Fifth Third Bancorp v. Dudenhoeffer

Oral argument transcript · No. 12-751 · October Term 2013 · argued April 2, 2014 · the petitioner won

Decision: votes, opinion and citations · Official transcript (PDF) · Argument audio at the Supreme Court

Advocates

Robert A. Long, Washington, D.C., for the petitioner
Ronald Mann, New York, N.Y., for the respondent
Edwin S. Kneedler, Deputy Solicitor General, amicus curiae supporting the respondent

Transcript

From the Court's official transcript; speaker labels as in the transcript, with advocates' full names from its list of appearances.

Robert A. Long: Mr. Chief Justice, and may it please the Court: A fiduciary's decision to do exactly what an employee stock ownership plan is designed to do and what the plan requires by continuing to offer employer stock as an investment option is presumptively prudent. Statutory language, trust law, congressional policy, and practical considerations all support this result.

Justice Kennedy: You you want us to say that we have sort of a coach class trustee. We're all traveling in coach class when we have an ESOP. Once once we go down that road, how how do we define what the duties of the trustee are?

Robert A. Long: Well, we're not asking for a coach class trustee. I mean, we're we're saying to look at the statutory definition of the duty of prudence in Section 1104(a)(1)(b), which says that the duty of prudence must take into account the character and aims Alderson Reporting Company Official of the enterprise. So when we talk about ESOPs, we're talking about a pension plan of a very specific kind. It is designed, the definition

Justice Sotomayor: This does this plan didn't require you to invest solely in employer stock, did it?

Robert A. Long: This plan

Justice Sotomayor: It gave you the option to do it and to go above the 10 percent. But it didn't require you to buy only employer stock, did it?

Robert A. Long: Well well, ERISA, the statute, requires that an ESOP invest primarily in employer's stock. This particular plan, like many plans, requires that all of the assets in the ESOP be invested in employer stock except the amount that needs to be in cash for shortterm management requirements. So so Congress both

Justice Sotomayor: Could you point to the part of your plan that did that? Because I looked at it and I didn't see the plan requiring 100 percent investment.

Robert A. Long: If Your Honor, if you look at page 735 of the Joint Appendix, you'll find in in part 3.3, it states, "However, in all events, the Fifth Third stock fund as described shall be an investment Alderson Reporting Company Official option." And then if you look on 736 and then continuing on to 737, it says that, "The funds shall be invested primarily in Fifth Third stock." It says, "It may also be invested in shortterm liquid investments to the extent the administrator determines they are desirable to accommodate expected short run liquidity needs." But then it says, "The trustee shall have no discretionary authority to sell Fifth Third Bancorp shares or refrain from acquiring additional Fifth Third Bancorp shares with funds not held for short run liquidity needs." So we think that

Justice Sotomayor: You use the word "primarily." There's an allegation here that you should have stopped buying stock once you understood that there was a serious condition in the company. That you've breached your duty of loyalty, not of prudence. What do you do with that allegation?

Robert A. Long: Well, what we say is that these duties again, we're not asking for coach class duties. These are first class, if you will, duties, but they have to be understood in the context of this special kind of plan with special purposes. The the Alderson Reporting Company Official purpose of an ESOP is to own company stock, to give the employees a piece of the rock, an ownership interest in the company. And so when when the issue is, as you're as you're posing it, Justice Sotomayor, at what point does a duty of prudence or a duty of loyalty, either one, require the trustee to break the plans of the term, deviate from the plan's

Justice Sotomayor: It doesn't say you have to. It says "primarily." It doesn't say you have to continue buying.

Robert A. Long: Well, again, I mean, I I quoted the language. As we read the plan, and I think the government agrees with us on this, the the instructions of the plan are to invest all the money in Fifth Third stock except as needed for shortterm cash requirements. Now, there is the duty of prudence, and we're not asking for a second class duty. But we think in this context, given this special kind of plan, what that duty means is can the purpose of this

Justice Ginsburg: Mr. Long, there is no presumption written into this statute. There is an exception from the diversification requirements in ESOP. The whole object is to buy the company's stock, and so you don't need to diversify. But apart from that, the Alderson Reporting Company Official statutory requirement on loyalty and prudence is undiluted. And so I don't know where this presumption comes from. It's not in the statute itself.

Robert A. Long: Well well, we do think it comes from the text of the statute. It comes from the duty of prudence itself which looks to the character and aims of the plan, and then in Section 1107(d)(6), an ESOP is defined in ERISA to be a plan that's designed to invest primarily in the employer's own stock. So we think that defines the special character name of the plans. Congress has also spoken to this in other statutory enactments

Justice Kagan: Mr. Long, I think it

Justice Scalia: Section 1104 of ERISA, which this this plan is not exempted from, says that the fiduciaries must manage a plan, and I quote, "for the exclusive purpose of providing benefits to participants and their beneficiaries." Do you acknowledge that that's binding on the

Robert A. Long: It it is. And the government adds the word "retirement" before benefits, and they say an ESOP must be managed exclusively to provide retirement benefits, but that

Justice Scalia: Well, I don't add that. I'm just saying providing benefits. I mean, that's Alderson Reporting Company Official that's

Robert A. Long: Oh, yes.

Justice Scalia: that's quite different from running a plan to to own stock in the company. That's that's not the basic purpose of it.

Robert A. Long: Well, well, but, Justice Scalia, plans ERISA plans provide different kinds of benefits. The pension plans themselves can provide death benefits, hardship benefits, disability benefits. So if the benefit is stock in the company, a piece of the rock, you know, the duty of the fiduciary is to manage that as best as it can be managed to produce the largest benefit for the participants. But it's but it's not to go back to your question to say, well, you know, it looks like some other investment would be a better investment this week or this month.

Justice Kennedy: Is there anything in the trust law or the common law that allows us to define benefits that way?

Robert A. Long: Well, I mean, I don't think we're asking for a special definition of benefits. We're just saying that what this plan and trust law does say the settlor has a great deal of leeway to define the the benefits that are being provided. This is a particular kind of benefit, though, that Congress not only Alderson Reporting Company Official authorized, but has strongly encouraged. I mean, employers are strongly encouraged to offer this benefit. So to say that prudence or loyalty or or any of these fiduciary duties requires a sort of continuous monitoring of the company to see whether this is no longer such a good investment.

Justice Scalia: You say the benefits referred to in the providing benefits to participants, and you're saying the benefits to participants is their ownership of company stock, including worthless company stock.

Robert A. Long: Well well, no, not at all, Justice Scalia. I mean, the the idea is that the company stock is valuable, and the hope is

Justice Scalia: But when it ceases to be valuable, it seems to me you're not.

Robert A. Long: Well, and and we agree as as every court of appeals has has held, that has looked at this, all seven, that there there does come a time when the purpose of the ESOP, of allowing the employees to build an ownership stake in the company, can no longer be realized because the company is in serious peril, serious jeopardy.

Justice Kagan: But but there are occasions, Mr. Long, outside of that very narrow Alderson Reporting Company Official category of cases that you define in which the stock is going to be way, way, way, overvalued relative to what the fiduciaries know is the company's actual value. Let's just say it the the market price is four times more than the actual value, and the fiduciaries know that because of inside information that they have. It just sort of defies language to say that some a prudent person would retain the investment in that kind of wildly overvalued stock, doesn't it?

Robert A. Long: Well, I mean, if I could take that in several steps. I mean, that material overvaluation standard, which no court has ever accepted, we think, is unworkable. I mean, first of all, before you get to the inside information, which I think is the kernel of it that's left at the end, if you have a stock that is traded on an active market, you really can't tell the fiduciary, absent possibly inside information, Well, you need to outsmart the market.

Justice Kagan: No. But I'm talking about a case in which the fiduciary has inside information that that that enables him to know that the stock price is way overvaluing the actual value of the company.

Robert A. Long: But when you when you get to that point of the analysis, and this is what all the Alderson Reporting Company Official courts have recognized, you have to then bring in securities law, and you have to recognize to trade on that inside information would violate securities law. So prudence or loyalty cannot require a violation of securities law. So what what are the other options? You could halt trading. That would not itself violate securities law. But that could do great damage to the participants if the company if the company's own ESOP said, well, we think something is so wrong that we're shutting down the

Justice Kagan: Well, I I suppose it could, but a prudent manager might say that it would do greater damage to the to the participants in the plan to enable this misinformation to exist and to keep putting to keep buying stock, to keep putting more and more of their retirement investments into something that is really overvalued.

Robert A. Long: Well, I mean, our point is that that public announcement, that the ESOP has stopped allowing purchases of company stock, could cause a sort of collapse in the stock price that would be terrible for the participants, and saying that prudence requires that is kind of risky gamble.

Justice Kagan: Well, you assume that Alderson Reporting Company Official truthful information will out in the end, and is it better to keep on putting more money into something that is is you know, is really not a good investment for the participants and the beneficiaries?

Robert A. Long: Well, but but by you know, stopping immediately you could cause even greater harm. But let I think your initial question

Justice Sotomayor: So what's wrong with following the law and disclosing that material information to the public and stopping the the employees from losing more money in worthless stock

Robert A. Long: And I think that's ultimate

Justice Sotomayor: or almost worthless stock?

Robert A. Long: That's ultimately where the government comes in. Now, we've moved a huge distance from let's, you know, shut down the ESOP to let's release information. But there we would say, again, we think you have to consider this in connection with securities law that if if you announce, well, there's this sort of general duty to release information I mean, first of all, that would be quite a big change in ERISA. There's there are many specific requirements for disclosure of information in ERISA. Alderson Reporting Company Official And what the lower courts

Justice Kennedy: It's just background information for this point you're discussing. Can can you tell me, is it a very common practice for the directors and officers of the company themselves to be the trustees? I had just assumed that that didn't happen much anymore. Can you just tell me, because a lot of these problems would be taken care of, insider information and so forth, if there was an outside trustee. And I assume tell me if I'm wrong that the reason for the trust for the company themselves to do it is because it saves money. It's it's cheaper than hiring an outside investment. Maybe I'm wrong about that. But can you

Robert A. Long: Well, in several

Justice Kennedy: Can you just tell us what the what the landscape is?

Robert A. Long: First first of all, it is common. So this this happens quite a lot. You know, second of all, this this idea of, well, we could appoint an independent trustee, would not really solve all the problems because then you'd have to have a monitoring trustee who would have to give the independent trustee any inside information that they had. Alderson Reporting Company Official So the government's suggestion is, well, okay, you'd get a lowlevel employee to be the monitoring trustee. Well, that could itself violate ERISA if you had somebody so low down that they wouldn't know anything, that that also could be a violation. So it's

Chief Justice Roberts: I mean, part of I'm sorry. If you want to

Robert A. Long: So so it's it's really not a solution, but it is common to have the officers of the company, and I think it's not just to save money. It's because it's a very important part of what the company does, and they want to have their top people running it.

Chief Justice Roberts: I mean, the dilemma we're talking about, which is you've got inside information and if you do something with it, it's going to hurt the beneficiary, I mean, isn't that just a reflection of the fact that these are really bad investments? I mean, you're putting all your eggs in one basket. Your your your job depends on the company and your your retirement depends on the company.

Robert A. Long: Well

Chief Justice Roberts: So that's why you're in this awkward position of saying if the company is Alderson Reporting Company Official doing something bad, you know, having inside inside information that should be disclosed because it affects the stock price, then it's going to hurt not only the company, but also your retirement stock.

Robert A. Long: Well, I mean, first of all, it's quite right that an ESOP, because it's totally undiversified, is not by itself a good retirement plan. And we think that just confirms that the the special nature and and aims of an ESOP is not solely for retirement benefits.

Justice Ginsburg: But it is it is a purpose, Mr. Long, isn't it? You said you quoted the statute, and the statute just says benefits. But isn't the plan doesn't the plan itself mention retirement?

Robert A. Long: Oh, yes. And and and the hope, of course, is that these plans will produce lots of retirement benefits. The third plan, for long periods of its history, has been extremely successful at producing retirement benefits. Our our basic argument is, though, that because of the nature of this plan, because it is linked to the company's stock, and because Congress recently looked at this exact issue after Enron and said, we want employees to have choices, but company stock can still be a choice and we actually encourage that Alderson Reporting Company Official

Justice Scalia: Well, the participants

Robert A. Long: but you don't shut it down as soon as there's trouble. If a company

Justice Scalia: Why do you need a special rule for for ESOPs? I mean, the the factors that you mentioned, it seems to me, apply to any trustee who's managing. You say, oh, you should have sold because the stock was overvalued on the on the stock market. Well, how is the trustee supposed to know that?

Robert A. Long: It's it's

Justice Scalia: Is he going to outguess the market?

Robert A. Long: Right. Absolutely.

Justice Scalia: Surely you don't demand that a prudent trustee outguess the market. Okay? So if it's not the market that's overvalued, it must be inside knowledge

Robert A. Long: Inside

Justice Scalia: that causes him to know.

Robert A. Long: And I want to come

Justice Scalia: And you have the same problem about not being able to use that inside knowledge.

Robert A. Long: You can't use it. And let me come back to Justice Alderson Reporting Company Official

Justice Scalia: So so why do we need a special rule for ESOPs I'm saying? All the points you make apply to any any kind of trustee, whether it's only company stock or not. Why do we need a special rule for for company stock operations?

Robert A. Long: Well, because if it were just an ordinary investment

Justice Scalia: Right.

Robert A. Long: where the purpose really is just to maximize retirement benefits

Justice Scalia: Right.

Robert A. Long: there you do look at the riskreturn ratio and the expenses and all

Justice Scalia: No. But you have the same the same the same problems that that you justify doing nothing for the ESOP, justifies doing nothing in the other in the other plans; namely, you can't expect me to to outsmart the market, number one, nor can you expect me to use my inside knowledge. That violates the securities laws. So those are your two points, but it seems to me those points apply. We don't have to adopt a special law for this.

Robert A. Long: Well well, but, again, Justice Scalia, we're we are agreeing with the lower Alderson Reporting Company Official courts. There is absolutely a duty of prudence, and we don't deny that there would be a point when a prudent ESOP fiduciary

Justice Kagan: But even in saying that, Mr. Long, you have a category where you would say the duty of prudence applies, and it's this category of where the company is on the verge of collapse. But even there, you would face the exact same securities law problems that you're that you're saying should preclude

Robert A. Long: Well

Justice Kagan: the government's test. Because there, too, you would have this kind of, I don't know what to do, I'm between a rock and a hard place, the securities laws prevent me from selling on inside information. The same problems apply.

Robert A. Long: Well, no. What what we're saying is using public information, the chances that the company is going to be able to provide employee ownership for the long term may become so low that a prudent fiduciary would decide to shut it down. But I do I do want to answer your question on inside information because I think that's the nub of it, and you raised the point of, if the fiduciary actually knows the inside information, don't Alderson Reporting Company Official they have to do something, make it public. We talked about the securities law problem with trading on it. The government says, Well, just just make it public. Just release it to the public. There we think the problem is, first of all, that that would create this new sort of general ERISA duty to provide information when it's not spelled out in ERISA as you know, which has very specific requirements. But

Justice Sotomayor: That's not an ERISA responsibility. It's an SEC responsibility. It's 10b5 responsibility. Aren't you supposed to disclose any information that a reasonable investor

Robert A. Long: And and that's

Justice Sotomayor: would real

Robert A. Long: that's really exactly our point, Justice Sotomayor. This is if there's inside information that has to be disclosed, the securities law provides a complete legal regime for this. The government even agrees that in terms of the timing of disclosure, the SEC timing should govern.

Justice Sotomayor: So what's what's wrong with a rule that simply says a fiduciary has to do whatever it's possible to protect beneficiaries within the bounds of the law? Alderson Reporting Company Official

Robert A. Long: Well, it it

Justice Sotomayor: And so if the law required you to disclose it, and you didn't, you've breached your duty of prudence and of loyalty, because you've protected the company

Robert A. Long: Well

Justice Sotomayor: but not the beneficiaries.

Robert A. Long: It sounds good, but I think it would create serious problems. I mean, you would have, then, two sources of information about the company, the ESOP fiduciary, which you would be saying would have an independent duty to decide when it thinks there's been some material misstatement or some inside information and the company, which could create great confusion.

Justice Sotomayor: You you don't you're you have an absolute duty to the beneficiary.

Robert A. Long: Well, but but the I guess the point is, Justice Sotomayor, from the the fiduciary can say, Look, if there's been a securities law violation about disclosure or material misstatements, there's a securities law remedy for that, and the plan participants will get that remedy.

Justice Kagan: Well, then, what if the

Justice Alito: In an ESOP in an ESOP, Alderson Reporting Company Official can the fiduciary take into account the interests of the participants as employees as opposed to their interests as investors? It doesn't seem to me that those will necessarily always be the same. And there may be situations in which something that would be potentially good for the participants as investors would be quite bad for them as employees. They want to keep their jobs. They want the company to stay afloat. Can that properly be taken into account, or is that outside of the bounds?

Robert A. Long: I mean, I I don't think you have to do that. I think you you know, you look at the interest of the participants who are both employees and participants in the plan, you know. So so I don't think it's necessary to say, Well, we're not even looking at them as participants in the plan. We're looking at them only as employees. Are we think

Justice Alito: No, I'm not saying only as employees, but I'm saying can you take that into account at all? If you're in the situation where stopping trade stopping purchases in company stock would be a signal that would potentially trigger bankruptcy and liquidation for the company, can that be taken into account? It might not be in the best interests if Alderson Reporting Company Official the if the if these participants were simply investors, it might be in their best interests to stop buying the stock. But if taking that step would have the consequences that I mentioned, it might be very much not in their best interests as employees.

Robert A. Long: Well, I mean, I think I'd say that that would be one way to sort of work this out. It that's another way of getting to the the bottom line that we think is correct here, which is that an ESOP is a special kind of pension plan, and the whole nature of it is to own company stock. And therefore

Justice Kennedy: Well, how do you fine define the standard or the duty that's responsive to Justice Alito's concern? And I had the same problem. Let's assume that trustees in a nonESOPs plan have a duty to maximize returns and provide stable investments. Is it somehow different when it's an ESOP?

Robert A. Long: Yes, I I think it is. If there's

Justice Kennedy: And if so, what is the duty?

Robert A. Long: The I think the

Justice Kennedy: How do you define it?

Robert A. Long: I think the the duty is to maximize the returns for this special kind of a vehicle, Alderson Reporting Company Official which is a vehicle that owns stock in only one company, the the employee's company, and for reasons that this kind of goes to to Justice Alito's point but in a different way for reasons that go beyond just the returns. It's it is because it is the the employees' company. Congress thought it was beneficial for many reasons to encourage employee ownership of companies, and so you don't look to whether, you know, this appears to be a bad investment as compared to a mutual fund.

Justice Kennedy: Well, if I'm the trustee, I don't know what my duty is based on your answer. I don't know what I'm supposed to do.

Robert A. Long: Well, I mean, the courts of appeals have had a fairly uniform approach to this for now almost 20 years, and it has it has not been causing a great deal of of trouble. The approach they've all been taking is that because of the special nature of ESOPs and, you know, when the plan requires that all the funds be invested in the ESOP at least, that's what the fiduciary must do, and that is presumptively prudent. It's not necessarily prudent, and there would be, you know the way we think the Courts have Alderson Reporting Company Official best expressed it, if and they draw this from trust law if the special aims of this plan, employee ownership, can no longer reasonably be achieved, then prudence requires the plan to be shut down. That is not a brightline standard, but that is the standard the courts have adopted. I'd like to save the balance of my time, if I may.

Chief Justice Roberts: Thank you, Mr. Long. Mr. Mann. ORAL ARGUMENT OF RONALD MANN ON BEHALF OF THE RESPONDENTS

Ronald Mann: Thank you, Mr. Chief Justice, and may it please the Court: I think what I can most usefully do is talk first about the question of the relevant benefits that was raised by some of you, and then second address this socalled "rock and a hard place" problem which we think is essentially a confession of disloyalty by my most able opposing counsel. First, the nature of the benefits in the statute, the reference to benefits in 404(a)(2)(A) is quite plain. It refers to the basic type of plan that's covered by ERISA, which is an employee benefit plan as defined in Section 1002 sub 3 Alderson Reporting Company Official

Justice Ginsburg: Mr. Mann, I think it would help if you raised the podium a bit so you’re closer to the microphone.

Ronald Mann: Section 1002, Sub 3 describes employee benefit plans, which are the subject of ERISA. And there are two types of employee benefit plans as defined in that section. There are plans that provide welfare benefits and plans that provide pension benefits. And I think there is no doubt that the benefits that must be the exclusive purpose of an ERISA plan are those benefits that are required to be governed by ERISA. And I think we need to remember the grand bargain of ERISA, reflection of the statute is, if employers are going to provide these kinds of benefits, the people that manage the retirement and welfare plans must accept fiduciary duties. That's the bargain of ERISA. If you are going to provide these kinds of benefits, you have to accept fiduciary duties. And the sole purpose of the plan under the statute is to provide those benefits. Now, I'd like to talk about this idea of this "rock and a hard place" that was first raised by Justice Kagan. I think that the best way to think about this is, essentially, what the petitioners are saying Alderson Reporting Company Official is, if I decide to put myself in a position where I owe duties to two different people, my employer on the one hand and the beneficiaries of the plan, because I've put myself in a conflicted situation, it's perfectly right for me to just do nothing. That's not the way it works. You can imagine a lawyer that undertakes to represent two clients with conflicting interests. If it comes to the point where the interests are in conflict, well, the lawyer has already made a mistake. The lawyer cannot simply say, well, I choose to protect one client, not the other. They have to be something, and they're going to violate some

Justice Breyer: I would say that well, what the problem but can you give me any example of any case? There may be so many you can't even give me your best one. But trusts have been around for probably 800 years. And can you give me an example of one where a court said a trustee has breached its fiduciary obligation because he failed to use inside information?

Ronald Mann: Oh, no, I I think there probably isn't such a case, but I would

Justice Breyer: You think there is not such a case?

Ronald Mann: I think there probably is not Alderson Reporting Company Official such a case. The court of appeal

Justice Breyer: Fine. If there is not such a case, what's the problem? Because what's the rock and the hard place?

Ronald Mann: Well, the

Justice Breyer: The person has an obligation to act prudently in respect to the fiduciaries to the beneficiaries, of course. But he cannot, irrespective of that, have an obligation to use inside information. End of the matter. What what's wrong with saying just that?

Ronald Mann: I I'm not sure what you mean by that, but I'd like to

Justice Breyer: What I mean by it is just what I said. There is no rule of trust or ERISA law that you can breach a duty to a beneficiary by failing to use inside information, period. I don't know what the SEC's brief is. I'm going to ask

Ronald Mann: I think I

Justice Breyer: the SG what their opinion is because they don't seem to appear on this brief.

Ronald Mann: I think I would respectfully disagree with that, and I think it's important to understand why, Justice Breyer and Justice Kagan. Alderson Reporting Company Official

Justice Breyer: The answer is there's not been a case ever holding the contrary

Ronald Mann: But that's

Justice Breyer: but you yourself disagree with it.

Ronald Mann: But that is

Justice Breyer: Now, what the reason you disagree with it?

Ronald Mann: That is because the courts of appeals unanimously, as Mr. Long says, have held that the trustees of these plans have no duties at all. And so if trustees have no duties at all, it's of course quite difficult for them to breach the duties. Now, my

Justice Breyer: I'm sorry. I'm saying go back to England. There are many cases where settlors have said what kinds of things you should invest in, and they invest in them. They have inside information that it is a bad investment. Is there any case that says they have a duty of obligation not to do what the settlor says? I wouldn't have been surprised if you had found some cases, but I'm also not surprised that there aren't any. That's why I asked the question.

Ronald Mann: With respect to that particular question, and I I did not understand your question Alderson Reporting Company Official that way, and I don't I can't say whether there is or has never been such a case. But what's important from our perspective is the trustees in this case undertook to represent conflicting interests. Ordinarily when people undertake to represent conflicting interests

Justice Sotomayor: Let me just continue to Justice Breyer's question. There are some legal duties. I don't know of a trustee who has to break the law. They can't sell on the basis of inside information, and that's a legal prohibition.

Ronald Mann: I think that's clearly true, but I think they, at the same time, at their peril, breach their duties of loyalty to those for whom they've accepted a fiduciary duty. And the

Justice Sotomayor: So your claim rises and falls on the fact that you think they're they've breached their duty of loyalty by having the inside information and or exactly what is your claim? What could they have done that wouldn't breach the law?

Ronald Mann: My claim does not rise or fall at all on that. And I don't think there is any reason why you need to address that, given the particular nature of the complaint. The complaint in this case alleges that the trustees knew or would have known, if they had Alderson Reporting Company Official undertaken a reasonable investigation of the type that is required by ordinary principles of prudence, that the stock was materially overvalued, and the stock was a much more risky investment than it was at the time that the plan was designed.

Justice Sotomayor: How would they

Justice Alito: What do they have to do then? You said they can't sell the stock based on that information. What are they supposed to do? Or is it your argument that they just never you never should have insiders serving as trustees; you always have to have an outside running these ESOPs?

Ronald Mann: Well, I wouldn't say that you always have to, but I do think that the situation is quite parallel to the situation that corporate directors face when they come into a conflicted situation. In the corporate context where directors ordinarily are protected by the business judgment rule, if a situation arises in which their interests patently diverge from the interests of the shareholders, they don't simply decide to represent both interests but pick one over the other. They instead step aside and appoint and, you know, allow independent people to represent the shareholders.

Justice Alito: So you're basically saying Alderson Reporting Company Official that if it's not flatly prohibited, it is very unwise. It generally shouldn't happen. You're putting yourself in an impossible position if you are an insider and you're going to serve as the trustee of an ESOP.

Ronald Mann: Well, I think it's a plain implication of Justice Kennedy's opinion in Glenn and the majority opinion in Glenn that the structure of the fiduciary and the relationship to the trust being conflicted should raise a red flag.

Justice Breyer: Here when you say I am totally with you on this. We walk into the trustee's office. It's like Ralph Nader investigating the FTC years ago. There is someone asleep on the sofa. In his inbox is ten feet of papers telling him about all public telling him about the corporation's condition. It's apparent he's never read them. If he had read them, he would have taken action. Of course you would have a case, I would think.

Ronald Mann: But that is our complaint.

Justice Breyer: But you want to go beyond that?

Ronald Mann: No. Our complaint is they have the information in step one. They didn't do anything. Step one, they did not

Justice Breyer: Not just information. Alderson Reporting Company Official Remember I carefully said all this was publicly available information. You want to say it also applies when it's not publicly available information. Am I right or wrong?

Ronald Mann: You are correct. I would also like to say that, but I would like to point out our complaint alleges a large amount of information that is one, public; two, false information promulgated by the petitioners, the falsity of which perhaps could have been undertaken by discovered by considerable investigation. And instead of conducting a reasonable investigation that a trustee for a billion dollar pension plan ordinarily would conduct and just to be clear for the earlier discussion, this is not a plan that is invested solely in Fifth Third stock. This plan has a variety of investments. There is one particular fund that has 1 to $200 million

Justice Kennedy: Suppose you were a legislature or a congressman. You are absolutely committed to the idea that it's important and salutary to have employees own stock in the company for which they work. How would you write the statute?

Ronald Mann: I think Congress has done a great job of writing the statute. Congress wrote a Alderson Reporting Company Official statute that tells employers you can set up these plans, and the trustees don't have to diversify, which is inherent in having a plan that has employee stock

Justice Kennedy: Well, once you say the trustee doesn't have the duty to diversify, it seems to me you are living in something of a different world.

Ronald Mann: I think that's right. And that's why we believe that this standard of prudence is affected by the fact that it's an employee stock ownership plan rather than just a portion of the fund that owes employers' stock. But that doesn't mean that there's no duty of loyalty. It shouldn't affect that at all.

Chief Justice Roberts: Well, but affected is not quite enough. I mean, this trustee's job is to buy the company's stock. In that particular fund, it's 100 percent, other than the money you need to buy and sell. So he has the easiest job in the world. He gets up in the morning and says, "I think I will buy some of this company's stock." (Laughter.)

Chief Justice Roberts: That's what he's supposed to do. And I think that what every Court of Appeals has recognized is that that is by definition prudent, because that is the settlor's objective with Alderson Reporting Company Official one exception. If everything is going, you know, south and the company's collapsing, well, then he does have the obligation to do something. So I don't understand how you keep can say that he has breached a fiduciary duty of prudence when the people investing in this ought to know what they're going to get is the company's stock.

Ronald Mann: I think it's I'm glad that you asked that question, because I think that's central at the disagreement between respondents and petitioners. Now, the first answer, of course, is that you can't look at the statute without thinking that Congress had a different understanding of the duties. And if I just could just mention a couple of things about the statute. It's not only the point that Justice Scalia made that Section 404(a)(2) specifically carves out some duties but not others. It's also that it only forgives prudence to the extent of diversification, which means that prudence has to mean something other than diversification. And then it still further limits the scope of forgiveness. It only forgives it with respect to the acquisition or holding of qualifying employee securities employer securities, which is much narrower than the fiduciary duty defined in Section 403 to manage and control the Alderson Reporting Company Official assets of the plan. But what's important for our purpose is, it would not if you ask the question, although the statute resolves it, it would not have been sensible for Congress to tell the people that manage employer stock ownership plans that they have no duties of prudence or loyalty to the employers whose retirement funds are at stake.

Chief Justice Roberts: Well, what is exactly the duty of prudence? Presumably, you buy you invest the funds in the company's stock, whether it's going up or going down, right? If you have the funds, all you can do is invest them. The stock is down half a point or whatever. You still buy it, right?

Ronald Mann: Okay. So I'd like to say, first, there is the duty of loyalty. And it does breach the duty of loyalty, for example, as the Court said in Varity, and I don't think it's controversial, to lie to the beneficiaries.

Chief Justice Roberts: Well, what's the answer to my question?

Ronald Mann: With respect to the duty so the duty of loyalty is enough to sustain

Chief Justice Roberts: No, no. I didn't ask a question about the duty of loyalty. Alderson Reporting Company Official

Ronald Mann: With respect to

Chief Justice Roberts: I asked a question of whether or not the trustee is imprudent because he buys the stock because it's gone down you know, gone down 10 percent.

Ronald Mann: Okay. The most fundamental thing about the duty of prudence that you would get from your statement of trust is that the outcome of the investment is not what's relevant. What's relevant is, and Justice Scalia when he was on the D.C. Circuit wrote a long opinion in Fink, which discusses in detail, and you'd see the same thing in the comments to Section 90 of the restatement, the most important thing is what you might call procedural prudence. Okay. These people are managing a fund of $1 billion. The relevant question is what would a reasonable trustee of a billiondollar fund have done to investigate the situation? Would someone with a billiondollar fund and 100 to $200 million of Fifth Third stock have routinely been collecting information about the nature of that investment, whether they should take some action? It well might be it well might be that they should not in a flighty or haphazard way dispose of the stock, because that's the baseline of this plan, is to invest in the stock. But that's entirely different Alderson Reporting Company Official from doing absolutely nothing, not telling the employers information

Justice Alito: Do you think the trustee has a duty to acquire inside information? The trustees say, I don't want to know insider information. I'm going to put myself in exactly the position of an outside trustee, so I'm going to take into account only public information, I'm not going to do an investigation.

Ronald Mann: Our position is that the duty of the trustee is to behave as a prudent fiduciary would behave, and if the trustee is unable to do that because the trustee has conflicting interests to serve, then the trustee is violating the duty of loyalty and should arrange the situation differently.

Justice Alito: What's the answer to my question? Assuming that

Ronald Mann: The answer to your question

Justice Alito: permissible for an insider to be in this position, can the insider behave like an outsider?

Ronald Mann: I think it's plain in the case that if the trustee does not undertake the investigation that a prudent fiduciary would take, because of their concern about acquiring insider information of the employer, then they would violate the ordinary standard Alderson Reporting Company Official of prudence.

Chief Justice Roberts: Well, can we talk concretely instead of just saying, well, they've got to do what a prudent fiduciary can do? Are they allowed to take into account the impact of a decision to stop buying on the beneficiaries? The stock is going down, if the trustee stops buying, that's going to cause a drop in the value of the shares and that's going to hurt the beneficiaries. So what does he do? Does he say, I shouldn't buy any more because I think it's going to go down some more? Or should he say, I should keep buying because otherwise all of the holdings, and this is all they are invested in, their holdings are going to go down?

Ronald Mann: I think the obligation of the fiduciary at all times is to behave prudently in managing investment prudently. There might

Chief Justice Roberts: I asked for an answer to the question. And I it doesn't it's not going to help me to have this mantra as opposed to

Ronald Mann: Well, I don't I don't believe that the question is whether they must sell or mustn't sell. I think they have to decide would it be in the based on the facts we know right now, do we believe that this is a shortterm blip in the stocks and it will rise Alderson Reporting Company Official back up, in which case, we

Justice Breyer: In a way, what happens is that the trustee, knowing that the company has announced an enormous oil strike, is having to sit on a private meeting where three people come in and you say, yeah, there was an oil strike, but it's impossible to get the oil out. Ha, ha, we put one over on that time. Okay.

Ronald Mann: If the

Justice Breyer: Now, what's that trustee supposed to do?

Ronald Mann: I think I lost track of whether the oil strike was true or false.

Justice Breyer: No. There's a false.

Ronald Mann: Okay.

Justice Breyer: He alone, when two other people, know that this oil is worthless. The market doesn't. It's totally inside information. What, in your opinion, is he supposed to do?

Ronald Mann: I believe that the trustee violates the duty of loyalty and the duty of prudence if the trustee, believing that the stock is overvalued, in fact, does not take action to protect the beneficiaries.

Justice Breyer: Okay. So your answer is, totally inside information, he sells, right?

Ronald Mann: I didn't say that. I think he Alderson Reporting Company Official needs to do something. (Laughter.)

Justice Kennedy: I just don't see what the trustee is supposed to do. You have the company stock. By comparing it with other stocks, there will be many investments that are just as good or better. When does he have to make the investment, in other words, just as good or better? I don't understand. I don't understand what how we're going to implement what Congress wanted to implement.

Ronald Mann: Well, we believe that the traditional fiduciary standard is not that hard to implement. It's a standard that's been imposed on fiduciaries for centuries. It's a standard that all managers of trusts have undertaken. The only thing that's really different about these particular trustees is that they're managing funds that are worth, you know, billions of dollars.

Justice Ginsburg: Mr. Mann, you said you were going to deal with the rock and a hard place.But it’s been put to you that if the trustee goes out and sells, that would be a signal that things are bad with the company. So it will end up being worse for the beneficiaries of the plan.

Ronald Mann: We certainly believe that if the trustee's view, based on the information, is that Alderson Reporting Company Official selling the stock would be bad for the beneficiaries, then a decision not to sell is prudent. If the trustee decides selling would be bad for the beneficiaries so we're not going to sell, that is a prudent decision. It might be right. It might be wrong. But if that's their decision, I think that's prudent. If a trustee decides selling would be beneficial to the beneficiaries, it might be right, it might be wrong, but if that's what they actively decide, then I think they need to do something. And that's our position. Now, the rock and the hard place, I understand that some of the Justices have disagreed. But I mean, our position on that is quite clear. The only reason petitioners are between a rock and a hard place is they have undertaken to have interests that directly conflict with their fiduciary obligation to these employees' retirement benefits. There is nothing in the statute. There is no practical consideration that petitioners have suggested. There is no reason that these funds need to be managed by insiders. As far as we

Justice Ginsburg: What about the argument – so you have outside trustees, they have to get information from the insider and if they get the information from an insider we're back in the same place.

Ronald Mann: Well, of course, if you wait Alderson Reporting Company Official until you are in possession of information and you know the stock is overvalued, you can't solve the problem by stepping aside then. But if you set up the trust in the hands of an independent investment manager in the beginning, we believe that if you look carefully to provisions of Section 1105(c) and (d), you will see that Congress has provided a great deal of protection for the person it appoints. Of course, it's true that if the person in the company that appoints a fiduciary knows that there is a breach of fiduciary duty by the investment manager, they're still liable. But what else could Congress possibly say? Congress couldn't write a statute that says people that knowingly breach fiduciary duties of the employees are not supposed to be liable, so

Chief Justice Roberts: The status of the trustee, whether it's an interested party or a disinterested fiduciary, is disclosed to the beneficiaries, I take it, at the outset? They can decide that they don't want to invest in that particular fund and there are nine other options because of that potential conflict?

Ronald Mann: Yes, they are advised of that. Their ability not to invest in that particular fund is limited during the class period because all of the Alderson Reporting Company Official matching contributions for all of the class period went directly into this fund. So employees would have to take that active step to remove them from the fund.

Chief Justice Roberts: If they wanted they got four percent matching funds if they were in that fund?

Ronald Mann: That is correct. I think the most important thing for us to emphasize is the point of ERISA is that if an employer is going to provide employee benefits, the people that manage those benefits have to accept fiduciary duties. There is nothing unusual about that. The standard is not unworkable. It's a standard that is provided for centuries. And if the only reason that the people managing the fund can't comply with those duties is because they have obligations to the employers, then that is not something that ERISA can tolerate. Thank you.

Chief Justice Roberts: Thank you, counsel. Mr. Kneedler. ORAL ARGUMENT OF EDWIN S. KNEEDLER ON BEHALF OF THE UNITED STATES, AS AMICUS CURIAE, SUPPORTING RESPONDENTS

Edwin S. Kneedler: Mr. Chief Justice, and may it please the Court: Alderson Reporting Company Official Several points at the outset. Justice Alito asked about taking into account the interests of employees as employees. But Section 1104 speaks in terms of operating the plan for the exclusive purpose of providing benefits to participants and their beneficiaries, which means the interests of employees are taken into account only insofar as they are participants in the plan, not more generally. And the second and related point I would like to make with respect to that is the use of the word "benefits" in 1104(a) that says that the plan must be operated for the exclusive purpose of providing benefits to participants. We have that on page 6(a) of our petition appendix. Further up on that is the definition in 1234 of an individual account plan, which

Justice Sotomayor: Mr. Kneedler, a stock drop in and of itself, I don't think, can prove a lack of prudence because

Edwin S. Kneedler: Agree.

Justice Sotomayor: You agree with that?

Edwin S. Kneedler: Yes, we do. I mean, there are situations in which there may be additional unusual circumstances, but simply a stock drop would not. But I think that, as Justice Scalia pointed out, that would also be true in a diversified plan. Alderson Reporting Company Official

Justice Sotomayor: Exactly. It's true almost anywhere because you can't outsmart the market.

Edwin S. Kneedler: At least we're not insisting that a fiduciary in order to be prudent must

Justice Sotomayor: So how do you deal with what has been vexing us, the issue of what a fiduciary should or can do when they are an insider and have only inside information, not public information?

Edwin S. Kneedler: Right.

Justice Sotomayor: So where is the breach of fiduciary duty? Where's the breach of loyalty? What can it consist of, and what does someone have to prove in a complaint? Because this has to do with a pleading presumption and a merits presumption.

Edwin S. Kneedler: Right. And if there is a substantive principle here, that would have to be pleaded. If it is an evidentiary presumption, as the Sixth Circuit said, that would not have to be pleaded in the complaint. But several points on that. First of all, in response to Justice Breyer's question about inside information, we would point out on page 31 of our brief, quoting Scott, that if a fiduciary has peculiar knowledge about a corporation's stock's value, that is a Alderson Reporting Company Official factor to be taken into account in terms of the way the trustee exercises his responsibility.

Justice Breyer: Well, the the union brief says the thing to do in that situation is, without saying anything, turn the trusteeship over to a person who doesn't have that knowledge. That takes care of the problem. And the reason I raised the question, of course, is there are trillions of dollars probably managed by ERISA funds. I don't know what percentage of those involve stocks. Not this kind of this kind. Maybe you know, but my guess is a lot. And obviously, before I wrote a word that said what you have to do or don't have to do with inside information, I would like to know directly, not indirectly, what the SEC thinks.

Edwin S. Kneedler: Well

Justice Breyer: And maybe you can tell me. But the SEC isn't here. And at least there's no SEC lawyer that signed your brief. So I don't know the extent to which that's

Edwin S. Kneedler: I mean, this is primarily a labor case. The security

Justice Breyer: It might be you might have a good reason for it.

Edwin S. Kneedler: Right. Alderson Reporting Company Official

Justice Breyer: But right now I am supposed to write some words or join some words.

Edwin S. Kneedler: Right.

Justice Breyer: And those words will tell trustees of possibly I have no idea but maybe hundreds of billions, or maybe billions anyway, of of assets in the stock market, what they're supposed to do when they learn some inside information that affects the company's stock. And I hate to tell you, I don't know anything in this area about what the likely effects are. And, therefore, I'd like to know what they think. And the closest I came to it was the AFLCIO brief, frankly, where they said what you're supposed to do here is is turn this over. So what do I do?

Edwin S. Kneedler: Well, that is, of course, one option if if circumstances get very bad. This was true in the WR Grace situation. The trustee the inside trustees appointed an outside trustee to do an evaluation. But the first the first step that that Mr. Mann pointed out is, I think, a fundamental one that should not be overlooked here. And that is that the fiduciaries have an obligation to actually exercise their discretion and actually investigate. And here, the allegation is that these trustees did not even do that. So if you're going to be giving deference to a Alderson Reporting Company Official trustee under

Justice Sotomayor: I'm sorry. Investigate what, the nonpublic information? Investigate

Edwin S. Kneedler: Investigate investigate the consequences of the nonpublic this would be true of public information, too, that the this is not a plan like this, even though it is exempt from from requirements of diversification, there are still prudence duties, which include investigation and and monitoring of the of the investment. So the the fiduciaries of a plan like this do have an ongoing obligation to investigate and to keep themselves apprised of how the company is doing.

Chief Justice Roberts: Well, what exactly, concrete terms, what do you do as the trustee? You have this information, inside information that says that the stock is overvalued. Do you sell? In which case the beneficiaries' holdings go way down and they sue you, or do you not sell? In which case when the information comes out, the beneficiaries sue you because their value goes down. What are you supposed to do?

Edwin S. Kneedler: In in the category of cases we're talking about here, and these are the ones that are of the greatest concern to the Department of Labor, the stock is materially overvalued because of the Alderson Reporting Company Official inside information. In that situation and I think this is the point Justice Kagan was making it would it would ordinarily be the right thing to do to sell, the truth will out eventually. But and there may be there may be a precipitous drop. But the stock has already been at a at a level and and stock has already been purchased at an inflated level, which means that the employees are not getting what they were entitled to.

Justice Alito: But you say they should sell based on the inside information?

Edwin S. Kneedler: No, he can't he can't sell on the basis of inside information. He could I'm sorry, he could stop purchasing, which is

Justice Breyer: But the market will see through that in about two seconds. But the

Edwin S. Kneedler: Well, no, this is the

Justice Breyer: That isn't really my question. It's a numerical question. What you know, I was making up numbers wildly. What are the actual numbers? That is, approximately how much in assets is accounted for by ownership of the company's you know, this kind of a plan where you buy the company's stock. Do you know?

Edwin S. Kneedler: I don't know the amount of Alderson Reporting Company Official assets, but

Justice Breyer: About?

Edwin S. Kneedler: as I as I recall, I think there are perhaps 12 or 14,000 ESOP plans. Some about half the employees covered are in publicly traded in publicly traded corporations. I want to make another point in terms of the purposes of an ESOP. The Congress has provided for investment in in employer stock, but it has not excepted the fiduciaries from the general duty of of prudence. The statute the statute makes that clear. And in 2006, Congress provided that employees of publicly traded companies must be given the right to diversify, which reflects the judgment

Justice Kennedy: But your your argument, at least according to the Petitioners's brief, and I think they're correct, you go away from the purity standard. You have your own standard whether or not it's materially overvalued in this instance. Or are you saying

Edwin S. Kneedler: For inside where there's inside information and is it is it materially overvalued. And there could there can be circumstances

Justice Kennedy: But but then but Alderson Reporting Company Official then you are creating a special standard which is just what you're accusing the Petitioners of doing.

Edwin S. Kneedler: Well, the question is what's the general standard of prudence. And it would always be imprudent for a diversified or nondiversified plan for the fiduciaries to purchase a an asset that they or hold on to an asset that they know to be or should know with reasonable investigation is materially overvalued.

Justice Alito: Well, let me give you – I’ll give you this example. It's helpful to have something concrete here and not just general statements of of about fiduciary duty. Let's say that the trustee receives inside information that someone has alleged that corporate office a particular corporate officer has engaged in illegal conduct. And if it turns out that that conduct actually took place, that that information that will cause damage to the company. But it's it's it hasn't been proven. There's simply been an allegation. Now, what at that point, what does the trustee what do you think the trustee has to do? If that information were available to the public, let's say it would cause the price of the stock to go down, so Alderson Reporting Company Official it's material it's material information, but at a somewhat preliminary stage. What do you do? Completely stop buying the stock? You can't sell. Disclose the information? What is supposed to be done?

Edwin S. Kneedler: There is no absolute answer in that situation. Stopping buying might be the right approach. That's not uncommon, and there are blackout periods where where plans in companies bar trading in the stock. But if it's material information that the securities laws require to be disclosed, there is no reason why the participants in an ERISA plan should be unprotected when that material information affects the

Justice Alito: Well, that's no. But but would that information have to be disclosed under the securities laws? Let's say there was no prior no prior misleading statement regarding this matter.

Edwin S. Kneedler: It would have to be disclosed.

Justice Alito: Eventually.

Edwin S. Kneedler: If it's major, it might have to be disclosed within 4 days under under 8(k). Otherwise, it would be quarterly or annually. And we are we are suggesting that the that disclosure obligations should be geared to what the securities law Alderson Reporting Company Official provides

Justice Kennedy: The Chief Justice indicated I can ask just one question. Is this a case in which we must decide what the fiduciary standard is quite without regard to inside information? Is inside information just an added issue in the case or is it the key issue in the case?

Edwin S. Kneedler: We think in this case it is it is the key issue. The Court does not have to decide what fiduciary obligations the fiduciary of an ESOP would have in in dire circumstances where the where you have a failing company or mismanagement or something like that. We are focused here on inside information that materially enhances the value of the stock, overvalues it, and in that situation, we think that a fiduciary of an ESOP, just like the fiduciary of any other plan, has a has a duty of prudence not to remain invested in or to purchase materially overvalued stock.

Chief Justice Roberts: Thank you, counsel. Mr. Long, you have five minutes. REBUTTAL ARGUMENT OF ROBERT A. LONG, JR. ON BEHALF OF THE PETITIONERS

Robert A. Long: The ESOP association brief reports at page 2 that there are $1.07 trillion in these Alderson Reporting Company Official employee stock plans, and we think really that's the key, are all of the Courts of Appeals considering many cases, you know, with many different fact patterns have not disagreed. There is no circuit split on the issue that we've spent all our time discussing this morning. The only circuit split is on whether this presumption applies at the motion to dismiss stage. The real point here, as as Justice Kennedy said, Congress strongly supports ESOPs. It wants to encourage them so it

Justice Sotomayor: I I appreciate that. But if I'm listening to the government carefully and understanding its position, it's basically saying if there's been a violation of a securities law that a fiduciary knows, then why shouldn't it be liable both under the company, under 10b5, and the director of the plan or the trustee of the plan as a breach of loyalty to or or of prudence to the beneficiaries?

Robert A. Long: Well, again again

Justice Sotomayor: It's like yes, it's a double remedy, but there's lots of things that provide double remedies. So if that person should have disclosed.

Robert A. Long: Well, I mean, securities law will provide the first remedy. And if you're going to add an Alderson Reporting Company Official additional

Justice Sotomayor: Well, it won't as a trustee.

Robert A. Long: If you're going to add an additional

Justice Sotomayor: It will against the company.

Robert A. Long: Well, but but the additional ERISA remedy in this ESOP context is going to create these tremendous problems. I I couldn't begin to understand what the ESOP fiduciary was supposed to do in these circumstances, I mean, in terms of

Justice Sotomayor: Obey the law. I think that that's the simple answer.

Robert A. Long: Well, but you will create two different centers of communication now out of each corporation with an ESOP. The corporation's own statements and then the ESOP.

Justice Sotomayor: You know they created the conflicts.

Robert A. Long: Well, I think I think

Justice Sotomayor: I'm not shrugging my shoulder out of lack of sympathy but out of reality. The loyalty is to the beneficiaries. If you're going to place someone there who comes to inside knowledge, Alderson Reporting Company Official you're going to create potentially a problem.

Robert A. Long: Well, but

Justice Sotomayor: But I think your adversary was saying that's a selfinduced problem, not one that the law should excuse you from following whatever the law is.

Robert A. Long: Well, but but two points. I mean, you I would submit you should be very cautious about interpreting these duties in ways that will make ESOPs unworkable, and I think that would basically cause many companies to say we can't put fiduciaries in that situation, so we're not going to have ESOPs at all. And the you know, again, because the special purpose of an ESOP is to give the employees a piece of the rock, ownership in the company, if the company is going through temporary hard times, even if there's a situation where there's some, you know, material misinformation that is out in the market, that may all be corrected in the long term. You know, in this case, if the fiduciaries had shut down the ESOP, they would certainly have been sued because they would have violated the plan terms, and the the plan has done very well. It's gone up from $2 to over $22. So they might have had a very hard time winning that case because they would have been Alderson Reporting Company Official challenged that prudence didn't really require you to shut it down. Yes, we were going through some severe problems, but we came through them. That's the razor's edge. That's the rock and the hard place. They're going to be sued unless you recognize this presumption that every court of appeals has recognized to give the ESOP fiduciary some leeway. They're going to be different from any other fiduciary in any other plan because it's the company's stock. And if they, you know if if the stock goes down under this openended duty of prudence, they're going to be sued for not having anticipated that and done something, sold, stopped trading, put out information. But if they don't do it and the stock goes up, they're going to be sued for that. And, in fact, you know, if you recognize the government's approach, there'll be a whole new class of cases, which is, if the stock goes up, their plaintiffs' lawyers will be able to argue, well, the fiduciary should have should have anticipated that, and the participants who were selling and deciding to move over to the S&P 500 fund, you let them sell their stock too cheaply, and that's a violation. So it's it's unworkable. We submit. Alderson Reporting Company Official

Chief Justice Roberts: Thank you, counsel. The case is submitted. (Whereupon, at 11:30 a.m., the case in the aboveentitled matter was submitted.)