Opinion ID: 2462978
Heading Depth: 2
Heading Rank: 1

Heading: Count I: Inclusion of the McGraw-Hill Stock Fund as an Investment Option

Text: Plaintiffs first argue that the district court erred by dismissing their claims that the defendants acted imprudently by continuing to allow plan participants to invest in McGraw-Hill stock during the Class Period. We disagree. As we explain in the companion Citigroup opinion, we adopt the Moench presumption and review defendants' decision to continue to allow Plan participants to invest in employer stock, in accordance with the Plans' terms, for an abuse of discretion. See Moench v. Robertson, 62 F.3d 553, 571 (3d Cir.1995) ([A]n ESOP fiduciary who invests the assets in employer stock is entitled to a presumption that it acted consistently with ERISA by virtue of that decision.). Plan fiduciaries are only required to divest an EIAP or ESOP of employer stock where the fiduciaries know or should know that the employer is in a dire situation. Edgar v. Avaya, Inc., 503 F.3d 340, 348 (3d Cir.2007). Mere stock fluctuations, even those that trend downward significantly, are insufficient to establish the requisite imprudence to rebut the presumption. Wright v. Or. Metallurgical Corp., 360 F.3d 1090, 1099 (9th Cir.2004). Here, we agree with the district court that even if we assume that plaintiffs' allegations are proved, plaintiffs are unable to establish that defendants knew or should have known that McGraw-Hill was in a dire situation. Plaintiffs' allegations relate entirely to operations within the Credit Market Services group of S & P, which is one of McGraw-Hill's three operating segments. More specifically, plaintiffs allege that Credit Market Services provided inflated ratings to two structured-finance products: collateralized debt obligations and residential mortgage backed securities. Even if the defendant fiduciaries were aware of these problems in the Credit Market Services group of S & P, the facts alleged do not support plaintiffs' contention that defendants should have determined that McGraw-Hill itself was in a dire situation. Defendants could not reasonably have foreseen, based on the information alleged to have been available to them at the time, the sharp decline in the price of McGraw-Hill stock that occurred after the problems with S & P's ratings practices become public. Moreover, they were not compelled to conclude that McGraw-Hill was in the kind of dire situation that would have required them to limit participants' investments in the Stock Fund.