William B. Fisch, et al v. Suntrust Banks, Inc., et al

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
Nos. 11-11607, 11-11608
Non-Argument Calendar
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D.C. Docket No. 1:08-cv-03384-RWS
WILLIAM B. FISCH,
and
SUNIL KAPILASHRIMI,
and, individually and on behalf of all others similarly situated,
DANIELLE CLAY, et al.,
Plaintiffs-Appellees,
versus
SUNTRUST BANKS, INC., Suntrust Bank,
ALSTON D. CORRELL,
DAVID H. HUGHES, et al.,
Defendants-Appellants,
________________________
Appeals from the United States District Court
for the Northern District of Georgia
________________________
(March 5, 2013)
Before CARNES, BARKETT and FAY, Circuit Judges.
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PER CURIAM:
This interlocutory appeal involves a putative class action brought under the
Employee Retirement Income Security Act of 1974 (“ERISA”) alleging that
retirement plan1 fiduciaries breached their duties by continuing to invest plan
assets into the plan sponsor’s publically traded securities. The plaintiffs’
disclosure claim alleged that the defendants breached their fiduciary duties by not
disclosing to the plan participants material, negative, nonpublic financial
information about the sponsor’s business and risks associated with investing in the
bank. The plaintiffs’ prudence claim alleged that the defendants breached their
fiduciary duties under ERISA by continuing to invest in the sponsor’s securities
when it was imprudent to do so.
Upon motion from the defendants, the district court dismissed the prudence
claim on the grounds that it was a veiled diversification claim and barred by 29
U.S.C. § 1104(a)(2). The district court denied the defendants’ motion to dismiss as
to the disclosure claim, finding that the plaintiffs had sufficiently alleged an
obligation of the plan administrators to disclose nonpublic, negative, material
information to the plan participants.
The district court certified two questions for interlocutory review under 28
U.S.C. § 1292(b). The first question, which relates to the disclosure claim, is:
1 The plan in question qualifies as both an Eligible Individual Account Plan and an Employee
Stock Ownership Plan under ERISA.
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Does ERISA impose upon fiduciaries of an Eligible Individual
Account Plan that offers the plan sponsor’s publicly traded stock as an
investment option a duty to disclose material, nonpublic financial
information about the plan sponsor beyond the specific disclosures
mandated by ERISA and its implementing regulations?
The second certified question relates to the prudence claim and asks:
Does § 404(a)(2) of the Employee Retirement Income Security Act of
1974 (“ERISA”), which exempts individual account plans (“EIAPs”)
that acquire and hold employer securities from ERISA’s
diversification requirement, exempt fiduciaries of EIAPs from
exercising their overarching duty of prudence under §404(a)(1) even
when it is imprudent to acquire or hold employer securities in an
EIAP?
This Court’s recent decision in Lanfear v. Home Depot, Inc., 679 F.3d 1267
(11th Cir. 2012), resolves the issues in this case. Home Depot answers the
disclosure claim question in the negative, finding that ERISA does not impose a
duty to provide plan participants with nonpublic information affecting the value of
the company’s stock. Id. at 1284. Home Depot also answers the prudence claim
question in the negative, finding that such a prudence claim was not a veiled
diversification claim, and thus does not fall within the § 404(a)(2) exemption. Id.
at 1276-77.
Defendants argue that alternative grounds exist that would justify a dismissal
of the complaint. However, these issues were not dealt with by the district court.
Under these circumstances, we feel it best to remand this matter to the district court
so that it may proceed in the regular course.
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We answer both certified questions in the negative, reverse the district
court’s order granting in part and denying in part the defendants motion to dismiss,
and remand to the district court for further proceedings consistent with this opinion
and the Home Depot decision.
REVERSED AND REMANDED
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