismissing claim where factual allegations about 

defendants’ alleged inside information were “sparse” and “nearly non-existent”). 

Third, the ERISA-based corporate disclosure regime that Plaintiffs advocate would conflict 

with the objectives of the federal securities laws that govern such disclosures, as the SEC recently 

explained. Consequently, under Dudenhoeffer, Defendants face no ERISA exposure for failing to 

cause the disclosures at issue. 

Fourth, ERISA regulates fiduciaries only when they act in their fiduciary capacity with 

respect to a plan, and not when they act in their separate corporate capacity. See Pegram v. 

Herdrich, 530 U.S. 211 (2000). Here, any inside knowledge that Defendants allegedly possessed 

was acquired in their capacity as corporate officers, and any decisions concerning whether to 

publicly disclose that information were made in a corporate capacity as well. Since they were not 

acting as fiduciaries in allegedly taking (or failing to take) the actions at issue, Plaintiffs’ ERISA 

fiduciary breach claims necessarily fail. 

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Finally, Plaintiffs’ remaining claim (Count II)—a derivative claim for failure to monitor 

brought against those corporate officers with responsibility for appointing members of the 

EBAB—fails both because Plaintiffs’ underlying claim against the EBAB and its members fails 

and because their monitoring allegations are wholly conclusory.

BACKGROUND 

A. The Kraft Heinz Savings Plan 

General structure. This case concerns the Kraft Heinz Savings Plan (the “Plan”), a 

defined contribution retirement plan (also known as an individual account plan). FAC ¶ 36. In 

such plans, the benefits that participants receive are based solely on the amount of money 

contributed to their individual accounts, plus any earnings and less any losses or allocated 

expenses. ERISA § 3(34), 29 U.S.C. § 1002(34). The Plan gives participants control over the 

investment of the assets in their accounts among the various investment options under the Plan. 

See FAC ¶ 36; ERISA § 404(c), 29 U.S.C. § 1104(c). 

The Company Stock Fund. Kraft Heinz was formed by the 2015 merger of the H.J. Heinz 

Company and Kraft Foods, Inc. FAC ¶ 45. Its stock trades on the NASDAQ exchange in an 

efficient market. FAC ¶ 13. The investment options available to participants in the Plan include 

the Company Stock Fund, which allows participants to invest in Kraft Heinz stock. FAC ¶ 36. 

 The inclusion of the ESOP in the Plan renders it an “eligible individual account plan” under 

ERISA § 407(d)(3), 29 U.S.C. § 1107(d)(3). As a result, the Plan can hold Kraft Heinz stock under 

statutory exemptions that free the Plan’s fiduciaries from ERISA’s diversification requirement, the 

prudence standard to the extent that it requires diversification, and other ERISA limitations on the 

holding of company stock. See Dudenhoeffer, 573 U.S. at 416-17. 

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B. Defendants and their roles with respect to the Plan 

Defendants fall into two categories. The first category includes the Plan’s Employee 

Benefits Administration Board (EBAB) and the EBAB’s members during the putative class period, 

all of whom were Kraft Heinz officers or employees: Andrew Stoner, Rishi Natarajan, Yang Xu, 

James Liu, Greg Guidotti, Christopher Skinger, and Vince Garlati (collectively, the “EBAB 

Defendants”). FAC ¶¶ 1, 26, 30-35. The second category consists of senior corporate officers 

who had the authority to appoint and remove members of the EBAB during that time frame: former 

CEO Bernardo Hees, CFO Paulo Basilio, and former CFO David Knopf (collectively, the 

“Executive Defendants”). FAC ¶¶ 27-29, 41. 

The EBAB is the Plan’s administrator within the meaning of ERISA § 3(16)(A), 29 U.S.C. 

§ 1002(16)(A). FAC ¶ 39. It is “responsible for selecting the investment options in which 

participants elect to invest their Plan accounts.” FAC ¶ 38. Because they are charged with the 

administration of the Plan and responsibility for carrying out its provisions, the EBAB Defendants 

are alleged to be Plan fiduciaries under ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A). FAC ¶¶ 26, 

30-35. 

C. Plaintiffs and their claims 

Plaintiffs are alleged to be participants in the Plan. FAC ¶¶ 21-25. They seek to represent 

a class of persons “who participated in the Plan and whose individual accounts purchased and/or 

held Kraft Heinz stock at any time between May 4, 2017, through February 21, 2019, and who 

were damaged thereby.” FAC ¶ 104. Plaintiffs claim to have suffered losses after February 21, 

2019, when the price of Kraft Heinz stock fell by approximately 27%. FAC ¶¶ 5, 75. Plaintiffs 

attribute the fall to the public disclosure of the following information made by Kraft Heinz on that 

date: (i) a $15.4 billion impairment of goodwill and other intangible assets to account for the 

declining market share of certain Kraft Heinz brands; (ii) a $25 million increase to the costs of 

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products sold taken after an internal investigation that followed an SEC subpoena into the 

company’s procurement function; and (iii) plans for a smaller dividend than Kraft Heinz had paid 

in the past. FAC ¶¶ 2-4, 71-74. Plaintiffs allege that Defendants knew or should have known prior 

to February 21 that Kraft Heinz would have to make these disclosures and that its stock price 

would decline when it did so. FAC ¶¶ 76-77. According to Plaintiffs, before the disclosures, the 

price of Kraft Heinz stock was “artificially inflated,” in that the price was higher than it would 

have been if the information disclosed on February 21 had been previously disclosed and 

incorporated into the stock price. FAC ¶ 82. 

In their two-count First Amended Complaint, Plaintiffs claim that Defendants breached 

fiduciary duties imposed by ERISA. FAC ¶¶ 114-28. In Count I, Plaintiffs assert that the EBAB 

Defendants breached fiduciary duties imposed by ERISA in their management of the Plan. FAC 

¶¶ 114-21. Plaintiffs claim that “Defendants had the power to cause corrective public disclosures 

to be made through the Company’s SEC filings that would have corrected the stock’s artificially 

inflated price and ensured that Kraft Heinz stock was a prudent investment,” and that they breached 

fiduciary duties imposed by ERISA by failing to do so. FAC ¶ 89; see FAC ¶¶ 90-103. 

In Count II, Plaintiffs claim that the Executive Defendants breached a fiduciary duty to 

monitor the EBAB and its members by failing to remove the EBAB’s members who were allegedly 

“allowing Plan participants to be harmed by the continued investment of their retirement funds in” 

Kraft Heinz stock. FAC ¶ 127. 

 Plaintiffs originally filed this case in the U.S. District Court for the Western District of 

Pennsylvania. See Dkt. 61. It was transferred to this Court on April 9, 2020. See Dkt. 62. 

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ARGUMENT 

Dismissal is warranted under Rule 12(b)(6) unless the complaint pleads facts sufficient to 

state a claim that is facially plausible, meaning “above the speculative level.” Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 555–56 (2007) (citations omitted). “Threadbare recitals of the elements 

of a cause of action, supported by mere conclusory statements, do not suffice,” because courts “are 

not bound to accept as true a legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 

556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “‘[N]aked assertion[s]’ devoid of 

‘further factual enhancement’” should likewise be disregarded. Id. (quoting Twombly, 550 U.S. at 

557); Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013) (The Court “need not accept as 

true statements of law or unsupported conclusory factual allegations.”). Dismissal is also 

warranted “when the allegations in a complaint, however true, could not raise a claim of 

entitlement to relief” because of a deficiency in the plaintiff’s legal theory. Twombly, 550 U.S. at 

558 (citations omitted). 

I. Count I Fails to State a Claim for Breach of Fiduciary Duty under ERISA against the 

EBAB Defendants. 

An ERISA fiduciary must “discharge his duties with respect to a plan solely in the interest 

of the [plan’s] participants and beneficiaries,” and “with the care, skill, prudence, and diligence 

under the circumstances then prevailing that a prudent [person] acting in a like capacity and 

familiar with such matters would use in the conduct of an enterprise of a like character and with 

like aims.” ERISA § 404(a)(1), 29 U.S.C. § 1104(a)(1). Plaintiffs allege that the EBAB 

Defendants, based on their position as alleged corporate insiders, knew or should have known of 

the negative financial information that Kraft Heinz ultimately revealed in February 2019 prior to 

its public disclosure, and that they breached their ERISA duties of prudence and loyalty by failing 

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to cause this same negative information to be disclosed earlier in order to “correct[] the stock’s 

artificially inflated price.” FAC ¶ 89. Plaintiffs are mistaken. 

In Dudenhoeffer, the Supreme Court directed the lower courts to “fully” consider “one 

important mechanism for weeding out meritless” ESOP stock drop cases: “the motion to dismiss 

for failure to state a claim.” 573 U.S. at 425. The Supreme Court instructed: to “divide the 

plausible sheep from the meritless goats” at the pleading stage, lower courts should conduct a 

“careful, context-sensitive scrutiny of a complaint’s allegations.” Id. The Court went on to 

prescribe a high pleading bar for plaintiffs bringing claims based on an alleged failure to act on 

inside corporate information: 

To state a claim for breach of the duty of prudence on the basis of inside 

information, 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. at 428. 

Plaintiffs’ fiduciary breach claim against the EBAB Defendants does not meet that high 

standard and should be dismissed for each of the following independent reasons. First, Plaintiffs 

do not plausibly allege that a prudent fiduciary could not have concluded that earlier disclosure of 

the alleged inside information would do more harm than good. Second, Plaintiffs do not plausibly 

allege that the EBAB Defendants possessed the alleged inside information at issue before it was 

disclosed in February 2019. Third, the ERISA-based disclosure duty that Plaintiffs advocate is 

inconsistent with the federal securities disclosure laws and the objectives of those laws—as the 

SEC has recently explained. Finally, Plaintiffs’ theory that Defendants should have caused Kraft 

Heinz to publicly disclose any alleged inside information is inconsistent with extensive case law 

holding that ERISA regulates fiduciaries only when they act in their fiduciary capacity with respect 

to a plan, and not when they act as a corporate executive. 

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A. Plaintiffs have failed to plausibly allege that a prudent fiduciary in the EBAB 

Defendants’ position could not have concluded that earlier disclosure would 

do more harm than good. 

To state a claim under Dudenhoeffer, Plaintiffs must propose an “alternative [course of] 

action” that is consistent with the federal securities laws and “‘plausibly allege[]’ that a prudent 

fiduciary in the same position ‘could not have concluded’ that the alternative action ‘would do 

more harm than good.’” Amgen, 136 S. Ct. at 760 (quoting Dudenhoeffer, 573 U.S. at 429–30). 

Plaintiffs’ pleading burden is “significant,” in that the alternative course of action must be “so 

clearly beneficial that a prudent fiduciary could not conclude that it would be more likely to harm 

the fund than to help it.” Whitley, 838 F.3d at 529 (emphasis in original). Plaintiffs here propose 

a single alternative course of action: that the EBAB Defendants should have caused the 

information that was disclosed on February 2019 to be disclosed earlier (although they do not say 

when). FAC ¶ 89. While they acknowledge that such earlier disclosure would have resulted in a 

significant decline in the market price of Kraft Heinz stock, they assert that such harm will always 

be outweighed by the harm resulting from a delayed disclosure. Plaintiffs have not satisfied their 

burden. 

Plaintiffs’ conclusory allegation that the earlier disclosure of negative information will 

always be less harmful than later disclosure has been rejected by every court to consider it, with 

one exception that is inapplicable here: the Second Circuit’s opinion in Jander v. Retirement Plans 

Committee of IBM, 910 F.3d 620 (2d Cir. 2018). That opinion was vacated by a unanimous 

Supreme Court earlier this year. See Jander, 140 S. Ct. 592.2

 And that case is readily distinguished 

from this case, because the Second Circuit relied on a host of factual allegations not present here. 

 2

 On June 22, 2020, following supplemental briefing on remand from the Supreme Court, the Second Circuit 

reinstated its original judgment pursuant to its original opinion, finding that the defendants-appellees had forfeited 

certain arguments that were made before the Supreme Court and declining to consider those arguments. See Jander

v. Ret. Plans Comm. of IBM, No. 17-3518, 2020 WL 3412115 (2d Cir. June 22, 2020). 

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In Jander, the Second Circuit principally relied on what it took to be well-pleaded allegations that 

the disclosure of a known impairment of IBM’s microelectronics unit was, in fact, inevitable, 

because the plaintiffs alleged that: (a) the impairment should have been recognized earlier under 

generally accepted accounting principles; (b) IBM was likely to sell the business unit and thus to 

disclose the impairment in connection with the sale; and (c) a likely sale was imminent and that 

third parties were, in fact, performing financial due diligence on the value of the microelectronics 

unit. See 910 F.3d at 628-30. No such facts have been alleged here. The Second Circuit has itself 

distinguished Jander and affirmed dismissal in a case where the plaintiffs had failed to plausibly 

allege that the disclosure was inevitable. See O’Day v. Chatila, 774 F. App’x 708, 711 (2d Cir. 

2019). 

Plaintiffs offer no well-pleaded allegations to support their theory on the particular facts of 

this case. Rather, they rely on conclusory assertions about general economic principles. See FAC 

¶ 91. Such bare allegations of “generalized economic and reputational fallout” without 

“particularized facts in support of why earlier disclosure would have lessened the impact on the 

ERISA stock is a death-knell to this particular theory.” Perrone v. Johnson & Johnson, No. 19-

00923 (FLW), 2020 WL 2060324, at *19 (D.N.J. April 29, 2020) (“[C]ourts have routinely 

rejected similar arguments” as “too conclusory to satisfy Dudenhoeffer’s standard.” (citing In re 

Allergan ERISA Litig., No. 17-1554, 2018 WL 8415676, at *5 (D.N.J. July 2, 2018) (collecting 

cases)).3

 See also, e.g., Martone v. Robb, 902 F.3d 519, 526-27 (5th Cir. 2018) (rejecting as “too 

 3 See also In re Target Corp. Sec. Litig., 275 F. Supp. 3d 1063, 1087 (D. Minn. 2017) (“Plaintiffs may not simply 

allege that because a stock price drop was inevitable, ipso facto almost any legal alternative action aimed at softening 

losses to participants would do more good than harm.”); In re JPMorgan Chase & Co. ERISA Litig., No. 12-4027, 

2016 WL 110521, at *4 (S.D.N.Y. Jan. 8, 2016) (explaining that “[t]hese assertions are not particular to the facts of 

this case and could be made by plaintiffs in any case asserting a breach of ERISA’s duty of prudence”), aff’d sub nom.

Loeza v. John Does 1-10, 659 F. App’x 44 (2d Cir. 2016); Wilson v. Edison Int’l, Inc., 315 F. Supp. 3d 1177, 1193 

(C.D. Cal. 2018) (providing samples of generic allegations in complaint that could apply to any similar claim); 

Graham v. Fearon, No. 16-2366, 2017 WL 1113358, at *6 (N.D. Ohio Mar. 24, 2017) (explaining plaintiff’s claims 

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11 

generic” plaintiff’s assertion that “the longer a fraud of a public company like Whole Foods 

persists, the harsher the correction is likely to be when that fraud is finally revealed,” and noting 

that “Martone’s counsel”—who also represents Plaintiffs here—“has made essentially the same 

argument for early disclosure in ERISA actions against other companies in other jurisdictions”);

Saumer v. Cliffs Nat. Res. Inc., 853 F.3d 855, 864 (6th Cir. 2017) (rejecting complaint for failing 

to plausibly allege that a prudent fiduciary could not have concluded that disclosure would do more 

harm than good); Whitley, 838 F.3d at 529 (same); Rinehart v. Lehman Bros. Holdings Inc., 817 

F.3d 56, 67-68 (2d Cir. 2016) (affirming dismissal based on failure to explain in non-conclusory 

fashion how an investigation would have uncovered inside information). 

Plaintiffs’ theory is also contrary to Dudenhoeffer’s clear directive that courts must 

consider the impact of an earlier disclosure on a plan’s pre-existing holdings of company stock in 

applying the “more harm than good” standard. As the Supreme Court explained: 

[L]ower courts faced with such claims should also consider whether the complaint 

has plausibly alleged that a prudent fiduciary in the defendant’s position could not 

have concluded that ... 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. 

573 U.S. at 429–30 (citations omitted) (emphasis added). Plaintiffs’ proposed alternative course 

of action plainly would have subjected the Plan to this very harm, as Plaintiffs themselves concede. 

E.g., FAC ¶ 89 (alleging that disclosure “would have corrected the stock’s artificially inflated 

price”). The price drop would have reduced the value of the Plan’s significant existing holdings 

of Kraft Heinz stock, thereby harming the Plan, the participants whose accounts held the stock, 

and any participant who sold Kraft Heinz stock between the unspecified date when Plaintiffs 

believe the disclosure should have occurred and the date when it in fact occurred. 

 

had failed to meet Dudenhoeffer’s requirement of “more than assumptions and speculation to show that a proposed 

alternative meets both prongs of the test”), aff’d, 721 F. App’x 429 (6th Cir. 2018). 

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Given Plaintiffs’ acknowledgement that any purported corrective disclosures would have 

caused a drop in value, regardless of the timing, the claim cannot satisfy Dudenhoeffer. See 

Perrone, 2020 WL 2060324, at *19 (explaining that a drop in value, without more, fails 

Dudenhoeffer). See also, e.g., Whitley, 838 F.3d at 529 (where a plaintiff’s proposed action “would 

likely lower the stock price[,] ... a prudent fiduciary could very easily conclude that such actions 

would do more harm than good”) (emphasis in original); Graham, 721 F. App’x at 436 (“Plaintiffs’ 

argument does not account for the risk of market overreaction to such a disclosure, resulting in a 

decline worse than actually warranted. Nor does Plaintiffs’ proposal factor in the potential harm 

to ESOP participants planning to sell their [] stock during the class period.”). In other words, 

precisely because a prudent fiduciary could conclude that actively attempting to collapse the value 

of an asset in which the plan is heavily invested would do more harm than good, Plaintiffs’ 

allegations fail the Dudenhoeffer standard. 

Moreover, Plaintiffs have not plausibly alleged any facts ruling out the possibility that 

intervening events might have softened the blow from the supposedly inevitable disclosure, or 

even removed the need to make the disclosure at all. See Iqbal, 556 U.S. at 678 (courts should 

disregard “‘naked assertion[s]’ devoid of ‘further factual enhancement’” (quoting Twombly, 550 

U.S. at 557)).4

 In either case, a prudent fiduciary could well have concluded that earlier disclosure 

would hurt the plan more than it would help it. And prudent fiduciaries are well aware that new 

developments often dilute, cancel out, or counterbalance what had seemed to be purely bad news. 

For this reason, too, “a prudent fiduciary could conclude” that “disclos[ing] inside information to 

 4

 By contrast, in Jander, the Second Circuit relied heavily on its conclusion that the complaint there adequately 

pleaded that the disclosure was indeed inevitable “because IBM was likely to sell the [microelectronics] business and 

would be unable to hide its overvaluation from the public at that point.” See 910 F.3d at 630. The Second Circuit 

noted that “[t]his allegation is particularly important.” Id. And it later affirmed dismissal of an ERISA complaint that 

failed to plausibly allege that the disclosure was indeed inevitable. See O’Day, 774 F. App’x at 711. 

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the market to deflate the stock price ... would have done more to harm the Plan than to help it.” 

Singh v. RadioShack Corp., 882 F.3d 137, 148-49 (5th Cir. 2018); see Graham, 721 F. App’x at 

437 (“Although earlier disclosure may have ameliorated some harm to the Fund, that course of 

action was not so clearly beneficial that a prudent fiduciary could not conclude that it would be 

more likely to harm the fund than to help it.”); Loeza v. John Does 1-10, 659 F. App’x at 46 

(affirming dismissal of ERISA fiduciary duty claim filed by counsel for Plaintiffs here with similar 

allegations as “wholly conclusory” and insufficient under Dudenhoeffer); Saumer, 853 F.3d at 864 

(rejecting claim under Dudenhoeffer because the “fiduciaries could have concluded that divulging 

inside information ... would have collapsed Cliffs’s stock price, hurting participants already 

invested in the ESOP”). Just as in every other case to consider similar allegations of delayed 

disclosure, Plaintiffs have not carried their burden of “proposing an alternative course of action so 

clearly beneficial that a prudent fiduciary could not conclude that it would be more likely to harm 

the fund than to help it.” Whitley, 838 F.3d at 529 (emphasis in original). 

B. Plaintiffs have also failed to plausibly allege that Defendants actually possessed 

the alleged inside information prior to the February 2019 disclosure. 

Plaintiffs’ assertion that Defendants should have disclosed the information earlier than 

February 2019 rests entirely on Plaintiffs’ speculation that the EBAB Defendants knew that 

information earlier. See, e.g., FAC ¶ 82. For example, Plaintiffs speculate that certain “members 

of the EBAB were ... well-positioned to know that Kraft Heinz stock was materially overvalued” 

because they held marketing, finance, or accounting roles. FAC ¶ 84; see FAC ¶¶ 84-86. Yet 

Plaintiffs do not allege what information the EBAB and its members knew prior to the February 

2019 disclosure, when or how they learned such information, or when they supposedly should 

have disclosed that information. Indeed, Plaintiffs effectively concede that the company’s 

financial disclosures satisfied GAAP, making it particularly implausible that a reasonable fiduciary 

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would question them. FAC ¶ 99. Having failed to provide the “further factual enhancement” 

required by Iqbal and Twombly, the Complaint consists solely of “mere conclusory statements”

and “naked assertion[s],” which “do not suffice.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 

U.S. at 557). Courts have routinely rejected such conclusory allegations as insufficient under 

Dudenhoeffer. See In re Lehman Bros. Sec. & ERISA Litig., 113 F. Supp. 3d 745, 762 (S.D.N.Y. 

2015) (“[P]laintiffs must be able to allege with specificity how a hypothetical investigation would 

have elucidated risks allegedly known only to corporate insiders or otherwise would have 

alleviated the purported harm to ESOP beneficiaries caused by the alleged breach”), aff’d sub nom.

Rinehart, 817 F.3d at 67 (“[T]he TCAC nowhere explains in a non-conclusory fashion how

plaintiffs’ hypothetical investigation would have uncovered the alleged inside information”); see 

also Order at *11-12, Houssain, No. 15-08184 (dismissing claim that defendants had inside 

knowledge of ongoing business negotiations where plaintiffs’ “supporting factual allegations are 

nearly non-existent”). 

Plaintiffs have failed to plausibly allege that the EBAB Defendants possessed the inside 

information ultimately disclosed in February 2019 as of May 4, 2017, the start date of the putative 

class period. See, e.g., FAC ¶ 82 (conclusory assertion that Defendants knew “[t]hroughout the 

Class Period”). Plaintiffs apparently picked that date because it coincides with the date on which 

Kraft Heinz filed its Form 10-Q for the quarter ended April 1, 2017. FAC ¶ 53 But they fail to tie 

that date to their allegations of the EBAB Defendants’ supposed fiduciary breach or knowledge of 

negative financial information. In short, they offer no allegations plausibly showing either that the 

EBAB Defendants possessed the information at issue on that date or that the EBAB Defendants 

were obliged to disclose it then. 

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The Federal Rules of Civil Procedure “do[] not unlock the doors of discovery for a plaintiff 

armed with nothing more than conclusions.” Iqbal, 556 U.S. at 678-79. In the absence of plausible 

allegations on these points, Plaintiffs have failed to state a claim for breach of fiduciary duty. 

C. Plaintiffs’ claim that ERISA required the EBAB Defendants to make 

disclosures that were not required by the securities laws conflicts with the 

objectives of those laws. 

Count I separately fails because Plaintiffs seek to derive a duty to disclose nonpublic 

corporate information from ERISA, but ERISA does not modify, supplant, or supersede the 

complex disclosure regime established by the federal securities laws and regulated by the SEC. 

Plaintiffs’ theory is that ERISA required the EBAB Defendants to “cause corrective public 

disclosures to be made through the Company’s SEC filings” earlier than February 2019. FAC 

¶ 89. Yet Plaintiffs do not allege any facts showing that the federal securities laws required an 

earlier disclosure. See FAC ¶ 101 (asserting, in conclusory fashion, only that “the issuance of a 

corrective disclosure was arguably required by the federal securities laws” (emphasis added)); id.

¶ 102 (“even if Defendants determined that disclosure was not required by the securities laws, 

disclosure was certainly not prohibited by them”). Plaintiffs’ claim rests on the shaky foundation 

that ERISA can require fiduciaries to cause disclosures of material nonpublic information about 

public companies even where the federal securities laws do not require disclosure. Plaintiffs are 

wrong as a matter of law. 

In Dudenhoeffer, the Supreme Court instructed that “courts should consider the extent to 

which an ERISA-based obligation ... to disclose inside information to the public could conflict 

with the complex insider trading and corporate disclosure requirements imposed by the federal 

securities laws or with the objectives of those laws.” 573 U.S. at 429 (citations omitted). The 

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Court added that “[t]he U.S. Securities and Exchange Commission has not advised us of its views 

on these matters, and we believe those views may well be relevant.” Id.5

Over five years after Dudenhoeffer, the SEC had the opportunity to provide the Supreme 

Court with an official statement of its views on this matter: “In the view of the SEC and the United 

States, it would generally be inconsistent with the objectives of the securities laws to impose an 

ERISA-based duty to publicly disclose inside information in the absence of a securities-laws duty.” 

U.S. Br. 18, Ret. Plans Comm. of IBM v. Jander, No. 18-1165, 2019 WL 3824687 (U.S. Aug. 13, 

2019) (“U.S. Jander Br.”).6

 The Department of Labor, which has principal administrative 

authority over ERISA, “concurs in the conclusion that ERISA does not impose a duty to disclose 

in those circumstances.” Id. The brief filed by the SEC, the Solicitor General, and the Department 

of Labor in the Jander case explains that “[t]he federal securities laws already impose a 

comprehensive disclosure regime governing when, how, and by whom such disclosures must be 

made when the stock is publicly traded.” Id. at 13. This “comprehensive scheme of public 

disclosure rules [is] designed to protect investors.” Id. at 11; see also Bateman Eichler, Hill 

Richards, Inc. v. Berner, 472 U.S. 299, 315 (1985). Accordingly, “[t]here is no sound reason to 

adopt a different set of disclosure rules to protect those investors who are participants in an ESOP.” 

 5

 Even before Dudenhoeffer, the Seventh Circuit held that “violation of ERISA’s disclosure requirement ... 

requires evidence of either an intentionally misleading statement, or a material omission where the fiduciary’s silence 

can be construed as misleading.” Howell v. Motorola, Inc., 633 F.3d 552, 571 (7th Cir. 2011); see also id. (“To the 

extent that [the plaintiffs] argue that the defendants negligently misrepresented information ... in their SEC filings, 

that negligence would not be enough to show a violation of ERISA’s disclosure duty. ... [T]his court has required 

some deliberate misstatement before it finds a violation of the ERISA duty to disclose material information.”). 

Plaintiffs offer no allegations that could satisfy that standard. 

6

 The SEC recently filed the same brief with the Second Circuit on remand from the Supreme Court. See Ltr. of 

SEC, Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. June 1, 2020), ECF No. 116 (attaching brief filed on 

behalf of the United States in Supreme Court). The Second Circuit declined to consider the argument because the 

defendants there had failed to preserve it. See Jander v. Ret. Plans Committee of IBM, No. 17-3518, 2020 WL 

3412115, at *1 (2d Cir. June 22, 2020). Here, by contrast, the argument is squarely presented. 

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U.S. Jander Br. 11. Thus, absent a separately mandated securities law disclosure, Plaintiffs’ plea 

for earlier disclosure should be rejected. 

The securities laws and regulations enacted by Congress and the SEC “do not create an 

affirmative duty to disclose any and all material information.” Matrixx Initiatives, Inc. v. 

Siracusano, 563 U.S. 27, 44 (2011); see also Chiarella v. United States, 445 U.S. 222, 235 (1980). 

“Except for specific periodic reporting requirements (primarily the requirements to file quarterly 

and annual reports), there is no general duty on the part of a company to provide the public with 

all material information. Thus, possession of material nonpublic information alone does not create 

a duty to disclose it.” In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1432 (3d Cir. 

1997) (Alito, J.) (citations omitted). The securities laws recognize that companies often have valid 

reasons for maintaining the secrecy of inside information, and that the decision of whether to 

disclose such information should generally be left to market forces and private decisionmakers 

rather than courts and regulators.7

The Supreme Court and the SEC have made a deliberate judgment that persons who invest 

in publicly traded stocks, including through ERISA-governed plans, should be protected by these 

“complex insider trading and corporate disclosure requirements.” Dudenhoeffer, 573 U.S. at 429. 

The SEC has cautioned that the imposition of an ERISA-based duty to disclose would conflict 

with these objectives. See Jander, 140 S. Ct. at 595-96. “There is no sound reason to adopt a 

different set of disclosure rules to protect those investors who also happen to be investors through 

an ESOP, or the ESOP itself.” U.S. Jander Br. 22. 

 7 See, e.g., Flamm v. Eberstadt, 814 F.2d 1169, 1177 (7th Cir. 1987) (“[S]ilence pending settlement of the price 

and structure of a [merger] deal is beneficial to most investors, most of the time”); SEC v. Materia, 745 F.2d 197, 199 

(2d Cir. 1984) (“Because even a hint of an upcoming tender offer may send the price of the target company’s stock 

soaring, information regarding the identity of a target is extremely sensitive and zealously guarded.”). 

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As the Supreme Court suggested in Dudenhoeffer, courts should heed the SEC’s views on 

this matter and refrain from interpreting ERISA to impose corporate disclosure requirements that 

modify, supplant, or supersede “the careful plan that Congress has enacted for regulation of the 

securities markets.” Chiarella, 445 U.S. at 235. Because Plaintiffs do not assert (much less

plausibly allege) that the securities laws imposed a duty to disclose the information at issue here 

earlier than it was in fact disclosed, their fiduciary duty claim fails as a matter of law. 

Plaintiffs’ claim that the EBAB Defendants should have made earlier disclosures fails for 

an additional reason: the EBAB Defendants that Plaintiffs accuse of violating their fiduciary duties 

by failing to cause the disclosure of information earlier had no direct authority to cause Kraft Heinz 

to make SEC disclosures. FAC ¶ 120 (distinguishing EBAB Defendants from “personnel with 

disclosure responsibilities”). Thus, even if ERISA could be read to impose disclosure duties on 

fiduciaries who, in their corporate capacity, had such securities law obligations, no claim could be 

asserted against the EBAB Defendants because they had no such duties. 

Apparently recognizing that the EBAB Defendants had no separate securities law 

disclosure obligations, Plaintiffs assert that “Defendants who were members of the EBAB should 

have tried to cause to be disclosed, through the appropriate personnel, truthful or corrective 

disclosures.” FAC ¶ 43. But this assertion falls short of a plausible factual allegation that the 

EBAB Defendants’ action (or alleged inaction) resulted in any actionable harm to the Plaintiffs. 

Indeed, Plaintiffs’ suggestion that such entreaties would have resulted in an earlier disclosure is 

nothing more than rank speculation and cannot satisfy Iqbal’s requirements. See Brosted v. Unum 

Life Ins. Co. of Am., 421 F.3d 459, 465 (7th Cir. 2005) (“To state a claim for breach of fiduciary 

duty under ERISA, the plaintiff must establish ... that the breach caused harm to the plaintiff.”) 

(citation omitted). The claim against the EBAB Defendants should therefore be dismissed.

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D. Plaintiffs’ claim also fails because ERISA’s fiduciary duties apply only when 

a fiduciary acts in his fiduciary capacity, not when he acts in his corporate 

capacity. 

ERISA recognizes that plan fiduciaries may also serve in other roles, and it regulates them 

only when they act in their capacity as fiduciaries with respect to the plan. See, e.g., Howell, 633 

F.3d at 562 (“Courts have been careful to respect the distinction between the capacity of fiduciary 

or plan administrator, on the one hand, and employer or plan author on the other.”). As many 

courts have held, ERISA does not regulate fiduciaries’ conduct in their capacity as corporate 

officers rather than ERISA fiduciaries, such as when they make public disclosures of corporate 

information. Because the EBAB Defendants do not act as fiduciaries when they participate in 

corporate decision-making about disclosures of company information, Plaintiffs’ ERISA claim 

fails on this independent ground.8

ERISA provides that “a ‘person is a fiduciary with respect to a plan,’ and therefore subject 

to ERISA fiduciary duties, [only] ‘to the extent’ that he or she ‘exercises any discretionary 

authority or discretionary control respecting management’ of the plan, or ‘has any discretionary 

authority or discretionary responsibility in the administration’ of the plan.” Varity Corp. v. Howe, 

516 U.S. 489, 498 (1996) (quoting ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A)); see also Larson 

v. United Healthcare Ins. Co., 723 F.3d 905, 917 (7th Cir. 2013); Howell, 633 F.3d at 555. 

“‘[U]nder this definition, a person may be an ERISA fiduciary with respect to certain matters but 

not others’; fiduciary status exists only ‘to the extent’ that the person ‘has or exercises the described 

authority or responsibility’ over a plan.” Coulter v. Morgan Stanley & Co., Inc., 753 F.3d 361, 

366 (2d Cir. 2014) (quoting F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.3d 1250, 1259 

(2d Cir. 1987)). 

 8

 The Second Circuit also declined to consider this argument in Jander because the defendants there had failed to 

preserve it. See Jander, 2020 WL 3412115, at *1. There is no such impediment here. 

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Thus, “ERISA recognizes that a party might be acting in a fiduciary capacity at some points 

and in an ordinary capacity at other points.” Priddy v. Health Care Serv. Corp., 870 F.3d 657, 661 

(7th Cir. 2017). As the Supreme Court has put it, “the trustee under ERISA may wear different 

hats,” such as plan fiduciary and corporate executive. Pegram, 530 U.S. at 225. “In every case 

charging breach of ERISA fiduciary duty, then, the threshold question is ... whether [the alleged 

fiduciary] was acting as a fiduciary (that is, was performing a fiduciary function) when taking the 

action subject to complaint.” Id. at 226.9

 If not, then the plaintiff’s “ERISA count fails to state an 

ERISA claim” and must be dismissed. Id. at 237. 

Here, Plaintiffs’ theory is that “Defendants had the power to cause corrective public 

disclosures to be made through the Company’s SEC filings that would have corrected the stock’s 

artificially inflated price,” and that they breached their fiduciary duties under ERISA by failing to 

do so. FAC ¶ 89; see also, e.g., id. ¶¶ 87, 91, 99. But that theory does not satisfy the “threshold 

question” in this case because the EBAB Defendants were not acting as ERISA fiduciaries when 

they allegedly failed to “cause corrective public disclosures to be made through the Company’s 

SEC filings.” Pegram, 530 U.S. at 226; FAC ¶ 89. Per Plaintiffs, the EBAB Defendants allegedly 

“had the power to cause corrective public disclosures,” not because they wore the hats of ERISA 

fiduciaries, but because they also wore the hats of corporate officers. Since public disclosures of 

company information are corporate matters that the EBAB Defendants would have addressed in 

their corporate capacity, Pegram and its progeny make clear that ERISA did not require 

 9

 Consistent with Pegram, Dudenhoeffer holds that insider fiduciaries are subject to the “same duty of prudence 

that applies to ERISA fiduciaries in general”—not a higher duty requiring them to take actions that may be available 

to them only because they also happen to wear corporate officer hats. 573 U.S. at 412 (citation omitted); see also id.

at 419 (ERISA’s “prudent person” standard applies to “fiduciaries’ investment decisions and disposition of [plan] 

assets,” rather than, for instance, corporate disclosure decisions) (internal quotations & citation omitted); Perrone, 

2020 WL 2060324, at *15 (“[T]here is no indication in Dudenhoeffer that the Supreme Court’s imposition of the 

alternative action standard was intended to erode the pre-existing case law recognizing that corporate insiders, who 

are also fiduciaries of an ERISA plan, play a dual role, and should not be subject to ERISA liability for actions taken 

solely in their corporate capacity.”). 

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21 

Defendants to cause such disclosures to be made. Accordingly, they did not breach any duty 

imposed by ERISA when they allegedly failed to do so. 

Consistent with Pegram, many “[c]ourts have dismissed ERISA claims alleging breaches 

of fiduciary duty to disclose in the employer stock context where the challenged statements 

consisted of SEC filings and statements made to the market.” In re SLM Corp. ERISA Litig., No. 

08-4334, 2010 WL 3910566, at *9 (S.D.N.Y. Sept. 24, 2010 2010) (quoting Gearren v. McGrawHill Cos., Inc., 690 F. Supp. 2d 254, 272 (S.D.N.Y. 2010), aff’d sub nom. Slaymon v. SLM Corp., 

506 F. App’x 61 (2d Cir. 2012).10 In short, “ERISA does not create an obligation to disclose 

information about an investment option that the public itself does not know when the fiduciaries 

have made no false or misleading statement to the beneficiaries.” Lingis, 649 F. Supp. 2d at 876 

(citation omitted); see also Jander, 140 S. Ct. at 596 (Gorsuch, J., concurring) (“Because ERISA 

fiduciaries are liable only for actions taken while ‘acting as a fiduciary,’ it would be odd to hold 

[ERISA] fiduciaries liable for ‘alternative action[s they] could have taken’ only in some other 

capacity”) (emphasis in original). 

A federal court recently applied these principles to the Dudenhoeffer framework in 

dismissing a claim materially identical to the one at issue here. In Perrone, a putative class of 

ESOP participants brought an ERISA lawsuit, claiming that the plan fiduciaries (who were also 

senior company executives) possessed negative inside information about the company that made 

 10 See, e.g., Gearren, 660 F.3d at 611 (“[D]efendants who signed or prepared [their company’s] SEC filings were 

acting in a corporate, rather than ERISA fiduciary, capacity when they did so.”); Kirschbaum v. Reliant Energy, Inc., 

526 F.3d 243, 257 (5th Cir. 2008) (defendants were not “acting in anything other than a corporate capacity” when 

preparing SEC disclosures) (citation omitted); Rogers v. Baxter Int’l Inc., 710 F. Supp. 2d 722, 737 (N.D. Ill. 2010) 

(“a person who makes a public statement, such as in a securities filing, does not make that statement in a fiduciary 

capacity,” so the plaintiff’s “argument that defendants misled ‘the market’ concerns non-fiduciary communications”) 

(citations omitted); Lingis v. Motorola, Inc., 649 F. Supp. 2d 861, 874-75 (N.D. Ill. 2009) (“[T]he allegedly negligent 

statements made in the SEC filings were not made in Defendants’ capacity as ERISA fiduciaries. ... [T]hey did so in 

their corporate capacities rather than in their fiduciary capacities.”), aff’d sub nom. Howell v. Motorola, Inc., 633 F.3d 

552 (7th Cir. 2011). 

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its “stock price ... artificially inflated.” 2020 WL 2060324, at *1. They asserted that the 

defendants “breached their fiduciary duties” because they “could, and should, have ... ma[de] 

corrective disclosure” of that inside information to the market. Id. at *11. The court rejected that 

argument, holding that “issuing SEC filings, the mechanism through which Plaintiffs allege 

Defendants should have made their disclosures, are conducted in a corporate capacity, not a 

fiduciary one, and thus cannot constitute an adequate alternate course of action under 

Dudenhoeffer.” Id. at *14; see also id. at *14-17. See also In re Lehman Bros. Sec. & ERISA 

Litig., 113 F. Supp. 3d at 767–68 (post-Dudenhoeffer decision finding that a rule requiring 

appointing fiduciaries to share nonpublic information with other fiduciaries would create 

“ceaseless conflict” between corporate officers and fiduciaries).

As in Perrone, because Plaintiffs have not identified any alternative action that the EBAB 

Defendants could have taken in their capacity as fiduciaries, Plaintiffs' claim for breach of ERISA 

fiduciary duties fails. 

II. Plaintiffs have failed to state a claim for breach of the duty to monitor (Count II). 

Count II claims that the Executive Defendants breached their duty to monitor the EBAB 

and its members. FAC ¶¶ 122-28. Plaintiffs do not claim that these Defendants had a fiduciary 

duty under ERISA to disclose the information at issue here themselves, only that they breached 

their duty to monitor the EBAB and its members by failing to detect and address the supposed 

fiduciary breach alleged in Count I. See id. Count II fails for three independent reasons. 

First, as addressed above, Plaintiffs have failed to adequately plead any underlying 

violation of ERISA. Their derivative claim for failure to monitor must therefore be dismissed 

because “Plaintiffs cannot maintain a claim for breach of the duty to monitor . . . absent an 

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23 

underlying breach of the duties imposed under ERISA.” Rinehart v. Lehman Bros. Holdings Inc., 

817 F.3d 56, 68 (2d Cir. 2016) (quoting Rinehart v. Akers, 722 F.3d 137, 154 (2d Cir. 2013)).11

Second, even if Plaintiffs had adequately pleaded an underlying claim, their failure-tomonitor claim would still fail. “The duty of an ERISA fiduciary to review the performance of its 

appointees is a limited one. Specifically, a fiduciary must review the performance of its appointees 

at reasonable intervals in such a matter as may be reasonably expected to ensure compliance with 

the terms of the plan and statutory standards.” In re Calpine Corp. ERISA Litig., No. 03-1685, 

2005 WL 1431506, at *6 (N.D. Cal. Mar. 31, 2005) (citation omitted). Here, Plaintiffs provide 

only a handful of conclusory allegations, none of which establishes that the Executive Defendants 

failed to meet this standard. FAC ¶¶ 27-29, 83, 123-25, 127. Such legal conclusions are 

inadequate under Iqbal. See Calpine, 2005 WL 1431506, at *6 (“Plaintiff has not alleged any facts 

that support his claim that . . . Defendants failed to periodically review the performance of the 

Committee members.”). 

Third, and finally, Plaintiffs have not alleged that the Executive Defendants had an ERISA 

fiduciary duty to make any corrective disclosures, nor could they encourage the EBAB Defendants 

to do so, as none of the EBAB Defendants is alleged to have authority to make such disclosures. 

For all of these reasons, Count II should be dismissed. 

CONCLUSION 

For the foregoing reasons, this Court should dismiss the First Amended Complaint with 

prejudice. 

 11 See also, e.g., Catalfamo v. Sears Holding Corp., No. 17-5230, 2018 WL 10560956, at *5 (N.D. Ill. Aug. 21, 

2018) (following Rinehart); White v. Marshall & Ilsley Corp., No. 10-311, 2011 WL 2471736, at *12 (E.D. Wis. June 

21, 2011) (“[T]he court is compelled to dismiss” the monitoring claim because it is “predicated on the existence of 

underlying breaches of fiduciary duty that are meritless.”), aff’d, 714 F.3d 980 (7th Cir. 2013). 

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Dated: July 2, 2020 Respectfully submitted, 

PAUL, WEISS, RIFKIND, WHARTON & 

GARRISON LLP 

/s/ Daniel J. Kramer 

Daniel J. Kramer (pro hac vice) 

Andrew J. Ehrlich (pro hac vice) 

William A. Clareman (pro hac vice) 

1285 Avenue of the Americas 

New York, NY 10019-6064 

Phone: (212) 373-3000 

Fax: (212) 757-3990 

dkramer@paulweiss.com 

aehrlich@paulweiss.com 

wclareman@paulweiss.com 

Matthew D. Stachel (pro hac vice) 

500 Delaware Avenue, Suite 200 

Post Office Box 32 

Wilmington, DE 19899-0032 

(302) 655-4410 

mstachel@paulweiss.com 

JENNER & BLOCK LLP 

Dean N. Panos (Il. ARDC # 6203600) 

Howard S. Suskin (Il. ARDC # 6185999) 

Gabriel K. Gillett (Il. ARDC # 6328233) 

353 N. Clark Street 

Chicago, IL 60654-3456 

Phone: (312) 222-9350 

Fax: (312) 527-0484 

dpanos@jenner.com 

hsuskin@jenner.com 

ggillett@jenner.com 

Counsel for Defendants 

Case: 1:20-cv-02256 Document #: 93 Filed: 07/02/20 Page 30 of 32 PageID #:810
25 

STEPTOE & JOHNSON LLP 

Paul J. Ondrasik, Jr. 

Sara R. Pikofsky 

Mark Savignac 

1330 Connecticut Ave., NW 

Washington, DC 20036 

Phone: (202) 429-3000 

Fax: (202) 429-3902 

pondrasik@steptoe.com 

spikofsky@steptoe.com 

msavignac@steptoe.com 

Of Counsel for Defendants 

Case: 1:20-cv-02256 Document #: 93 Filed: 07/02/20 Page 31 of 32 PageID #:811
CERTIFICATE OF SERVICE 

The undersigned hereby certifies that a copy of the foregoing Defendants’ Opening Brief 

in Support of Their Motion to Dismiss the First Amended Complaint was filed on July 2, 2020 with 

the Clerk of the Court using the CM/ECF system, which will effect electronic service on all parties 

and attorneys registered to receive notifications via the CM/ECF system. 

 By: /s/ Daniel J. Kramer 

Daniel J. Kramer 

Case: 1:20-cv-02256 Document #: 93 Filed: 07/02/20 Page 32 of 32 PageID #:812