                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

In re: SYNCOR ERISA LITIGATION,         
CAROL PILKINGTON; DONNA BROWN;
KAREN THOMPSON; CYNTHIA DUNN;
ANTOINETTE HART; SHIRLEY
NOBREGA; DEBORAH PINNER;
PAMELA THOMSON; CHERIE
BRANNAN, on behalf of themselves
                                              No. 06-55265
and all others similarly situated,
               Plaintiffs-Appellants,
                                               D.C. No.
                                            CV-03-02446-RGK
                  v.
                                               OPINION
CARDINAL HEALTH, INC.; ROBERT D.
WALTER; PAUL S. WILLIAM,
                         Defendants,
                 and
SYNCOR INTERNATIONAL
CORPORATION; ROBERT G. FUNARI;
MONTY FU,
              Defendants-Appellees.
                                        
        Appeal from the United States District Court
           for the Central District of California
        R. Gary Klausner, District Judge, Presiding

                 Argued and Submitted
          November 9, 2007—Pasadena, California

                   Filed February 19, 2008

     Before: Kim McLane Wardlaw, Carlos T. Bea, and
              N. Randy Smith, Circuit Judges.

                             1431
1432   IN RE: SYNCOR ERISA LITIGATION
       Opinion by Judge N.R. Smith
1434          IN RE: SYNCOR ERISA LITIGATION


                       COUNSEL

T. David Copley, Law Offices of Keller Rohrback, L.L.P.,
Seattle, Washington, and Edward W. Ciolko, Law Offices of
Schiffrin & Barroway, LLP, Radnor, Pennsylvania, for the
plaintiffs-appellants.

Daniel S. Floyd, Law Offices of Gibson, Dunn & Crutcher
LLP, Los Angeles, California, for the defendants-appellees.
                IN RE: SYNCOR ERISA LITIGATION                1435
                           OPINION

N.R. SMITH, Circuit Judge:

   We hold that, when parties (1) enter into a binding class
action settlement agreement, which requires court approval
pursuant to Rule 23(e) of the Federal Rules of Civil Proce-
dure, and (2) provide the required notice of the settlement to
the district court prior to the district court’s entry of the final
judgments, the district court should hold a hearing and review
the settlement agreement to determine if it is fair, reasonable,
and adequate. See Fed. R. Civ. P. 23(e)(2). Failure to do so—
even when the district court has already drafted a summary
judgment order— is an abuse of discretion. We also hold that
genuine issues of material fact exist regarding whether the
Defendants breached their fiduciary duty under ERISA as set
forth in 29 U.S.C. § 1104(a), which precludes an award of
summary judgment. Accordingly, we reverse and remand.

I.   Factual Background

   Syncor International Corp. (“Syncor”), a health care ser-
vices company, merged with Cardinal Health, Inc.
(“Cardinal”) on January 1, 2003. Prior to the merger, Syncor
was the administrator and fiduciary of the Syncor Employee’s
Saving and Stock Ownership Plan (“the Plan”), a retirement
plan governed by the Employee Retirement Income Security
Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. Committee
members appointed by Syncor’s board of directors adminis-
tered the Plan. Syncor’s board of directors also had final
decision-making authority regarding all aspects of the Plan’s
administration. Defendants-Appellees Monty Fu (“Fu”) and
Robert G. Funari (“Funari”) were both members of Syncor’s
board of directors.

  The Plan consisted of two components. First, the Plan’s
401(k) component allowed participants to contribute between
one and fourteen percent of their compensation each pay
1436              IN RE: SYNCOR ERISA LITIGATION
period to any of the nine available investment funds chosen
by Syncor.1 The second component of the Plan allowed partic-
ipants to invest as much as an additional two percent of their
compensation in an employee stock ownership plan
(“ESOP”), which was designed to invest primarily in Syn-
cor’s common stock.

   On June 14, 2002, Syncor and Cardinal announced that
Cardinal would acquire Syncor in a stock-for-stock merger.
The merger agreement provided that Syncor shareholders
would receive 0.52 shares of Cardinal common stock for each
outstanding share of Syncor common stock. Pursuant to the
merger agreement, Cardinal conducted a due diligence review
of Syncor’s operations. In October 2002, after conducting the
review, Cardinal notified Syncor that certain payments made
by Syncor’s Taiwanese subsidiary, Syncor Taiwan, Inc., may
have violated the Foreign Corrupt Practices Act (“FCPA”), 15
U.S.C. § 78dd-1 et seq.

   Cardinal discovered that, beginning in approximately 1985,
Defendant Fu and Moses Fu (Defendant Fu’s brother, who
was in charge of Syncor’s Taiwan subsidiary) knowingly
made cash bribes to doctors at Taiwanese government-
operated hospitals in order to increase sales and grow Syn-
cor’s business. Syncor also systematically encouraged the
managers of its other foreign operations to use bribes in the
countries in which they did business. Despite these illegal
practices, the Plan’s committee members, including Fu and
Funari, allowed the Plan to hold and acquire Syncor stock
when they knew or had reason to know of Syncor’s foreign
bribery scheme.

   Thereafter, Cardinal announced that it had discovered ille-
gal payments made by Syncor’s subsidiaries in Taiwan and
China. After this disclosure, Syncor’s stock price dropped,
losing almost half its value. Cardinal then reduced the merger
  1
   The 401(k) component of the Plan is not at issue in this matter.
                IN RE: SYNCOR ERISA LITIGATION              1437
exchange rate to 0.47 shares of Cardinal stock for each Syn-
cor share. This change resulted in a loss of between 24 and
65.5 million dollars to members of the Plan. As a result of this
loss, a class action complaint was filed on behalf of all per-
sons who were participants in the Plan (“the Class”). On
March 28, 2005, the district court certified the lawsuit as a
class action.

   Syncor then entered into a non-prosecution agreement with
the Department of Justice. Syncor Taiwan, Inc. entered a
guilty plea to one count of violating the FCPA and paid a fine
of $2,000,000. Syncor also entered a consent decree with the
Securities Exchange Commission in which Syncor agreed to
the entry of a cease-and-desist order and agreed to pay a fine
of $500,000. Fu surrendered $2,500,000 worth of his own
Syncor stock to reimburse Syncor for the fines.

II.   Procedural History & Settlement

   On February 24, 2004, the Class filed its consolidated com-
plaint, which alleged that Syncor and the Plan’s committee
members breached their fiduciary duties to the Plan and its
participants in violation of ERISA §§ 404(a)(1)(A)-(D) &
405. In its January 10, 2005 Order Re: Civil Jury Trial, the
district court ordered the parties to comply with the local rules
setting out mandatory settlement procedures. On October 19,
2005, the district court entered an order granting the parties
additional time to participate in a settlement procedure. In
November 2005, Defendants Syncor and Funari filed a joint
Motion for Summary Judgment and Defendant Fu filed a sep-
arate Motion for Summary Judgment. The parties engaged in
formal mediation on December 12, 2005, with settlement
negotiations continuing after that date. During the time period
following mediation, the parties continued to file documents
regarding the summary judgment motions. On December 16,
2005, the district court took the motions “under submission.”

  On January 10, 2006, without notice that the district court
had reached a decision regarding the summary judgment
1438            IN RE: SYNCOR ERISA LITIGATION
motions, the parties signed a “Revised Term Sheet,” with a
proposed settlement. The term sheet stated, “Court approval
is a condition of this settlement.” Pursuant to Central District
of California Local Rule 16-15.7, which instructs litigants on
how to report a settlement, the parties left a message for the
district court’s clerk regarding the parties’ term sheet. Coun-
sel for the Class also delivered a letter to the district court
stating, “The parties have signed a term sheet and have begun
the process of formally documenting the settlement.” Neither
party provided the term sheet to the district court. On the
same day, the district court signed an order granting Syncor’s,
Funari’s, and Fu’s motions for summary judgment, holding
Plaintiffs failed to demonstrate genuine issues of material fact
existed as to whether Defendants breached their duty of pru-
dence.

   The following day, January 11, 2006, the parties submitted
a signed stipulation and a proposed order asking the district
court, among other things, to “not issue a ruling on the
Motions for Summary Judgment.” Again neither party pro-
vided the term sheet to the district court. Even though the par-
ties provided the required notice of settlement to the district
court, the district court nevertheless entered its order granting
the motions for summary judgment on January 11, 2006. The
district court entered final judgments against the Class on Jan-
uary 12, 2006. Thereafter, the district court denied the parties’
proposed order regarding settlement as moot.

   On January 25, 2006, the Class filed a motion under Fed-
eral Rules of Civil Procedure 60(b) and 59(e) requesting that
the district court set aside the final judgments. The Class also
filed a motion for preliminary approval of the settlement pur-
suant to Rule 23(e) of the Federal Rules of Civil Procedure.
On March 2, 2006, the district court denied the Class’s Rule
60(b) and Rule 59(e) motions and the Class’s motion for pre-
liminary approval of the settlement holding that merely
because “the parties reached a tentative settlement on the
same day the Court issued its summary judgment rulings does
                IN RE: SYNCOR ERISA LITIGATION              1439
not, without more, mean that a manifest injustice will result
if the Court allows its summary judgment rulings to stand.”

   The Class appeals from the district court’s rulings and
raises two issues: (1) whether the district court abused its dis-
cretion by not considering the class action settlement and (2)
whether the district court erred by concluding plaintiffs failed
to demonstrate genuine issues of fact existed as to whether the
fiduciaries breached their fiduciary duty to the Plan and par-
ticipants. We have jurisdiction under 28 U.S.C. § 1291. We
reverse and remand.

III.   Standard of Review

   Motions for relief from judgment pursuant to Rule 60(b) of
the Federal Rules of Civil Procedure are addressed to the
sound discretion of the district court and will not be reversed
absent an abuse of discretion. See United States v. Washing-
ton, 394 F.3d 1152, 1157 (9th Cir. 2005). “A district court
abuses its discretion if it does not apply the correct law or if
it rests its decision on a clearly erroneous finding of material
fact.” Bateman v. United States Postal Serv., 231 F.3d 1220,
1223 (9th Cir. 2000).

   We also review the denial of a motion to alter or amend a
judgment under Rule 59(e) of the Federal Rules of Civil Pro-
cedure for abuse of discretion. Smith v. Pac. Props. & Dev.
Corp., 358 F.3d 1097, 1100 (9th Cir. 2004). “Rule 59(e)
amendments are appropriate if the district court (1) is pre-
sented with newly discovered evidence, (2) committed clear
error or the initial decision was manifestly unjust, or (3) if
there is an intervening change in controlling law.” Dixon v.
Wallowa County, 336 F.3d 1013, 1022 (9th Cir. 2003) (inter-
nal quotation marks omitted).

  We review de novo the district court’s grant of summary
judgment and, viewing the evidence in the light most favor-
able to the non-moving party, determine whether there are any
1440            IN RE: SYNCOR ERISA LITIGATION
genuine issues of material fact for trial. Gammoh v. City of La
Habra, 395 F.3d 1114, 1122 (9th Cir. 2005).

IV.    Discussion

  A.    The Settlement Agreement

   [1] Federal Rule of Civil Procedure 23(e) requires the dis-
trict court to “approve any settlement of a certified class”
before such a settlement becomes final. Fed. R. Civ. P. 23(e).
In evaluating a class action settlement under Rule 23(e), the
district court determines whether the settlement is fundamen-
tally fair, reasonable, and adequate. Id. The purpose of Rule
23(e) is to protect the unnamed members of the class from
unjust or unfair settlements affecting their rights. See Davis v.
City and County of San Francisco, 890 F.2d 1438, 1444 n.5
(9th Cir. 1989). Here, the district court never considered
whether to approve the settlement because the court found
that its summary judgment order mooted the tentative settle-
ment agreement.

   [2] The parties agree that they had reached an enforceable
settlement agreement subject to court approval. Our court has
previously held that the requirement that the district court
approve a class action settlement does not affect the binding
nature of the parties’ agreement. See Collins v. Thompson,
679 F.2d 168, 172 (9th Cir. 1982) (“Judicial approval of a
[class action settlement] is clearly a condition subsequent, and
should not affect the legality of the formation of the proposed
[settlement] as between the negotiating parties.”) At the time
of the settlement, Defendants knew they had dispositive
motions pending and chose the certainty of settlement rather
than the gamble of a ruling on their motions. Thus, Defen-
dants chose to forego the chance that the district court would
grant summary judgment in their favor. Because the parties
bound themselves to a settlement agreement subject only to
court approval (which they had agreed to seek) and gave the
required notice of the agreement, the district court should not
                IN RE: SYNCOR ERISA LITIGATION               1441
have (1) filed its order granting the motions for summary
judgment and (2) entered final judgments against the Class.

   The facts of this case are somewhat analogous to Sheng v.
Starkey Labs, Inc., 117 F.3d 1081 (8th Cir. 1997). Although
the settlement in Sheng did not involve a class action, the
Eighth Circuit’s reasoning that the district court abused its
discretion is equally applicable here. In Sheng, the district
court signed (but did not enter) an order granting summary
judgment the Friday before the mediation was to commence.
Id. at 1082. The following Monday, the parties settled the
matter and the district court vacated its summary judgment
order and dismissed the case. Id. Thereafter, the defendant
filed a Rule 60(b) motion seeking to vacate the order dismiss-
ing the case. After remand for an evidentiary hearing, a new
district court judge reinstated the summary judgment order.
Id. at 1083. The Eighth Circuit held the defendant was bound
by the settlement, notwithstanding the court’s ruling on the
merits. “Rule 60(b) does not allow district courts to indulge
a party’s discontent over the effects of [the party’s] bargain.”
Id. at 1083 (internal quotation omitted). Accordingly, the
court held that because the parties had entered into a binding
settlement, the district court abused its discretion in granting
the defendant’s Rule 60(b) motion. Id.

   Additionally, there is a strong judicial policy that favors
settlements, particularly where complex class action litigation
is concerned. See Class Plaintiffs, 955 F.2d at 1276. In Offi-
cers for Justice v. Civil Service Comm’n of the City and
County of San Francisco, 688 F.2d 615 (9th Cir. 1982), we
specifically stated that, “it must not be overlooked that volun-
tary conciliation and settlement are the preferred means of
dispute resolution. This is especially true in complex class
action litigation . . . .” Id. at 625. This policy is also evident
in the Federal Rules of Civil Procedure and the Local Rules
of the United States District Court, Central District of Califor-
nia, which encourage facilitating the settlement of cases. See
Fed. R. Civ. P. 16(a)(5) (one of the five purposes of a pretrial
1442            IN RE: SYNCOR ERISA LITIGATION
conference is to facilitate settlement); L.R. 16-2.9 (requiring
parties to exhaust all possibilities of settlement); L.R. 16-15
to 15.9 (setting forth policies and procedures for settlement
including encouraging disposition of civil litigation by settle-
ment by any reasonable means). The record demonstrates that
the Class complied with the local rules by reporting the settle-
ment immediately to the trial judge’s courtroom deputy clerk
and timely memorializing the settlement. See L.R. 16-15.7.
The district court, nevertheless, refused to vacate the sum-
mary judgment order and subsequent final judgments even
though the parties had entered a binding settlement agreement
subject only to the district court’s approval pursuant to Rule
23(e).

   [3] Defendants argue that the district court has the discre-
tion to enter final judgment rather than review the proposed
settlement in order to manage its calendar. Defendants argue
that, because the settlement was not yet final, the district court
did not abuse its discretion by entering the judgments on the
merits. These arguments, however, are not compelling under
these circumstances. Because the parties provided appropriate
notice to the district court of the settlement agreement, the
court should never have filed its order or entered the final
judgments. The parties informed the district court that they
had entered a binding settlement agreement the day before the
district court entered its summary judgment order and two
days before the district court entered the final judgments. The
district court thus should have reviewed the settlement docu-
ment as required under Fed. R. Civ. P. 23(e). The district
court’s management of its docket must not undercut a valid
settlement agreement between the parties that is appropriately
provided to the district court for review.

   [4] That the district court had already drafted a summary
judgment order is not justification for refusing to approve an
otherwise enforceable settlement agreement between the par-
ties. The district court is not a party to the settlement. The
court’s role in the class action settlement process is to protect
                IN RE: SYNCOR ERISA LITIGATION              1443
the right of those not involved in negotiating the settlement,
generally the unnamed class members. Officers for Justice,
688 F.2d at 624 (stating the primary concern of section 23(e)
is the protection of those class members, whose rights may
not have been given due regard by the negotiating parties).

   [5] Therefore, we hold that the district court abused its dis-
cretion by entering the final judgments and by refusing to
vacate the final judgments under Rules 59(e) and 60(b)(6).
The district court erred when it did not apply Rule 23(e) and
review the settlement agreement prior to the entry of the judg-
ments. Therefore, we reverse the district court’s denial of the
Class’s motion to vacate the entry of final judgments and
remand with instructions to the district court to review the set-
tlement pursuant to Rule 23(e). Accordingly, we also vacate
the district court’s entries of judgments in favor of Syncor,
Fu, and Funari.

  B.   Summary Judgment

   Defendants moved for summary judgment on the basis that
they did not breach their fiduciary duties because (1) 29
U.S.C. § 1104 exempted them from the duty to diversify hold-
ings in company stock, and (2) Syncor stock was not an
imprudent investment. In reviewing the motions for summary
judgment, the district court applied the so-called “Moench
presumption,” under which fiduciaries of ESOPs are pre-
sumed to have acted consistently with ERISA in their deci-
sions to invest assets in employer stock. See Moench v.
Robertson, 62 F.3d 553, 571 (3d Cir. 1995). A plaintiff may
rebut this presumption by establishing that the fiduciary
abused its discretion and a prudent investor under the circum-
stances would not have followed the plan’s mandate to invest
in employer securities. Id. The district court granted Defen-
dants’ motions, finding the Class failed to rebut the Moench
presumption because the Class failed to present any evidence
that Syncor knew that its financial condition was seriously
1444            IN RE: SYNCOR ERISA LITIGATION
deteriorating and that there was a genuine risk of insider self-
dealing.

   [6] Viewing the evidence in the light most favorable to the
Class, we find there are genuine issues of material fact for
trial rendering summary adjudication inappropriate. As an ini-
tial matter, this Circuit has not yet adopted the Moench pre-
sumption, see Wright v. Oregon Metallurgical Corp., 360
F.3d 1090, 1098 n.3. (9th Cir. 2004), and we decline to do so
now. In any event, the district court’s determination that the
Class did not rebut the Moench presumption based solely
upon Syncor’s financial viability (as shown by evidence that
Syncor stock outperformed both the NASDAQ and S&P 500)
is not an appropriate application of the prudent man standard
set forth in either Moench or 29 U.S.C. § 1104.

   [7] The plain language of 29 U.S.C. § 1104(a)(2) does not
require fiduciaries of an eligible individual account plan to
diversify their investment outside of company stock in order
to meet the prudent man standard of care. See Wright, 360
F.3d at 1096-97. However, 29 U.S.C. § 1104(a)(2) does not
exempt fiduciaries from the first prong of the prudent man
standard, which requires a fiduciary to act with care, skill,
prudence, and diligence in any investment the fiduciary
chooses. See Wright, 360 F.3d at 1097, 29 U.S.C.
§ 1104(a)(1)(B). A prudent man standard based only upon a
company’s alleged financial viability does not take into
account the myriad of circumstances that could violate the
standard. A violation may occur where a company’s stock did
not trend downward over time, but was artificially inflated
during that time by an illegal scheme about which the fidu-
ciaries knew or should have known, and then suddenly
declined when the scheme was exposed. While financial via-
bility is a factor to be considered, it is not determinative of
whether the fiduciaries failed to act with care, skill, prudence,
or diligence.

  [8] We find that genuine issues of material fact exist
regarding whether Defendants breached the “prudent man”
                IN RE: SYNCOR ERISA LITIGATION             1445
standard set forth in 29 U.S.C. § 1104(a). The “prudent man”
standard of care requires a fiduciary to discharge his duties
with respect to a plan solely in the interest of participants
“with the care, skill, prudence and diligence under the circum-
stances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the con-
duct of an enterprise of a like character with like aims.” 29
U.S.C. § 1104(a)(1)(B). Here, there is a genuine issue whether
the fiduciaries breached the prudent man standard by knowing
of, and/or participating in, the illegal scheme while continuing
to hold and purchase artificially inflated Syncor stock for the
ERISA Plan.

V.    Conclusion

   We conclude that the district court abused its discretion by
entering the final judgments and by refusing to vacate the
final judgments under Rules 59(e) and 60(b)(6). We further
hold that the district court erred in granting summary judg-
ment. We therefore reverse the district court’s summary judg-
ment in favor of Defendants. We also reverse the order of the
district court denying the Class’s Rule 60(b)(6) and Rule
59(e) motions and remand with instructions to the district
court to review the settlement agreement pursuant to Rule
23(e) and to take further actions consistent with this opinion.

     REVERSED and REMANDED.
