Opinion ID: 700665
Heading Depth: 2
Heading Rank: 3

Heading: Were the losses to the Plan caused by the trustees' breach?

Text: 24 The district court also applied a faulty notion of the causality required between the breach and the loss. The district court concluded that [n]othing in the record suggests that the trustees' decisions to secure the plaintiffs' promissory notes with Company stock and to make the ESOP the obligated party on the plaintiffs' notes had any effect on the value of either the ESOP's assets or the Company stock. Order at 9-10. We reject this conclusion for two reasons. First, this statement is factually inaccurate. The trustees' decisions to secure the plaintiffs' promissory notes with Company stock and to make the ESOP the obligated party on the plaintiffs' notes are the cause-in-fact of the decrease in the ESOP's assets. But for these decisions, the Company, not the ESOP, would have purchased the now worthless shares. Although, absent the trustees' breach, the beneficiaries of the Plan might have had trouble obtaining payment of the notes in full due to the Company's bankruptcy, there would have been no loss to the Plan. 7 Moreover, this statement reflects a misapprehension of the law. The decisions to use Company stock as security for the Plan's notes need not cause Company stock to go down in value. Rather, these decisions merely must cause a loss to the Plan. If a breach of fiduciary duty caused the Plan to purchase Company stock which declined in value, the causal link between the breach and the loss is established, even if the Company stock would have inevitably declined in value. See Donovan, 754 F.2d at 1056-58; Heller, 657 P.2d at 992.