Opinion ID: 663131
Heading Depth: 2
Heading Rank: 2

Heading: Causal Connection Between Breach and Loss

Text: 14 The district court may have granted summary judgment on the ground that there was no causal connection between the trustees' alleged breach of duty and a loss to the ESOP. The court devoted much discussion to the Company stock itself, independent of the steps that the trustees took in making the decision to secure the notes. For instance, the court reasoned that the stock constituted adequate security because it was the only collateral that the ESOP could offer the plaintiffs, it was something in addition to and supporting the promissory note[s], and because it is common commercial practice for a lender to take a security interest in the object purchased with the borrowed money. Roth v. Sawyer-Cleator Lumber Co. Employee Stock Ownership Plan, 805 F.Supp. 1475, 1481, 1482 (D.Minn.1992). These factors do not relate to breach of duty because they do not concern the conduct of the trustees. Indeed, as the foregoing discussion suggests, the court could not analyze how the trustees acted because there are disputed facts as to their conduct. 15 Under the prudent person standard, the relevance that the facts relating to the stock hold is that they tend to show that the trustees' decision was objectively reasonable regardless of the process by which they reached it and thus that there was no causal connection between their allegedly deficient conduct and a loss to the ESOP. Even if a trustee failed to conduct an investigation before making a decision, he is insulated from liability if a hypothetical prudent fiduciary would have made the same decision anyway. Cf. Fink v. National Sav. & Trust Co., 772 F.2d 951, 962 (D.C.Cir.1985) (Scalia, J., concurring in part and dissenting in part) (arguing that where a fiduciary fails to investigate investment decisions, he is not liable for damages if he happened--through prayer, astrology or just blind luck--to make ... objectively prudent investments). The trustees are not entitled to summary judgment on the causation theory that a hypothetical prudent fiduciary would have decided to secure the plaintiffs' notes with Company stock. To say that their decision was objectively reasonable would require taking into account everything that the trustees should have known at the time of their decision. See id. We do not know what they should have known because the relevant facts are disputed. Thus, the causal connection between breach and loss, like breach itself, is a fact-intensive inquiry that is not susceptible to summary judgment in this case. Because it is a case-specific question, we simply cannot say whether a hypothetical prudent fiduciary would have secured the plaintiffs' promissory notes with Company stock.