          United States Court of Appeals
                       For the First Circuit

No. 17-1515

          MARY BARCHOCK; THOMAS WASECKO; STACY WELLER,

                      Plaintiffs, Appellants,

                                 v.

   CVS HEALTH CORPORATION; THE BENEFITS PLAN COMMITTEE OF CVS
     HEALTH CORPORATION; GALLIARD CAPITAL MANAGEMENT, INC.,

                       Defendants, Appellees.


          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF RHODE ISLAND

              [Hon. Mary M. Lisi, U.S. District Judge]


                               Before

                  Torruella, Kayatta, and Barron,
                          Circuit Judges.


     Jason H. Kim, with whom Todd M. Schneider, Schneider Wallace
Cottrell Konecky Wotkyns LLP, Sonja L. Deyoe, and Law Offices of
Sonja L. Deyoe were on brief, for appellants.
     Meaghan VerGow, with whom Brian D. Boyle, Bradley N. García,
O'Melveny & Myers LLP, Robert Clark Corrente, Whelan, Corrente,
Flanders, Kinder & Siket LLP, Joel S. Feldman, Mark B. Blocker,
Robert N. Hochman, Daniel R. Thies, and Sidley Austin LLP were on
brief, for appellees.
     Evan A. Young, Shane Pennington, Baker Botts LLP, Steven P.
Lehotsky, Janet Galeria, U.S. Chamber Litigation Center, and Janet
M. Jacobson, on brief for amici curiae Chamber of Commerce of the
United States of America and American Benefits Council.
     Brian D. Netter, Nancy G. Ross, Mayer Brown LLP, and Kevin
Carroll, on brief for amicus curiae Securities Industry and
Financial Markets Association.
March 23, 2018




    - 2 -
            BARRON, Circuit Judge.        The plaintiffs allege violations

of the fiduciary duty of prudence under the Employee Retirement

Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461, by

the     fiduciaries    of   an    employer-sponsored            retirement       plan.

Specifically, the plaintiffs contend that a particular investment

fund offered through the plan was invested too heavily in cash or

cash-equivalents for the years at issue and thus that the plan was

imprudently managed and monitored.              The District Court dismissed

the complaint for failure to state a claim under ERISA. We affirm.

                                        I.

            To understand the sole issue on appeal, it helps to

provide some background concerning the duty of prudence that ERISA

establishes.    We then describe the particular allegations that the

plaintiffs offer in support of the imprudence claims that they

bring and the travel of the case.            Finally, we briefly review the

rulings below.

                                        A.

            ERISA      provides    that        any     person      who    exercises

discretionary       authority     or    control        in    the   management       or

administration of an ERISA plan (or who is compensated in exchange

for investment advice) is a fiduciary.                 29 U.S.C. § 1002(21)(A).

ERISA further provides that such a fiduciary has a duty to act

"with    the   care,    skill,    prudence,          and    diligence    under     the

circumstances then prevailing that a prudent man acting in a like


                                       - 3 -
capacity and familiar with such matters would use in the conduct

of an enterprise of a like character and with like aims."                    Id.

§ 1104(a)(1)(B).

             Importantly, the Supreme Court has explained that "the

content of the duty of prudence turns on 'the circumstances . . .

prevailing' at the time the fiduciary acts."             Fifth Third Bancorp

v.   Dudenhoeffer,    134   S.    Ct.   2459,   2471    (2014)   (omission    in

original) (quoting 29 U.S.C. § 1104(a)(1)(B)).              Accordingly, with

respect to whether a complaint states a claim of imprudence under

ERISA,   "the     appropriate    inquiry     will    necessarily   be   context

specific."      Id.

             As we explained in Bunch v. W.R. Grace & Co., 555 F.3d

1 (1st Cir. 2009), in connection with a claim of imprudence

concerning an ERISA plan's investments, "[t]he test of prudence

-- the Prudent Man Rule -- is one of conduct, and not a test of

the result of performance of the investment."               Id. at 7 (quoting

Donovan v. Cunningham, 716 F.2d 1455, 1467 (5th Cir. 1983)).

Moreover, we explained that "[w]hether a fiduciary's actions are

prudent cannot be measured in hindsight."              Id. (quoting DiFelice

v. U.S. Airways, Inc., 497 F.3d 410, 424 (4th Cir. 2007)).

                                        B.

             In   2016,   the    plaintiffs     --   Mary   Barchock,    Thomas

Wasecko, and Stacy Weller -- filed this suit in the United States

District Court for the District of Rhode Island.                   They did so


                                     - 4 -
pursuant to 29 U.S.C. § 1132(a), which authorizes any ERISA plan

participant to bring a civil action against an ERISA fiduciary

liable under 29 U.S.C. § 1109 for breach of its duties.

             According     to   the   complaint,   the   three   plaintiffs

participated from 2010 to 2013 in an ERISA employee retirement

plan that was sponsored by their employer, CVS Health Corporation

("CVS"), and administered by the Benefits Plan Committee of CVS.1

The plan was a 401(k) defined contribution plan that offered

several investment options to participants, including what is

known as a "stable value fund."               The Benefits Plan Committee

appointed Galliard Capital Management, Inc. ("Galliard") to manage

that fund.

             All   three    plaintiffs    allocated   portions   of   their

retirement investments under the plan to this stable value fund,

which held approximately $1 billion in assets.            Their complaint

alleged that CVS, the Benefits Plan Committee, and Galliard owed

the plaintiffs a fiduciary duty of prudence under ERISA with

respect to the plan's investments in the fund and that each of the

defendants breached that duty.

             In so claiming, the plaintiffs' complaint described what

a stable value fund is by quoting the description of such funds



     1 The undisputed facts are drawn from the complaint and
documents incorporated by it. See Trans-Spec Truck Serv., Inc. v.
Caterpillar, Inc., 524 F.3d 315, 321 (1st Cir. 2008).


                                      - 5 -
given by the Seventh Circuit in Abbott v. Lockheed Martin Corp.,

725 F.3d 803 (7th Cir. 2013).          Specifically, the complaint quoted

Abbott as describing stable value funds, or SVFs, as "recognized

investment vehicles" that

            typically invest in a mix of short- and
            intermediate-term    securities,   such    as
            Treasury securities, corporate bonds, and
            mortgage-backed securities. Because they hold
            longer-duration instruments, SVFs generally
            outperform money market funds, which invest
            exclusively in short-term securities.      To
            provide the stability advertised in the name,
            SVFs are provided through "wrap" contracts
            with banks or insurance companies that
            guarantee the fund's principal and shield it
            from interest-rate volatility.

Id. at 806 (citations omitted).

            The complaint did not identify what information was

provided    by    the   defendants   to   plan   participants   before    they

invested in the CVS stable value fund.           Notably, the complaint did

not allege that the plan documents specified how the fund's assets

would be allocated.        The complaint did, however, allege that the

fund was part of a mix of investment options that the employer

offered    in    "lifestyle"   funds   described    as   "conservative"   and

"moderate," as opposed to "aggressive." The complaint also alleged

that, according to the plan's Internal Revenue Service Form 5500

Annual Return from one of the years at issue, the fund's stated

objective was "to preserve capital while generating a steady rate




                                     - 6 -
of   return      higher    than   money    market     funds   provide"   (emphasis

omitted).

              With respect to Galliard, the complaint contended that,

as a fiduciary, it breached its duty of prudence under ERISA in

managing the CVS stable value fund by investing "too much" of the

fund's assets in short-term debt obligations equivalent to cash,

as opposed to intermediate-term investments that generally provide

higher returns.           Specifically, the complaint alleged that from

2010 to 2013, Galliard invested between twenty-seven and fifty-

five percent of the fund's assets in an investment fund offered by

a different firm that was invested "primarily" in such cash

equivalents.        (Galliard allocated the balance of the CVS stable

value     fund     to    intermediate-term         investments.)      This    asset

allocation, according to the complaint, predictably both resulted

in unnecessary liquidity and "acted as an enormous drag on the

duration      of   the    overall   Stable        Value   Fund   portfolio,   which

depressed returns."

              The complaint further alleged that this asset allocation

was a "severe outlier" when compared to allocation averages for

the stable value industry.2          And, to identify those averages, the


      2In addition, the complaint made a related allegation that
Galliard's parent company managed a different stable value fund
that, between 2010 and 2013, invested all of its assets in yet
another fund that, in turn, invested less than ten percent of the
fund in "interest-bearing cash or cash equivalents." The complaint
then purported to infer from these allegations that "Galliard well


                                          - 7 -
complaint incorporated a survey of industry data from 2011 and

2012.3   That survey was released by the Stable Value Investment

Association, which the complaint described as a trade association

for the stable value industry.              The complaint alleged that,

according to the survey, the average mean allocation of assets to

cash or cash-equivalent investments by stable value funds surveyed

was between only five and ten percent for the years 2011 and 2012.4

          Finally,       the    complaint     alleged   that   Galliard's

relatively high allocation of investments in short-term, cash-

equivalents   was   at   odds   with   "well-established   principles   of

stable value investing."        The complaint explained that investors

in stable value funds generally agree to contractual provisions

that restrict the liquidity of their investments in exchange for

relatively stable returns from longer-term investments.         Yet, the




understood . . . that it was not necessary to maintain such a large
percentage of cash or cash equivalents in a stable value fund."
However, the plaintiffs have abandoned this argument on appeal.
     3 The complaint stated that the survey was attached as an
exhibit, although it appears not to have actually been attached.
However, the defendants subsequently filed the survey in the
District Court as an exhibit attached to a declaration by one of
their attorneys, and the plaintiffs did not oppose that filing.
     4 The complaint also alleged that, due to the CVS stable value
fund's relatively high investment in cash equivalents, the
"average duration of [the fund's] investments" (presumably
excluding its pure cash holdings) between 2010 and 2012 was
approximately one year, whereas the average duration of
investments by stable value funds participating in the survey
during 2011 and 2012 was approximately three years.


                                   - 8 -
complaint alleged, Galliard's excessive allocation of the CVS

stable    value   fund's   assets      to   short-term,   cash-equivalent

investments resulted in liquidity that the investors did not want

and for which the plaintiffs paid a premium by losing out on the

higher returns generally associated with longer-term investments.

And, the complaint asserted, that allocation decision cannot be

justified in terms of reducing risk because stable value funds, as

conventionally structured, have historically outperformed money

market funds -- which invest in cash equivalents -- in terms of

both return and volatility.       To support that last proposition, the

complaint cited an academic study from 2007 and an updated version

of that study from 2011.        See David F. Babbel & Miguel A. Herce,

A Closer Look at Stable Value Funds Performance (Wharton Financial

Institutions Center Working Paper No. 07-21, 2007); David F. Babbel

& Miguel A. Herce, Stable Value Funds: Performance to Date (Wharton

Financial Institutions Center Working Paper No. 11-01, 2011).

           As for the other two defendants -- CVS and the Benefits

Plan Committee -- the complaint alleged that they had breached

their duty of prudence by inadequately monitoring Galliard.           The

complaint asserted that, had they been prudent, they "would have

immediately discovered that the reason for the [CVS stable value

fund's]   poor    performance    was    because   an   unreasonably   high

percentage of the . . . assets were invested in cash-equivalent

accounts that produced abysmal investment returns and that this


                                    - 9 -
allocation strategy was highly anomalous by industry standards."

Yet, the complaint alleged, neither CVS defendant "took any action"

to change Galliard's investment strategy.

          The plaintiffs sought declaratory and injunctive relief,

as well as reimbursement for losses from reduced investment return,

damages, and attorney's fees.    The plaintiffs also requested class

certification on behalf of all participants in the CVS retirement

plan who invested in the plan's stable value fund.

          The defendants moved to dismiss the complaint under Rule

12(b)(6) of the Federal Rules of Civil Procedure for failure to

state a claim under ERISA.      The defendants did not dispute that

they were ERISA fiduciaries.      However, they contended that the

complaint did not state a claim that was cognizable under ERISA

because the allegation that Galliard allocated a relatively high

proportion of the fund's assets to short-term, cash-equivalent

investments could not alone support a claim of imprudence.      The

defendants also contended that, to the extent that the complaint

was simply alleging that Galliard should have taken more risk with

the fund's investments in order to achieve higher returns, the

plaintiffs were merely criticizing the performance of the fund

with the benefit of hindsight and that such second-guessing could

not support a claim under ERISA for breach of the duty of prudence.

Finally, the defendants contended that the failure to state a claim

against Galliard necessarily meant that the complaint failed to


                                - 10 -
state a claim against the CVS defendants for imprudently monitoring

Galliard.

                                    C.

            The District Court assigned the case to a Magistrate

Judge.    The Magistrate Judge recommended dismissing the complaint

on the grounds specified by the defendants.          The District Court

agreed, and it dismissed the complaint and entered judgment in

favor of the defendants.

            The District Court reasoned that the plaintiffs' claims

were not focused on the prudence of the decisions that Galliard

made when evaluated in light of the circumstances prevailing at

the time that Galliard made those decisions.              Rather, in the

District Court's view, the plaintiffs were merely alleging that,

if the fund's investments in cash-equivalents had instead been

invested in the same manner as the fund's other assets, then the

fund   would   have   earned   higher    returns.   The   District   Court

therefore determined that the complaint failed to state a claim

under ERISA, as the claim did not even purport to account for the

specific context in which the challenged investment decisions were

made and instead focused only on how poorly those decisions turned

out.     In short, the District Court concluded, the complaint was

making    an   impermissible    "hindsight"    critique   of   Galliard's

management of the fund.




                                  - 11 -
              The plaintiffs then filed this appeal challenging the

District Court's dismissal of the complaint under Rule 12(b)(6)

for failure to state a claim.               Our review is de novo.                SEC v.

Tambone, 597 F.3d 436, 441 (1st Cir. 2010) (en banc).                       We take the

complaint's well-pleaded facts as true, and we draw all reasonable

inferences in the plaintiffs' favor.               Id.    Well-pleaded facts must

be "non-conclusory" and "non-speculative."                      Schatz v. Republican

State Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012).                         As part

of   our   review,    we   may   consider        "implications          from    documents

attached to or fairly incorporated into the complaint."                                Id.

(internal quotation marks omitted) (quoting Arturet-Vélez v. R.J.

Reynolds Tobacco Co., 429 F.3d 10, 13 n.2 (1st Cir. 2005)).                            To

survive dismissal, however, the complaint must "contain sufficient

factual matter, accepted as true, to state a claim to relief that

is plausible on its face."             Tambone, 597 F.3d at 437 (quoting

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).                          "If the factual

allegations in the complaint are too meager, vague, or conclusory

to   remove    the   possibility      of    relief       from    the    realm    of   mere

conjecture, the complaint is open to dismissal."                       Id. (citing Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

                                           II.

              With   respect     to   the        claim    of     imprudence      against

Galliard, the plaintiffs insist that, contrary to the ruling below,

their complaint's allegation of imprudent investment is not based


                                      - 12 -
merely on the fact that the CVS stable value fund turned out to

have performed poorly.      For that reason, the plaintiffs insist

their imprudence claim against Galliard is "not based on mere

hindsight criticism" of its investment strategy.

            In pressing this contention, the plaintiffs appear to be

asserting   that,   with   respect   to   ERISA's   requirement   that   a

fiduciary exercise the prudence that "a prudent man" would use "in

the conduct of an enterprise of a like character and with like

aims," 29 U.S.C. § 1104(a)(1)(B), the management of a fund labeled

as a stable value fund constitutes the relevant "enterprise" of

comparison.     From that implicit premise,5 the plaintiffs then

contend that Galliard -- by allocating twenty-seven to fifty-five

percent of the CVS stable value fund's assets to an investment

fund primarily holding short-term, cash-equivalent investments

-- "departed radically" from the investment standards and logic


     5   Given  that   the   plaintiffs   are   not   bringing   a
misrepresentation claim, it is not clear why the relevant
comparative enterprise under ERISA here should be the management
of funds labeled as stable value funds, as opposed to a more
general or a more specific category of retirement funds. After
all, the CVS fund stated its investment objective in more general
terms, while the funds that participated in the stable value fund
survey incorporated in the plaintiffs' complaint were not all
similarly structured, as some were "individually managed single-
plan accounts," others were "bank and investment company
commingled pooled funds," and still others were "life insurance
company accounts attached to full service products." But, rather
than affirmatively argue that, for purposes of evaluating whether
Galliard's investment strategy was an imprudent one, the proper
"enterprise" is the management of a fund labeled as a stable value
fund, the plaintiffs just assert that it is the proper one to use.


                                - 13 -
then prevailing for the management of such funds.        And, in the

plaintiffs'   view,   we   can    reasonably   infer   that   Galliard

imprudently invested the fund's assets solely from the fact that

Galliard's "cash"-focused strategy "departed radically" from the

practices and logic guiding the management of such funds.       Thus,

the plaintiffs contend, they did not need to allege anything more

about the specific context in which Galliard made particular

investment decisions in order to state a claim of imprudence.

          The defendants counter that the plaintiffs have failed

to state a plausible claim of imprudent investment management

against Galliard under ERISA for the following reasons.           The

defendants point out that the complaint itself alleges that CVS

offered the stable value fund as part of its more conservative

retirement plan options and that the fund's stated objective was

"to preserve capital while generating a steady rate of return

higher than money market funds provide."        And, the defendants

contend, it is clear from the face of the complaint that Galliard

then fulfilled that conservative investment objective that had

been disclosed to the plan participants.

          In addition, the defendants note, the plaintiffs "do not

directly criticize the process by which the Fund's investment

allocation was selected in pursuit of that objective."        In that

regard, the defendants point out that the plaintiffs have abandoned

their complaint's assertion that Galliard was a sleeping manager


                                 - 14 -
who took a "fire-and-forget" approach to asset allocation, in light

of the complaint's contrary allegations that Galliard actively

managed the CVS stable value fund.            Nor, the defendants point out,

have the plaintiffs "suggested that defendants had something to

gain from managing the fund conservatively," which could raise

doubts about the prudence of Galliard's investment process.

             As a result, the defendants contend that the mere fact

that the complaint alleges that Galliard pursued a relatively more

"cash"-focused          investment     strategy    than     most      funds      that

participated       in     the    industry     survey    that      the    complaint

incorporates is insufficient to state a claim of imprudence.                      In

their view, such a complaint necessarily fails to provide the kind

of context for evaluating Galliard's investment choices that Fifth

Third Bancorp and Bunch demand.

             The    plaintiffs         do   not   dispute       the     defendants'

characterization of what their complaint does and does not allege.

Thus, they do not dispute that Galliard met the CVS stable value

fund's stated objective of preserving capital while outperforming

money market funds, which are, as indicated above, "cash"-based.

In addition, the plaintiffs clarified at oral argument that they

are not arguing that offering money market funds as a retirement

plan would in and of itself be a breach of the duty of prudence

under ERISA.       Nor, the plaintiffs also clarified at oral argument,

is   their   theory       that   the    defendants     should    be     liable   for


                                        - 15 -
misrepresenting the investment vehicle in which the plaintiffs

invested as a stable value fund when it was, in the plaintiffs'

view, managed more like a money market fund.

               Thus, on the plaintiffs' own account, we are left with

the following allegation.            Given what the plaintiffs contend was

then-prevailing        stable     value     management    practice         and   logic,

Galliard was imprudent in managing the CVS stable value fund,

despite    meeting       the     fund's     stated   investment          objective    of

outperforming money market funds, solely because the CVS fund was

managed "too much" like a money market fund.                  And we are left with

that allegation even though, on the plaintiffs' theory, a money

market fund itself is a prudent retirement investment vehicle to

offer and the CVS fund was not misrepresented to plan participants

as something that it was not.

               We have -- just recently -- rejected a claim that an

ERISA fiduciary imprudently managed a stable value fund by, among

other    things,       establishing       too   conservative        of    a   benchmark

(despite disclosing and then exceeding that benchmark) and not

investing in higher-risk, higher-return instruments.                          Ellis v.

Fidelity Mgmt. Tr. Co., No. 17-1693, 2018 WL 991515, at *6-8 (1st

Cir.    Feb.    21,    2018).      And,    in   doing   so,    we    indicated       that

conservativism in the management of a stable value fund -- when

consistent      with    the     fund's    objectives    disclosed        to   the    plan

participants -- is no vice.              "Were this case to proceed to trial,"


                                          - 16 -
we observed in Ellis, "it is completely unclear by what standard

a jury could find a disclosed choice of benchmark to be imprudent

as    'too   conservative,'    particularly    where    plaintiffs     make   no

argument that offering more conservative investments (such as

money market funds) would constitute an ERISA violation."               Id. at

*7.     In this regard, we explained elsewhere in the opinion,

"[u]nless we are to say that ERISA plans may not offer very

conservative investment options (such as money market funds or

treasury bond funds), then we cannot say that plans may not offer

different types of stable value funds, including those that are

intentionally and openly designed to be conservative."            Id. at *6.

             Our   analysis    in   Ellis   clearly    casts   doubt   on     the

viability of the plaintiffs' imprudence claim here.             But, we have

not previously had occasion to address whether the allegation here

that an ERISA fiduciary "departed radically" from the practices

and financial logic of like funds could -- on its own -- provide

a standard for how conservative is "too conservative" and thus

suffice to state a claim of imprudence under ERISA.                    And the

plaintiffs contend that such an allegation can suffice both because

a    substantial   body   of   out-of-circuit    precedent     supports     that

conclusion and because the logic of the statutory provision that

imposes the duty of prudence does as well.            And so we now consider

each of those arguments.




                                    - 17 -
                                           A.

                We begin with the plaintiffs' contention that out-of-

circuit precedent supports their position.                      But, as we will

explain, none of the cases on which the plaintiffs rely passed on

the question presented here: whether allegations that a stable

value fund invested a relatively high proportion of its assets in

cash       or   cash-equivalents,    and    that     such   a   "cash"   allocation

departed radically from the logic and practices of such funds,

suffice in combination to state a claim of imprudence under ERISA.

                Several of the cases cited by the plaintiffs hold merely

that alleged differences between a challenged fund's performance

or characteristics and those of comparable funds suffice to state

a claim of imprudence under ERISA where a flaw in the fiduciary's

decision-making        process      could       be   reasonably    inferred    from

allegations of self-dealing.6               The plaintiffs also cite cases


       6
       See Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 595-96
(8th Cir. 2009) (allegation that ERISA fiduciary invested in funds
with higher management fees as "a quid pro quo" in return for
kickbacks); Krueger v. Ameriprise Fin., Inc., No. 11-02781, 2012
WL 5873825, at *10-11 (D. Minn. Nov. 20, 2012) (allegation that
ERISA fiduciary invested in its own affiliated funds that charged
higher management fees because doing so generated additional
profits for the fiduciary).    The only other case to which the
plaintiffs point in which an imprudence claim was allowed to go
forward at the motion-to-dismiss stage included allegations, not
present in our case, that ERISA fiduciaries selected a "relatively
new, expensive, underperforming investment option" because the
funds in which they invested were managed by a firm affiliated
with the retirement plan's record-keeper and trustee, that these
funds charged higher management fees than comparable funds, and
that the funds "had no meaningful record of performance so as to


                                      - 18 -
-- involving rulings after bench trials, rather than at the motion-

to-dismiss stage -- in which findings of imprudence under ERISA

did not rest on allegations of self-dealing. But, in each of those

cases, the finding that an ERISA fiduciary had violated the duty

of prudence rested on evidence that, in managing investments for

ERISA plan participants, the fiduciary took on more risk than the

fiduciary had disclosed to the participants.7

               Finally,   the    plaintiffs      also   rely    on   an   unreported

district court decision in the Abbott litigation, which is the

same       litigation   that    produced   the    Seventh      Circuit's   decision

permitting class certification, 725 F.3d 803, from which the

plaintiffs' complaint quotes in order to describe what stable value

funds are.        In that litigation, the district court denied the

defendants' motion for summary judgment with respect to a claim

that the manager of a stable value fund breached its duty of




indicate that higher performance would offset this difference in
fees." Lorenz v. Safeway, Inc., 241 F. Supp. 3d 1005, 1019 (N.D.
Cal. 2017).
       7
       See Cal. Ironworkers Field Pension Tr. v. Loomis Sayles &
Co., 259 F.3d 1036, 1045 (9th Cir. 2001) (overinvestment in
collateralized mortgage obligations was imprudent, "given evidence
that [collateralized mortgage obligations] could be highly risky
investments" and "that the [ERISA-governed trust fund] had very
conservative investment guidelines"); Prudential Ret. Ins. &
Annuity Co. v. State St. Bank & Tr. Co. (In re State St. Bank &
Tr. Co. Fixed Income Funds Inv. Litig.), 842 F. Supp. 2d 614, 646
(S.D.N.Y. 2012) ("enhanced index funds" were imprudently managed
to accept twice as much risk than disclosed to investment adviser
for ERISA retirement plans that had invested in those funds).


                                      - 19 -
prudent investment under ERISA.         Abbott v. Lockheed Martin Corp.,

No. 06-0701, 2009 WL 839099, at *9-11 (S.D. Ill. Mar. 31, 2009).

              The plaintiffs here contend that their imprudence claim

"fit[s] squarely within the claims and rulings in Abbott."                   In

particular,      the   plaintiffs    represent     that    the   "fundamental

allegation" in Abbott was that the fund was imprudently invested

in short-term, cash-equivalent investments because between fifty

and ninety-nine percent of the fund's assets were invested in cash-

equivalents.        See id. at *9.    Thus, the plaintiffs contend that

the district court's summary judgment decision in Abbott supports

their contention that their complaint has stated an imprudence

claim against Galliard by alleging that Galliard invested between

twenty-seven and fifty-five percent of the CVS stable value fund's

assets in an investment fund that was primarily invested in cash-

equivalents.

              However, we do not see how the district court's summary

judgment ruling in Abbott shows that the imprudence claim that the

plaintiffs bring here is cognizable. To be sure, at oral argument,

the defendants were willing to assume that it might be possible to

infer imprudent stable value management from an extreme allocation

of   assets    to   cash   or   cash-equivalents   --     perhaps,   in   their

counsel's words, if "nearly 100 percent" of a fund's assets are so

allocated, like the alleged ninety-nine percent cash-equivalent

allocation in Abbott.       But, as the defendants point out, the high


                                     - 20 -
end of the alleged cash-equivalent allocation of the stable value

fund in Abbott was much higher than that of the CVS stable value

fund here.8      And, more importantly, it is clear from the district

court's summary judgment ruling that the plaintiffs in Abbott did

not allege that the fund there was imprudently managed solely

because a relatively high proportion of the fund's assets were

invested in cash-equivalents.         See id. at *9-11.

            Thus, the precedents on which the plaintiffs rely do not

help their cause.      Those precedents simply did not have occasion

to pass on a theory akin to that of the plaintiffs -- namely, that

imprudence can be inferred solely from their complaint's charge

that Galliard's cash-equivalent allocation "departed radically"

from both industry averages and the underlying financial logic of

stable value management.

                                       B.

            In    evaluating   whether      the   plaintiffs'   novel   theory

nonetheless has force, it is important to keep in mind that the

complaint     does    not   allege     anything     about   the   particular

circumstances that Galliard faced in managing the fund beyond the

facts that there was a financial crisis in 2008 during which money


     8 In fact, the complaint does not actually allege what the
precise cash-equivalent allocation here was.        The complaint
alleges merely that twenty-seven to fifty-five percent of the CVS
stable value fund's assets -- depending on the year at issue
-- were allocated to a separate investment fund that was, in turn,
invested "primarily" in cash equivalents.


                                     - 21 -
market yields declined and that the fund's stated objective was

"to preserve capital while generating a steady rate of return

higher than money market funds provide."           To supply the required

context   for    the   plaintiffs'    imprudence    claim,     the    complaint

instead relies on the extent to which Galliard's cash-equivalent

allocations deviated from allocation averages in the stable value

industry as well as from what the plaintiffs contend is the

inherent logic of stable value funds.

           A claim resting on such evidence, however, runs into the

concern that we recently set forth in Ellis.              For it is hard to

see how the fact that a stable value fund was run conservatively

indicates that it was being run imprudently, where "plaintiffs

make no argument that offering more conservative investments (such

as money market funds) would constitute an ERISA violation."

Ellis, 2018 WL 991515, at *7.           We see no daylight between the

prudence claim rejected in Ellis and that presented here.               Even if

we grant plaintiffs' premise and assume that evidence showing a

"radical[]"      deviation   from    standard   stable      value    management

practice could on its own supply the necessary context to state a

claim of imprudence, we do not see how the evidence that the

plaintiffs have put forward on that score could suffice.

           The    plaintiffs    emphasize    the   data   contained     in   the

industry survey that their complaint incorporates.                   But, that

survey    sets    forth   the   arithmetic      mean   of     cash-equivalent


                                    - 22 -
allocations by all of the stable value funds participating in the

survey for each year. Neither the survey nor the complaint reveals

the   distribution   of    cash-equivalent    allocations   by   the   funds

participating in the survey that results in the industry-wide

arithmetic means that the survey sets forth.            And, without such

distribution information, it is unreasonable to infer solely from

the complaint's allegation that Galliard "departed radically" from

the annual arithmetic means of cash-equivalent allocations by like

funds that Galliard was a "severe outlier" from all other such

funds when it came to asset allocation decisions -- at least given

the large number of stable value funds that existed.9

           In   fact,     the   industry    survey   incorporated   by   the

complaint indicates that the cash-equivalent allocations in the

surveyed funds ranged widely -- from 0.3 to 36.5 percent in 2011




      9The large number of stable value funds is apparent from the
complaint.   The industry survey incorporated by the complaint
indicates that forty-three firms participated in the survey, with
over $700 billion in combined stable value assets under management.
It appears, however, that those forty-three firms managed assets
held by many different defined contribution retirement plans. The
survey itself does not say how many plans were covered or what the
variation in the asset allocations of their stable value fund
investments was. But, in this regard, the academic study of stable
value funds on which the complaint relies indicates that there
were over $800 billion invested in stable value funds through
almost half of all defined contribution plans. Babbel & Herce,
Stable Value Funds: Performance to Date, 1. And the study states
that $561 billion of those assets were held by as many as 173,050
plans. Id. at 1 n.4.


                                   - 23 -
and from 0.44 percent to 48.2 percent in 2012.10   And the complaint

alleges that the CVS stable value fund's allocation to a fund

primarily invested in cash-equivalents was 44 percent in 2011 and

48 percent in 2012.   That means, with respect to the two years for

which the survey provides data, that the CVS stable value fund's

cash-equivalent allocation was potentially outside the range of

allocations made by the surveyed funds in 2011 but then was

necessarily within the range of allocations made by the surveyed

funds in 2012.

          In the absence of any additional context, these survey

statistics thus show merely that Galliard charted a relatively

more "cash"-focused course than most of the funds that were

surveyed, while taking the most "cash"-focused course in one year

but not in the next year.    But, consistent with our reasoning in

Ellis, we do not see how those facts alone can suffice to support

a plausible claim that such decision-making was imprudent.

          Given the paucity of allegations that the complaint

makes about the circumstances facing the CVS stable value fund at

the time, it would be pure speculation to infer that Galliard did



     10 The defendants suggest that the low end of the range was
never below two percent. Their estimation of the range apparently
excludes the survey's data from stable value funds offered by life
insurance companies that commingled the assets of unrelated
retirement plans.    We instead consider the range that is most
favorable to the plaintiffs, but the difference ultimately has no
bearing on our analysis.


                               - 24 -
not have a good reason to make those "cash"-heavy decisions.11

After all, we see no reason to accept the plaintiffs' implicit

assertion that, in managing a stable value fund, a decision to

take the path less traveled is for that reason imprudent.

          To be sure, the complaint does allege that Galliard's

management of the CVS stable value fund was imprudent in 2010 and

2013 as well.   But the survey incorporated by the complaint does

not even encompass those years, and the complaint contains no data

about how other funds in the industry allocated their investments

in either of those years.   Thus, the complaint does not provide

any direct allegation that the CVS fund was unique in being

invested so substantially in cash-equivalents in 2010, the sole

year when its cash-equivalent allocation reached potentially as

high as fifty-five percent, or 2013, when its cash-equivalent

allocation was no more than twenty-seven percent.

          Nor does the complaint allege that stable value funds'

average asset allocations in the years not covered by the survey

(2010 and 2013) were similar to the industry average allocations

for the intervening years (2011 and 2012) that the survey does

cover. And, in any event, the CVS fund's potential cash-equivalent


     11 It is true that the complaint alleges that money market
yields declined during the crisis. But that additional allegation,
without any additional context, does not make it plausible that a
decision to increase money market investments immediately
following the crisis was imprudent, even if in hindsight it proved
to have been relatively costly.


                             - 25 -
allocation in 2013 (twenty-seven percent) was well within the range

for each year that the survey covers.

          Moreover,     2010,     which    is    when    Galliard's     "cash"

allocation was at its height, was the year closest to the "2008

financial crisis" referenced in the complaint.             That fact may or

not make stable value funds' asset allocations in 2010 distinct

from subsequent years.     But, in light of the allegations in the

complaint, it would be pure speculation to infer that average

industry allocations in that year -- for which the complaint

provides no survey data -- would have been no different from the

averages derived from the survey data for the subsequent years.

See, e.g., Ellis, 2018 WL 991515, at *6-8 (granting summary

judgment against a claim that an ERISA fiduciary was imprudent

"[i]n the wake of the 2007-2008 financial crisis" by allocating a

stable value fund's assets "away from higher-return, but higher-

risk sectors . . . and toward treasuries and other cash-like or

shorter duration investments," id. at *2).

          Given   the   evident    problem      with    resting   a   claim   of

imprudence solely on these survey data, the plaintiffs' claim needs

to rest on something more in order to be plausible. The plaintiffs

contend that the complaint contains that "something more" because

it alleges that the "underlying financial logic" of stable value

funds renders reasonable an inference that Galliard's relatively




                                  - 26 -
more money-market-fund-like choices (as the survey data reveal

them to have been) were not just cautious but imprudent.

              The complaint alleges in this regard that stable value

funds have historically outperformed money market funds without

increased volatility. And the complaint relies for that allegation

on   an     academic   study   whose    results,    at   least    in   part,    were

available at the time of Galliard's investment decisions.12                      The

plaintiffs then argue that the study suggests that investing in

the types of short-term debt obligations that compose money market

funds is imprudent if an alternative option to invest in longer-

term investments is available and -- as the complaint alleges was

true of stable value fund investors -- anticipated liquidity needs

are reduced.

              The   academic    study    on     which    the    plaintiffs      rely,

however, does not itself suggest that a stable value fund should

refrain from holding any particular proportion of its assets in

cash or cash equivalents, such that imprudence could be inferred

from      Galliard's   allocations.        Rather,       with    respect   to    the

composition of stable value funds, the study states only that they



       12
        As the complaint points out, the updated version of the
2007 study, which was released in 2011, indicated that this trend
generally continued during the financial crisis preceding
Galliard's decisions. However, that version of the study was not
available at the time that Galliard decided to allocate fifty-five
percent of the CVS stable value fund during 2010 to an investment
fund primarily holding cash-equivalents.


                                       - 27 -
are "typically comprised of high quality, short maturity (usually

well under five years) corporate and government bonds, mortgage-

backed      securities,     and     asset-backed      securities,"     without

addressing the extent to which they might also hold cash or cash-

equivalents.     Babbel & Herce, Stable Value Funds: Performance to

Date, 3.     And the study then simply makes a retrospective claim

that stable value funds, however their assets happened to have

been constituted in the past, have historically outperformed money

market funds.     Id. at 16.

             Moreover, at oral argument, the plaintiffs' counsel

emphasized that their theory is not that any investment in cash

equivalents by an ERISA fiduciary is by itself a breach of the

duty   of   prudence.       Thus,    the   argument    that   the    plaintiffs

necessarily must press is that the underlying financial logic of

stable value funds dictates not that any investment in cash or

cash equivalents is imprudent but rather that the specific cash-

equivalent allocation here was.

             The plaintiffs, however, have failed to offer a theory

for determining, based on the underlying financial logic of stable

value funds, how much liquidity is "too much," such that imprudence

may be reasonably inferred.           And they certainly do not offer a

theory   that   would     make    plausible   the   notion    that   the   cash-

equivalent allocations of a fund labeled as a stable value fund

are imprudent simply because those allocations are consistently


                                     - 28 -
larger for a certain number of years than the mean allocations of

five   to   ten   percent       derived    from    all    funds       (whatever   their

particularities) participating in a survey conducted by a trade

association for the stable value industry.

             After   all,       the   plaintiffs        have    not     explained     why

financial logic makes it plausible to conclude -- without knowing

anything more about the particular circumstances affecting an

ERISA fiduciary's choices regarding asset allocations -- that what

the plaintiffs call a five to ten percent "cash buffer" is prudent,

but that a buffer closer to twenty-seven to fifty-five percent

"cash" is not.       Rather, as far as the complaint reveals, the

plaintiffs' only basis for setting the maximum threshold for a

prudent "cash buffer" at ten percent is the allegation that the

annual arithmetic means of the surveyed funds' cash-equivalent

allocations were no higher than ten percent.                           The plaintiffs

themselves    acknowledge,        however,       that    they    need    to   point   to

something more than merely that the CVS fund's cash-equivalent

allocations were higher than those means in order to state a claim

of imprudence under ERISA.            Otherwise, in the plaintiffs' words,

we are left with "just cavils about deviation from industry

standards."

                                          III.

             That still leaves the question whether the complaint

nevertheless      states    a    claim    against       the     CVS   defendants      for


                                       - 29 -
imprudently monitoring Galliard.           However, the complaint alleges

no harm other than the stable value fund's underperformance as a

result of Galliard's alleged misallocation of the fund's assets.

Because   of   our   determination    that    this   alleged   harm   is   not

cognizable under ERISA, there remains no basis for supporting a

claim against the CVS defendants.           Accordingly, we conclude that

the complaint also fails to state a plausible claim against the

CVS defendants.

                                     IV.

            For these reasons, the judgment of the District Court is

affirmed.




                                 - 30 -
