Opinion ID: 2462978
Heading Depth: 2
Heading Rank: 2

Heading: Count II: Misstatements and Omissions

Text: Plaintiffs also allege that defendants breached their fiduciary duty of loyalty both by failing to disclose information about McGraw-Hill's financial condition to Plan participants and by making false or misleading statements about McGraw-Hill to the participants. In the Citigroup opinion, we explained why we reject the argument that fiduciaries have a duty to disclose nonpublic information about the expected performance of the employer's stock. Accordingly, plaintiffs cannot state a claim for relief based on defendants' failure to disclose to participants information regarding S & P's rating practices and, more generally, McGraw-Hill's financial strength. Plaintiffs' claims that defendants made false or misleading statements or omissions regarding McGraw-Hill stock also cannot survive defendants' motion to dismiss. The only specific false or misleading statements identified by defendants are those contained in SEC filings that were later incorporated into the Plans' Summary Plan Descriptions (SPDs). ERISA, however, only holds fiduciaries liable to the extent that they were acting as a fiduciary ... when taking the action subject to the complaint. Pegram v. Herdrich, 530 U.S. 211, 226, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000). Here, defendants who signed or prepared the SEC filings were acting in a corporate, rather than ERISA fiduciary, capacity when they did so. See 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 filings). Therefore, in the circumstances presented here, these defendants may not be held liable under ERISA for misstatements contained in the SEC filings. Plaintiffs also argue that because the Plans' SPDs incorporated the SEC filings, the SPDs contained the same misstatements as the SEC filings. Defendant Marty Martin, as the Plans' administrator, was responsible for distributing the SPDs to participants. 29 U.S.C. § 1021(a)(1). We have held that a fiduciary may be held liable for false or misleading statements when the fiduciary knows those statements are false or lack a reasonable basis in fact. Flanigan v. Gen. Elec. Co., 242 F.3d 78, 84 (2d Cir.2001). Plaintiffs have not provided any specific allegations as to how Martin knew or should have known that S & P's rating practices were improper or that, consequently, the SEC filings contained misstatements or omissions. While plaintiffs do allege in conclusory fashion that all of the defendants knew or should have known of the material misrepresentations contained in the SEC filings, Compl. ¶ 48, they provide no basis for this conclusion, especially as it is applied to Martin, who served as McGraw-Hill's Vice President for Employee Benefits. Accordingly, plaintiffs have not adequately alleged that Martin made any intentional or knowing misstatements to Plan participants by incorporating SEC filings into the SPDs.