United States District Court, E.D. Missouri, Eastern Division
DOUGLAS R. ROE, ELMER BUSH, RONALD K. HUFF and JEROME MCLAUGHLIN on behalf of themselves and the Arch Coal, Inc. Employee Thrift Plan, and/or on behalf of a class consisting of similarly situated participants of the Plan, Plaintiffs,
ARCH COAL, INC., et al., Defendants.
MEMORANDUM AND ORDER
E. JACKSON UNITED STATES DISTRICT JUDGE.
matter is before the Court on the separate motions of the
Arch Defendants and Mercer Trust Company to dismiss the
plaintiffs' amended complaint for failure to state a
claim. Plaintiffs have responded, and the issues are fully
Douglas R. Roe, Elmer Bush, Ronald K. Huff, and Jerome
McLaughlin, individually and as representatives of the Arch
Coal, Inc. Employee Thrift Plan (the Plan), bring this
consolidated class action pursuant to §§ 404, 405,
409 and 502 of the Employee Retirement Income Security Act of
1974 (ERISA), 29 U.S.C. §§ 1104, 1105, 1109 and
1132. Plaintiffs claim that the defendants breached duties of
prudence and loyalty in administering the Plan. The
defendants are Arch Coal, its directors, the company officers
who served as Plan Administrator and/or on the Retirement
Committee (collectively, the Arch Defendants), and Mercer
Trust, the Plan's trustee. The Plan is a retirement
savings plan which required the Arch Coal Stock Fund (the
Fund) to include Arch Coal stock as one of the investment
options offered to Plan participants. During the period July
27, 2012 to November 12, 2015 (the Class Period), Arch Coal
was the sponsor of the Plan.
to the amended complaint, the Plan and its participants
suffered tens of millions of dollars of losses during the
Class Period, as the market price of Arch Coal Stock fell
from approximately $680.00 on July 27, 2012 to $1.42 on
November 12, 2015. On or about November 12, 2015, the
Plan's investment in the Fund was forcibly liquidated.
Before and during the Class Period “massive amounts of
publicly-available information” about the collapse of
the coal industry in general, and Arch Coal in particular,
was generated. [Doc. #43, ¶6, 9-10, 85-399]. On January
11, 2016, Arch Coal filed for bankruptcy. Plaintiffs claim
that the defendants failed to protect the interests of the
Plan's participants and beneficiaries, in violation of
the defendants' legal obligations under ERISA.
purpose of a motion to dismiss under Rule 12(b)(6) is to test
the legal sufficiency of the complaint. Fed.R.Civ.P.
12(b)(6). The factual allegations of a complaint are assumed
true and construed in favor of the plaintiff, “even if
it strikes a savvy judge that actual proof of those facts is
improbable.” Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 556 (2007) (citing Swierkiewicz v. Sorema
N.A., 534 U.S. 506, 508 n.1 (2002)); Neitzke v.
Williams, 490 U.S. 319, 327 (1989) (“Rule 12(b)(6)
does not countenance . . . dismissals based on a judge's
disbelief of a complaint's factual allegations.”);
Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) (stating
that a well-pleaded complaint may proceed even if it appears
“that a recovery is very remote and unlikely”).
The issue is not whether the plaintiff will ultimately
prevail, but whether the plaintiff is entitled to present
evidence in support of his claim. Scheuer, 416 U.S.
at 236. A viable complaint must include “enough facts
to state a claim to relief that is plausible on its
face.” Twombly, 550 U.S. at 570; see
Id. at 563 (stating that the “no set of
facts” language in Conley v. Gibson, 355 U.S.
41, 45-46 (1957), “has earned its retirement”);
see also Ashcroft v. Iqbal, 556 U.S. 662,
678-84 (2009) (holding that the pleading standard set forth
in Twombly applies to all civil actions).
“Factual allegations must be enough to raise a right to
relief above the speculative level.” Twombly,
550 U.S. at 555.
imposes duties of loyalty and prudence on a plan fiduciary.
29 U.S.C. § 1104(a)(1)(A)-(B). The duty of prudence
requires the fiduciary to act “with the care, skill,
prudence, and diligence under the circumstances then
prevailing that a prudent [person] 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.” 29
U.S.C. § 1104(a)(1)(B). The duty of prudence includes
choosing wise investments and monitoring investments to
remove imprudent ones. Tibble v. Edison Int'l,
135 S.Ct. 1823, 1828-1829 (2015).
Count I of the amended complaint, the plaintiffs claim that
the Arch Defendants breached their fiduciary duty by
“failing to adequately monitor the prudence of
investment in Arch Stock for Plan beneficiaries and
continuing to allow the investment of the Plan's assets
in Arch Stock throughout the Class Period.” [Doc. # 43
at ¶ 414]. The Arch Defendants argue that the
allegations in Count I fail to state a claim for breach of
any duty to manage the plan prudently and that
plaintiffs' claim is foreclosed by the Supreme
Court's decision in Fifth Third Bancorp v.
Dudenhoeffer, 134 S.Ct. 2459, 189 L.Ed.2d 457 (2014).
Dudenhoeffer, the Supreme Court wrote that
“where a stock is publicly traded, allegations that a
fiduciary should have recognized from publicly available
information alone that the market was over- or undervaluing
the stock are implausible, as a general rule, at least in the
absence of special circumstances.” Id., at
2471. Here, plaintiffs' claim rests on allegations that
the Arch Defendants should have recognized from publicly
available information alone that the market was improperly
valuing Arch Coal stock. Courts applying
Dudenhoeffer have concluded that allegations that
fiduciaries breached their duties of prudence in managing
employee stock ownership plans based upon public information
revealing poor performance failed to state a claim. See
Saumer v. Cliffs Nat. Res. Inc., 853 F.3d 855, 862 (6th
Cir. 2017) (finding that participants in an employee stock
ownership plan failed to state a claim that fiduciaries
breached their duty of prudence based on public information
which revealed company's declining revenues, high
operating costs, and unmanageable debt); Coburn v.
Evercore Trust Co., N.A., 844 F.3d 965, 969 (D.C. Cir.
2016) (foreclosing breach of prudence claims where
fiduciaries relied on a stock price reflecting all publicly
available information, absent allegations of special
circumstances); Rinehart v. Lehman Bros. Holdings
Inc., 817 F.3d 56 (2d Cir. 2016) (interpreting
Dudenhoeffer to foreclose breach of prudence claims
based on public information “irrespective of whether
such claims are characterized as based on alleged
overvaluation or alleged riskiness of a stock”). The
Court concludes that the ruling in Dudenhoeffer
applies in this case such that, absent allegations of special
circumstances, plaintiffs cannot maintain a breach of
prudence claim based on the fiduciaries' alleged failure
to recognize public information indicating that the Arch Coal
stock was improperly valued.
argue that they plausibly alleged Arch Coal Stock was an
imprudent investment for the Plan during the Class Period and
claim the Supreme Court's opinion in Tibble v. Edison
Int'l confirms the viability of their claims. 135
S.Ct. at 1829. Plaintiffs suggest that Tibble's
holding that market-priced retail class mutual funds can be
imprudent for retirement savings is incompatible with
defendants' argument. In Tibble, the Court wrote
that “[a] plaintiff may allege that a fiduciary
breached the duty of prudence by failing to properly monitor
investments and remove imprudent ones.” Id. at
1826. In Dudenhoeffer, however, the Court agreed
that “a fiduciary usually ‘is not imprudent to
assume that a major stock market…provides the best
estimate of the value of the stocks traded on it that is
available to him.” 134 S.Ct. at 2471-72. [quoting
Summers v. State Street Bank & Trust Co., 453 Fed.
404, 408 (7th Cir. 2006). Therefore, applying both
Dudenhoeffer and Tibble, a plaintiff could
properly allege that a fiduciary breached the duty of
prudence by failing to properly monitor investments and
remove imprudent ones, but not when the allegations are based
upon publicly available information.
also argue that Tatum v. RJR Pension Inv. Comm., 855
F.3d 553, 564 (4th Cir. 2017), supports their position.
Tatum does not address the Dudenhoeffer
pleading standard at issue and was decided after a bench
trial in which the district court found that a prudent
fiduciary would have relied on the market price as a correct
estimate of the present value of the stock. Id. at
564-65. Further, Tatum distinguishes
Dudenhoeffer, noting that it “concerned
allegations that the market overvalued a stock and that a
fiduciary should have known the stock was overvalued because
of public information, ” not loss causation which was
at issue in Tatum. Id. at 566. Because the