    10-4061-cv
    In Re: SLM Corp. ERISA Litig.

                                    UNITED STATES COURT OF APPEALS
                                        FOR THE SECOND CIRCUIT

                                            SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007,
is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court’s Local Rule 32.1.1. When citing
a summary order in a document filed with this court, a party must cite either the Federal Appendix or an electronic
database (with the notation “summary order”). A party citing a summary order must serve a copy of it on any party not
represented by counsel.

            At a stated term of the United States Court of Appeals for the Second Circuit, held at the
    Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York,
    on the 26th day of December, two thousand twelve.

    PRESENT:

          PIERRE N. LEVAL,
          DEBRA ANN LIVINGSTON,
          DENNY CHIN,
                            Circuit Judges.
    _______________________________________________

    JIM SLAYMON, Individually and on behalf of all others similarly situated, ALAN CORDERO,
    Individually and on behalf of all others similarly situated,
                                  Plaintiffs,

    JITENDRA A. PATEL, Individually on behalf of all others similarly situated, ALEX CORDERO,
    Individually and on behalf of all others similarly situated,
                                  Plaintiffs-Appellants,

                     -v.-                                                        No. 10-4061-cv

    SLM CORP., DEPIETTO, SLM CORP. RETIREMENT COMMITTEE, ROBERT L. LORD, THOMAS J.
    FITZPATRICK, CHARLES ELLIOT (C.E.) ANDREWS, JOHN MCMANUS, JOHN AND JANE DOES 1
    THROUGH 10, THE SALLIE MAE BOARD OF DIRECTORS, SANDRA MASINO, CHIEF ACCOUNTING
    OFFICER OF SALLIE MAE, INVESTMENT ADVISORY COMMITTEE, COMPENSATION COMMITTEE, ANN
    TORRE BATES, WILLIAM M. DIEFENDERFER, III, EARL A. GOODE, DIANE SUITT GILLELAND, RONALD
    F. HUNT, ALBERT L. LORD, BARRY A. MUNITZ, A. ALEXANDER PORTER, JR., WOLFGANG
    SCHOELKOPF, STEVEN L. SHAPIRO, ANTHONY P. TERRACCIANO, HOWARD NEWMAN, FRANK PULEO,
    BARRY L. WILLIAMS, JOHN DOES 1 THROUGH 10, BEING CURRENT AND FORMER MEMBERS OF THE
    RETIREMENT COMMITTEE OF SLM CORP., SALLIE MAE, CHARLES ELLIOT ANDREWS, J. LANCE


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FRANKE, ROBERT LAVET, JONI REICH,
                         Defendants-Appellees.
_______________________________________________


                                       PETER H. LEVAN (Edward W. Ciolko, Mark K. Gyandoh, on
                                       the brief), Kessler Topaz Metzler & Check, LLP, Radnor,
                                       Pennsylvania, for Plaintiffs- Appellants.

                                       (Stephen J. Fearon, Jr., Garry T. Stevens, Jr., on the brief),
                                       Squitieri & Fearon, LLP, New York, New York, for
                                       Plaintiffs- Appellants.

                                       BRIAN T. ORTELERE, Morgan, Lewis & Bockius LLP, New
                                       York, New York, for all Defendants-Appellees.

                                       (Eric D. Reicin, on the brief), Deputy General Counsel, SLM
                                       Corp., Reston, Virginia, for Defendant-Appellee SLM Corp.

       Appeal from the judgment of the United States District Court for the Southern District of

New York (Pauley, J.).

       UPON DUE CONSIDERATION, it is hereby ORDERED, ADJUDGED, and DECREED

that the judgment of the District Court entered September 24, 2010 is AFFIRMED.

       Plaintiffs-Appellants Jitendra Patel and Alex Cordero (“Plaintiffs”) appeal from a judgment

granting Defendants-Appellees’ (“Defendants”) motion to dismiss the Second Consolidated Class

Action Complaint in its entirety for failure to state a claim upon which relief can be granted and for

lack of subject matter jurisdiction. SLM Corp. (“SLM” or “Sallie Mae”) is a private corporation

that, during the Class Period, originated and issued student loans through the Federal Family

Education Loan Program (“FFEL”) and through its Private Education Loan Program (“PEL”).

Plaintiffs were participants in the SLM Corp. Savings Plan (“Savings Plan”), an employee pension




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benefit plan as defined by ERISA § 3(2A), 29 U.S.C. §1002(2A). Defendants allegedly served as

fiduciaries of the Savings Plan and the SLM Corp. Retirement Plan (“Retirement Plan”).

       Plaintiffs contend that defendants breached (1) their duty of prudence by not divesting the

Savings Plan of SLM stock when that stock became an imprudent investment; (2) their duty of

loyalty by not disclosing material information to Savings Plan participants and by incorporating

false or misleading statements into the Savings Plan documents; and (3) their duties to avoid

conflicts of interest and monitor fellow fiduciaries. Plaintiffs also assert that they have standing to

raise claims on behalf of the Retirement Plan participants although neither Plaintiff is, or ever has

been, a participant in the Retirement Plan.

       We review a district court’s grant of a motion to dismiss pursuant to Federal Rule of Civil

Procedure 12(b)(6) or 12(b)(1) de novo, construing the complaint liberally, accepting all well-

pleaded factual allegations as true, and drawing all inferences in favor of the plaintiffs. Jaghory v.

N.Y. State Dep’t of Educ., 131 F.3d 326, 329 (2d Cir. 1997). We assume the parties’ familiarity with

the underlying facts, procedural history of the case, and issues on appeal, which we reference only

as necessary to explain our decision to affirm.

                                              *   *    *

1. Duty of Prudence

       Plaintiffs allege that information known to the Defendants during the Class Period would

have led a reasonable fiduciary to divest the Savings Plan of SLM stock before the stock’s value fell

from a high of $57.98 in July 2007 to $8.89 on September 9, 2010 -- the day on which Plaintiffs

filed the Second Consolidated Class Action Complaint. Because the Savings Plan is an Employee

Stock Option Plan (“ESOP”) that requires that SLM stock be offered as an investment option, we


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apply a heightened presumption of prudence pursuant to our holding in In re Citigroup ERISA

Litigation, 662 F.3d 128, 138 (2d Cir. 2011). See also Moench v. Robertson, 62 F.3d 553, 571 (3d

Cir. 1995) (first articulating the presumption of prudence). Under this presumption, we review a

fiduciary’s decision not to divest under an abuse-of-discretion standard. Citigroup, 662 F.3d at 140.

To rebut this presumption, Plaintiffs must plausibly allege facts that show that Defendants knew or

should have known that SLM was “in a ‘dire situation’ that was objectively unforeseeable by the

settlor,” such that a reasonable fiduciary would have divested the Savings Plan of SLM stock. Id.

(quoting Edgar v. Avaya, Inc., 503 F.3d 340, 348 (3d Cir. 2007)). Assuming arguendo that

Defendants knew of the facts alleged, Plaintiffs’ claim fails because reasonable fiduciaries with such

knowledge could still disagree as to whether they were obligated to divest. See id. at 140-41; see

also Gearren v. The McGraw-Hill Cos., 660 F.3d 605, 610 (2d Cir. 2011).

       Plaintiffs allege that by January 2007 SLM altered its conservative business model and began

extending more loans to students attending nontraditional colleges and universities. According to

the complaint, SLM failed to collect sufficient information to evaluate the risk of these “subprime”

loans, did not maintain adequate capitalization for these loans, and improperly granted forbearances

to hide the number of subprime loans in default. We accept these allegations as true. Nevertheless,

the fact that a company possesses some risky assets is not enough cause by itself to justify divesting

a plan of the company's stock. See Citigroup, 662 F.3d at 141 (holding presumption was not

overcome where company’s exposure to subprime loans caused its stock price to drop approximately

the same percentage as SLM’s stock price during the relevant time period). Here, the complaint

alleges that, at most, SLM's subprime loans comprised between 13% and 15% of its PEL loans. The

complaint makes no allegations with respect to loans issued through the FFEL program. Even


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though these subprime loans ultimately accounted for a disproportionate share of the charge-offs,

the Plaintiffs have not demonstrated that, at the time, a reasonable fiduciary could have predicted

the impact on SLM's stock price.

        Plaintiffs assert that the presence of other warning signs distinguish this case from Citigroup

and indicate that a reasonable fiduciary would have divested the Savings Plan of SLM stock.

However, these additional factors, such as the failure of a merger with a private equity firm and the

triggering of equity forward contracts, do not necessarily portend future financial difficulties and

would not have indicated that SLM was actually in a “dire situation.” Similarly, while the reduction

of federal subsidies in the College Cost Reduction and Access Act of 2007, Pub. L. No. 110-84, 121

Stat. 784, negatively impacted SLM, a reasonable fiduciary would not have concluded that SLM

was in a dire situation.

2. Additional Claims

        Plaintiffs assert four additional claims for breach of fiduciary duty, but none are availing.

First, as we have previously held, ERISA fiduciaries do not have a general duty to disclose

nonpublic investment information to plan participants beyond what is called for in ERISA’s

“comprehensive set of reporting and disclosure requirements.” Citigroup, 662 F.3d at 142-43

(quoting Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 83 (1995)) (internal quotation marks

omitted). Here, the Savings Plan documents, which include a general warning that investing in

undiversified stock is riskier than other investment options, satisfy ERISA’s requirements.

        Second, assuming arguendo that SLM’s SEC filings included false or misleading information

and that those filings were incorporated into the Savings Plan documents, Plaintiffs still fail to state

a claim for making false and misleading statements because there is no basis on which to conclude


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that the fiduciaries who incorporated those filings into the Savings Plan documents knew, at the time

that the filings were incorporated, that the statements were false or misleading. See Gearren, 660

F.3d at 611. Moreover, the complaint fails plausibly to allege that the Defendants, including SLM

Corp. and CEO Albert Lord, who originally made the allegedly false or misleading statements, did

so while acting in a fiduciary capacity, rather than in a corporate capacity. As such, Plaintiffs’ claim

is foreclosed by our holdings in Citigroup, 662 F.3d at 144, and Gearren, 660 F.3d at 611.

        Lastly, we agree with the district court that Plaintiffs’ claim for breach of duty to monitor

other fiduciaries is derivative of Plaintiffs’ other claims. Because Defendants did not otherwise

breach their fiduciary duties, this claims also fails. In addition, Plaintiffs’ allegation that Defendants

breached their duty to avoid conflicts -- which is based predominately on stock sales and equity-

based incentive compensation -- is, without more, insufficient to state a conflict of interest claim.

See Citigroup, 662 F.3d at 145-46.

3. Standing

        We also affirm the district court’s dismissal of the claims against the Retirement Plan for

lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). Here,

Plaintiffs were never participants in the Retirement Plan and lack constitutional standing to bring

claims against fiduciaries of that Plan. Even though the fiduciaries for the two plans overlap, the

plans have separate governing documents, and the decision not to divest the Retirement Plan of SLM

stock must be viewed separately from the decision not to divest the Savings Plan of SLM stock. A

favorable ruling against the Retirement Plan fiduciaries requiring them to compensate the aggrieved

Retirement Plan participants would not guarantee a similar outcome for the aggrieved Savings Plan

participants and, thus, would afford Plaintiffs no relief. Moreover, Plaintiffs fail to allege any


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general harm that would be cured by granting injunctive relief to participants of the Retirement Plan.

Because Plaintiffs cannot satisfy redressability, they lack standing under Article III. See Lujan v.

Defenders of Wildlife, 504 U.S. 555, 560-61 (1992); Kendall v. Emps. Ret. Plan of Avon Prods., 561

F.3d 112, 120-21 (2d Cir. 2009).

       We have reviewed Plaintiffs’ remaining arguments and find them to be without merit.

Accordingly, for the foregoing reasons, the judgment of the district court is AFFIRMED.

                                                      FOR THE COURT:
                                                      Catherine O’Hagan Wolfe, Clerk




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