     18‐2621‐cv(L)
     O’Day v. Chatila


                               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 ASUMMARY ORDER@). A PARTY
CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT
REPRESENTED BY COUNSEL.

 1         At a stated term of the United States Court of Appeals for the Second Circuit,
 2   held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the
 3   City of New York, on the 7th day of June, two thousand nineteen.
 4
 5          PRESENT: GERARD E. LYNCH,
 6                           RAYMOND J. LOHIER, JR.,
 7                                      Circuit Judges,
 8                           BRIAN M. COGAN,*
 9                                     District Judge.
10          ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
11          ERIC O’DAY, ROBERT LINTON, LEE MEDINA,
12          GAURAB SAMANTA, Individually, on Behalf of
13          the SunEdison, Inc. Retirement Savings Plan, and
14          on Behalf of All Other Similarly Situated Plan                       Nos. 18‐2621‐cv(L),
15          Participants and Beneficiaries,                                      18‐2632‐cv(CON)
16
17                          Plaintiffs‐Appellants,


     * Judge Brian M. Cogan, of the United States District Court for the Eastern District of
     New York, sitting by designation.
 1
 2            v.
 3
 4   AHMAD CHATILA, EMMANUEL
 5   HERNANDEZ, ANTONIO R. ALVAREZ,
 6   CLAYTON C. DALEY, JR., GEORGANNE C.
 7   PROCTOR, STEVEN V. TESORIERE, JAMES B.
 8   WILLIAMS, RANDY H. ZWIRN, PETER
 9   BLACKMORE, THE SUNEDISON RETIREMENT
10   SAVINGS PLAN INVESTMENT COMMITTEE,
11   BRIAN WUEBBELS, PHELPS MORRIS,
12   MATTHEW HERZBERG, MATT MARTIN,
13   JAMES WELSH,
14
15                    Defendants‐Appellees.
16   ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
17   FOR APPELLANTS:                                           DANIELLA QUITT, Glancy
18                                                             Prongay & Murray LLP, New
19                                                             York, NY (Robert I. Harwood,
20                                                             Glancy Prongay & Murray
21                                                             LLP, New York, NY, Nancy A.
22                                                             Kulesa, Levi & Korsinsky, LLP,
23                                                             New York, NY, Thomas J.
24                                                             McKenna, Gregory M.
25                                                             Egleston, Gainey McKenna &
26                                                             Egleston, New York, NY,
27                                                             Francis A. Bottini, Jr., Albert Y.
28                                                             Chang, Bottini & Bottini Inc.,
29                                                             La Jolla, CA, on the brief).

30   FOR APPELLEES                                        MARK B. BLOCKER, Sidley
31   AHMAD CHATILA,                                       Austin LLP, Chicago, IL
32   EMMANUEL HERNANDEZ,                                  (Christopher K. Meyer,
33   ANTONIO R. ALVAREZ,                                  Sidley Austin LLP, Chicago,

                                              2
 1         CLAYTON C. DALEY, JR.,                       IL, Sarah A. Hemmendinger,
 2         GEORGANNE C. PROCTOR,                        Sidley Austin LLP, San
 3         STEVEN V. TESORIERE, JAMES                   Francisco, CA, on the brief).
 4         B. WILLIAMS, RANDY H. ZWIRN,
 5         THE SUNEDISON RETIREMENT
 6         SAVINGS PLAN INVESTMENT
 7         COMMITTEE, BRIAN WUEBBELS,
 8         PHELPS MORRIS, MATTHEW
 9         HERZBERG, MATT MARTIN,
10         JAMES WELSH:
11
12         FOR APPELLEE                                 Michael Bongiorno, Timothy
13         PETER BLACKMORE:                             Perla, Wilmer Cutler Pickering
14                                                      Hale and Dorr LLP, Boston,
15                                                      MA.

16         Appeal from a judgment of the United States District Court for the

17   Southern District of New York (P. Kevin Castel, Judge).

18         UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

19   AND DECREED that the judgment of the District Court is AFFIRMED.

20         Plaintiffs are participants in a defined‐contribution retirement savings plan

21   (the Plan) that was available to employees of SunEdison, Inc. They appeal from

22   the judgment of the District Court (Castel, J.) granting Defendants’ motion to

23   dismiss the complaint. The Plan gave employees the opportunity to invest in an

24   employee stock ownership plan consisting largely of publicly traded shares of


                                             3
 1   SunEdison stock. Plaintiffs claim that Defendants breached various duties

 2   under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §

 3   1001, et seq., by failing to protect the Plan when Defendants knew or should have

 4   known that SunEdison was on the verge of bankruptcy. We assume the parties’

 5   familiarity with the underlying facts and the record of prior proceedings, to

 6   which we refer only as necessary to explain our decision to affirm.

 7         Plaintiffs claim that Defendants breached their duty of prudence by

 8   continuing to offer SunEdison shares as an investment option despite their access

 9   to public and non‐public information regarding SunEdison’s dire financial

10   straits. The District Court correctly held that Plaintiffs did not allege any

11   “special circumstances” that would affect the reliability of the market price as a

12   reflection of the value of SunEdison shares. In the absence of special

13   circumstances, allegations that a fiduciary should have recognized that a publicly

14   traded stock was overvalued or risky from publicly available information alone

15   are generally implausible. See Fifth Third Bancorp v. Dudenhoeffer, 573 U.S.

16   409, 426–27 (2014); Rinehart v. Lehman Bros. Holdings Inc., 817 F.3d 56, 65–67

17   (2d Cir. 2016).


                                              4
 1         Relying on Jander v. Retirement Plans Committee of IBM, 910 F.3d 620 (2d

 2   Cir. 2018), cert. granted, ‐‐‐ S. Ct. ‐‐‐, 2019 WL 1100213 (June 3, 2019), Plaintiffs

 3   also argue that Defendants should have responded to non‐public information of

 4   SunEdison’s financial troubles by making proper disclosures and halting

 5   purchases or divesting the Plan of SunEdison stock. In Jander we held that a

 6   prudent fiduciary could have concluded that disclosing the overvaluation of

 7   IBM’s microelectronics business would not have done more harm than good

 8   because it was inevitable that the overvaluation would be disclosed (the business

 9   was about to be sold) and studies showed early disclosure of fraud would soften

10   the reputational damage. Id. at 628–30. Unlike the plaintiff in Jander, the

11   Plaintiffs here have not alleged that an earlier disclosure of SunEdison’s financial

12   problems might have caused less damage than a later disclosure. Nor have they

13   alleged that disclosure of SunEdison’s problems alone, without also halting

14   purchases of SunEdison stock or divesting SunEdison stock altogether, would

15   have sufficed. This case is therefore quite different from Jander and much closer

16   to Rinehart, in which we addressed allegations that a prudent fiduciary should

17   have divested or stopped purchasing stock and held that a prudent fiduciary


                                                5
 1   could have concluded that such an action would have done more harm than

 2   good. Rinehart, 817 F.3d at 68; see also Fifth Third, 573 U.S. at 429–30.

 3         Plaintiffs also allege that Defendants breached their duty of prudence by

 4   failing to monitor the Plan’s assets. But such a claim requires Defendants both

 5   to have improperly monitored investments and to have failed to remove

 6   imprudent ones. See Tibble v. Edison Intʹl, 135 S. Ct. 1823, 1828–29 (2015).

 7   Plaintiffs failed to plausibly allege that it was imprudent for Defendants not to

 8   remove any investments.

 9         Plaintiffs further claim that Defendants breached their duty of loyalty

10   because their compensation was linked to SunEdison’s financial performance.

11   Specifically, Plaintiffs argue that Defendants’ compensation structure caused

12   them to pursue a growth strategy that led to SunEdison’s demise. But Plaintiffs

13   do not even allege that the compensation structure caused Defendants to act

14   adversely to the Plan while acting as fiduciaries, and for that reason we agree

15   with the District Court’s decision to dismiss that claim. See Pegram v. Herdrich,

16   530 U.S. 211, 225–26 (2000); In re DeRogatis, 904 F.3d 174, 191 (2d Cir. 2018).

17   Finally, the District Court correctly dismissed, on the ground that Plaintiffs failed


                                               6
1   to identify any underlying breach of a fiduciary duty under ERISA, Plaintiffs’

2   claim that certain fiduciaries failed to adequately monitor other fiduciaries. See

3   Rinehart, 817 F.3d at 68.

4         We have considered Plaintiffs’ remaining arguments and conclude that

5   they are without merit. For the foregoing reasons, the judgment of the District

6   Court is AFFIRMED.

7                                         FOR THE COURT:
8                                         Catherine O=Hagan Wolfe, Clerk of Court




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