Legal Case Summary

. Two points in response to that, your honor. One is that a rissa does not require that each individual fund to be diversified. Nothing in the statute requires that. The regulations specifically speak of a diversified portfolio. We have cited to the court young versus general motors, the second circuit, on published case, dismissing a claim where the charge was that a single fund was undiversified as being unsupported by rissa. The second point, your honor, is that this is a stock that had already been in the stock. The value of the assets and the pension plans for untold numbers of people had been destroyed. In other words, what I think I'm getting at is that the one red flag or any kind of investment counselor, any kind of portfolio manager, would be that the account had to maintain adequate diversity as an understanding financial managers or audited. Maybe by the controller or other regulators. And the first thing they look for is an absence of diversity and an over investment in a single stock because the employees are simply going to be. They are actually more exposed, even though the in-run, this in-run fiasco was company stock. It's so often a case that what leads to calamitous consequences is an absence of diversity and here the managers try to counteract that. Is there a danger of putting them in a whipsaw, which is darned if you do and you're darned if you don't? Several points in response to that. One is that this is a stock that was already in the plan. So any risk that was in the stock was already existed for the participants who had made choices to invest. Wouldn't they want to diminish that risk with some relative promise? Not necessarily, Your Honor, because there is a place as de-fuelese recognized for some risk within a portfolio. And there's a diversified portfolio here. There's no allegation here that the portfolio of options that was available to plan participants was unversified. Not only within the total portfolio, within each fund in the portfolio. I don't believe that's the case, Your Honor, not in the regulations, not in the statute, not as held by the second circuit, not indeed as conceded by my colleagues from RJRB-LO. There's no regulations that required the sale of the Nabisco stock. In addition, a number of companies continued to hold former employer stock as a frozen option in their plan, which is an important point here that this stock was a frozen option. There were no new investments allowed. This relates to participants who were choosing to hold that stock and forcing the sale at a low point in its value. Where's the risk heightened here about the tobacco litigation? There was a risk from the tobacco litigation to be sure that was in the stock already prior to the spin-off. And our experts had testified that that was a risk that had not increased following the spin-off. RJR company stock furthermore remained in the plan. There was no question or no discussion about whether or not that stock would have been eliminated

. The district court test for examining the kinds of questions that Your Honor is asking here, the district court found a breach. The district court then asked a question which is unsupported in Arissa, which is whether or not it was possible that some fiduciary somewhere could have made the same decision that the fiduciaries who did so with absolutely no investigation or analysis made. And under plaster and hypothetical stock with the district court rationale. No, you're not your Honor. But we are stuck with the findings of fact and make all kinds of findings of fact with respect to the breach. It did make all kinds of findings of fact with respect to the breach. That's correct. It found that the fiduciaries conduct felt far below the conduct that Arissa expects and requires a fiduciary. It seemed to me that those facts were pretty substantial. And then the district court adopted the standard with respect to who or the burden that you urged. Yes, it did. It correctly found that the fiduciaries bore the burden. But then it failed to hold them to that burden when it applied a standard on causation, which was a standard essentially of plausibility or speculation rather than the hypothetical prudent fiduciary standard that this court adopted in plaster. And that standard is that a fiduciary who has breached its duty as these fiduciaries had according to the findings of fact of the district court can only be excused from liability if it's a wood more likely than not. A prudent fiduciary who made that investigation would have made the same decision. We also said in plaster that the question really the broader question is whether or not the investment in question was objectively prudent, which suggests a broad menu of choices akin to the could have. So what do we do with that? Plasters use the language objective prudence and plasterers did so in talking about the context of causation once there had already been a finding of a breach of the duty of prudence. So objective prudence has to be interpreted in light of the fact that the question now before the court is causation. And that question is answered as plasterers adopted according to a hypothetical prudent fiduciary test. There is then the hypothetical prudent fiduciary test as used in every circuit uses the words would have. There is no circuit level authority for the proposition that a fiduciary who has breached its duty can be excused from liability for compensating the plan. There are only monetary relief in this case. There are holdings where fiduciaries, I mean it seems to me that we may be on the brink of a certain path breaking principle. Can we hold someone monetarily liable of fiduciary plan managers monetarily liable, the losses that result from an investment decision that we might conclude was objectively prudent. That would be a pretty aggressive holding to hold plan managers or fiduciaries generally monetarily liable for objective prudent actions. That would open all kinds of doors. The opposite is true as a first point that it would be a fairly aggressive and radical departure from the case law to find that a fiduciary that had breached its duty could be excused from liability under Section 409 based on the fact that it was possible that a hypothetical prudent fiduciary who had considered everything that should have been considered would have found the same way. Second point is that objective prudence while the district court used the words prudence and referred to plasters, the court did not apply the correct standard

. The court found that on the one hand it was possible that fiduciaries could have kept the stock in the plan. On the other hand it found that it was possible that a fiduciary based on some broad general concerns without taking into account all the facts and circumstances that are relevant could possibly have decided to eliminate stock from the plan. Second point is that they are likely to be whipsawed here because if they had held on to the stock and it had plummeted and a lawsuit could have been brought, you held on to this too long notwithstanding the caution flags that should have come up. You should have known that after the RJ are Nabisco split, that there were going to be a lot of employees who were going to be holding predominantly or not exclusively Nabisco funds. You should have known that Nabisco funds were of especially high risk because of the back of the tank that single stock funds were risky as a general matter because a lot of employees invest in a single fund. They are just going to. You should have assumed the value of the stock had plummeted instead of risen. The argument would be made. There were these red flags, there were these caution signals. You didn't pay any attention to them. You just held on to this and the stock just went south. My concern is particularly with respect to the fact of diversification because I'm not sure it's necessarily a global question here about what could have. It strikes me that the precedent particularly plastered but also the scolier concurrence and think that many other circuits have adopted that the standard here is a kind of one of objective prudence. The incentive should be for fiduciaries to diversify not to hold on to funds where have single stocks. If we rule in your favor would we be setting in motion a set of incentives that would have fund managers delay impermissively long in implementing a basic investment principle which is to diversify and protect the employees of this company against an executive. The extraordinary risk that comes with holding a single stock fund. I would think we want to encourage rather than discourage plan managers to diversify. You can say well it's all a question of timing and this and that and all the rest but still how do we get around the fact that we rule for you that we are really knocking a hole in this basic investment principle of diversification and to me the whole case revolves around diversification and the need to diversify much more than a global. The question where their investment decisions may that are non diversifying. I can see a case for example where investment decision was made that led to maybe less and less diversity and may have been objectively prudent but they may still be problems with it. But when something leads into the direction of greater diversity isn't that a different kettle of fish. The incentive that needs to be directed to plan fiduciaries is that they investigate thoroughly and carefully whenever they make a plan investment decision. Dr. Biller are expert who the court adopted as part of its standard of prudence. Testified that the most important risk to be considered here was the risk to the participants of forcing a sale of a stock that was already in the plan on an arbitrary timeline in the face of certain losses when they are sold at a low point in its value. This is a case where the stock is already in the plan as employer stock and as a result of a corporate restructuring the issue is whether and how to move investment options. That needs to be done through due diligence. So here's a situation where the district court found that the fiduciaries fell far below the standard of care that's required in making any plan investment decision

. Could I just pick up on what Judge Wilkinson, because I share those problems and it seemed to me that you had a road to go in finding that there was a reach of duty here. But you put on a really persuasive case the district court found and I think the findings are substantiated by the record. A risk gives the fiduciary all kinds of opportunities to act prudently and escape liability no matter what happens to the stock. If you carefully consider it, if you have meetings, if you do this, that you are not liable. That's why there are so few of these cases. But this is the extraordinary case where the record is virtually devoid of the kind of thoughts that we think fiduciaries and just think of a fiduciary in your own life who would go out and sell a principal asset with a short meeting and not really very well attenuated goals and not much to do. If not any discussion with an expert or a misunderstanding of the law, all of which the district court found and all of which seems to me to be substantiated in the record. But then the problem remains we come with all this case law that talks about diversification. But it seemed to me, I don't know if this is true or not, that that went to whether there was a breach of the duty to begin with that discussion of diversification. And they aren't at this final, yes, there's been a breach of the duty. And it's their burden to show that it's more likely than not that the reasonable pruned in person would do the same thing. Now do the diversification cases come in at that? They talk about diversification in that last step? Did you understand my question? Yes, I do understand your question. And the diversification cases have come up predominantly in the context of either employer stock or portfolios of the plan. And they, the one case that comes the closest to talking about that in that context is Plasturus, where the court demanded to say this is a decision that needs to be evaluated in all the facts. And in other words, there's no per se rule in favor of diversifying the plan assets. And in this case, the plan assets were diversified. So I think I find this a very difficult case. But if we should say diversification counts as a heavy weight. And it counts as a heavy weight here at the end. It doesn't, it seems to me that even if a fiduciary breaches its duty right and left all kinds. Let's take it away from this case, even a worst case of breach of duty. That if there is a claim by the fiduciary at the end that this was needed for diversification, there's no violation of a RISA. And that seems to defeat all the things that are in a RISA. It does make prudent fiduciary. And I see that my time is up. I continue answering your question. Yes. Yes

. It would defeat everything that is in a RISA in particular in this case. In the sense that it would say it's meaningless to have gone through the fact that the fiduciaries did not take any of the steps they were required to take in making this very important plan investment decision that would affect and lock in losses for plan participants. But the fact that diversification is important still allows the district court in this last step to find against you. Well, if it should find that a reasonable fiduciary did everything appropriate and still made the decision because of diversification. As long as the district court is considering all the relevant facts and circumstances of the plan, of the participants, of the warnings that were made to the participants as this court for a few inches. And in fact, I mean, maybe he was. He was saying, look, there was a breach that I wish they'd gone about it in a different way. But at the end of the road, the decision was objectively standard, objectively prudent. What I wanted because to me, you know, I don't feel the need to make global statements here again. It turns on this particular desire to diversify funds, which I'm concerned about putting roadblocks in the way of diversification. I just think that's a real problem. But I meant to ask you about the Justice Scalia's concurrence and the think case. And that's widely cited. And he said when he was on the DC circuit that you have to put the vivid language to one side. But he said, you know, you can't be held liable for losses resulting from an objectively prudent investment decision, even if you arrive at it by astrology. And that is the think concurrence has been broadly adopted. What is your reaction to that? Would we be creating rip tides in circuit law if we departed from the think concurrence and held in essence? That someone can be held liable, monetarily, for losses resulting from objectively prudent action? The think concurrence says that the fiduciary decision should be evaluated according to everything the fiduciary should have known and is consistent with the hypothetical prudent fiduciary test that this court adopted in plasters. Where this court would be departing from that concurrence would be to hold that it was all that was required for causation was replantifs to show some sort of connection between the breach and the loss, which certainly before plasters would have been what we could and would have argued. So think says and think furthermore when it talks about an objectively prudent investment talks about a blue chip stock that no one could argue with. So here the question is a stock that was already in the plan as an undiversified option. Would a hypothetical prudent fiduciary take into account all the facts and circumstances? The fund itself was not diversified. That's the point. Don't the individual funds need to be diversified as long as a fund is an option? No, they don't. No. I mean an example would be real estate funds or small cap funds or large cap funds or as often happens in restructuring situations like this one former employer stock that then becomes held as a frozen option in the plan. The employee can go from fund fund. The employee can go from fund fund. The participants have made choices about how to allocate their portfolios based on the range of options that are in the plan

. The in terms of what the district court did. It didn't it in effect adopt a totality of a circumstances test by saying look there were procedural things that I wish had gone differently. But in the final analysis I find there outweighed by the the objective prudence of the decision to enhance the verse. The district court did not actually make that conclusive finding instead it said that it was sufficient to find that some fiduciary somewhere could have made the same decision. And that while there were factors that pointing to hold pointed to holding the stock in the plan that there were factors that pointed against it and therefore it would find no causation. That's not consistent. The district court actually suggests that if it had applied the test that you would insist on here that it would reach a different result. Or a sense from the tenor of the court's order that the result might not be different under the would have tests. The court for example in adopting the doctor billers testing with the duty of prudence said that the most important consideration was the minimizing the risk of large losses to the participants enforcing the sale on an arbitrary timeline. The district court's use of the wrong test for causation meant that it didn't need to consider Dr. Biller's opinion on causation and it would on remand. But I think that I read your papers as acknowledging that the district court could come out the same way. But what you're asking us to do is to direct the district court to use the correct test. Correct your honor. That is what we're asking. So thank you. I hope I still have some time for a battle. John. Oh, I'm sorry. You see the secretary is Mr. Hartman. We'd be pleased to hear from you. Thank you very much, Judge Wilkinson. May it please the court. I want to begin by responding to Judge Wilkinson's concern that fiduciaries here are going to be whipsawed between reverse stock drop liability. This is not a case involving a prudent fiduciary who ticked all of his eyes and crossed all of his teeth and simply ended up with a poor decision. This is a case where the fiduciary was held by the district court following a five week bench trial at which the district judge had the opportunity to hear from experts for both sides. It was found to have breached its fiduciary duties and thus to have breached a rissa and a rissa implements the law of trust which holds that as between an innocent beneficiary and the defaulting fiduciary, the fiduciary must bear the risk of uncertainty as a consequence of his breach of fiduciary duty

. I'd also like to respond to defendant's argument that the wood have test is contrary to a rissa and unworkable in practice. In fact, the opposite of the wood have is the only test that is consistent with a rissa. It's the basic test in this circuit and in the United States for causation. We're talking here not about liability which is an issue that the district court decided. The question is what the effects of that breach were on the decision to purchase the viscos or to sell the viscos stock? I think it seemed to be your brief which I read with interest though indicated that the district court could probably would arrive at the same conclusion even if we were to remain the case. I think you pointed out that liquidation itself was reasonable given the highly risky nature of single stock funds. I think the viscos stock had dropped in price between the split and the liquidation. They were looking at a falling stock and they were looking also at the tobacco tank and the additional albatross that that would impose upon the stock. I think the district court found that the e-con takeover offer for the viscos which sent the stock prices higher could not be known to the fiduciaries. Could not have been known. Judge Wilkinson I think I agree with you generally about our position. We don't take a final conclusion as to what the outcome would be on remand. We think it's extremely important however that this court articulate here today the proper standard for causation which is what have and not could have. As to the breach and the e-con takeover the breach that the district court found was a breach of the duty to investigate not a breach to fail of failing to take into account the possibility or the plausibility of an e-con takeover. The proper test the district court should have asked following the 8th circuit's decision in Roth in this court's decision in plasters is would the hypothetical prune fiduciary. More likely than not have made the same decision as this fiduciary who breached its fiduciary duties in breach to riser. The district court did not ask that decision instead it asked for speculation as to what could have happened. Although as Judge Motsa pointed out there is a potential range of options that may be available to prune fiduciary which may the court may need to go through in order to establish liability. Once liability is established we shift from the could have standard to the would have standard. You know I'm looking at these other circuit cases. The danger here is this could have would have can get you into a bit of a Byzantine debate and a bit of an academic debate. I don't see the other circuit getting wrapped around the axel on would have could have a lot and what they do seem. It's important to keep the law because you're talking about people trying to follow law and understand what standards are going to guide their conduct. If we if we depart from the more straightforward standard of objective prudence or imprudence as plasterers indicate and of course plasterers found no law causation I think. But it did remain. The standard of prudence which covers a lot of a lot of ground we endanger of I think taking a fairly straightforward standard and trying to muddy it up. I don't see in this would have could have stuff blown large in other circuit decisions that there may be. You're on our you've asked a few questions so far may respond to each of them in terms of the distinction between what having could have we don't think it has been addressed in the erissa context by other courts we think that they district court below made an error of first impression and this court has the opportunity to correct it

. We don't think that by endorsing the would have standard that this court would be departing from any set of law in fact it would be following it's this court's decision in plasterers which use the would have language the 8th circuit decision in Roth the 5th circuit decisions the decisions of the 3rd circuit as well in fact no court of appeals has the best of the secretaries knowledge endorsed a could have standard how should we if at all then address the thing case I guess think was not an erissa case. I think that was the first point maybe it was but how do we deal with that well judge the as that was actually I think that was judge Wilkinson's question as well I think that objective prudence here is shorthand for causation the question is once you've established liability was that liability traceable to the losses and in order to show objective prudence that's where this state is. The standard this language comes in from class. Why do you think the investment decision was improved. I don't necessarily the secretary's not taking opinion on whether it was in Britain. See I mean that you got to give us some reason to believe you when I read your brief I very instant brief but I said he's giving us all kinds of reasons to believe in your brief your very own brief that this was a prudent decision and you indicated the highly risking nature as I say of single stock funds nabisco stock decline in price after the split between the split and the liquidation it's uncertain future given the tobacco tank the fact that the perspective take over bit was not known to the trustees and so an understanding of you on the standard but what you were it seemed to me your brief in important respects underscore that this was an objectively prudent action. Your honor again we think that objective prudence is shorthand for causation we think the breach here was the breach of the duty to investigate the district court down difference with that of me at all what difference should it have made. Well that's the question that the district court should have asked the district court should have asked defendants following the plan of having shown the breach and having made a prima fascia case on causation and losses whether the hypothetical reasonable prudent fiduciary would have made the same decision anyways and ask your question judge Wilkinson about how these cases are going to be decided frankly they're decided with the assistance of experts district courts are well equipped to listen to experts here just open up a road to litigation where someone you've got to ask whether people are even going to want to serve as fiduciaries after a certain point as you see if we announce a decision that said all right these were all probability objectively prudent actions but nonetheless the objective prudent actions may have required a more expensive investigation it seems to me that the far that you go behind an objective prudent decision and particularly one in the area in the direction of greater sort of diversification you're asking I think you're opening a bit of a dangerous door. Respectfully judge Wilkinson I disagree I don't think that the decision here affects the conduct of fiduciaries at all the question of liability is separate from the question of causation the question of causation is what then judge Scalia got at his concurrence in think and he effectively articulates the no harm no foul principle which has been expanded by the eighth circuited Roth and then adopted by this court. I agree with that right no we certainly do agree with that and that goes to causation and the question is if despite the breach the hypothetical prudent fiduciary would more likely than not have reached the same result then the fiduciary is is shielded liability where is that language in that comes in Roth and I think in this courts it's not in thing actually but I'm trying to understand where you think think comes in does it come in when you determine you look in the beginning to see there's a breach no think comes in at causation your honor when and what is causation where we are right now yes your honor that's the could have versus would have questions that were addressing justice Scalia didn't use could have would have did he no he did not but you think tell me what your argument is because I'm not understanding it well as it's been interpreted in the erissa context as said Wilkinson or judge D has pointed out I think was not actually in a rissa case but it's been interpreted in the erissa context by the eighth circuited Roth and by this court indirectly in the time yes judge D has however again I think those questions go primarily to liability and then the question on the simple question very simple question or causation would a hypothetical prudent fiduciary more likely than not have reached the same outcome it will likely require expert testimony but expert testimony was required here as well there were experts for both sides following it would likely have arrived at the same outcome but the outcome here is not just the versification but the timing yes yes your honor and that's a question for the experts that's a question that the secretary of labor is not taking a position on its effect intensive question that the court below considered can I ask you this question read the district court's opinion I think it is possible to read the last section of the opinion as applying the would have standard verges back or between what I'm going to have and I take your point but if the court had applied that standard you wouldn't have any issue if the court applied the would have standard to the evidence following its it's consideration of expert testimony fact witness testimony following five weeks of trial and it reached the same outcome the secretary of labor would be comfortable with that result the secretary thinks that you can't read the opinion that way because ultimately the district court is saying there's basically a range of activity that could be reasonable for to do she could do this and the other thing and therefore that reason yes your honor and that does seem not like would have but exactly your honor it's porting a concept that's appropriate to liability to the causation state do you do these eric cases a lot I do your honor all right maybe you can tell me what I was worried about church will come soon is sort of talked talked about the bad consequences of one holding and I was worried about the consequences of another holding because it seemed to me that erissa is all about the really protecting the employer the plan for do she or the plan for do she or he does this and if they have a plan and they adopt the plan and they follow the plan he didn't do here but if they did all that then they're not going to be liable no matter what happens to stop because we all know from our own or at least I know from my own bitter experience I can go up and down you know and you know I can't tell I'm sorry to hear the your stocks have done your honor but yes there it would be a severe consequence the secretary's concern from endorsing this could have test in that it would lower the standard for fiduciary liability and expose innocent participants in beneficiaries to imprudent conduct of fiduciaries so you're right that it be given that was imprudent conduct exactly given that it was imprudent conduct erissa reflects a balance that was struck after months of congressional debate drawing on the law of trust which developed over hundreds of years in the English courts in the American courts and there's a very complex jurid's prunes under it in the decision of the district court below upsets that balance and undermines work concern the protections for the purpose of diversification was to protect the employees yes your honor and we're not seem to indicate that there's something else no your honor we're not taking an opinion on whether diversification was met here but we agree with Ms. Worthman that under the court's findings yes your honor but diversification under the modern portfolio theory which the secretary in the courts have adopted is to be looked at on a portfolio wide issue as I think your honor judge mott's a wrote in defaulis there are special risks that come with single stock plans but that doesn't that's not a dispositive matter doesn't mean that they are never appropriate here in fact the plan document required them to be held beyond the time at which the fiduciaries here sold the stocks thank you so thank you your honor the charnes who pleased to hear from you sir thank you your honor may please the court we would submit that plasterers resolve this case and plasterers does not adopt the would have standard and I will take the position that no other circuit has done so either plasterers is based on think which by the way is an aristocrates head note that west writes but it begins employer sponsored or risk of retirement plan beneficiaries brought suit and so forth so think was an aristocrates and I apologize for for the laboring think excuse me laboring plasterers but I think it's important to look at plasterers and what it actually says it's got one sentence in the middle of six paragraphs of analysis on causation that quotes the Roth case that has the would have standard that is not the standard this court has adopted as the be all and end all for causation but that has this court start court starts on page 217 the federal reporter by saying the fiduciary the finding that the former trustees breach their fiduciary duties to investigate and diversify did not establish as a matter of law that the actual investments were imprudent and liability can only attach if in fact that was the case this court said expressly liability can only attach to a decision made after bad process if the decision investment decision that made was made was imprudent or continued accordingly in order to hold the former trustees liable for damages based on their given breach of fiduciary duty that's the process breach the district court must first determine that the former trustees investments were imprudent again the question is imprudence and the court then says the meat again the third paragraph on page 218 the third paragraph of the causation analysis the mere fact that the former trustees failed to investigate alternative investment options does not mean that their actual investments were necessarily imprudent ones the next sentence quotes Roth 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 but the next standard there but the next sentence clarifies what this court meant the next very next sentence is a quote from fake it is the imprudent investment rather than the failure to investigate and evaluate that is the basis of the suit and two paragraphs later this court remands to the district court and it doesn't remand until the district court to determine what a hypothetical prudent fiduciary would do it remands quote for the court to determine the prudence of the former trustees actual investments here at trial in its opinion its findings of fact and conclusions of law the district court found that removing the nabisco funds was objectively prudent planifs have not challenged that factual finding on appeal and that resolves this appeal in our view plaster is established as a standard of objective prudence for causation here the district court found objective prudence as a factual matter after a five-week bench trial in the plaintiff's objective prudence means using the highest any if any fiduciary could have come to this conclusion and any reasonable fiduciary in words the district court recognize that there's a range of permissible options of fiduciaries may for example want to put a growth fund in the plan there are hundreds of growth funds virtually all of them but probably are prudent this is so even as we know take it's a for purposes of this argument I know you're not receiving that forever and more but for purposes of this argument here we take as found the fact that the fiduciary here violated the plain and was not prudent in any number of respect and therefore you get by that first label and then to your burden to show something and you think that your only burden is to show that some of their fiduciary who had done everything that is required by the RISA would have come out the same way well I would phrase it differently using the language of plaster is which is assuming there's a procedural breach of prudence is the decision that the fiduciary is made nonetheless objectively prudent what I'm trying to do is flesh out what objective prudence means you know we have and if objective prudence means that you have to show that a reasonable fiduciary would have done this then you lose for at least you get a remit if you have to you think that you meet the wood have standard well your honor I'm happy to hear that argument well I do think and I'm brief we do argue that they make the wood handstand largely for the reasons that you make that make a reasonable fiduciary in your circumstances the reasonable fiduciary would have made the same choices I think I don't believe I'll answer your question I don't believe that's the standard but if that is the standard the answer is yes and the reason is your district court didn't find that district court didn't go that far but the reason is your opinion and defilease but we would have to make some findings that district court didn't make I well I think you have to make legal findings but I don't I think you can make that decision based on the district court's factual findings and your opinion until defilease judge mods because in defilease you said placing retirement funds in any single stock fund carry significant risk and so it seemed generally imprudent for a risk of purpose what's the portion of the whole analysis was the legal director it was directed toward the the U.S. Airways fund to the to the procedural breach that's right but my as far as the district court is concerned on 50 pages of finding that you all breach this fiduciary so you're in a different position then they weren't legal well but then the question addressing the question of causation the question is whether removing of the funds was nonetheless prudent as Scalia says if he uses astrology but happen to choose the prudent option there's no monetary damage and that's an important point I think I think judge Wilkinson asked council about that my colleagues on the other side which is a Rissa has a very sophisticated I think remedy scheme if there's a procedural breach which led to an imprudent investment participants can get monetary relief if there's a procedural breach astrology is used or darts are used that happens to choose a good investment and prudent investment as the district court found here you cannot get monetary relief but that's not all that doesn't mean that the plan F's are left remedialist they can get equitable relief for example if they haven't suffered any losses as a result of the procedural breach they can ask the district court for an order to remove the fiduciaries from the plan so they can't use astrology again now plaintiffs here at trial didn't ask for any equitable relief all I asked was for money and I think the reason a second reason suppose there's no investigation at all I mean suppose they just by a blind look there's no here there was a meeting and here there are these different factors I mean that the trustees actually did get together and they did get together and they discussed the matter and discussed it in a few minutes but suppose they'd been no meeting and they had just snapped their fingers and said we don't need to meet on this this is absolutely obvious celadeg on stock would in would in your view that they would still be insulated from monetary liability that's what thinks as and that's what ceilio says and think he actually uses the phrase blind luck and the reason is that what what is what is thinks journey been through the circuit court when we're talking about occurring opinion during a justice is circuit court it you know it's a lowly concurring opinion of a circuit judge your honor but it's been very well treated by the circuits including by plasterers which quoted it and relied on it and I think the reason plaster is also quoted the Roth would have what are we to make up the would have standards in this context I think the would have standard is an example of where the there's objective prudence and therefore there's no causation of monetary liability example that you posited where a trustee is looking at a menu of various investment options and happens to pick a over C or D or E is different in kind and degree in this case where the question is the best or not and if the best went to do so I mean that's not the same case as a trustee being considering the menu of options why shouldn't we treat that case different well I think you're right it's not the same case but I think the the would have standard is virtually impossible to apply in a situation when there are multiple options because you're never going to have a more likely than not I mean here I granted let's say that's true but what about the case well in this case we think that again the question is we think under under plasterers from the start to finish of six paragraphs the question is there's no causation if the investment was nonetheless objectively prudent the district court found removing that moving the funds was objectively prudent and the standard the district court applied based on the experts and other testimony and the plaintiffs haven't challenged that fine you also find that removing the funds at the time that it occurred was also prudent he did he found removing them as of January 31st 2000 was objectively prudent he didn't exclude the possibility that other courses of action would also be prudent he didn't make finding satisfaction but he said it might well be leaving a minute was prudent perhaps February 28th would have been prudent but he found that what they did on that day was objectively prudent and therefore under plasterers sounds like they could have done it on any day and it would have been objectively prudent well or is because it doesn't seem to be any way to measure that if we don't get to the substance of any expert testimony as the time it may well be because of the nature of this these stock funds you know these were due funds that were in the not employer single stock funds that were in the plan as a result of the spin off then the NGH fund the visco group holding this fund which is one of the two had fallen 60% in value from mid June of 99 when the spin off happened until the end of January of 2000 and with the with the fiduciaries here we're doing was acting based on their stat the statutory command was it this orissa in the 1109 specifically says the fiduciaries have a duty to diversify the investments of the plan so as to minimize the risk of large losses unless under the circumstances it is clearly prudent not just prudent but clearly prudent not to do so and here the district court found that you're not standing that you reached your duty you didn't follow the plan you didn't you know so you come to the final step I just don't know what's left with the risk of this record you could go to the standard of would any fiduciary do it well I just close to must it would a reasonable for you Sherry who had followed all the steps would have done I don't think the standards would any fiduciary do it's would a careful fiduciary analyzing the things that a careful fiduciary of course the district court didn't say that either well no district court that will maybe be good to this well district court looks specifically at removing the fund to funds as of January 31st 2000 and found based on the evidence before him that that step was objectively prudent okay but I guess sort of building on what Judge Diaz asked you I don't see any situation can you change the fact slightly in this case where the district court's analysis would lead it to a contrary conclusion it seems to me like any decision you may would have some fiduciary somewhere would have taken well I think with the new the new fiscal funds were incredibly highly risky funds so I think Judge Diaz may will be right that no matter when the fiduciaries took them out it would have been a prudent decision but that's not to say that that's not to put the plans says right well yeah the plan the June usually supposed to follow the plan we are supposed to follow the plan the June plan require the tunobisco funds to be held as frozen funds right the it was in a moment in November as your honor will the district what hell was not valid and then the but before the district court held to rely on is pretty strong for that before the back in the June plan but your honor before the district court granted their post trial motion to amend the parties entered a stipulation because the plaintiffs complied every one of their complaints before trial alleged the validity of the November amendment they are appeal to this court as you will remember was based on the wording of the November amendment and when they came in at the end after trial and said in November amendment is invalid we said wait a second here that puts a stream prejudice on the defendants because our if the November amendment were not valid our experts would have had different testimony we might have had different fact the problem here is I don't know you know in reading the briefs and the amicus briefs I don't know if anybody who really thinks this case is going to come out any differently on remand and but but the question is rather than you know just broadly embracing the think concurrence or making some global pronouncement about of objectively prudent decision is always valid no matter what procedural infirmities preceded it and the rest it is the particulars of this case that seemed to me to set a particularly bad precedent because even if you even if you don't agree at the fact with the fact that that an objectively prudent decision in all cases invariably insulates plan managers from monetary liability to go behind this particular decision where you have a highly risky fund you have a highly concentrated fund you have a decline in price and everything if you go behind this you're going to go behind an awful lot of perfectly sensible investment decisions and open trustees to I think broad prospects of monetary liability now people who want this sort of advocate this sort of rule indicate all this is not going to be a problem all they have to do is you know check the list and put the you know go through the the check list and do the procedural this and procedural that but it always is a problem and it it's going to be litigated extensively if a decision that is in accord with probably the basic investment in the investment criteria and the the basic investment load star which is to protect employees under iris from the prospect of dramatic and catastrophic loss and they wanted to protect them is relatively sooner rather than later this is exact opposite of in run and the disaster that befell the employees in Houston and you're on your exactly right the fiduciaries here even if their procedures were not up to snuff acted to protect participants and one important point is in plaintiffs labored mightily a trial to show otherwise there's no evidence that any fiduciary any orissa plant in the almost 40 years since orissa was adopted as a matter of fiduciary discretion has included a non employer single stock fund in a 401k plan not a single one not a single one they point to put up their few handful of plans in the record I think there was seven which had not employer funds after a corporate transaction those were put in by the set with courts found on these single fund plans even if they were one of a number of options because the argument was made in response to you that well it doesn't matter because there just a menu of options in the nabisco plan is on the nabisco fund is only one would you address the fact that even though this is a single stock fund there are many many investment options within the plan as a whole well I think defilece answers the question defilece says a fiduciary must determine that's right but the point is that diversification if if as defilece says a single stock fund is per se imprudent then I know even if you adopt the plan of standard no hypothetical prudent fiduciary would ever do that and this work never will have liability in as well I wouldn't go that far what what what are we about we should have been some rejoice in the very beginning with this all involves this single stock fund we are let me give you let me give you possibly violate fiduciary duty or cause you any harm well let me give you a hypothetical we put it up which is you buy a company you look at the erissa manager you look at their 401k plan and they've got a fund that invests in lottery stock lottery tickets you can do use no procedures and take that out I would submit that is per se imprudent you can look at that take it out if it just so happens that the next week one of those tickets would have hit you know the power ball that's an imprudent investment and I think now this not suggesting we are going that far but I think as judge Wilkinson has pointed out the statutory command is to protect participants by diversifying and defilece says that is done not only defilece the seventh circuit in white says that is done fun by fund within the plan unless there's a clue I thought you were responding to my question when you said let me give you our hypothetical I wasn't sure I understood how it responded if we should say that every time you get rid of a single stock fund there is no violation of a risk which is I take it to your position well that's is there any well well where where I don't need to take the hypothetical well there would be even though you're getting rid of a single stock fund let's say that there's a corporate transaction that's set to close a week later and there is no doubt or virtually no doubt I guess there's never no doubt that everything is going to proceed as planned and that will result in a 20% appreciation of the stock at closing for a week maybe in that circumstance a fiduciary could say you know what it's a reasonable risk for a week here the NGH stock gather from you what you just said maybe a reasonable fiduciary could find to the contrary and therefore there would be no liability well it depends on the facts for example maybe there's a substantial you are the one to put maybe in so that was in your facts I understand your there are no certainties in investing as you alluded to before so since there are no certainties there's never any liabilities what you're saying to no you're dealing with this well tell me give me an example where there would be live the problem is that a rissa doesn't like single stock funds and a rissa doesn't like people that do not follow its procedures which give all kinds of coverage to the fiduciary I completely agree with you but plasterers but plasterers with plasterers said though was that there was fiduciary you know plasterers found a fiduciary procedural breach and went on to say that's not enough to establish liability you still have to remember the investment plasterers was a terrible decision I mean over the cost of decades the trustees there invested their retirement savings of the union members in CDs and tea bills which had very low interest rates it seems pretty obvious I think to me reading that case that this court and the district court thought that a diversified portfolio of stocks and bonds would be a better investment but the court didn't allow didn't follow the district court's holding that there was a there was liabilities and that's not enough to be a good example of the court but the court didn't allow the district court's holding that there was a liabilities and that's not enough to be a good example of the court but the court didn't allow the district court's holding that there was a liabilities and that's not enough to be a good example of the court but the court didn't allow the district court's holding that there was a liabilities and that's not enough to be a good example of the court but the court didn't allow the district court's holding that there was a liabilities and that's not enough to be a disabilitybanarch y dancer but to be about $200 and $40 a day do one of them took a big part into consideration to that and look what he did his take a big part into consideration to that and look what he did his take a big part in remains good prudent investment options. And again, this does not leave a remedy hole in Arissa. The remedy where there's no loss is an action to remove the fiduciaries or take other equitable relief with respect to the fiduciaries to make sure that they don't follow the imprudent procedures again. Plain is elected for whatever reason, not to seek that trial here. There's been no case, there are cases like the Roth case that use the language of what were prudent fiduciary have done. There was no case that I'm aware of that any of the plan F's or the labor department have cited, no case that assesses monetary liability for a prudent decision, an objectively prudent decision. Including this. There's no case. Included. That's right. And that's what I was interested in. And I, maybe my research has been deficient, but I wasn't, I would be interested in another case in which there was a five week trial and extensive findings with respect to the breach of the duty and the conclusion that you bore the burden of establishing the breach to make any difference. Is there such a case of that? I'm not sure I understand your question. Well, in other words, the case that comes exactly, is this case, did it? Of course, the burden only is, there's, there's, there's, there's, there with me a second. There is this long trial with many witnesses and much backfinding in which there's finding a breach of the fiduciary duty. There's no doubt about that

. And I know you just read that, I don't want to appeal, but you have backfinding with respect to that. And then the district court concludes that each your burden to establish that breach didn't make any difference. Okay, is there any case that does those do things? On causation after a trial, I don't think, I think the answer is no. So I'm not sure that the fact that there is no finding of monetary damages is very decisive since there's no case in which there has been a finding of liability and a finding that you bear the breach of just determining that you are still not, the decision would have been the same. Well, I like to make two points about the burden of proof on causation. That's fine, if you want to argue burden of proof, but I just wanted to establish, no, I know you have an argument about burden of proof and you're, but my first point relates to what you make it. My first argument relates to the way you just said, which is burden of proof only matters when the evidence is in equipment. If the person with, if one party has a slightly better evidence than the other party, it doesn't matter who bears the burden of proof. So I guess I would put somewhat less weight on who bears the burden of proof than you do in your question with respect to the... All right, I'll amend my question. There isn't the burden of proof. Somehow they said that the stockholders had the, the beneficiaries had the burden of proof, but there was this five or six week trial where there were all these findings of breach of the judiciary duty by the trustee. Is there such a case? Again, the trials are very rare. Geophilie says the case of the trial. They are. And the district court, you never ruled on the party's summer judgment motion, so we didn't have an opportunity to... Certainly ruled on whether in fact there'd been a breach. One key, my second point on causation. But the answer is not, you haven't found one either. Off the top of my head, I don't recall why you're on it. Sorry. Well, you've been with this case for a long time, because you're not a law bearer and anybody else in the court? Well, I don't agree with that, Your Honor. But on the burden of proof, seven circuits, second, third, sixth, seventh, ninth, tenth, and eleventh, put the burden of proof on causation on the plan. You wouldn't know that from reading the briefs on the other side, but only two circuits have put the burden of proof on the defendant

. But the causation is an element of a plaintiff's cause of action. Element of the cause of action, the general rule is this court and the Supreme Court have said is the plaintiff bears the court. Now, in limited circumstances, for example, when they're self-dealing, it makes... in trust law and in a whistle law, it makes sense to move the burden of proof to the defendant because the defendant's the one that has the evidence about, for example, co-mingling funds and... Or there's a fiduciary relationship. But that's... If you bring a case against your trustee, just a regular trust law. No. There's seven circuits that have held there's no shifting of the burden of proof on causation. Is that an arrest? An arrest, an arrest. I'm talking about regular trust law. I think my reading of the cases and the briefs sort of skin the surface of trust law on this point is that the cases are a little bit all over the place in trust law about the burden of proof. Has anybody indicated at any point in this argument how this could possibly come out differently on remand? No, Your Honor. We think it will come out exactly the same. We think that we preserve the argument that even if you apply... I agree with Your Honor. We think that plaster is as a pretty clear standard and this court is bound by it and should apply it. But if the court thinks it's more complicated than I think, I think you could apply there would have standard and say based on the arguments that we made and preserved below and we've made to this court because it's a single stock fund, it's non-diversified, it's highly risky, it's improved in per se as DeFelice said that a hypothetical proof and fiduciary would have eliminated it without making any real legal rulings. Do we need to go as far as the fint concurrence and or as far as your interpretation of plaster to uphold what the district court did here? I mean from some of the discussion you would think the district court ruled against you. But ultimately it came down in your favor. And is it... isn't it possible to take a narrow view of what the district court decided to take a view that under the totality of the circumstances, the district court... The district court has this one reference so it has this reference to could have, Judge Mots pointed out at the end of the opinion that may be a reference to would have. But is it possible to say that the district court has already told us what it's going to do, which is given the facts of this case, no liability attached. I mean don't we... Don't we... Look, the rule the district court could be affirmed on a basis somewhat different. That's that whole idea of affirming a district court on an alternate ground is to avoid remands. And especially in a case like this where the district court has said, looking at everything, monetary liability, monetary liability is not justified. Under these circumstances, and there are four or five of them. I mean, but is this a hoop that we're jumping through? Judge Wilkinson, I agree with you completely. I would just add upon the points you made, this case has been pending for 12 years. It took a relatively slow path through the district court. I think this court should be reticent to remand for further proceedings in light of the factors you discussed just now as well as the factual findings of the district court. I think that it's well within this court's discretion and ability to look at those factual findings which have not been contested or shown to be clearly erroneous. And rule that under the would have standard hypothetical prudent for the issue and would have removed these funds. After all, the district court found as a fact and it's not been contested and appeal two things about the Nabisco funds. Number one, they were exceedingly high risk. District court said not only were they individual stocks which the police says are very high risk, the seven circuit is head of high risk, but there's a back-o-tain. It was a very real possibility that the market was imposing on NGH and it was a very high risk

. And is it... isn't it possible to take a narrow view of what the district court decided to take a view that under the totality of the circumstances, the district court... The district court has this one reference so it has this reference to could have, Judge Mots pointed out at the end of the opinion that may be a reference to would have. But is it possible to say that the district court has already told us what it's going to do, which is given the facts of this case, no liability attached. I mean don't we... Don't we... Look, the rule the district court could be affirmed on a basis somewhat different. That's that whole idea of affirming a district court on an alternate ground is to avoid remands. And especially in a case like this where the district court has said, looking at everything, monetary liability, monetary liability is not justified. Under these circumstances, and there are four or five of them. I mean, but is this a hoop that we're jumping through? Judge Wilkinson, I agree with you completely. I would just add upon the points you made, this case has been pending for 12 years. It took a relatively slow path through the district court. I think this court should be reticent to remand for further proceedings in light of the factors you discussed just now as well as the factual findings of the district court. I think that it's well within this court's discretion and ability to look at those factual findings which have not been contested or shown to be clearly erroneous. And rule that under the would have standard hypothetical prudent for the issue and would have removed these funds. After all, the district court found as a fact and it's not been contested and appeal two things about the Nabisco funds. Number one, they were exceedingly high risk. District court said not only were they individual stocks which the police says are very high risk, the seven circuit is head of high risk, but there's a back-o-tain. It was a very real possibility that the market was imposing on NGH and it was a very high risk. And the second thing that it could go bankrupt because of tobacco liability, and that was depressing, so the district court found that the stock was very high risk. And second, it found that there was no reason to expect above market returns. There was another factor here. Was it the... Icon takeover that SEMF-a-Price-Skaha? That's right, Your Honor. All right. Did the trustees in this instance have any inkling of the Incon takeover? And should they have been expected to have some view of the Incon takeover? Well, and the district court made factual findings. It's found not only... But did the district court say that? Was that the factor that sent the price up? Yes, I think that's undisputed. And it found also... What were the factual findings? Actually, respect to the Incon takeover. That not only did the fiduciaries hear not anticipated, it could not have been anticipated, but that nobody anticipated. Or is not a single analyst report that anticipated it, a single newspaper article, nothing anticipated, it could not have been anticipated. So in other words, if they had investigated extensively, now I... You know, I can... We would think, well, can there be liability in the case where there was a procedural default? Well, maybe so, maybe not. But if you had a different case of whether further investigation would have uncovered evidence of the Incon takeover, would that have been a different case if they met more extensively or investigated more extensively, and then they could have found.

. And the second thing that it could go bankrupt because of tobacco liability, and that was depressing, so the district court found that the stock was very high risk. And second, it found that there was no reason to expect above market returns. There was another factor here. Was it the... Icon takeover that SEMF-a-Price-Skaha? That's right, Your Honor. All right. Did the trustees in this instance have any inkling of the Incon takeover? And should they have been expected to have some view of the Incon takeover? Well, and the district court made factual findings. It's found not only... But did the district court say that? Was that the factor that sent the price up? Yes, I think that's undisputed. And it found also... What were the factual findings? Actually, respect to the Incon takeover. That not only did the fiduciaries hear not anticipated, it could not have been anticipated, but that nobody anticipated. Or is not a single analyst report that anticipated it, a single newspaper article, nothing anticipated, it could not have been anticipated. So in other words, if they had investigated extensively, now I... You know, I can... We would think, well, can there be liability in the case where there was a procedural default? Well, maybe so, maybe not. But if you had a different case of whether further investigation would have uncovered evidence of the Incon takeover, would that have been a different case if they met more extensively or investigated more extensively, and then they could have found... Oh, wait a minute. That somebody ready with a takeover bid that's going to send the price of this in a positive direction. Would there be liability in those circumstances? That would be a different case with possibly a different outcome like Judge Mott's was looking for hypotheticals. But in fact, there was an analyst report, I think it was from Solomon Smith Barney, issued a week before Icon made his tender offer, and it didn't even mention Icon. So it's uncontroverted that could not have been for a senior man. They could have spent a million dollars hiring experts and economists and financial advisors that never would have discovered that Icon was planning this. So that's the district court found. My point is that I think this is a more fact-specific case than maybe either of the parties suggested it. I mean, we're talking about having some global adoption of this standard or this standard, but I think it's that a lot of it bottoms out on the fact of the presence of the single stock fund, and the high risk... the high risk character of the Nabisco fund in particular, the fact that Icon takeover could not have been discovered. In every case, it doesn't need to be the broadest case in the world. I agree with you, Your Honor. But I think there's a... You have to ask, where does the danger lie? And there's been some suggestion that, well, if we hold... If we absolve the trustees in this instance, we're establishing a broad rule that no matter what you do, no matter how arbitrary your actions are, there can never be liability if there's an objective decision in the end of the road. It doesn't need to be written that broad. But if you take the facts here, and the reasonableness of the decision here in light of widely accepted investment criteria, and hold that the monetary liability is possible, that is a broad ruling. That is a broad ruling, because if it can happen under these facts, it can happen anywhere. But if we hold the trustees monetarily protected in this instance, we're not necessarily establishing a broad ruling that applies with a different set of facts. I think that's right. And Plasterer specifically addresses this question, and it says that if there's no causation, we don't need to assess monetary liability, because in most instances, Plasterer says, page 218, in most instances, a procedural breach will actually cause monetary loss, and therefore monetary liability, and that adequately deters improved entrustee

.. Oh, wait a minute. That somebody ready with a takeover bid that's going to send the price of this in a positive direction. Would there be liability in those circumstances? That would be a different case with possibly a different outcome like Judge Mott's was looking for hypotheticals. But in fact, there was an analyst report, I think it was from Solomon Smith Barney, issued a week before Icon made his tender offer, and it didn't even mention Icon. So it's uncontroverted that could not have been for a senior man. They could have spent a million dollars hiring experts and economists and financial advisors that never would have discovered that Icon was planning this. So that's the district court found. My point is that I think this is a more fact-specific case than maybe either of the parties suggested it. I mean, we're talking about having some global adoption of this standard or this standard, but I think it's that a lot of it bottoms out on the fact of the presence of the single stock fund, and the high risk... the high risk character of the Nabisco fund in particular, the fact that Icon takeover could not have been discovered. In every case, it doesn't need to be the broadest case in the world. I agree with you, Your Honor. But I think there's a... You have to ask, where does the danger lie? And there's been some suggestion that, well, if we hold... If we absolve the trustees in this instance, we're establishing a broad rule that no matter what you do, no matter how arbitrary your actions are, there can never be liability if there's an objective decision in the end of the road. It doesn't need to be written that broad. But if you take the facts here, and the reasonableness of the decision here in light of widely accepted investment criteria, and hold that the monetary liability is possible, that is a broad ruling. That is a broad ruling, because if it can happen under these facts, it can happen anywhere. But if we hold the trustees monetarily protected in this instance, we're not necessarily establishing a broad ruling that applies with a different set of facts. I think that's right. And Plasterer specifically addresses this question, and it says that if there's no causation, we don't need to assess monetary liability, because in most instances, Plasterer says, page 218, in most instances, a procedural breach will actually cause monetary loss, and therefore monetary liability, and that adequately deters improved entrustee. Well, I think that is what you just said to a directly contradiction hold position. If in most instances, the procedural breach is going to result in monetary damages, we sure have procedural breaches here, so that if we follow the most instances rule, it would result in monetary damages. Well, most is not all your honor, and they're... You were arguing, it's assertively saying it supports your position, and it doesn't. It's of course just the contrary position. Well, respectfully, I disagree with Judge Moss, because I think, most means not all, and where... You have the supposition, do you have a monetary, do you have a fiduciary breach? Not clear in Plasterers, but clear as clear as can be here. No, no. But you do have a fiduciary breach. Plasterer, in most instances, where you have a fiduciary breach, you have monetary damages. That's what you just did. Plasterer has found the fiduciary breach. Procedural breach, just like in our case, and then it remanded for the causation inquiry, and the objection to that was the same one that Judge Wilkinson was sort of putting to the side. The objection in Plasterers was, well, you're letting people off Scott Frey. If you say the fiduciaries, this is objectively prudent. But he said most instances you would have. And most instances you're in your rule. Most instances you won't. I disagree with that. In this case, because there's single stock funds that are highly risky and are per se prudent, yes, taking them out is almost always going to be prudent. It's always always, excuse me, it's always almost always not going to cause... Even if it's contrary to the plan

. Well, I think that is what you just said to a directly contradiction hold position. If in most instances, the procedural breach is going to result in monetary damages, we sure have procedural breaches here, so that if we follow the most instances rule, it would result in monetary damages. Well, most is not all your honor, and they're... You were arguing, it's assertively saying it supports your position, and it doesn't. It's of course just the contrary position. Well, respectfully, I disagree with Judge Moss, because I think, most means not all, and where... You have the supposition, do you have a monetary, do you have a fiduciary breach? Not clear in Plasterers, but clear as clear as can be here. No, no. But you do have a fiduciary breach. Plasterer, in most instances, where you have a fiduciary breach, you have monetary damages. That's what you just did. Plasterer has found the fiduciary breach. Procedural breach, just like in our case, and then it remanded for the causation inquiry, and the objection to that was the same one that Judge Wilkinson was sort of putting to the side. The objection in Plasterers was, well, you're letting people off Scott Frey. If you say the fiduciaries, this is objectively prudent. But he said most instances you would have. And most instances you're in your rule. Most instances you won't. I disagree with that. In this case, because there's single stock funds that are highly risky and are per se prudent, yes, taking them out is almost always going to be prudent. It's always always, excuse me, it's always almost always not going to cause... Even if it's contrary to the plan. Well, but again, there's party stipulated a trial that they wouldn't make that argument. Whether you're complying with the plan is also evidence of your prudence. You look at the re-mocases about that, and they didn't make any stipulation about that. Well, they did. They argued. They argued... We're arguing under that specific provision of erudition. Oh, I... But they were using... All right, we'll look here from the other side. You're right. I've been up here for a very long time. Is it possible? Will we give the other side lots of extra time? If you look at the stipulation that the party's entered, and that is, I apologize, that is from pages 852 to 859 of the joint appendix. The plan of specifically stipulated after trial when they tried to amend their complaint. They would not argue there was any higher burden on the defendants as a result of the inviolidity of the November amendment, because we made exactly the point you're making, which is they're going to... We said, Judge Chilli, they're going to argue we violated the plan. And if you're going to let them do that, our experts need to say different things, or additional things. And it was a result of the parties..

. Well, but again, there's party stipulated a trial that they wouldn't make that argument. Whether you're complying with the plan is also evidence of your prudence. You look at the re-mocases about that, and they didn't make any stipulation about that. Well, they did. They argued. They argued... We're arguing under that specific provision of erudition. Oh, I... But they were using... All right, we'll look here from the other side. You're right. I've been up here for a very long time. Is it possible? Will we give the other side lots of extra time? If you look at the stipulation that the party's entered, and that is, I apologize, that is from pages 852 to 859 of the joint appendix. The plan of specifically stipulated after trial when they tried to amend their complaint. They would not argue there was any higher burden on the defendants as a result of the inviolidity of the November amendment, because we made exactly the point you're making, which is they're going to... We said, Judge Chilli, they're going to argue we violated the plan. And if you're going to let them do that, our experts need to say different things, or additional things. And it was a result of the parties... We took a break in the proceedings. The party's negotiated stipulation in which, as you'll see in those transcript pages, the plan has very clearly said that the only thing they would get and that they wanted from an inviolidity of the November amendment was that the libousco... Their argument that the fiduciaries could have kept the libousco funds in the plan as frozen funds. Let me ask you one other question. Notwithstanding the district court's use of the words could use, do you think it's possible to read the district court's opinion taken as a whole that he made a finding of prudence in accordance with 29 U.S. CA-1104-A1B? Yes. I think... And why do you say that? The could-word discussion, I think, is sort of a side show. But look, we don't take... We try not to leap on one infulicitous phrase with respect to district courts, but I'm asking you whether the courts' opinion taken as a whole can be read to make a finding on the ultimate question of compliance with 1104-A1B? I think the answer is yes, because this recorded a three-step analysis. His first step is a could-word I decide it's could. That's what this went on a lot of argument. His second step is if removing the libousco funds was objectively prudent, then a hypothetical prudent producer could have done it. And then his third step was a factual analysis and factual findings to determine yes, it was objectively prudent. So he made the finding at the very last section of his opinion that removing the two funds was objectively prudent under 1104. So I think that a cop I understand your question, Judge Wilkinson. I think that's exactly right. Thank you, sir. Thank you. And Ms. Worthman, we'd be pleased to hear from you in Rebuddle

. We took a break in the proceedings. The party's negotiated stipulation in which, as you'll see in those transcript pages, the plan has very clearly said that the only thing they would get and that they wanted from an inviolidity of the November amendment was that the libousco... Their argument that the fiduciaries could have kept the libousco funds in the plan as frozen funds. Let me ask you one other question. Notwithstanding the district court's use of the words could use, do you think it's possible to read the district court's opinion taken as a whole that he made a finding of prudence in accordance with 29 U.S. CA-1104-A1B? Yes. I think... And why do you say that? The could-word discussion, I think, is sort of a side show. But look, we don't take... We try not to leap on one infulicitous phrase with respect to district courts, but I'm asking you whether the courts' opinion taken as a whole can be read to make a finding on the ultimate question of compliance with 1104-A1B? I think the answer is yes, because this recorded a three-step analysis. His first step is a could-word I decide it's could. That's what this went on a lot of argument. His second step is if removing the libousco funds was objectively prudent, then a hypothetical prudent producer could have done it. And then his third step was a factual analysis and factual findings to determine yes, it was objectively prudent. So he made the finding at the very last section of his opinion that removing the two funds was objectively prudent under 1104. So I think that a cop I understand your question, Judge Wilkinson. I think that's exactly right. Thank you, sir. Thank you. And Ms. Worthman, we'd be pleased to hear from you in Rebuddle. Thank you, Your Honours. Yes, there were a number of points made. So I have a number of points I'd like to address beginning with the question of the district court and how it comes out different on remand. This case has been going on for 12 years. We would certainly like to see this case resolved. We believe there's factual evidence in the record that if this court wanted to, it could find that a prudent producer would not have made that decision. But certainly it would come out different on remand. I would point the court to page 38 of the district court's opinion in the Joint Appendix as compared to page 76. Page set, that's where the court is discussing timing. The court did not make a finding that the timing was objectively prudent. Moreover, and more globally important, the court by virtue of its using the somebody somewhere standard. But it's possible that some fiduciary could have made the same decision, meant that it ignored a lot of the evidence that it had found was important in deciding what would a prudent fiduciary have done in looking at the breach. Those same considerations come in at the causation stage. What do you think a prudent fiduciary would do? Hold on, hold on to the fund? Yes, I do think a prudent fiduciary would have held on to the funds in all the facts and circumstances. Okay, on all of you think it should have held on to the Nabisco fund? Absolutely. There's two funds, the NGH fund and the NA fund. The participants had made decisions about how to invest their options among portfolio. These are 401k savings. Why should they have held on to the funds? Is it because there were a menu of options within the total portfolio? I think of extraordinarily relevant consideration. What about the seventh circuit decision that would say, even if it's one of a number of options, it's still highly risky, thing to have a single stock fund. And that risk was already in the plan. It's not, I think my colleague for RGR, concedes that at points there's important to have a risk option, an option that does have some risk in it in a plan, because you don't want necessarily to have all your investments in the lowest, most conservative investment option. You think that the decision that the trustees made here, or the plan managers made here, was objectively prudent? Yes, I do think that. You just disagree with the district court's finding on objective prudence. We do disagree with that finding. It comes down, and what we've argued to this court, is that the district court didn't make the correct decision. What is the district court clearly erroneous? We had a five week trial. Would you say it was clearly erroneous when he said that they made an objective prudent decision? That's not a factual finding

. Thank you, Your Honours. Yes, there were a number of points made. So I have a number of points I'd like to address beginning with the question of the district court and how it comes out different on remand. This case has been going on for 12 years. We would certainly like to see this case resolved. We believe there's factual evidence in the record that if this court wanted to, it could find that a prudent producer would not have made that decision. But certainly it would come out different on remand. I would point the court to page 38 of the district court's opinion in the Joint Appendix as compared to page 76. Page set, that's where the court is discussing timing. The court did not make a finding that the timing was objectively prudent. Moreover, and more globally important, the court by virtue of its using the somebody somewhere standard. But it's possible that some fiduciary could have made the same decision, meant that it ignored a lot of the evidence that it had found was important in deciding what would a prudent fiduciary have done in looking at the breach. Those same considerations come in at the causation stage. What do you think a prudent fiduciary would do? Hold on, hold on to the fund? Yes, I do think a prudent fiduciary would have held on to the funds in all the facts and circumstances. Okay, on all of you think it should have held on to the Nabisco fund? Absolutely. There's two funds, the NGH fund and the NA fund. The participants had made decisions about how to invest their options among portfolio. These are 401k savings. Why should they have held on to the funds? Is it because there were a menu of options within the total portfolio? I think of extraordinarily relevant consideration. What about the seventh circuit decision that would say, even if it's one of a number of options, it's still highly risky, thing to have a single stock fund. And that risk was already in the plan. It's not, I think my colleague for RGR, concedes that at points there's important to have a risk option, an option that does have some risk in it in a plan, because you don't want necessarily to have all your investments in the lowest, most conservative investment option. You think that the decision that the trustees made here, or the plan managers made here, was objectively prudent? Yes, I do think that. You just disagree with the district court's finding on objective prudence. We do disagree with that finding. It comes down, and what we've argued to this court, is that the district court didn't make the correct decision. What is the district court clearly erroneous? We had a five week trial. Would you say it was clearly erroneous when he said that they made an objective prudent decision? That's not a factual finding. Your honor, that's a mixed question of law, in fact. And as a mixed question of law, the question is, what was the standard that the district court used in determining whether or not it was objectively prudent? And the district court used the wrong standard. Let me tell you, let me, because I interrupted you previously, and I'm sorry, tell me why you think it was objectively prudent, imprudent for them to have held the fund. Yes. The most important consideration as Dr. Biller testified was that of minimizing the risk of large losses to the participants by forcing the sale at a low point in their value. Now, the stock was at a low point. It was not an imminent danger of bankruptcy. There was no allegations that that was the case. While there was some litigation risk, the argument was, in fact, in the district court found that the stock price incorporated the value, the risk that had been anticipated. And so it was what it was. It was falling between the RGR and Nubisco split and the time of the liquidation, the price the stock had been falling. Largely it had been falling, not every single day had it been falling. The fundamentals of Nubisco were strong. The analyst ratings were positive. Over time, the sell ratings, which had existed immediately after the spin-offs were eliminated. The district court found that those were considerations that could have lent support to keeping this fund in hand. Did your answer to me incorporate a great deal of market hindsight? I don't think that- We're looking at a crystal wall into the future that the trustees didn't have. No, Your Honor. And hindsight is not appropriate in a Neurissa case. And what the question is, is what should the fiduciaries have known from doing a thorough investigation? Which the district court found correctly, they absolutely did not do. They did not look at the portfolios of the participants to see what their other holdings were. They did not look at the- It stated intent of the plan to provide for participants long-term savings. They did not look at the characteristics of NGH or NA to determine whether or not- To sell and at what time? It might make sense to sell- You really don't agree then with the Scalia concurrence at all. Which says if they got there by blind luck and they made a finder of fact found was an objectively prudent decision that there wouldn't be lost causation and it wouldn't be mine. Because what you stated was quite contrary to the position that Justice Scalia stated and that many circuits have- Sided if not adopted. Respectfully Your Honor, I disagree. The think concurrence which has been adopted by some cases in the context of the hypothetical prudent fiduciary test says that the question is- Everything that a trustee should have known and taken into account and that requires looking at all the facts and circumstances

. Your honor, that's a mixed question of law, in fact. And as a mixed question of law, the question is, what was the standard that the district court used in determining whether or not it was objectively prudent? And the district court used the wrong standard. Let me tell you, let me, because I interrupted you previously, and I'm sorry, tell me why you think it was objectively prudent, imprudent for them to have held the fund. Yes. The most important consideration as Dr. Biller testified was that of minimizing the risk of large losses to the participants by forcing the sale at a low point in their value. Now, the stock was at a low point. It was not an imminent danger of bankruptcy. There was no allegations that that was the case. While there was some litigation risk, the argument was, in fact, in the district court found that the stock price incorporated the value, the risk that had been anticipated. And so it was what it was. It was falling between the RGR and Nubisco split and the time of the liquidation, the price the stock had been falling. Largely it had been falling, not every single day had it been falling. The fundamentals of Nubisco were strong. The analyst ratings were positive. Over time, the sell ratings, which had existed immediately after the spin-offs were eliminated. The district court found that those were considerations that could have lent support to keeping this fund in hand. Did your answer to me incorporate a great deal of market hindsight? I don't think that- We're looking at a crystal wall into the future that the trustees didn't have. No, Your Honor. And hindsight is not appropriate in a Neurissa case. And what the question is, is what should the fiduciaries have known from doing a thorough investigation? Which the district court found correctly, they absolutely did not do. They did not look at the portfolios of the participants to see what their other holdings were. They did not look at the- It stated intent of the plan to provide for participants long-term savings. They did not look at the characteristics of NGH or NA to determine whether or not- To sell and at what time? It might make sense to sell- You really don't agree then with the Scalia concurrence at all. Which says if they got there by blind luck and they made a finder of fact found was an objectively prudent decision that there wouldn't be lost causation and it wouldn't be mine. Because what you stated was quite contrary to the position that Justice Scalia stated and that many circuits have- Sided if not adopted. Respectfully Your Honor, I disagree. The think concurrence which has been adopted by some cases in the context of the hypothetical prudent fiduciary test says that the question is- Everything that a trustee should have known and taken into account and that requires looking at all the facts and circumstances. It involves requiring a decision that a hypothetical prudent fiduciary would have made the same decision not just would have, but for this plan- Under these circumstances- Right, yes. At this time as well and I believe that it will come out differently now. But let's suppose that plaintiffs do bear the burden of causation, of proof on a question of causation. The causation just like in an anti-discrimination case, causation is an element of a plaintiff's cause of action. How can the district court- I mean how can the district courts finding on the matter of causation be clearly in error when it finds that this was an objectively prudent decision given the various facts and circumstances? If a couple of points in response to that, one is that- It's an arbor to show a pre-mphasia case on causation under the test as adopted by the fifth and the eighth circuit. If it comes out differently and it's arbor to show that it's nonetheless the same question which is- Would a hypothetical prudent fiduciary nonetheless have made the same decision anyway? And we would meet that burden under the detailed facts and circumstances. If all of those facts and circumstances are considered, including the timing. Can I just ask one last question because I'm a little confused about it. Is it your concession that the district court's conclusion that this was objectively reasonable is a finding of facts, a conclusion of law? What is that? No, I'm sorry. I view that- No, no, no, I'm misunderstanding. You didn't do any wrong. Okay. Yes, I want to be clear that that's the question of causation is always a mixed question of law. In fact, and in this case it's a question of law because it's the application of the wrong standard. So you would say that the ultimate finding that there was objectively- That the trustee acted objectively reasonable was based on an incorrect standard. Yes, exactly. Like if you dismissed for some re-judgment and you stated the standard correct standard and then in fact you found a bunch of facts. Yes. It couldn't hold or if you said the standard was which side prevails which is most likely, you know, on a reasonable doubt. And the standard wasn't that. Exactly. You saw you make that saying. Okay. So that's where you think that the objective reasonable ultimate conclusion rests on an inappropriate scale. Exactly. A misinterpretation of section 49 and a rest set. Okay. Thank you very much

. We'll come down and read counsel and take a brief recess