                       RECOMMENDED FOR FULL-TEXT PUBLICATION
                            Pursuant to Sixth Circuit Rule 206
                                   File Name: 12a0299p.06

               UNITED STATES COURT OF APPEALS
                                FOR THE SIXTH CIRCUIT
                                  _________________


                                                   X
                                                    -
 JOHN DUDENHOEFER, on behalf of himself
                                                    -
 and all others similarly situated; ALIREZA
 PARTOVIPANAH,                                      -
                           Plaintiffs-Appellants, -
                                                        No. 11-3012

                                                    ,
                                                     >
                                                    -
                                                    -
             v.
                                                    -
                                                    -
 FIFTH THIRD BANCORP; KEVIN T. KABAT;
                                                    -
                                                    -
 PAUL L. REYNOLDS; THE PENSION AND

                                                    -
 PROFIT SHARING COMMITTEE; NANCY
                                                    -
 PHILLIPS; GREG CARMICHAEL; ROBERT
                                                    -
 SULLIVAN; MARY TUUK; JOHN DOES 1–20,
                          Defendants-Appellees. N
                     Appeal from the United States District Court
                    for the Southern District of Ohio at Cincinnati.
                No. 1:08-cv-538—Sandra S. Beckwith, District Judge.
                                   Argued: June 7, 2012
                         Decided and Filed: September 5, 2012
     Before: COOK and STRANCH, Circuit Judges; LAWSON, District Judge.*

                                   _________________

                                        COUNSEL
ARGUED: Peter H. LeVan, Jr., KESSLER TOPAZ MELTZER & CHECK, LLP,
Radnor, Pennsylvania, for Appellants. Joseph M. Callow, Jr., KEATING, MUETHING
& KLEKAMP PLL, Cincinnati, Ohio, for Appellees. Melissa Moore, UNITED
STATES DEPARTMENT OF LABOR, Washington, D.C., for Amicus Curiae.
ON BRIEF: Edward W. Ciolko, Mark K. Gyandoh, KESSLER TOPAZ MELTZER &
CHECK, LLP, Radnor, Pennsylvania, Thomas J. McKenna, GAINEY & McKENNA,
New York, New York, for Appellants. Joseph M. Callow, Jr., James E. Burke, Danielle
M. D’Addesa, David T. Bules, KEATING, MUETHING & KLEKAMP PLL,
Cincinnati, Ohio, for Appellees. Melissa Moore, UNITED STATES DEPARTMENT



        *
        The Honorable David M. Lawson, United States District Judge for the Eastern District of
Michigan, sitting by designation.


                                              1
No. 11-3012        Dudenhoefer, et al. v. Fifth Third Bancorp, et al.              Page 2


OF LABOR, Washington, D.C., Jay E. Sushelsky, AARP FOUNDATION, Washington,
D.C., for Amici Curiae.
                                 _________________

                                       OPINION
                                 _________________

       JANE B. STRANCH, Circuit Judge. Plaintiffs John Dudenhoefer and Alireza
Partovipanah, participants in and contributors to their employer’s retirement plan, filed
suit against Fifth Third and several individual Defendants on behalf of themselves and
a class of similarly situated individuals alleging violations of the Employee Retirement
Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. Plaintiffs alleged that plan
fiduciaries continued to invest in and hold Fifth Third Stock despite its precipitous
decline in value in breach of their fiduciary duties including their duty to prudently and
loyally manage the plan’s investment in company securities. The district court found
Plaintiffs failed to state claims upon which relief could be granted and granted
Defendants’ Motion to Dismiss the Amended Complaint. This appeal followed. For the
following reasons, we REVERSE the judgment of the district court and REMAND for
further proceedings.

                                 I. BACKGROUND

A.     Factual History

       Because this appeal arises from a decision at the motion to dismiss stage, we
draw the facts from the allegations of the Amended Complaint. Plaintiffs John
Dudenhoefer and Alireza Partovipanah, former employees of Fifth Third Bank, are plan
participants in the Fifth Third Bancorp Master Profit Sharing Plan (“the Plan”) and
invested in Fifth Third common stock through the Plan during the class period. The Plan
is a defined contribution retirement plan for employees sponsored by Fifth Third, which
serves as trustee. Participants make voluntary contributions to the Plan from their
salaries and direct the Plan to purchase investments for their individual account from
No. 11-3012         Dudenhoefer, et al. v. Fifth Third Bancorp, et al.               Page 3


options preselected by the Defendants. During the class period, these options included
Fifth Third Stock, two collective funds, or seventeen mutual funds.

        Once employees are eligible to participate in the Plan, Fifth Third matches
100% of the first 4% of a participant’s compensation contributed as part of the
employee’s compensation package. Those matching contributions are initially invested
in the Fifth Third Stock Fund but may be moved subsequently to the other investment
options. The Plan is not invested solely in Fifth Third Stock, nor is it required to be: the
Plan Document does not mandate that the Fifth Third Stock Fund invest solely in Fifth
Third Stock and does not limit the ability of the Plan fiduciaries to remove the Fifth
Third Stock Fund or divest assets invested in the Fifth Third Stock Fund, as prudence
dictates. The Plan fiduciaries chose to incorporate by reference Fifth Third’s SEC filings
into the Summary Plan Description (SPD), an ERISA required communication to Plan
participants.

        During the class period, a significant amount of the Plan’s assets were invested
in Fifth Third Stock. Plaintiffs allege that, during this period, Fifth Third switched from
being a conservative lender to a subprime lender, its loan portfolio became increasingly
at risk due to defaults, and it either failed to disclose the resulting damage to the
company and its Stock or provided misleading disclosures. The price of Fifth Third
Stock declined 74% from the beginning of the class period, July 19, 2007 through
September 18, 2009, causing the Plan to lose tens of millions of dollars. The Amended
Complaint further alleges that: Defendants were aware of the risks presented by its
investment in the subprime lending market, citing specific public sources; and business
and accounting mismanagement related to these risks, coupled with incomplete and
inaccurate statements by Fifth Third executives, caused the price of Fifth Third Stock
to be artificially inflated before plummeting. It is alleged that “[a] prudent fiduciary
facing similar circumstances would not have stood idly by as the Plan’s assets were
decimated.”
No. 11-3012        Dudenhoefer, et al. v. Fifth Third Bancorp, et al.              Page 4


B.     Procedural History

       On September 21, 2008, Plaintiffs filed an Amended Complaint alleging ERISA
violations against Fifth Third; Kevin T. Kabat, Fifth Third’s President and Chief
Executive Officer during the class period; and members of Fifth Third’s Pension, Profit
Sharing, and Medical Plan Committee (the “Committee”). Plaintiffs allege each
Defendant acted as a fiduciary with respect to the Plan during the class period. The
Amended Complaint contains four counts. Count I alleges that: (1) all Defendants
breached their fiduciary duties under ERISA by maintaining significant investment in
Fifth Third Stock and continuing to offer it as an authorized investment option at a time
that they knew or should have known it was imprudent to do so; and (2) the Defendants
breached their fiduciary duties by failing to provide Plan participants with accurate and
complete information about Fifth Third and the risks of investment in Fifth Third Stock.
Count II alleges that Fifth Third and President/CEO Kabat breached their fiduciary
duties under ERISA by failing to properly monitor the performance of their fiduciary
appointees. Count III alleges that all Defendants failed to avoid or ameliorate inherent
conflicts of interest relating to their management of the Plan. Finally, Count IV alleges
that all Defendants are liable for breaches of their co-fiduciaries.

       On October 5, 2008, Defendants filed a Motion to Dismiss the Amended
Complaint. On November 24, the district court granted the motion, finding that the
Amended Complaint failed to state a plausible claim for relief. Specifically, the district
court found that the Plan was an employee stock ownership fund (“ESOP”) under
ERISA and, thus, Defendants benefitted from a presumption that their decision to remain
invested in employer securities was reasonable. Applying this presumption at the
motion to dismiss stage, the district court found that Count I of the Amended Complaint
failed to allege facts to overcome this presumption of reasonableness. The district court
also found that Count I of the Amended Complaint failed to the extent it relied on SEC
filings incorporated into Plan documents because the court concluded the Defendants did
not speak in a fiduciary capacity when those alleged misstatements and omissions were
made. Finally, the district court dismissed the remaining Counts based entirely on their
No. 11-3012         Dudenhoefer, et al. v. Fifth Third Bancorp, et al.                Page 5


dependency on Count I. The district court dismissed the Amended Complaint in its
entirety and denied the Plaintiffs’ request for leave to amend. Plaintiffs timely appealed.

                                     II. ANALYSIS

A.      Standard of Review

        This court reviews the district court’s order granting a Rule 12(b)(6) motion to
dismiss de novo. Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 572 (6th Cir.
2008). In assessing a complaint for failure to state a claim, we must construe the
complaint in the light most favorable to the plaintiff, accept all well pled factual
allegations as true, and determine whether the complaint “contain[s] sufficient factual
matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation and citation omitted).

B.      Count I: Violations of ERISA Fiduciary Duties

        1.      Fiduciary Duties under ERISA for ESOPs

        “ERISA is a comprehensive statute designed to promote the interests of
employees and their beneficiaries in employee benefit plans.” Shaw v. Delta Air Lines,
Inc., 463 U.S. 85, 90 (1983). ERISA safeguards the “financial soundness” of employee
benefit plans “by establishing standards of conduct, responsibility, and obligation for
fiduciaries of employee benefit plans, and by providing for appropriate remedies,
sanctions, and ready access to the Federal courts.” 29 U.S.C. § 1001(a), (b). Section
404(a)(1) establishes the fiduciary duties of trustees administering plans governed by
ERISA:

        (a) Prudent man standard of care


        (1) Subject to sections 1103(c) and (d), 1342, and 1344 of this title, a
        fiduciary shall discharge his duties with respect to a plan solely in the
        interest of the participants and beneficiaries and—
                (A) for the exclusive purpose of:
No. 11-3012        Dudenhoefer, et al. v. Fifth Third Bancorp, et al.              Page 6


                       (i) providing benefits to participants and their
                       beneficiaries; and
                       (ii) defraying reasonable expenses of administering the
                       plan;
               (B) with the care, skill, prudence, and diligence under the
               circumstances then prevailing that a prudent man acting
               in a like capacity and familiar with such matters would
               use in the conduct of an enterprise of a like character and
               with like aims;
               (C) by diversifying the investments of the plan so as to minimize
               the risk of large losses, unless under the circumstances it is
               clearly prudent not to do so; and
               (D) in accordance with the documents and instruments governing
               the plan insofar as such documents and instruments are consistent
               with the provisions of this subchapter and subchapter III of this
               chapter.

29 U.S.C. § 1104(a)(1). These fiduciary duties have been broken down into three
components. See Gregg v. Transp. Workers of Am. Int’l, 343 F.3d 833, 840 (6th Cir.
2003). First, a fiduciary owes a duty of loyalty “pursuant to which all decisions
regarding an ERISA plan must be made with an eye single to the interests of the
participants and beneficiaries.” Id. (quoting Kuper v. Iovenko, 66 F.3d 1447, 1458 (6th
Cir. 1995) (internal quotations marks omitted)).         Second, ERISA imposes “an
unwavering duty to act both as a prudent person would act in a similar situation and with
single-minded devotion to [the] plan participants and beneficiaries.” Id. (same). Third,
ERISA fiduciaries must act for the exclusive purpose of providing benefits to plan
beneficiaries. Id. “The duties charged to an ERISA fiduciary are the highest known to
the law.” Pfeil v. State Street Bank & Trust Co., 671 F.3d 585, 591 (6th Cir. 2012)
(citation and alteration omitted). Section 409(a) of ERISA holds a fiduciary who
breaches any of these duties personally liable for any losses to the plan that result from
its breach of duty. 29 U.S.C. § 1109(a).

       Congress made certain exceptions to these fiduciary duties for investments by
employee stock ownership plans (“ESOPs”), defined under 29 U.S.C. § 1107(d)(6). See
Kuper, 66 F.3d at 1458. Specifically, Congress eliminated the duty to diversify and the
No. 11-3012        Dudenhoefer, et al. v. Fifth Third Bancorp, et al.                 Page 7


duty of prudence to the extent that it requires diversification with respect to investment
in employer stock. 29 U.S.C. § 1104(a)(2). “[A]s a general rule, ESOP fiduciaries
cannot be held liable for failing to diversify investments, regardless of whether
diversification would be prudent under the terms of an ordinary non-ESOP pension
plan.” Kuper, 66 F.3d at 1458.

       However, these specific statutory exemptions do not relieve ESOP fiduciaries
from their remaining fiduciary duties. As we explained in Kuper, the statutory
exemptions for ESOPs

       do[] not relieve a fiduciary . . . from the general fiduciary responsibility
       provisions of [§ 1104] which, among other things, require a fiduciary to
       discharge his duties respecting the plan solely in the interests of plan
       participants and beneficiaries and in a prudent fashion . . . nor does it
       affect the requirement . . . that a plan must be operated for the exclusive
       benefit of employees and their beneficiaries.

Id. (citations omitted) (alterations and omissions in original); Eaves v. Penn, 587 F.2d
453, 460 (10th Cir. 1978) (“[T]he legislative history combined with a natural and clear
reading of § 404, lead to the inexorable conclusion that ESOP fiduciaries are subject to
the same fiduciary standards as any other fiduciary except to the extent that the standards
require diversification of investments.”).

       These competing concerns—administering ESOP investments consistent with the
provisions of both a specific employee benefit plan and the comprehensive fiduciary
scheme of ERISA—are “particularly evident when an employee claims that a fiduciary
breached his ERISA duties by failing to diversify an ESOP.” Kuper, 66 F.3d at 1458.
In recognition of this conflict, we have adopted an abuse of discretion standard of review
for an ESOP fiduciary’s decision to invest in employer securities. Id. at 1459. “A
fiduciary’s decision to remain invested in employer securities is presumed to be
reasonable, the so-called Kuper or Moench presumption.” Pfeil, 671 F.3d at 591 (citing
Kuper, 66 F.3d at 1459). “A plaintiff may then rebut this presumption of reasonableness
by showing that a prudent fiduciary acting under similar circumstances would have made
a different investment decision.” Kuper, 66 F.3d at 1459. Our precedent thus
No. 11-3012          Dudenhoefer, et al. v. Fifth Third Bancorp, et al.              Page 8


establishes the standard that we find strikes the proper balance between the limited
exemptions for ESOPs and fulfillment of the remedial purposes of ERISA.

        2.      Continued Offering of and Failure to Divest the Plan of Fifth Third Stock

        The Amended Complaint alleges in Count I that all Defendants breached their
ERISA fiduciary duties by continuing to offer and failing to divest the Plan of Fifth
Third Stock and by failing to provide complete and accurate information about Fifth
Third Stock. These allegations underlie all Counts of the Amended Complaint and we
turn now to application of the legal standards to the allegations.

                a.      Application of the Kuper presumption

        The district court determined that Kuper’s presumption of reasonableness applies
at the motion to dismiss stage and was not overcome here. In so holding, it recognized
that at the time of its decision, we had not resolved the issue and our district courts were
split. This is no longer the case.

        In February 2012, we issued our decision in Pfeil holding that the Kuper
presumption “is not an additional pleading requirement and thus does not apply at the
motion to dismiss stage.” 671 F.3d at 592. We based our conclusion on “the plain
language of Kuper itself where we explained that an ESOP plaintiff could ‘rebut this
presumption of reasonableness by showing that a prudent fiduciary acting under similar
circumstances would have made a different investment decision.’” Id. at 592-93
(emphasis added in Pfeil) (quoting Kuper, 66 F.3d at 1459). We noted that Kuper
applied the presumption at summary judgment to a fully developed evidentiary record
and reasoned that it would be inconsistent to apply the Kuper presumption—which
concerns questions of fact—at the pleading stage where the court must accept the well
pled factual allegations of a complaint as true. Id. at 593.

        Pfeil recognized that some circuits have reached a different conclusion and apply
the presumption of reasonableness at the pleading stage. We specifically distinguished
several cases relied on by the district court in this case noting that, “[w]e find these
decisions distinguishable because these circuits have adopted more narrowly-defined
No. 11-3012          Dudenhoefer, et al. v. Fifth Third Bancorp, et al.              Page 9


tests for rebutting the presumption than the test this Court announced in Kuper.” Id. at
594-95. Unlike these other circuits, we emphasized that the Sixth Circuit has “not
adopted a specific rebuttal standard that requires proof that the company faced a ‘dire
situation,’ something short of ‘the brink of bankruptcy’ or an ‘impending collapse.’” Id.
at 595. When properly applied to a fully developed evidentiary record, Kuper only
requires a plaintiff to prove that “a prudent fiduciary acting under similar circumstances
would have made a different investment decision.” Kuper, 66 F.3d at 1459. And this
unembellished standard makes sense—not just because it closely tracks the statutory
language of § 404(a)(1)(B)—but also because that language imposes identical standards
of prudence and loyalty on all fiduciaries, including ESOP fiduciaries. Due to this
equality of standard, if a “prudent man acting in a like capacity and familiar with such
matters” would not have undertaken that conduct at issue, then an ESOP or any other
fiduciary may not do so regardless of whether a dire situation, pending bankruptcy, or
impending collapse exists. We are not free to limit the standard set by the statute by
imposing conditions not present in the statutory language.

        Following the teaching of Pfeil, we do not apply the Kuper presumption of
reasonableness to test the sufficiency of Plaintiffs’ Amended Complaint. We apply the
normal rules of notice pleading under Federal Rule of Civil Procedure 8. Thus, the
proper question at the Rule 12(b)(6) stage in this case is whether the Amended
Complaint pleads “facts to plausibly allege that a fiduciary has breached its duty to the
plan” and a causal connection between that breach and the harm suffered by the
plan—“that an adequate investigation would have revealed to a reasonable fiduciary that
the investment [in Fifth Third Stock] was improvident.” Pfeil, 671 F.3d at 596.

                b.      Sufficiency of Plaintiffs’ Allegations

        In the Amended Complaint, Plaintiffs allege that by the class period starting date
of July 19, 2007, Defendants had knowledge of the 2007 warnings by industry
watchdogs of subprime lending practices, the rise of foreclosures and delinquency rates
in real estate loans, several published articles warning of the risks of loosening standards
in order to invest in the subprime lending market, and the closure of several mortgage
No. 11-3012            Dudenhoefer, et al. v. Fifth Third Bancorp, et al.                          Page 10


companies due to their investment in the subprime mortgage industry. The Amended
Complaint specifically enumerates and describes these warnings and public information
of which the Defendants were aware. Plaintiffs allege this knowledge should have led
Defendants to investigate whether Fifth Third Stock was still a prudent investment given
its own exposure to the subprime lending. In addition to overexposure to subprime
lending, the Amended Complaint also alleges Fifth Third Stock was an imprudent
investment option because of company mismanagement and lack of sound leadership.
Plaintiffs allege that Defendants knew or should have known of the existence of these
problems because of their high-ranking positions within the company. The Amended
Complaint alleges Fifth Third’s participation in the U.S. Government’s Troubled Asset
Relief Program (“TARP”) is further evidence that the company was in a weakened
financial condition and an imprudent investment.1

         As Pfeil explained, Plaintiffs need only allege a fiduciary breach and a causal
connection to losses suffered by the Plan. They do so here. Plaintiffs allege that Fifth
Third engaged in lending practices that were equivalent to participation in the subprime
lending market, that Defendants were aware of the risks of such investments by the start
of the class period, and that such risks made Fifth Third Stock an imprudent investment.
Plaintiffs allege the price of Fifth Third Stock dropped 74% during the class period. The
Amended Complaint also expressly alleges that “[a]n adequate (or even cursory)
investigation would have revealed to a reasonable fiduciary that investment by the Plan
in Fifth Third Stock was clearly imprudent. A prudent fiduciary acting under similar
circumstances would have acted to protect participants against unnecessary losses, and
would have made different investment decisions.”



         1
           In Pfeil, we gave examples of a court’s temptation “to consider facts and evidence that have not
been tested in formal discovery” when applying the Kuper presumption to a motion to dismiss. Pfeil,
671 F.3d at 593-94. For example, evidence presented by State Street, the defendant in Pfeil, in its motion
to dismiss allegedly showed the government was expected to intervene on behalf of the company, which
State Street argued showed that it was not unreasonable for the plans to continue to hold company stock
during the class period. Id. We noted that “[t]he possibility of federal intervention and its effect on the
reasonableness of holding company stock, however, present questions of fact inappropriate for resolution
on a motion to dismiss.” Id. Therefore, the district court erred to the extent it weighed Plaintiffs’ alleged
evidence of Fifth Third’s participation in the TARP program and its effect on the reasonableness of holding
Fifth Third Stock.
No. 11-3012         Dudenhoefer, et al. v. Fifth Third Bancorp, et al.              Page 11


        Based on the foregoing, the Amended Complaint plausibly alleges a claim of
breach of fiduciary duty and the requisite causal connection under Count I regarding
Defendant’s failure to divest the Plan of Fifth Third Stock and remove that stock as an
investment option. See Pfeil, 671 F.3d at 596.

        3.      Failure to Provide Complete and Accurate Information About Fifth Third
                Stock

        “[A] claim based on the purported material misrepresentations of fiduciaries is
a classic breach-of-fiduciary-duty claim under ERISA.” Pfahler v. Nat’l Latex Prods.
Co., 517 F.3d 816, 826 (6th Cir. 2007). “As one would expect, lying is inconsistent with
the duty of loyalty owed by all fiduciaries and codified in § 404(a)(1).” Gregg, 343 F.3d
at 843 (citation, alteration, and internal quotation marks omitted). A fiduciary also may
not materially mislead beneficiaries. Varity Corp. v. Howe, 516 U.S. 489, 505 (1996).
We have explained that “a misrepresentation is material if there is a substantial
likelihood that it would mislead a reasonable employee in making an adequately
informed decision in pursuing . . . benefits to which she may be entitled.” Krohn v.
Huron Mem’l Hosp., 173 F.3d 542, 547 (6th Cir. 1999) (citation omitted). ERISA
fiduciary duty provisions incorporate the common law of trusts, and the “duty to inform
is a constant thread in the relationship between beneficiary and trustee; it entails not only
a negative duty not to misinform, but also an affirmative duty to inform when the trustee
knows that silence might be harmful.” Id. at 548 (quoting Bixler v. Central Pa.
Teamsters Health & Welfare Fund, 12 F.3d 1292, 1300 (3d Cir. 1993)). Significantly,
“a fiduciary breaches its duties by materially misleading plan participants, regardless of
whether the fiduciary’s statements or omissions were made negligently or intentionally.”
Id. at 547.

        The threshold question in all cases charging breach of ERISA fiduciary duty is
whether the defendant was “acting as a fiduciary (that is, was performing a fiduciary
function) when taking the action subject to complaint.” Pegram v. Herdrich, 530 U.S.
211, 226 (2000). A defendant’s fiduciary status is also an element of a claim of
misrepresentation. To establish a claim for breach of fiduciary duty based on alleged
No. 11-3012         Dudenhoefer, et al. v. Fifth Third Bancorp, et al.             Page 12


misrepresentations, a plaintiff must show that: (1) defendant was acting in a fiduciary
capacity when it made the challenged statements; (2) the statements constituted material
misrepresentations; and (3) plaintiff relied on them to his/her detriment. James v. Pirelli
Armstrong Tire Corp., 305 F.3d 439, 449 (6th Cir. 2002). “Whether the communications
constituted misrepresentations and whether they were material . . . are questions of fact
that are properly left for trial.” In re Unisys Sav. Plan Litig., 74 F.3d 420, 443 (3d Cir.
1996); see James, 305 F.3d at 455 (“[W]ith respect to the situation presented when an
employer on its own initiative disseminates false and misleading information about a
benefit plan, the position of the Sixth Circuit is aligned with that of the Third Circuit in
Unisys.”).

        The district court held that Plaintiffs’ disclosure claim in Count I failed because
Defendants’ alleged misstatements and omissions were not made in a fiduciary capacity
when Defendants expressly incorporated Fifth Third’s SEC filings into Plan documents.
The court’s conclusion is broader than its reasoning, which focused on the filing of SEC
documents with the SEC, not on the decision of Defendants to incorporate those filings
into the Plan documents. Plaintiffs concede that the preparation, signing, and filing of
SEC documents are not fiduciary acts under ERISA. See In re World Com, Inc., 263 F.
Supp. 2d 745, 766 (S.D.N.Y. 2003). The issue here is Plaintiffs’ allegation that
Defendants violated their fiduciary duties when they chose to incorporate SEC filings
into ERISA Plan documents.

        The Defendants expressly incorporated by reference specifically named SEC
filings into the Plan’s summary plan description (“SPD”). An SPD, a document ERISA
requires to be sent to plan participants to provide specified information about the plan,
is unquestionably a fiduciary communication. See 29 U.S.C. § 1022. Defendants chose
to provide Plan participants with selected information—alleged to include
misrepresentations about Fifth Third and its Stock—by incorporating only specifically
enumerated SEC filings and specific future filings into the SPD:

        The SEC allows us to “incorporate by reference” into this booklet the
        information we file with it, which means that we can disclose important
        information to you by referring you to those documents. The information
No. 11-3012          Dudenhoefer, et al. v. Fifth Third Bancorp, et al.           Page 13


          incorporated by reference is an important part of this booklet, and
          information that we subsequently file with the SEC will automatically
          update and supersede information in this booklet and in our other filings
          with the SEC. In other words, in case of a conflict or inconsistency
          between information contained in this booklet and information
          incorporated by reference into this booklet, you should rely on the
          information that was filed later.

Am. Compl., Ex. A, SPD of Fifth Third Bancorp at 44.

          The Defendants correctly make no broad challenge to their status as fiduciaries
with respect to the preparation of Plan documents. The Amended Complaint alleges
Fifth Third was the trustee of the Plan and exercised responsibility through the
Committee for communicating with Plan participants and, in this fiduciary capacity,
disseminated the Plan documents, including the Plan SPD to participants. The
Amended Complaint also plausibly alleges that Kabat, President and CEO of Fifth Third,
is a de facto fiduciary in light of his authority to augment the Plan Committee’s powers
and responsibilities, authority to appoint Committee members, and authority to resolve
issues left unresolved by the Committee. See Moore v. Lafayette Life Ins. Co., 458 F.3d
416, 438 (6th Cir. 2006) (holding that plan fiduciaries include those “who exercise[]
discretionary control or authority over a plan’s management, administration, or assets”);
29 U.S.C. § 1002(21)(A). Finally, as named Plan administrator during the class period,
the Plan Committee was correctly alleged to be a fiduciary. 29 U.S.C. § 1102(a)(1).

          Although properly alleged to be fiduciaries with respect to the Plan, Defendants
argue that they were not acting in a fiduciary capacity when they incorporated the SEC
filings into the Plan documents. The district court identified Varity Corp. v. Howe, 516
U.S. 489 (1996), as an important precedent on the question of whether an employer was
acting in a fiduciary capacity when making statements about a company’s financial
health.    In Varity, the Court found that a defendant employer engaged in plan
administration—therefore acting in a fiduciary capacity—when he intentionally
connected his statements about the financial health of a division of the company to
statements about the future of plan benefits. Id. at 504. In applying Varity, the district
court only looked to the initial filing of the SEC disclosures and found “no factual
No. 11-3012         Dudenhoefer, et al. v. Fifth Third Bancorp, et al.           Page 14


allegations, however, which indicate that the speaker was intentionally connecting his
statements about Fifth Third’s financial condition to the Fifth Third Stock Fund.”
Though Varity contains some applicable law, it primarily addresses the determination
of when employer statements made outside the course of plan administration rise to the
level of fiduciary communications. Such is not the case here. The Defendants were
engaged in Plan administration: they were undertaking an ERISA-mandated fiduciary
duty—the provision of information to Plan participants through the required SPD. See
29 U.S.C. § 1022. In this context, our job is to inquire whether the Amended Complaint
plausibly alleged that Defendants committed a breach of fiduciary duty when, under the
facts alleged, they chose to incorporate by reference Fifth Third’s SEC filings into the
Plan’s SPD.

       No circuit court has answered the question of whether the express incorporation
of SEC filings into an ERISA-mandated SPD is a fiduciary communication. Defendants
rely extensively on Kirschbaum v. Reliant Energy, Inc., 526 F.3d 243 (5th Cir. 2008),
but the case provides no authority on this issue. The Fifth Circuit there addressed the
question of whether the incorporation of SEC filings into a plan’s prospectus is a
fiduciary communication. It reasoned that the misrepresentations were not actionable
under ERISA because they were only contained in the plan’s prospectus and Form S-8
registration, and the defendant was obligated to file those documents under the securities
laws and did not disseminate them to the plan participants. Id. at 257; accord Lanfear
v. Home Depot, Inc., 679 F.3d 1267, 1283-84 (11th Cir. 2012) (incorporation of SEC
filings into Form S-8 and stock prospectus are not fiduciary acts). That is not the case
before us. And our case is the very situation the Fifth Circuit in Kirschbaum recognized
was not before it. 526 F.3d at 257 (distinguishing a district court case where an
employer “had used the 10a Prospectus as the Summary Plan Description (‘SPD’) for
ERISA purposes,” noting that “Kirschbaum makes no such claim, and the record reveals
that the REI defendants issued a separate document to serve as the SPD”) (citing In re
Dynegy, Inc. Erisa Litig., 309 F. Supp. 2d 861 (S.D. Tex. 2004)). Thus, Kirschbaum is,
on its face, inapplicable.
No. 11-3012        Dudenhoefer, et al. v. Fifth Third Bancorp, et al.            Page 15


       We next review cases within our Circuit. A majority of district courts in this
Circuit have found that incorporation of SEC filings into plan documents is a fiduciary
act. Compare Griffin v. Flagstar Bancorp, Inc., No. 2:10-cv-10610, 2011 WL 1261196,
at *17 (E.D. Mich. Mar. 31, 2011) (dismissing the case under Rule 12(b)(6) but
recognizing the principle that if certain financial information is distributed by a
defendant or incorporated into plan documents, that information must be complete and
accurate), overruled by Griffin v. Flagstar Bancorp, Inc., 2012 WL 2989231 (6th Cir.
July 23, 2012) (reversing the district court’s dismissal under Rule 12(b)(6) because the
complaint set forth a “plausible claim for breach of fiduciary duty”), and In re Regions
Morgan Keegan ERISA Litig., 692 F. Supp. 2d 944, 955 (W.D. Tenn. 2010) (“[S]ince
it is universally accepted that ERISA fiduciaries are liable for making misrepresentations
in plan documents, they should also be prohibited from incorporating into plan
documents other documents that make material misrepresentations about the company
and then disseminating those misrepresentations to plan participants.” (quoting Taylor
v. KeyCorp, 678 F. Supp. 2d 633, 642 (N.D. Ohio 2009))), and In re General Motors
ERISA Litig., No. 05-71085, 2007 WL 2463233, at *6 (E.D. Mich. Aug. 28, 2007)
(holding that defendants were engaged in acts of plan administration when they
produced plan documents referencing various SEC filings that were allegedly
misleading), with Benitez v. Humana, Inc., No. 3:08CV-211-H, 2009 WL 3166651, at
*10 n.6 (W.D. Ky. Sept. 30, 2009) (“[T]he preparation of SEC filings is not a fiduciary
act for purposes of ERISA, even if the SEC filings are incorporated by reference into
ERISA documents.”). The majority line of cases correctly resolves this issue.

       The Amended Complaint plausibly alleges Defendants breached their fiduciary
duties by intentionally incorporating Fifth Third’s SEC filings into the Plan’s SPD and
thereby conveying misleading information to Plan participants. ERISA requires the
issuance of an SPD, but does not require the incorporation of a company’s SEC filings
into the SPD. See 29 U.S.C. § 1022. Defendants exercised discretion in choosing to
incorporate the filings into the Plan’s SPD as a direct source of information for Plan
participants about the financial health of Fifth Third and the value of its stock, an
investment option in the Plan. See Sengpiel v. B.F. Goodrich Co., 156 F.3d 660, 666
No. 11-3012           Dudenhoefer, et al. v. Fifth Third Bancorp, et al.                       Page 16


(6th Cir. 1998) (distinguishing between business and fiduciary decisions, and stating that
“[a]n employer is said to act in a fiduciary capacity when it communicates with
employees about their benefits because, in essence, the employer puts on its plan
administrator hat and undertakes action designed to carry out an important purpose of
the plan”). The SPD is a fiduciary communication to plan participants and selecting the
information to convey through the SPD is a fiduciary activity. Moreover, whether the
fiduciary states information in the SPD itself or incorporates by reference another
document containing that information is of no moment. To hold otherwise would
authorize fiduciaries to convey misleading or patently untrue information through
documents incorporated by reference, all while safely insulated from ERISA’s governing
reach. Such a result is inconsistent with the intent and stated purposes of ERISA—to
impose fiduciary duties “which are the highest known to the law,” Pfeil, 671 F.3d at
591—and would create a loophole in ERISA large enough to devour all its protections.

         We hold that Count I of the Amended Complaint—including the allegations that
Defendants breached their fiduciary duties (1) by continuing to offer Fifth Third Stock
as a Plan investment option and failing to divest the Plan of the Stock and (2) by
providing false and misleading information and failing to provide complete and accurate
information about the Stock to Plan participants—states a claim upon which relief may
be granted.2 The allegations of Count I easily satisfy the requirements that there be a

         2
           Defendants argue that to the extent Plaintiffs allege the Defendants failed to timely disclose
adverse corporate information, the Plaintiffs could not show loss causation. The district court agreed,
concluding that under the efficient market theory any disclosed negative information would have been
immediately assimilated by the market and reflected in the price of Fifth Third Stock. This argument is
ill-timed and without merit. Whether losses would have been more or less significant following timely
disclosure is speculative and, even if the question raised issues of causation and damages, such would be
inappropriate for resolution at the motion to dismiss stage. See Taylor v. KeyCorp, 678 F. Supp. 2d 633,
643 (N.D. Ohio 2009) (quoting In re Ferro Corp. ERISA Litig., 422 F. Supp. 2d 850, 863 (N.D. Ohio
2006)). Further, as courts have recognized:
         Assuming that Defendants in fact concealed and misrepresented material information
         on [the company stock], it is not evident that full public disclosure of the true facts
         would not have prevented as [sic] least some of the losses allegedly incurred by the
         Plan. Disclosure might not have prevented the Plan from taking a loss on [company]
         stock it already held; but it would have prevented the Plan from acquiring (through
         Plaintiffs’ uninformed investment decisions and through continued investment of
         matching contributions) additional shares of overpriced [company] stock: the longer the
         fraud continued, the more of the Plan’s good money went into a bad investment; and full
         disclosure would have cut short the period in which the Plan bought at inflated prices.
In re Honeywell Int’l ERISA Litig., No. 03-1214, 2004 WL 3245931, at *12 (D.N.J. Sept. 14, 2004); id.
No. 11-3012            Dudenhoefer, et al. v. Fifth Third Bancorp, et al.                         Page 17


plausible allegation that a fiduciary breached its duty to the plan and a causal connection
between that breach and the harm suffered by the plan.

C.        Counts II, III, and IV of the Amended Complaint

          Because the district court erred in dismissing Plaintiffs’ prudence and disclosure
claims under Count I, we reverse and remand the case. In its ruling below, the district
court did not substantively analyze the plausibility of Counts II through IV because it
found them derivative of Count I, which the court found deficient. These remaining
Counts do present claims dependent upon the fiduciary breach allegations of Count I that
we have found plausibly state a claim for relief. Based on our holding, we return Counts
II through IV to the district court to address in accordance with the principles stated
herein.

                                        III. CONCLUSION

          For the foregoing reasons, we REVERSE the district court judgment dismissing
the Amended Complaint and REMAND for further proceedings consistent with this
opinion.




at *12 n.17 (“In addition, as Plaintiffs suggest, although the Plan could not have sold Honeywell stock
without full disclosure, it could have refrained from purchasing more without such disclosure.”); see also
Pietrangelo v. NUI Corp., No. 04-3223, 2005 WL 1703200, at *4 (D.N.J. July 20, 2005) (holding that the
efficient market theory is inapplicable at the motion to dismiss stage and noting that defendants “could
have minimized Plan losses without disclosing adverse information by simply removing NUI stock as an
investment option”). For these reasons, an efficient market theory does not foreclose Plaintiffs’ ability to
establish damages or loss causation.
