finding that the district court did not abuse its discretion in denying a motion to amend, even where the discovery deadline had not yet closed, where “much else had occurred by that time” and “allowing the amendment would have required the parties and the court to backtrack and redo work that had already been completed”
How later courts described this case
- finding that the district court did not abuse its discretion in denying a motion to amend, even where the discovery deadline had not yet closed, where “much else had occurred by that time” and “allowing the amendment would have required the parties and the court to backtrack and redo work that had already been completed”
- finding that the district court did not abuse its discretion in denying a motion to amend under the more lenient Rule 15 standard, even where the discovery deadline had not yet closed, where “allowing the amendment would have required the parties and the court to backtrack and redo work that had already been completed…”
- holding "a trier of fact could reasonably conclude that defendants did not satisfy their duty to ensure that [the recordkeeper's] fees were reasonable" where plan fiduciaries failed to, inter alia, solicit competitive bidding for more than fifteen years
- holding that, based upon the opinions of experts in the field that recordkeeping costs should have been less, “a trier of fact could reásonably conclude that defendants did not satisfy them duty to ensure that [the recordkeeper’s] fees were reasonable”
Written by the judges who cited it.
The opinion
In the
United States Court of Appeals
For the Seventh Circuit
No. 10-1469
G ERALD G EORGE, et al.,
Plaintiffs-Appellants,
v.
K RAFT F OODS G LOBAL, INCORPORATED , et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 07 C 01713—Sidney I. Schenkier, Magistrate Judge.
A RGUED O CTOBER 19, 2010—D ECIDED A PRIL 11, 2011
Before C UDAHY and R OVNER, Circuit Judges, and
A DELMAN, District Judge.
A DELMAN, District Judge. Plaintiffs, current and former
employee-participants in the Section 401(k) plan (the
“Plan”) of Kraft Foods Global, Inc. (“Kraft”) brought this
Hon. Lynn S. Adelman, of the Eastern District of Wisconsin,
sitting by designation.
2 No. 10-1469
class action against various individuals and entities
associated with the Plan, alleging that they breached
their fiduciary duties under the Employee Retirement
Income Security Act of 1974 (“ERISA”) by imprudently
allowing the Plan to incur excessive expenses and
generate insufficient returns.1 The district court certified
a plaintiff class composed of Plan participants but ulti-
mately granted summary judgment to defendants.2 Plain-
tiffs appeal this grant of summary judgment along
with two of the district court’s procedural rulings—its
order denying plaintiffs’ motion for leave to file an
amended complaint and its order excluding the testi-
mony of one of plaintiffs’ expert witnesses, Dr. Edward
O’Neal. We affirm the procedural rulings and affirm in
part and reverse in part the grant of summary judgment.
I. Background
The Kraft Plan was a defined contribution plan within
the meaning of ERISA, see 29 U.S.C. § 1002(34), and was
structured as a typical Section 401(k) plan. The Plan
established an account for each participant, and partici-
1
Plaintiffs named Kraft and various committees and indi-
viduals associated with the operation and administration of
the Plan as defendants. Because none of the parties’ argu-
ments turns on the identity of the various defendants, we will
refer to them collectively as “defendants” or “Plan fiduciaries.”
2
The decision to certify a plaintiff class has not been appealed,
so we do not comment on whether class certification was
appropriate.
No. 10-1469 3
pants were allowed to contribute up to a specified
amount of their wages to that account. To an extent,
Kraft made matching contributions on behalf of its em-
ployees. Upon retirement, a participant had whatever
the account had accumulated through contributions
and investment earnings.
Between 2000 and 2006, the Plan had between 37,000
and 55,000 participants and between $2.7 billion and
$5.4 billion in assets. Participants were able to direct their
contributions into one or more mutual funds, and
during the relevant time the Plan allowed participants
to choose from a menu of seven to nine different funds.
Two of these funds were company stock funds (“CSFs”),
which invested almost exclusively in the common stock
of Kraft and Kraft’s then-parent company, Altria Group,
Inc. (formerly Philip Morris).3 The Plan also offered
various multi-stock funds, two of which are relevant to
this case, the Growth Equity Fund and the Balanced Fund.
In connection with their administration of the Plan,
the Plan fiduciaries hired various service providers,
including a recordkeeper, Hewitt Associates (“Hewitt”),
and a trustee, State Street Bank & Trust Company (“State
Street”). Hewitt’s job was to keep track of the various
accounts and transactions associated with the Plan and
to assist Plan participants in managing their accounts.
State Street’s job was to hold and manage the Plan’s
assets. The fees of both Hewitt and State Street were
paid out of Plan assets.
3
By 2007, Kraft was no longer a subsidiary of Altria.
4 No. 10-1469
Plaintiffs filed the present action in 2006, alleging that
Plan fiduciaries mismanaged the CSFs and paid excessive
fees to Hewitt and State Street. Plaintiffs’ claims arise
under 29 U.S.C. § 1104(a)(1), which provides that plan
fiduciaries must act prudently—i.e., “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.”
This section also states that plan administrative costs
must be “reasonable.” We explain the details of plaintiffs’
claims in the course of our analysis of each claim, below.
II. Motion to Amend Complaint
We start by examining whether the district court abused
its discretion in denying plaintiffs’ motion for leave to
file an amended complaint under Federal Rule of Civil
Procedure 15(a). See Soltys v. Costello, 520 F.3d 737, 743
(7th Cir. 2008). Plaintiffs’ original complaint, which
named seven different defendants, focused on the
alleged mismanagement of the CSFs and the alleged
payment of excessive fees to Plan service providers. The
proposed amended complaint sought to add an addi-
tional twenty-one defendants and to add claims
regarding various investment decisions made by Plan
fiduciaries. As the district court characterized the
proposed new claims, they involved attacks “on the
substantive investment choices made with the assets of
the Plan. Questions of whether there were appropriate
investment vehicles used, whether there should have
No. 10-1469 5
been holdings in investment X versus investment Y.
Whether there should have been cash position A or cash
position B.” (App. 17.) The district court contrasted
these claims with the claims in the original complaint,
which focused largely on “the issue of fees and expenses
paid to service providers.” (App. 16.)
Ultimately, the district court denied plaintiffs’ motion
on the ground of undue delay. See, e.g., Arreola v. Godinez,
546 F.3d 788, 796 (7th Cir. 2008) (recognizing that district
courts have broad discretion to deny leave to amend
where there has been undue delay). We therefore take
some time to explain the procedural history of the case
up to the time of the district court’s ruling.
Plaintiffs filed this lawsuit on October 16, 2006, in the
Southern District of Illinois. Defendants then moved to
transfer venue to the Northern District of Illinois, and the
Southern District allowed plaintiffs to conduct discovery
in connection with the venue motion. Through this
initial discovery, plaintiffs obtained much of the evi-
dence underlying the allegations they sought to add to
the case by way of their unsuccessful motion to amend.
The Southern District of Illinois granted defendants’
motion to transfer venue, and the case was transferred
to the Northern District of Illinois on March 26, 2007.
Shortly thereafter, the district court ordered the par-
ties to meet and confer pursuant to Federal Rule of
Civil Procedure 26(f) and arrive at a proposed discovery
schedule. In their proposal, the parties did not request
a deadline for joining parties or amending pleadings.
After receiving the parties’ proposal, the court entered
6 No. 10-1469
a scheduling order and, pursuant to the parties’ request,
bifurcated fact discovery from discovery relating to
class certification. The scheduling order set August 6,
2007, as the deadline for completing class-certification
discovery. The district also set a deadline for plaintiffs
to file their class-certification motion; briefing on this
motion was to be completed by January 25, 2008. After
entering this schedule, the court ordered the parties to
conduct a second Rule 26(f) discovery conference re-
garding fact (i.e., non-class certification) discovery. The
parties did so, and once again they failed to request a
deadline for adding parties or amending pleadings
without leave of court. Upon receipt of the parties’ new
proposed discovery plan, the district court set a dead-
line of March 21, 2008 for non-expert discovery and
a deadline of June 16, 2008 for expert discovery.
On November 12, 2007, plaintiffs filed their class-certifi-
cation motion, and briefing on this motion was complete
by January 25, 2008. On January 31, 2008, plaintiffs
moved for an extension of time to complete discovery
on the basis of the overwhelming number of documents
produced by defendants in response to plaintiffs’ requests
for production. The district court granted this request
and set deadlines for non-expert and expert discovery of
May 20, 2008 and August 15, 2008, respectively. On
March 21, 2008, plaintiffs moved to compel discovery
from defendants. Plaintiffs wanted to obtain unredacted
copies of certain documents, but defendants refused to
remove their redactions. The district court granted
this motion and ordered defendants to produce the
unredacted documents by April 4, 2008. On April 17,
No. 10-1469 7
2008, at plaintiffs’ request, the district court extended the
deadlines for non-expert and expert discovery until
July 21, 2008 and October 17, 2008, respectively. On
May 7, 2008, plaintiffs filed their motion for leave to file
an amended complaint.
In denying plaintiffs’ motion, the district court found
that plaintiffs knew about the facts that gave rise to their
proposed amendments “at the outset of the case, either
before the original complaint was filed in October of
2006, or shortly thereafter.” (App. 6.) Plaintiffs did not
include any argument in their opening brief on appeal
indicating that they dispute this finding. In their reply
brief, plaintiffs suggest that they were unable to “clearly
ascertain all of the fiduciaries and elements of their
breaches” until the district court granted plaintiffs’
motion to compel production of the unredacted docu-
ments. (Reply Br. at 5.) However, arguments raised for
the first time in a reply brief are forfeited. See, e.g., United
States v. Lupton, 620 F.3d 790, 807 (7th Cir. 2010). In any
event, plaintiffs do not identify any specific claims or
allegations that they could not have asserted prior to the
time they received defendants’ unredacted documents,
and so we are in no position to disturb the district
court’s finding regarding what plaintiffs knew and when.
Plaintiffs also indicate that they decided to wait until
after defendants finished their document production to
seek leave to amend in order to avoid having to seek
leave to amend more than once. That is, plaintiffs tell
us that they delayed seeking leave to amend in connec-
tion with the claims they knew about since nearly the
8 No. 10-1469
beginning of the case so that they would not have seek
leave a second time in the event that defendants’ docu-
ment production revealed even more claims. Plaintiffs
argue that the district court unfairly expected them to
seek leave to amend before defendants completed their
production. However, we do not think the district court
acted unfairly. If plaintiffs expected to bring new claims
but also wanted to delay seeking leave to amend until
they reviewed defendants’ written discovery, plaintiffs
could have requested a specific deadline for joining
parties or amending pleadings. The district court could
have then set the deadline for a time after plaintiffs re-
ceived the necessary discovery. Even though plaintiffs
submitted two different Rule 26(f) discovery plans to
the district court, they never informed the district court
that they contemplated amending their complaint or
that they needed a deadline for joining parties or
amending pleadings.4 Accordingly, plaintiffs’ desire to
avoid seeking leave to amend more than once does not
excuse their belated assertion of the claims they knew
about since nearly the beginning of the case.
Plaintiffs point out that delay alone is not a reason to
deny a proposed amendment, and that delay must be
4
In their briefs, plaintiffs blame the district court for not
including a deadline for joining parties or amending pleadings
in its Rule 16 scheduling order, see Fed. R. Civ. P. 16(b)(3)(A),
but we find that plaintiffs must share the blame, in that
they never requested such a deadline and did not object to
the court’s scheduling order on the ground that it failed to
include one.
No. 10-1469 9
coupled with some other reason, such as prejudice to
the defendants. See, e.g., Feldman v. Allegheny Int’l, Inc.,
850 F.2d 1217, 1225 (7th Cir. 1988). The district court
recognized this principle, however, and, in a detailed
oral opinion, explained that plaintiffs’ delay caused
prejudice to both the defendants and the court. The
court emphasized that the parties and the court
had already invested substantial resources in the class-
certification stage of the case, and that a motion for
class certification was fully briefed and on the verge of
being decided. The court reasonably determined that
adding twenty-one new defendants and several new
substantive claims to the case would have substantially
disrupted the progress that had been made regarding
class certification. Further, the court noted that discov-
ery was scheduled to be completed in the next few
months, and that the conclusion of discovery had
already been postponed a number of times. The court
found that adding the new claims and defendants at
that juncture would have “completely thwart[ed]” the
discovery schedule, and that allowing the amendment
would have added a year or more to the duration of
the case. (App. 16-18.)
The district court did not err in considering the impact
of the proposed amendments on the progress of the case,
see Vakharia v. Swedish Covenant Hosp., 190 F.3d 799, 811
n.14 (7th Cir. 1999); Perrian v. O’Grady, 958 F.2d 192, 195
(7th Cir. 1992); Campbell v. Ingersoll Milling Mach. Co., 893
F.2d 925, 927 (7th Cir. 1990), and we cannot say that the
court abused its discretion in concluding that this
impact was severe enough to require denial of leave to
10 No. 10-1469
amend. Plaintiffs emphasize that, at the time of the
denial, discovery had yet to close and no trial date
had been set. But, as explained above, much else had
occurred by that time, and the district court reasonably
determined that allowing the amendment would have
required the parties and the court to backtrack and redo
work that had already been completed, including the
work concerning class certification. Thus, although we
might not have denied leave to amend had we been in
the district court’s position, the district court did not
abuse its discretion in doing so.
III. Decision to Exclude Testimony from Dr. O’Neal
Plaintiffs next argue that the district court abused its
discretion when it struck plaintiffs’ designation of
Dr. Edward O’Neal as an expert witness on relevance
grounds. See Fed. R. Evid. 402; see also United States v.
Dooley, 578 F.3d 582, 591 (7th Cir. 2009) (stating that a
relevance determination is reviewed for abuse of discre-
tion). Plaintiffs describe O’Neal as an expert on mutual
funds and state that they sought to introduce his testi-
mony in order to show that defendants paid excessive
fees to the managers of the Growth Equity Fund and the
Balanced Fund. Both of these funds were “actively man-
aged,” meaning that the manager of each fund attempted
to beat the market through the selection of securities
for inclusion in the fund. Active management can be
contrasted with passive management—or indexing—in
which fund managers simply replicate the performance
of the market as measured by an index such as the
No. 10-1469 11
S&P 500. Because active managers monitor, research
and trade the holdings of the fund, they charge more
for their services than passive managers.
One of the claims that plaintiffs sought to raise through
their amended complaint was that the defendants im-
prudently allowed participants to invest their contribu-
tions in actively managed funds. Plaintiffs argued, and
Dr. O’Neal opined, that active management is of dubious
value, and that therefore the Plan should have offered
only passively managed index funds to Plan participants.
Because the district court denied the motion to amend,
however, this claim did not become part of the case.
Nonetheless, plaintiff still designated O’Neal as an
expert, arguing that his opinion was relevant to the
issue of whether the Plan paid excessive fees to the man-
agers of the Growth Equity Fund and the Balanced
Fund. Plaintiffs’ theory was that because active manage-
ment generally does not produce higher returns than
passive management, any fee charged by an active man-
ager in excess of the fee charged by a comparable
passive manager would be excessive. The district court
refused to allow plaintiffs to pursue this theory, finding
that plaintiffs were attempting to sneak their claim re-
garding the prudence of actively managed funds back
into the case.
On appeal, plaintiffs do not dispute that O’Neal’s
opinion as to excessive fees depended on his opinion as
to the imprudence of actively managed funds. Moreover,
we have reviewed plaintiffs’ original complaint and can
find no allegations giving defendants fair notice that
12 No. 10-1469
plaintiffs would be pursuing a claim premised on the
imprudence of actively managed funds. Thus, we con-
clude that the district court did not abuse its discretion
in concluding that O’Neal’s opinions were not relevant
to any issue in the case.
IV. Grant of Defendants’ Motion for
Summary Judgment
We next examine whether the district court erred in
granting defendants’ motion for summary judgment on
plaintiffs’ breach of fiduciary duty claims. We review
a district court’s grant of summary judgment de novo,
Perez v. Illinois, 488 F.3d 773, 776 (7th Cir. 2007), and will
affirm only if there is no genuine issue of material fact
and defendants are entitled to judgment as a matter of
law, Fed. R. Civ. P. 56(a). We take the evidence and
all reasonable inferences therefrom in plaintiffs’ favor.
Perez, 488 F.3d at 776.
A. Defendants’ Operation of CSFs
Plaintiffs first argue that defendants made imprudent
decisions with respect to the company stock funds, or
CSFs. The Plan offers two such funds to participants,
one that invests in Kraft common stock and one that
invests in Altria common stock. These funds are operated
on a “unitized” basis, meaning that participants own
units of the fund rather than shares of the relevant com-
pany stock. Although the CSFs invest almost exclusively
in the common stock of the relevant companies, they
No. 10-1469 13
also contain a small amount (roughly 5% of the overall
value of the fund) of cash and other similar highly liquid
investments. The parties refer to the non-stock portions
of the CSFs as the “cash buffers.” The value of a CSF unit
is determined by the value of the relevant company
stock as well as the value of the fund’s cash buffer.
The main benefit of unitization is that it allows partici-
pants to quickly sell their interests in the funds and
either receive distributions or transfer their contribu-
tions to other Plan funds. When a participant initiates a
sale of units, Plan administrators use cash from the
cash buffer to make an immediate distribution to the
participant or to immediately transfer the participant’s
investment in the CSF to another Plan fund. With-
out the cash buffer, the participant could not receive a
distribution or reinvest the relevant funds until Plan
administrators sold enough stock to fund the transac-
tion—a process that normally takes three business days.
Another benefit of unitization is that it allows the Plan
to save transaction costs by “netting” participant trans-
actions. Absent unitization, every time a participant
initiated either a purchase or sale of stock, the Plan
would have to enter the market and pay a brokerage
commission and various fees on the associated transac-
tion. With unitization, the Plan can offset a participant’s
request to purchase with another participant’s request
to sell, and the Plan will need to enter the market and
pay transaction costs only to the extent necessary to
meet a net inflow or outflow of investment in the
relevant fund.
14 No. 10-1469
Plaintiffs argue that the unitized structure of the CSFs
resulted in two problems—which the parties refer to as
“investment drag” and “transactional drag.” Investment
drag is caused by the cash buffer. When the relevant
company stock appreciates in value, the value of a unit
of the associated CSF also appreciates. However, because
investment in cash is less risky than investment in
stock, the return on the cash component of the CSF will
not be as high as the return on the stock component.
Thus, having cash in the fund when the stock goes up
results in lower returns than would have been ex-
perienced had the cash portion of the fund been used
to buy more stock. This phenomenon is what the
parties mean by investment drag. Note, however, that
describing this phenomenon as “drag” is appropriate
only if the value of the stock rises over the relevant
period. If the value of the stock declines, a unit of the
fund will not decline in value to the same extent as a
share of stock, since the value of cash is relatively sta-
ble. Thus, in a market in which the relevant stock is
declining, the presence of cash in the fund would be a
good thing.5
Transactional drag involves the transaction costs in-
curred by the fund in connection with participant trans-
actions—i.e., requests to buy and sell units of the fund.
5
Defendants point to this fact as an additional benefit of the
cash buffer—they contend that it acts as a hedge against a
decline in value of company stock. However, nothing in
the record indicates that the Plan fiduciaries viewed the
cash buffer as anything other than an administrative device.
No. 10-1469 15
A request to buy into or sell out of a fund generally
requires Plan administrators to buy or sell shares of
Kraft or Altria stock, and the Plan thus has to pay
the brokerage commissions, SEC fees, and other costs
associated with the trade. As noted above, the unitized
nature of the fund allows administrators to “net” re-
quests to buy and sell against each other in order to
minimize transaction costs. However, when transaction
costs are incurred, they are deducted from the overall
value of the fund rather than allocated to the specific
participants who initiated the transactions. Each partici-
pant thus bears a pro rata share of the fund’s total trans-
action costs regardless of the number of transactions
he or she initiates. This means that frequent traders do
not bear the full cost of their trades and that infrequent
traders essentially subsidize frequent traders. Plaintiffs
argue that this gives all participants an incentive to
trade frequently, which in turn results in higher trans-
action costs for the fund. These higher transaction costs
are what the parties mean by “transactional drag.”
Plaintiffs argue that the investment and transactional
drags associated with the unitized structure of the CSFs
caused investment in the CSFs to underperform direct
investment in Kraft and Altria common stock by $83.7
million between 2000 and 2007. Plaintiffs’ expert, Ross
Miller, arrives at this figure by estimating what the
funds would have earned had they not been unitized—i.e.,
had participants owned shares of the relevant stock
directly rather than indirectly through a fund.
At this point, we must pause to identify the precise
contours of plaintiffs’ claim. Plaintiffs’ legal theory is
16 No. 10-1469
breach of fiduciary duty under ERISA—more specifically,
breach of the prudent man standard of care outlined in
ERISA section 404(a). 29 U.S.C. § 1104(a). To decide the
issues presented by this appeal, however, we need to
identify the act or omission (or series of acts or omissions)
constituting the alleged breach of the prudent man stan-
dard of care. As to that, it is reasonably clear that we
are dealing with omissions rather than overt acts: plain-
tiffs argue that defendants should have done something
to minimize or eliminate investment drag and trans-
actional drag. But what is it that plaintiffs think defen-
dants should have done? Plaintiffs do not precisely
answer this question. However, it is reasonably clear
that plaintiffs think that defendants should have done
one or more of the following: (1) eliminate unitization
and the cash buffer and allow participants to own shares
of Altria and Kraft stock directly (thereby eliminating both
investment and transactional drag), and/or (2) impose
measures designed to reduce the number of participant-
initiated transactions (thereby reducing transactional
drag). In connection with (2), plaintiffs suggest that
defendants could have imposed a trading limit that
would have limited the number or frequency of trades
participants could make.
The next problem is identifying when plaintiffs think
defendants should have taken the above measures. As
noted, plaintiffs contend that the failure to eliminate
unitization and the cash buffer caused the Plan to miss
out on $83.7 million in investment gains between 2000
and 2007. However, nothing in the record indicates that
at the beginning of this period—i.e., in the year 2000 or
No. 10-1469 17
earlier—defendants were in possession of information
that would have caused a prudent man to realize that his
inaction would cost the Plan $83.7 million or cause the
Plan to incur other losses of similar magnitude. The
district court, in granting summary judgment to the
defendants, did not explicitly address the question of
when defendants might have breached their fiduciary
duties. However, the district court’s decision was based
on its determination that defendants had weighed the
costs and benefits of implementing plaintiffs’ proposed
solutions and concluded that the costs of making any
changes to the CSFs outweighed the benefits. (App. at 51-
60.) The court then deferred to the fiduciaries’ decision.
This approach implies that the district court had set its
sights on a relevant time period—i.e., a time when defen-
dants weighed the costs and benefits and reached a
decision. However, we are not directed to any place in
the record that identifies when defendants made this
decision.
Although we are not explicitly directed to a decision,
it is reasonably clear that any decision would have
been made between 2002 and 2004. During this time
period, the Kraft plan fiduciaries and the fiduciaries
of Altria’s 401(k) plan engaged in discussions about
transactional (and, to a lesser extent, investment) drag
in the CSFs maintained by both the Kraft plan and the
Altria plan. (Recall that during this time period, Altria
was Kraft’s parent company.) One fiduciary determined
that, in 2001, the transactional drag on the Kraft plan’s
Altria CSF was $3.6 million, which resulted in an
average cost of $145 per participant per year. The CSFs
18 No. 10-1469
in the Altria plan were experiencing even higher trans-
action costs, and fiduciaries of the Altria plan eventually
informed the fiduciaries of the Kraft plan that they
were taking measures to reduce these costs. By 2003,
Altria had moved to a structure known as “real-time
trading,” which was essentially the opposite of unitiza-
tion: under real-time trading, each participant owned
shares of the relevant stock rather than units of a fund
that invested in the stock. Around this same time, the
Kraft plan’s recordkeeper, Hewitt, informed Kraft plan
fiduciaries that although Hewitt did not offer a real-
time trading service, it could implement other solutions
to transactional drag, including various trading restric-
tions. (The Altria plan used a different recordkeeper,
Fidelity, and Fidelity offered a real-time trading service.)
Hewitt also informed Kraft that it was willing to work
with Kraft to develop a real-time trading solution if Kraft
wanted to adopt one in response to transactional drag
within the Kraft plan CSFs. The parties also cite various
emails and other correspondence among Kraft plan
fiduciaries and Hewitt regarding the costs and benefits
of various solutions to investment and transactional
drag. This correspondence continues into 2004 and seems
to come to an end in about December of that year.
Despite all this discussion of investment and trans-
actional drag, however, we can find nothing in the
record indicating that defendants ever made a decision
on these matters—i.e., that they actually determined
whether the costs of making changes to the CSFs out-
weighed the benefits, or vice versa. We know that the
status quo from 2004 persists to this day, but the record
No. 10-1469 19
does not tell us whether this persistence is the result of
a deliberate decision to maintain the status quo or
whether it was caused by the fiduciaries’ decision to
table the matter. Although the district court made
various statements indicating that it thought that Plan
fiduciaries had made a reasoned decision to maintain
the status quo,6 it did not cite a document or affidavit,
or any deposition testimony, explaining what that
decision was, and we have been unable to find anything.
Moreover, on appeal, defendants’ recitation of the facts
contains no citation to any such decision. Instead, they
offer the following in their statement of facts:
In 2003, Altria changed the CSFs in its 401(k) plan to a
non-unitized format using “Real Time Trading,” which
Fidelity offered to its recordkeeping clients, including
Altria. When this happened, the responsible person-
nel considered making a similar change in the [Kraft]
Plan. After extensive discussion regarding the costs
and benefits of alternatives with the [Kraft] Plan’s
recordkeeper, Hewitt (which did not have a system
similar to Real Time Trading), the Plan’s CSFs were
maintained as unitized.
6
See App. 57 (“Ultimately, defendants determined that the
advantages of maintaining the structure of the CSFs out-
weighed the benefits of changing to a real-time trading sys-
tem.”); App. 59 (“Here, the undisputed facts show that defen-
dants used a reasoned decision-making process to determine
the structure of the Plan’s company stock funds and to main-
tain an adequate amount of cash to meet the demands of
trading in the funds . . . .”).
20 No. 10-1469
(Appellee’s Br. at 11-12 (emphasis added).) The empha-
sized clause was obviously carefully worded to be con-
sistent with both a deliberate decision to maintain the
status quo as well as inertia. Thus, viewing the evidence
in the light most favorable to plaintiffs, we must con-
clude that no Plan fiduciary ever made a decision re-
garding the solutions to investment and transactional
drag that were proposed between 2002 and 2004.
In light of the above, we view plaintiffs as arguing that
defendants breached their fiduciary duties by failing
to reach a decision regarding the proposed solutions
to investment and transactional drag by the end of
2004. That is, we view plaintiffs as arguing that prudent
fiduciaries armed with the information that had been
presented to the Kraft fiduciaries between 2002 and 2004
would have at least decided between, on one hand, main-
taining the status quo and, on the other, making changes
to the CSFs in an effort to limit or eliminate investment
and transactional drag. Under ERISA, a fiduciary’s failure
to exercise his or her discretion—i.e., to balance the
relevant factors and make a reasoned decision as to the
preferred course of action—under circumstances in
which a prudent fiduciary would have done so is a
breach of the prudent man standard of care. DiFelice v.
U.S. Airways, Inc., 497 F.3d 410, 420-21 (4th Cir. 2007);
Armstrong v. LaSalle Bank Nat’l Ass’n, 446 F.3d 728, 733-
34 (7th Cir. 2006).
As noted, the district court’s grant of summary judg-
ment rests on its finding that the undisputed facts estab-
lished that defendants actually made a reasoned deci-
No. 10-1469 21
sion between the status quo and the various proposed
solutions. Since we conclude that this finding is not
supported by the record, we cannot affirm on the
grounds given by the district court. Moreover, the
district court’s characterization of the fiduciaries’ actions
has clouded the presentation of the issues on appeal.
Defendants devote most of their brief to arguing that
we must defer to the Plan fiduciaries’ decision; however,
as noted, they fail to direct us to the decision entitled to
deference. Although plaintiffs point out that defendants
never made a reasoned decision, they also contend that
even if they did there is a genuine issue of material fact as
to whether that decision could be described as prudent.
In this regard, plaintiffs argue that because Altria saw
fit to switch to real-time trading, a reasonable trier of
fact could conclude that it was imprudent for Kraft to
fail to follow suit.7
Given the state of the record, we think the best course
is to reverse the district court’s grant of summary judg-
ment on this claim and remand for further considera-
7
Although we do not conclusively resolve whether Kraft’s
failure to follow Altria’s lead could be deemed imprudent,
we note that plaintiffs have not established that Altria was
a prudent fiduciary. For all we know, Altria’s decision to
switch to real-time trading was imprudent. Plaintiffs might
say that Altria’s decision succeeded in eliminating investment
and transactional drag, but this would be an impermissible
attempt to prove imprudence by hindsight (or, as the case
may be, prudence by hindsight). See DeBruyne v. Equitable
Life Assurance Soc’y, 920 F.2d 457, 465 (7th Cir. 1990).
22 No. 10-1469
tion. However, before leaving this issue, we will provide
some additional analysis of plaintiffs’ claim in order
to guide the parties on remand. First, we repeat that
the record reveals a genuine issue of material fact as to
whether Plan fiduciaries made a decision with respect
to the proposed solutions to investment and trans-
actional drag. 8 Likewise, there is a genuine issue of mate-
rial fact as to whether the circumstances prevailing in
2004 would have caused a prudent fiduciary to make
a decision on these matters. If during further pro-
ceedings these issues are resolved in plaintiffs’ favor,
then plaintiffs will have established that defendants
breached the prudent man standard of care. In contrast,
if defendants establish that prudence did not require
them to make a decision, then plaintiffs’ claim for breach
8
The dissent characterizes the decision of the fiduciaries as
a choice between unitization and real-time trading. However,
the decision we are talking about is a choice between main-
taining the status quo and implementing changes to the CSFs
in order to reduce or eliminate investment and transactional
drag. Although one of the changes that plaintiffs suggested
was eliminating unitization, other solutions were also
proposed, such as imposing a trading limit to reduce the
transaction costs generated by frequent traders. Because the
fiduciaries could have addressed at least some of the problems
identified by plaintiffs without abandoning unitization, the
dissent’s observation that nearly all company stock funds
are unitized is beside the point.
No. 10-1469 23
of fiduciary duty will fail.9 If plaintiffs establish that
defendants should have made a decision, but defendants
are able to show (1) that they made one and (2) that
the decision involved “balancing competing interests
under conditions of uncertainty,” then the question
will be whether the fiduciaries abused their discretion.
Armstrong, 446 F.3d at 734.
Depending on how the above issues are resolved, the
district court will have to consider whether any remedy
is appropriate. If plaintiffs prove that defendants should
have made a decision with respect to investment and
transactional drag but did not, then plaintiffs would
likely be entitled to an injunction requiring the
fiduciaries to consider the proposed solutions to these
issues and come to a decision. See Brock v. Robbins, 830
F.2d 640, 647-48 (7th Cir. 1987) (discussing availability
of injunctive relief for breach of duty of prudence). Alter-
natively, the district court might determine that circum-
stances have changed since 2004, and that ordering
the fiduciaries to consider these issues today would be
pointless. In that case, the district court would award
no prospective relief.
9
In light of the dissent’s concerns, we want to emphasize this
sentence and repeat that we are not saying that the fiduciaries
will necessarily have breached their fiduciary duties if they
are found to have failed to make a decision on the issues
raised by plaintiffs. If, as the dissent suggests, the issues are
so trivial that a prudent fiduciary would have ignored them,
then the failure to make a decision will not result in liability.
24 No. 10-1469
Plaintiffs might also seek an order compelling the
fiduciaries to “make good to [the] plan” any losses
caused by their breach of fiduciary duty. 29 U.S.C.
§ 1109(a). If the district court determines that the fiducia-
ries rendered a decision in 2004 and plaintiffs prove that
the fiduciaries abused their discretion in making this
decision, then the court could require the fiduciaries to
make good any losses caused by this abuse. If, however,
the court determines that the fiduciaries breached their
fiduciary duties by failing to make a decision, then the
question becomes whether plaintiffs can show that the
failure to make a decision resulted in monetary loss. This
might be difficult to do, in that it is impossible to know
what would have happened had the fiduciaries made a
decision. Nonetheless, the evidence may show that had
the fiduciaries considered the appropriate factors they
would have come to a decision that would have resulted
in the CSFs performing better than they have over the
past several years. For example, plaintiffs might be able
to show that deciding to maintain the status quo would
have been imprudent, and that any prudent alternative
to the status quo would have improved the Plan’s perfor-
mance. We leave these matters for further exploration
on remand, if necessary.
In sum, because we find that the record reveals a
genuine issue of material fact as to whether defendants
breached the prudent man standard of care by failing to
make a reasoned decision under circumstances in which
a prudent fiduciary would have done so, we reverse
the district court’s grant of summary judgment on this
issue and remand for further consideration.
No. 10-1469 25
B. Recordkeeping Fees
Plaintiffs’ next claim is that the Plan fiduciaries acted
imprudently in connection with the fees paid to the
Plan’s recordkeeper, Hewitt, which are paid out of Plan
assets. Hewitt has been the Plan’s recordkeeper since
1995, when the Plan hired Hewitt after requesting bids
from various recordkeepers. Since then, the Plan has
extended Hewitt’s contract a number of times. During
the negotiations leading up to these extensions, the
Plan fiduciaries engaged various consultants for advice
as to the reasonableness of Hewitt’s fees. However, since
initially hiring Hewitt in 1995, the fiduciaries have not
solicited competitive bids from other recordkeepers.
During this time, the fees paid to Hewitt ranged between
$43 and $65 per participant per year.
As we understand their claim, plaintiffs are arguing
that prudent fiduciaries would have solicited competi-
tive bids for recordkeeping services on a periodic basis—
about once every three years—and that defendants’
failure to solicit periodic bids after initially hiring
Hewitt resulted in Hewitt receiving an excessive fee
once its initial contract term expired. In support of this
claim, plaintiffs offered the testimony of Lawrence R.
Johnson, who has expertise in the area of retirement-
plan recordkeeping services. Johnson reviewed the
process that defendants followed when they extended
Hewitt’s contract and opined that defendants acted
imprudently by extending the contract without first
soliciting bids from other recordkeepers. Johnson
further opined that a reasonable fee for the kind of
26 No. 10-1469
recordkeeping services the Plan needed would have
been between $20 and $27 per participant per year,
rather than the $43 to $65 the Plan paid to Hewitt.
In moving for summary judgment on this claim, de-
fendants argued that prudence did not require them
to solicit bids before extending Hewitt’s contract. Defen-
dants emphasized that they engaged several independent
consultants for advice as to the reasonableness of
Hewitt’s fee and argued that in doing so they satisfied
their duty to ensure that Hewitt’s fees were reasonable.
The district court, in granting summary judgment to
defendants, determined that Johnson’s opinions were “of
limited relevance” because Johnson’s experience involved
working with the retirement plans of mid-sized companies
rather than the plans of large companies such as Kraft.
(App. 64.) The court further determined that the Plan
fiduciaries were told by their consultants that Hewitt’s
fees were reasonable, and that the Plan prudently relied
on the advice of these consultants. Because we find that
Johnson’s opinions were relevant and admissible and
that the fiduciaries were not necessarily prudent in
relying on the advice of consultants in lieu of bids, we
reverse the grant of summary judgment on this claim.
Regarding Johnson’s opinions, if they are admissible
they create a genuine issue of material fact as to whether
defendants acted prudently. As noted, Johnson opines
that prudent fiduciaries would have solicited competitive
bids before extending Hewitt’s contract, and that defen-
dants’ failure to solicit bids caused them to overpay
Hewitt by at least $16 per participant per year. A reason-
No. 10-1469 27
able trier of fact could have credited Johnson’s opinions
and concluded that defendants’ failure to solicit bids
was imprudent. Moreover, defendants did not argue
that Johnson’s opinions were inadmissible under
Federal Rule of Evidence 702, and the district court did
not exclude his testimony on that basis. Rather, the
district court determined that Johnson’s opinions were
“of limited relevance” due to his inexperience with large
plans. (App. 64.) We do not understand this statement
to be a ruling that Johnson’s opinions were irrelevant
and thus inadmissible under Rule 402.1 0 Instead, the
district court decided that Johnson’s opinions were
10
In any event, ruling that Johnson’s opinions were irrelevant
would have been an abuse of discretion, since his opinions
went to the heart of plaintiffs’ claim. On appeal, defendants
argue that Johnson’s opinions are irrelevant because they
were based on what a mid-sized plan should have done. But
defendants mischaracterize Johnson’s opinions. He did not
express his opinions in terms of what mid-sized or large
plans should have done, but in terms of what the Kraft plan
fiduciaries should have done. If defendants believed that
Johnson was not qualified to render opinions as to what the
Kraft plan should have done because his experience involved
only mid-sized plans, then they should have argued that
his opinions were inadmissible under Rule 702. They did
not do so, and on appeal it is not obvious that Johnson was
unqualified to render his opinions. Indeed, defendants have
not pointed to any differences between the recordkeeping
needs of mid-sized and large plans that would make ex-
perience with mid-sized plans an insufficient qualification
for rendering an opinion about the recordkeeping needs of a
large plan.
28 No. 10-1469
entitled to less weight because of his inexperience with
large plans. But, of course, a district court may not weigh
the evidence at the summary judgment stage; it must
view the evidence in the light most favorable to the non-
movant. See, e.g., Payne v. Pauley, 337 F.3d 767, 770 (7th
Cir. 2003) (“[O]n summary judgment a court may not
make credibility determinations, weigh the evidence, or
decide which inferences to draw from the facts”). Thus,
the district court erred by failing to assume that the trier
of fact would have found Johnson’s opinions credible.1 1
The district court further erred by determining at the
summary judgment stage that defendants satisfied their
duty of prudence by relying on the advice of their con-
sultants. Although the fact that defendants engaged
11
The dissent is concerned that ERISA fiduciaries will be
subjected to distracting trials every time a plaintiff can find
one “expert” who will testify that the recordkeeper’s fee is too
high. However, if the expert’s opinion is a sham—as the dis-
sent’s use of scare quotes implies—then a defendant can argue
that it is inadmissible under Rule 702, an argument that defen-
dants in the present case did not make. Moreover, we are not
suggesting that fiduciaries must choose the least expensive
recordkeeper and ignore other considerations. If, as the
dissent suggests, the fiduciaries have good reasons for prefer-
ring a more expensive recordkeeper, then the court may
consider whether those reasons make the fee reasonable. In
the present case, however, the defendants have not given
reasons that would, as a matter of law, justify paying Hewitt
a fee that is roughly double the fee that plaintiffs’ expert says
is reasonable for the kinds of services the Plan needed.
No. 10-1469 29
consultants and relied on their advice with respect to
Hewitt’s fee is certainly evidence of prudence, it is not
sufficient to entitle defendants to judgment as a matter
of law. Keach v. U.S. Trust Co., 419 F.3d 626, 636-37 (7th
Cir. 2005) (stating that relying on advice from outside
consultant “is not a complete defense to a charge of
imprudence”); Howard v. Shay, 100 F.3d 1484, 1489 (9th
Cir. 1996) (same); Donovan v. Cunningham, 716 F.2d 1455,
1474 (5th Cir. 1983) (stating that “[a]n independent ap-
praisal is not a magic wand that fiduciaries may simply
waive over a transaction to ensure that their responsibili-
ties are fulfilled”); Donovan v. Bierwirth, 680 F.2d 263,
272 (2d Cir. 1982) (stating that soliciting outside advice
does not operate as a “complete whitewash” which,
without more, satisfies ERISA’s prudence requirement).
Moreover, even if reliance on the advice of consultants
were a complete defense, defendants’ consultants did not
unequivocally endorse the reasonableness of Hewitt’s
fee. In 2000, for example, one of the consultants, Buck,
stated that Hewitt’s fee “seemed” to be consistent with
the standards of the industry and the prices of similar
vendors. But Buck cautioned that “without an actual
fee quote comparison”—i.e, a bid from another service
provider—it “could not comment on the competitiveness
of [Hewitt’s] fee amount for the services provided.” (Pls.’
Stmt. of Add’l Facts ¶ 34.) Buck also opined that
Hewitt should have offered a tiered pricing structure
in which the per-participant cost went down as the
number of participants went up. In this regard, Buck
recommended that the cost per participant be $45 per
year once the number of participants reached 30,000,
30 No. 10-1469
and that the cost decline to $35 per participant per year
once the number of participants exceeded 40,000. The
contract that defendants entered into with Hewitt in
2000 did not contain such a tiered pricing structure or
anything similar.
Thus, after considering both the opinions of defendants’
consultants and the opinions of plaintiffs’ expert (along
with any other admissible evidence), a trier of fact could
reasonably conclude that defendants did not satisfy
their duty to ensure that Hewitt’s fees were reasonable.
We therefore reverse the grant of summary judgment
on this issue and remand for further proceedings.
C. State Street’s “Float” Income
Plaintiffs’ remaining claim involves the compensation
paid to State Street. As noted, State Street was the Plan’s
trustee and held the Plan’s assets. In addition to paying
a fee for State Street’s services, the Plan allowed State
Street to retain interest income from “float.” In general,
float consists of a set of funds on deposit at two
different financial institutions at the same time. See
Thomas P. Fitch, Dictionary of Banking Terms 198 (5th ed.
2006); David L. Scott, Wall Street Words 152 (3d ed. 2003);
http://en.wikipedia.org/wiki/Float_%28money_supply%29
(last viewed April 6, 2011). When a check is deposited
with a financial institution, the financial institution
credits the depositor’s account with the amount of the
check, allowing the depositor to earn interest on the
funds immediately. However, until the check clears, the
No. 10-1469 31
funds remain on the books of the financial institution
on which the check was written, and thus the person
who wrote the check also continues to earn interest on
the funds for a short time.
As applied to the present case, float refers to funds
that remained on deposit at State Street pending
clearance of a check written on Plan assets. When the
Plan issued a check, State Street would set aside funds
sufficient to cover the amount of the check in a separate
account. However, until the check cleared, those funds
could be used on a short-term basis to generate income.
Under State Street’s agreement with the Plan, State
Street was allowed to retain the income earned from
float. Absent this agreement, any float income would
have been property of the Plan.
The amount of float income earned over a period of time
varies depending on a number of factors, including the
number of checks written and interest rates. Plaintiffs
argue that defendants failed to determine how much
float income State Street was earning. Plaintiffs further
argue that unless defendants knew how much float
income State Street was earning, they could not satisfy
their fiduciary duty to ensure that State Street’s total
compensation (fees + float income) was reasonable.
The district court granted summary judgment to defen-
dants on this claim, and we affirm.
A key component of plaintiffs’ claim is their contention
that defendants did not know the amount of State
Street’s float income. However, in support of their sum-
mary judgment motion, defendants submitted a declara-
32 No. 10-1469
tion from a Plan fiduciary stating that defendants
received annual reports from State Street that disclosed
the dollar amount of State Street’s float income. (Dolsen
Decl. ¶ 14.) Plaintiffs did not produce any evidence
contradicting this statement in opposition to defendants’
motion for summary judgment, and they do not point to
any such evidence on appeal. Thus, as far as the record
reveals, it is undisputed that defendants received annual
reports regarding State Street’s float income. Moreover,
plaintiffs do not show that defendants failed to review
these reports, and they do not point to any other steps
that prudent fiduciaries would have taken to ensure that
State Street’s total compensation was not excessive.
Instead, plaintiffs emphasize that defendants have not
disclosed the actual dollar amount of the float income
retained by State Street. But we fail to see why that is a
problem. Plaintiffs do not direct us to an interrogatory,
deposition question, or other discovery request in which
they asked defendants to identify the amount of State
Street’s float income, and thus the absence of any
evidence in the record as to the amount of this income
does not give rise to an inference that defendants
did not know what it was. Accordingly, the district court
properly granted summary judgment on this claim.1 2
12
Plaintiffs argue that because one of the remedies they seek is
an accounting of the float income retained by State Street, the
district court should have ordered defendants to disclose the
amount of State Street’s float income even though plaintiffs
did not attempt to determine that amount during discovery. But
(continued...)
No. 10-1469 33
V. Conclusion
For the reasons stated, we affirm the district court’s
order denying leave to file an amended complaint along
with its decision to exclude evidence from Dr. O’Neal.
With respect to the court’s grant of summary judgment
to defendants, we A FFIRM IN PART, R EVERSE IN PART, and
remand for further proceedings consistent with this
opinion.
12
(...continued)
an accounting is an equitable remedy, Scheiber v. Dolby Labs.,
Inc., 293 F.3d 1014, 1022 (7th Cir. 2002), and therefore plain-
tiffs must at least demonstrate that equity requires defendants
to account for the float income retained by State Street. On
the present record, we have no reason to think that plaintiffs
could not have determined the amount of float income for
themselves by exploring the issue during discovery.
Thus, equity did not require an accounting. In any event, an
accounting of the type plaintiffs seek is a remedy for breach
of fiduciary duty. See Parke v. First Reliance Standard Life Ins.
Co., 368 F.3d 999, 1008-09 (8th Cir. 2004). As explained in the
text, plaintiffs failed to create a triable issue as to whether
defendants breached their fiduciary duties with respect to
State Street’s float income, and therefore plaintiffs were not
entitled to an accounting.
34 No. 10-1469
C UDAHY, Circuit Judge, concurring in part and
dissenting in part. This is an implausible class action
based on nitpicking with respect to perfectly legitimate
practices of the fiduciaries. I would therefore affirm the
excellent district court opinion throughout, including
the summary judgment matters the majority chooses
to reverse.
A particularly egregious issue involves the practice
of including minor amounts of cash in the Plan’s
company stock funds (“unitization”). This is, of course,
a form of hedging—now elevated to the ominous-
sounding level of “investment drag.” And this investment
drag is allegedly compounded by “transactional drag,”
which is another way of saying that trading costs are
shared (perfectly appropriately) pro rata among par-
ticipants instead of allocated to individual investors.
Apparently, the failure of the trustee-defendants
to make a “reasoned decision” on the record between
unitization and the alternative practice of “real-time
trading” is a basis for finding them in breach of their
fiduciary duty. But the majority points to no provision
of ERISA that would require a reasoned decision on the
record about such a universally accepted investment
practice as unitization.1
1
The cases the majority cites for the proposition that a demon-
strable exercise of discretion was required are entirely distin-
guishable and do not involve routine investment practices.
In DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 420 (4th Cir.
2007), a demonstrable exercise of discretion was required with
(continued...)
No. 10-1469 35
Hedging, involving the inclusion of small quantities of
cash in the trading unit, has the effect of preventing
the maximum realization of gain in bull markets or the
maximum realization of loss when the market declines.
This form of hedging is apparently present in the over-
whelming majority of managed fiduciary funds investing
in employer stock.2 It has been adopted perhaps for
the various administrative benefits asserted by the de-
1
(...continued)
respect to the retention of an investment company stock during
a period when the company’s viability was in question, and
in Armstrong v. LaSalle Bank Nat’l Ass’n, 446 F.3d 728, 733-34
(7th Cir. 2006), a demonstrable exercise of discretion was
required in valuing company stock where the company
recently purchased a large new subsidiary.
2
See Robert Rachal et al., Fiduciary Duties Regarding 401(k) and
ESOP Investments in Employer Stock, in ERISA Litigation, 783, 790
n. 17 (Jayne E. Zanglein & Susan J. Stabile, eds., 3d ed. 2008)
(“Because unitization lowers transaction costs and allows
participants to invest their money on the day of the fund
exchange, most employer stock funds for publicly traded
companies are unitized.”). A 2010 version of the same
chapter, evidently not yet available in print, indicates that the
prevalence of unitized stock funds may be as high as 90%.
See Robert Rachal et al., ERISA Fiduciary Duties Regarding 401(k)
& ESOP Investments in Employer Stock 9 n. 23 (2010), available at
http://swba.org/members_only/conference_presentations/fall_
2010/ERISA_Litigation_Article.pdf.
36 No. 10-1469
fendants 3 —or for the investment rationale that it
reduces risk (as well as reward). Whether or not to
hedge your bets is an investment decision, and hardly
a matter outside of the ordinary discretion of the fidu-
ciaries. It is obviously a matter every investor must rou-
tinely consider and decide. But I see no ERISA re-
quirement that the pros and cons be spread on the rec-
ord and the balance assessed. This is part of the
ABC’s of investing—not some sort of esoterica. What the
trustees did here is well within their discretion, both
from an administrative and an investment standpoint,
and should not become the subject of a federal lawsuit.
As to the other matter in which the majority has
reversed summary judgment, an allegedly excessive fee
for record-keeping service, the issue is much closer
than the unitization question but also less fundamental
and significant. In fact, the cases the majority cites for
the proposition that obtaining outside assessments
does not adequately demonstrate prudence are entirely
distinguishable, and involve ethically sensitive matters
unlike the size of fees paid to an outside record-keeping
service.4 It is hard to determine exactly what the majority’s
3
As the majority explained, among the most prominent
administrative advantages of unitization is that by main-
taining cash in the company stock plan, the fiduciaries can
satisfy withdrawals immediately instead of selling company
stock on the open market and incurring transaction fees.
4
For instance, in Keach v. U.S. Trust Co., 419 F.3d 626 (7th Cir.
2005), we stated that securing an independent assessment
was not a complete defense to a charge of imprudency in the
(continued...)
No. 10-1469 37
holding means for ERISA fiduciaries. The advice of con-
sultants is not good enough to justify a fee, but competi-
tive bidding may not always be required. So what is
adequate to support a fee without fear of litigation? If
plaintiffs can find one “expert” who will testify that the
fee is too high, must there be a trial? Here, the trustees
have a relationship with Hewitt going back fifteen years.
They have a good sense of the dimensions of the job and
Hewitt’s performance in carrying it out. Must they sub-
stitute any lower bidder that happens along? These are
difficult questions and they leave room for the discre-
tion which fiduciaries must be granted to perform their
task. Holding otherwise will only serve to steer their
attention toward avoiding litigation instead of managing
employee wealth.
I would be content with the opinion of the district court
on these matters. And I therefore respectfully dissent.
4
(...continued)
context of considering the propriety of a self-dealing purchase
of securities that had no recognized market value. Id. at 636-37.
Howard v. Shay, 100 F.3d 1484 (9th Cir. 1996), and Donovan
v. Bierwirth, 680 F.2d 263 (2d Cir. 1982), likewise concerned
fiduciaries seeking independent advice prior to engaging in
transactions involving a conflict of interest. Donovan v.
Cunningham, 716 F.2d 1455 (5th Cir. 1983), involved a
fiduciary’s reliance on an old valuation of closely held
stock, again in a self-dealing transaction.
4-11-11