Alexander Y. Usenko, Derivatively on Behalf of the SunEdison Semiconductor Ltd. Retirement Savings PlanPlaintiff - Appellant
MEMC LLC; The Investment Committee of the SunEdison Semiconductor Ltd. Retirement Savings Plan, Hemant Kapadia; Penny Cutrell; Steve Edens; Karen Steiner; Cheng Yang; Ben Llorico Defendants - Appellees John Does 1-10 Defendants
Submitted: January 16, 2019
from United States District Court for the Eastern District of
Missouri - St. Louis
BENTON, MELLOY, and KELLY, Circuit Judges.
Usenko is a former employee of SunEdison Semiconductor, LLC
(Semi). Semi was once a wholly owned subsidiary of SunEdison,
Inc. Semi made a defined-contribution retirement savings plan
available to its employees, including Usenko, that offered
SunEdison stock as a retirement investment option. On April
21, 2016, SunEdison filed for bankruptcy. In August 2017,
Usenko brought suit derivatively on behalf of the plan and,
in the alternative, as a putative class action on behalf of
plan participants. Usenko claims that Semi, the investment
committee of Semi's retirement savings plan, and the
members of the investment committee breached their fiduciary
duties under the Employee Retirement Income Security Act of
1974 (ERISA). Usenko alleges that between July 20, 2015, and
April 21, 2016, the defendants knew or should have known that
SunEdison was in poor financial condition and faced poor
long-term prospects and therefore should have removed
SunEdison stock from the plan's assets. The district
court dismissed Usenko's complaint as to all
defendants for failure to state a claim-other than Penny
Cutrell and Karen Steiner, who were dismissed for lack of
timely service-and denied Usenko leave to amend his
complaint. Usenko appeals the dismissal for failure to state
a claim and the denial of leave to amend. We affirm.
the following background from the well-pleaded factual
allegations in Usenko's complaint, which we accept as
true for purposes of the defendants' motions to
dismiss. Park Irmat Drug Corp. v. Express
Scripts Holding Co., 911 F.3d 505, 512 (8th Cir. 2018).
plan was created in May 2014, after Semi spun off from
SunEdison. The plan made several investment options available
to its participants, including a fund that invested solely in
the common stock of Semi's former corporate parent.
Usenko, among others, elected to exercise this option and
held shares of SunEdison common stock through his individual
plan account. The plan was later amended to freeze
contributions to the SunEdison stock fund. Pursuant to the
amendment, effective February 1, 2015, participants could
retain their existing investments but could no longer direct
additional investments into the SunEdison stock fund.
mid-2015, it was widely reported that SunEdison was facing
liquidity problems and was in financial distress due to an
ambitious series of acquisitions. On July 20, SunEdison
issued a press release announcing that it would acquire yet
another company, Vivint Solar, Inc., for $2.2 billion.
Markets reacted poorly, and SunEdison's stock price fell
from $31.56 per share to $26.01 per share in a week. On
August 6, SunEdison issued another press release, reporting a
$263 million loss in its second quarter. That same day, the
financial press warned that SunEdison had a $10.7 billion
corporate debt load and negative cash flow from operations.
By the end of the day, SunEdison's stock closed at $17.08
per share. At the time, investor demand for energy stocks was
November 10, SunEdison issued a press release reporting its
third quarter results. These results spurred more negative
commentary from the financial press, who questioned whether
SunEdison would even be able to meet its existing financial
obligations. On November 18, SunEdison's stock closed at
$3.25 per share. On January 7, 2016, SunEdison announced that
it was restructuring $738 million of its debt. That same day,
the financial press reported that this decision had triggered
a massive sell-off because of its dilutive effect on
investors, even though SunEdison's strategy would add an
estimated $555 million to its liquidity. That week, shares of
SunEdison dropped roughly 30 percent, closing at $3.41.
January 12, the financial press was reporting that SunEdison
might not survive the year, and SunEdison's stock closed
at $3.02 per share, hitting a low of $2.36 during the day.
Commentary suggested that SunEdison stock was risky due to
its generally disappointing historical performance and feeble
growth in earnings per share as well as the company's
high debt-management risk. SunEdison then twice publicly
delayed filing its annual report, stating that it needed
additional time for its audit committee to complete an
internal investigation and otherwise confirm the accuracy of
its financial position.
April, SunEdison and certain of its subsidiaries filed for
bankruptcy. SunEdison's common stock was suspended
immediately from trading at the market opening on the New
York Stock Exchange on April 21, 2016. All told, between July
20, 2015, and April 21, 2016, the market price of SunEdison
stock fell from $31.66 to $0.34. As a result, those who had
invested in SunEdison stock through Semi's retirement
plan effectively lost the entire value of their investment.
single-count complaint, Usenko alleges that the defendants
breached their fiduciary duties. He claims that they knew or
should have known that continuing to hold SunEdison stock
between July 20, 2015, and April 21, 2016, was imprudent
because SunEdison's failing ...