Court Opinion

ID: 3171728
Source: CourtListenerOpinion
Date Created: 2016-01-25 16:01:21.057082+00
Date Added: 2024-06-11T12:03:11.073469
License: Public Domain

Cite as: 577 U. S. ____ (2016)            1

                           Per Curiam

SUPREME COURT OF THE UNITED STATES
     AMGEN INC., ET AL. v. STEVE HARRIS, ET AL.
   ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED 

    STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

             No. 15–278.   Decided January 25, 2016

   PER CURIAM.
   The Court considers for the second time the Ninth Cir-
cuit’s determination that respondent stockholders’ com-
plaint states a claim against petitioner fiduciaries for
breach of the duty of prudence. The first time, the Court
vacated and remanded in light of Fifth Third Bancorp v.
Dudenhoeffer, 573 U. S. ___ (2014), a case which set forth
the standards for stating a claim for breach of the duty of
prudence against fiduciaries who manage employee stock
ownership plans (ESOPs). On remand, the Ninth Circuit
reiterated its conclusion that the complaint states such a
claim. The Court now reverses and remands.
   The stockholders are former employees of Amgen Inc.
and its subsidiary Amgen Manufacturing, Limited, who
participated in plans that qualified under 29 U.S. C.
§1107(d)(3)(A) as eligible individual account plans. Like
ESOPs, these plans offer ownership in employer stock as
an option to employees. The parties agree that the deci-
sion in Fifth Third is fully applicable to the plans at issue
here. See 788 F.3d 916, 935 (2014).
   All of the plans had holdings in the Amgen Common
Stock Fund (composed, unsurprisingly, of Amgen common
stock) during the relevant period. The value of Amgen
stock fell, and in 2007, the stockholders filed a class action
against petitioner fiduciaries alleging that they had
breached their fiduciary duties, including the duty of
prudence, under the Employee Retirement Income Secur-
ity Act of 1974 (ERISA), 88 Stat. 829, as amended, 29
U.S. C. §1001 et seq. The District Court granted the
2                   AMGEN INC. v. HARRIS

                          Per Curiam

fiduciaries’ motion to dismiss, and the Ninth Circuit re-
versed, Harris v. Amgen, Inc., 738 F.3d 1026 (2013). The
fiduciaries sought certiorari.
   While that petition was pending, this Court issued a
decision that concerned the duty of prudence owed by
ERISA fiduciaries who administer ESOPs. That decision,
Fifth Third, held that such ERISA fiduciaries are not
entitled to a presumption of prudence but are “subject to
the same duty of prudence that applies to ERISA fiduciar-
ies in general, except that they need not diversify the
fund’s assets.” 573 U. S., at ___ (slip op., at 1–2).
   Notwithstanding the lack of a presumption of prudence,
Fifth Third noted that “Congress sought to encourage the
creation of ” employee stock-ownership plans, id., at ___
(slip op., at 14), a purpose that the decision recognized
may come into tension with ERISA’s general duty of pru-
dence. Moreover, ESOP fiduciaries confront unique chal-
lenges given “the potential for conflict” that arises when
fiduciaries are alleged to have imprudently “fail[ed] to act
on inside information they had about the value of the
employer’s stock.” Id., at ___ (slip op., at 13). Fifth Third
therefore laid out standards to help “divide the plausible
sheep from the meritless goats,” id., at ___ (slip op., at 15):
    “To state a claim for breach of the duty of prudence on
    the basis of inside information, a plaintiff must plau-
    sibly 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
    ___ (slip op., at 18).
It further clarified that courts should determine whether
the complaint itself states a claim satisfying that liability
standard:
    “[L]ower courts faced with such claims should also
                 Cite as: 577 U. S. ____ (2016)            3

                          Per Curiam

    consider whether the complaint has plausibly alleged
    that a prudent fiduciary in the defendant’s position
    could not have concluded that stopping purchases—
    which the market might take as a sign that insider fi-
    duciaries viewed the employer’s stock as a bad in-
    vestment—or 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.” Id.,
    at ___ (slip op., at 20) (emphasis added).
   In the matter that is once again before the Court here,
following the issuance of Fifth Third, the Court granted
the fiduciaries’ first petition for a writ of certiorari, va-
cated the judgment, and remanded for further proceedings
consistent with that decision. Amgen Inc. v. Harris, 576
U. S. ___ (2014). On remand, the Ninth Circuit reversed
again the dismissal of the complaint and denied the fidu-
ciaries’ petition for rehearing en banc. See 788 F.3d 916.
The fiduciaries once more sought certiorari.
   The Court now holds that the Ninth Circuit failed to
properly evaluate the complaint. That court explained
that its previous opinion (that is, the one it issued before
Fifth Third was decided) “had already assumed” the
standards for ERISA fiduciary liability laid out by this
Court in Fifth Third. 788 F.3d, at 940. And it reasoned
that the complaint at issue here satisfies those standards
because when “the federal securities laws require disclo-
sure of material information,” it is “quite plausible” that
removing the Amgen Common Stock Fund “from the list of
investment options” would not “caus[e] undue harm to
plan participants.” Id., at 937–938. The Ninth Circuit,
however, failed to assess whether the complaint in its
current form “has plausibly alleged” that a prudent fiduci-
ary in the same position “could not have concluded” that
the alternative action “would do more harm than good.”
4                  AMGEN INC. v. HARRIS

                         Per Curiam

Fifth Third, supra, at ___ (slip op., at 20).
  The Ninth Circuit’s proposition that removing the
Amgen Common Stock Fund from the list of investment
options was an alternative action that could plausibly
have satisfied Fifth Third’s standards may be true. If so,
the facts and allegations supporting that proposition
should appear in the stockholders’ complaint. Having
examined the complaint, the Court has not found suffi-
cient facts and allegations to state a claim for breach of
the duty of prudence.
  Although the Ninth Circuit did not correctly apply Fifth
Third, the stockholders are the masters of their complaint.
The Court leaves to the District Court in the first instance
whether the stockholders may amend it in order to ade-
quately plead a claim for breach of the duty of prudence
guided by the standards provided in Fifth Third.
  The petition for certiorari is granted. The judgment of
the Ninth Circuit is reversed, and the case is remanded for
further proceedings consistent with this opinion.

                                            It is so ordered.