Petition for Writ of Certiorari — Gannett Company, Inc., et al., Petitioners v. Jeffrey Quatrone

Supreme Court briefOct 30, 2020

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No. 20IN THE

Supreme Court of the United States

___________

GANNETT CO., INC., THE GANNETT BENEFIT PLANS

COMMITTEE, and JOHN DOES 1-10,

Petitioners,

JEFFREY QUATRONE, on behalf of GANNETT CO., INC.

401(K) SAVINGS PLAN and all others similarly situated,

Respondent.

___________

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Fourth Circuit

___________

PETITION FOR A WRIT OF CERTIORARI

___________

CHRISTOPHER A. EISWERTH

SIDLEY AUSTIN LLP

1501 K St., N.W.

Washington, D.C. 20005

(202) 736-8000

LAURIN H. MILLS

SAMEK|WERTHER|MILLS LLC

2000 Duke St., Ste. 300

Alexandria, VA 22314

(703) 547-4693

TACY F. FLINT*

ERIC S. MATTSON

SIDLEY AUSTIN LLP

One S. Dearborn St.

Chicago, IL 60603

(312) 853-7000

tflint@sidley.com

Counsel for Petitioners Gannett Co., Inc. and

The Gannett Benefit Plans Committee

October 30, 2020

* Counsel of Record

QUESTION PRESENTED

The Employee Retirement Income Security Act of

1974 (“ERISA”), 29 U.S.C. § 1001 et seq., imposes on

fiduciaries of ERISA retirement plans a duty to act

with prudence and to “diversify[] the investments of

the plan so as to minimize the risk of large losses.”

Id. § 1104(a)(1)(B)-(C). The Second and Fifth Circuits

have held that in a defined contribution plan—in

which participants choose how to invest their assets

from a menu of investment options—these duties require fiduciaries to provide a diversified menu, but do

not require that each separate option on the menu be

diversified. Thus, in the Second and Fifth Circuits, a

fiduciary does not breach the duty of prudence or diversification merely by offering an undiversified single-stock fund as one item on the menu as long as the

overall menu is adequately diversified.

The Fourth Circuit here disagreed. Holding that

“each available fund on a menu must be prudently

diversified,” App. 19a, the court concluded that Plaintiff, Respondent Jeffrey Quatrone, stated a claim for

breach of the duties of prudence and diversification

solely by alleging that Defendants, Petitioners Gannett Co., Inc. and The Gannett Benefit Plans Committee, allowed participants to invest in an undiversified single-stock fund. The question presented is:

Whether a plaintiff adequately pleads breach of the

duties of prudence and diversification solely by alleging that fiduciaries permitted participants in a defined contribution plan to choose, from an adequately

diversified menu of investment options, to invest in

an undiversified single-stock fund.

(i)

PARTIES TO THE PROCEEDINGS

The parties to the proceedings are DefendantsPetitioners Gannett Co., Inc. and The Gannett Benefit Plans Committee, and Plaintiff-Respondent Jeffrey Quatrone. Additionally, Mr. Quatrone sought

leave to file an amended complaint in which Christina Stegemann would be substituted for Mr. Quatrone

as Plaintiff, but the motion to amend the complaint

was denied. App. 51a.

RULE 29.6 STATEMENT

Gannett Co., Inc. is a publicly traded company.

Black Rock, Inc. and The Vanguard Group, Inc. each

hold 10 percent or more of Gannett’s stock. The Gannett Benefit Plans Committee is not a corporation.

RELATED PROCEEDINGS

United States District Court (E.D. Va.):

Quatrone v. Gannett Co., Inc., No. 18-cv-325 (Sept.

26, 2018), motion for leave to amend denied,

Feb. 13, 2019.

United States Court of Appeals (4th Cir.):

Quatrone v. Gannett Co., Inc., No. 19-1212 (Aug.

11, 2020), petition for reh’g denied, Sept. 22,

2020.

TABLE OF CONTENTS

Page

QUESTION PRESENTED ...................................

PARTIES TO THE PROCEEDINGS ...................

RULE 29.6 STATEMENT ....................................

RELATED PROCEEDINGS.................................

TABLE OF AUTHORITIES .................................

PETITION FOR A WRIT OF CERTIORARI .......

OPINIONS BELOW .............................................

JURISDICTION....................................................

RELEVANT STATUTORY PROVISIONS ..........

INTRODUCTION .................................................

STATEMENT OF THE CASE..............................

A. Legal Background .....................................

B. Factual Background ..................................

C. Prior Proceedings ......................................

REASONS FOR GRANTING THE PETITION ....

I. THE COURTS OF APPEALS ARE SPLIT AS

TO WHETHER ERISA REQUIRES DIVERSIFICATION OF EACH INDIVIDUAL INVESTMENT OPTION OR DIVERSIFICATION OF THE OVERALL PLAN MENU ......

II. THE FOURTH CIRCUIT’S DECISION IS INCONSISTENT WITH DUDENHOEFFER .....

III. THE QUESTION PRESENTED IS EXCEPTIONALLY IMPORTANT TO THE EFFICIENT OPERATION OF ERISA DEFINED

CONTRIBUTION PLANS..............................

CONCLUSION .....................................................

(iii)

TABLE OF CONTENTS—continued

Page

APPENDICES

APPENDIX A: Opinion, Stegemann v. Gannett

Co., 970 F.3d 465 (4th Cir. 2020) .................

APPENDIX B: Order, Quatrone ex rel. Gannett

Co. 401(k) Sav. Plan v. Gannett Co., No.

1:18-cv-325 (AJT/JFA), 2019 WL 9441671

(E.D. Va. Feb. 13, 2019), vacated sub nom.

Stegemann v. Gannett Co., 970 F.3d 465

(4th Cir. 2020) ............................................... 46a

APPENDIX C: Order, Quatrone ex rel. Gannett

Co. 401(k) Sav. Plan v. Gannett Co., No.

1:18-cv-325 (AJT/JFA), 2018 WL 7983284

(E.D. Va. Sept. 26, 2018), vacated sub nom.

Stegemann v. Gannett Co., 970 F.3d 465

(4th Cir. 2020) ............................................... 52a

APPENDIX D: Corrected Order Denying Petition for Rehearing En Banc, Stegemann v.

Gannett Co., No. 19-1212 (4th Cir. Sept. 22,

2020), ECF No. 48 ......................................... 68a

APPENDIX E: Statutory Provisions Involved.... 70a

29 U.S.C. 1002(34)–(35).............. 70a

29 U.S.C. 1104(a), (c)(1)–(2) ....... 71a

APPENDIX F: Complaint, Quatrone v. Gannett

Co., No. 1:18-cv-00325-AJT-JFA (E.D. Va.

Mar. 22, 2018), ECF No. 1 ............................ 74a

APPENDIX G: Amended Complaint, Quatrone

v. Gannett Co., No. 1:18-cv-00325-AJT-JFA

(E.D. Va. Feb. 19, 2019), ECF No. 75-1 ....... 108a

CASES

TABLE OF AUTHORITIES

Page

Amgen Inc. v. Harris, 136 S. Ct. 758 (2016) ...

Cent. States, Se. & Sw. Areas Pension Fund v.

Cent. Transp., Inc., 472 U.S. 559 (1985) ....

Conkright v. Frommert, 559 U.S. 506

(2010) ..........................................................

Fifth Third Bancorp v. Dudenhoeffer, 573

U.S. 409 (2014) ....................................... passim

Harmon v. FMC Corp., No. 16-6073, 2018

WL 1366621 (E.D. Pa. Mar. 16, 2018) .......

Mertens v. Hewitt Assocs., 508 U.S. 248

(1993) ..........................................................

Muri v. Nat’l Indem. Co., No. 8:17-CV-178,

2019 WL 2513695 (D. Neb. June 18,

2019), appeal dismissed, No. 19-2408 (8th

Cir. July 18, 2019) ......................................

Obduskey v. McCarthy & Holthus LLP, 139

S. Ct. 1029 (2019) .......................................

Reidt v. Frontier Commc’s. Corp., No. 3:18cv-01538 (D. Conn. filed Sept. 11, 2018) ...

Ret. Plans Comm. of IBM v. Jander, 140 S.

Ct. 592 (2020) ............................................. 6, 7

Schweitzer v. Inv. Comm. of Phillips 66 Sav.

Plan, 960 F.3d 190 (5th Cir. 2020) ........ passim

Shaw v. Delta Air Lines, Inc., 463 U.S. 85

(1983) ..........................................................

Thole v. U. S. Bank N.A., 140 S. Ct. 1615

(2020) ..........................................................

Tibble v. Edison Int’l, 135 S. Ct. 1823

(2015) ........................................................ 5, 7, 8

Usenko v. MEMC LLC, 926 F.3d 468 (8th

Cir.), cert. denied, 140 S. Ct. 607 (2019) ... 25, 27

TABLE OF AUTHORITIES—continued

Page

Yates v. Nichols, 286 F. Supp. 3d 854 (N.D.

Ohio 2017), appeal dismissed, No. 183075, 2018 WL 1888998 (6th Cir. Apr. 17,

2018) ................................................... 19, 24, 27

Young v. Gen. Motors Inv. Mgmt. Corp., 325

F. App’x 31 (2d Cir. 2009) .................. 16, 18, 21

STATUTES

Employee Retirement Income Security Act,

29 U.S.C. § 1001 et seq. ..............................

29 U.S.C. § 1002(21)(A) .................................

§ 1002(34) ......................................

§ 1002(35) ...................................... 7, 22

§ 1025(a)(2)(B)(ii)(II) ....................

§ 1104(a)(1)(B) ..............................

§ 1104(a)(1)(B)-(C) ........................

§ 1104(a)(1)(C) .......................... 2, 7, 21

§ 1104(a)(2) ...................................

§ 1104(c)(1)(A)(ii) ..........................

§ 1109(a) ........................................

RULE

Sup. Ct. R. 10.................................................

OTHER AUTHORITY

Vanguard Sector & Specialty Funds,

Vanguard, https://investor.vanguard.com/

mutual-funds/sector-specialty (last visited

October 28, 2020) .......................................

PETITION FOR A WRIT OF CERTIORARI

Gannett Co., Inc. and The Gannett Benefit Plans

Committee (collectively, “Defendants”) respectfully

petition for a writ of certiorari to review the decision

of the United States Court of Appeals for the Fourth

Circuit in this case.

OPINIONS BELOW

The Fourth Circuit’s opinion is reported at 970 F.3d

465 and is reproduced at App. 1a-45a. The Fourth

Circuit’s order denying rehearing en banc is reproduced at App. 68a-69a. The district court’s order

granting the motion to dismiss is reproduced at App.

52a-67a. The district court’s order denying leave to

amend is reproduced at App. 46a-51a.

JURISDICTION

The Fourth Circuit issued its decision on August

11, 2020, and denied the petition for rehearing and

rehearing en banc on September 22, 2020. This Court

has jurisdiction under 28 U.S.C. § 1254.

RELEVANT STATUTORY PROVISIONS

29 U.S.C. § 1104(a)(1)(B) states:

a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and … 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.

Section 1104(a)(1)(C) requires a fiduciary to “diversify[] the investments of the plan so as to minimize

the risk of large losses, unless under the circumstances it is clearly prudent not to do so.”

Other relevant provisions of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C.

§ 1001 et seq., are reproduced in the Appendix, see

App. 70a-73a.

INTRODUCTION

In Fifth Third Bancorp v. Dudenhoeffer, this Court

acknowledged “the threat of costly duty-of-prudence

lawsuits” facing ERISA plan fiduciaries following a

drop in the stock price of an employer or other company in which plan assets were invested. 573 U.S.

409, 423 (2014). To separate “the plausible sheep

from the meritless goats” and limit “meritless, economically burdensome lawsuits,” the Court laid out a

demanding pleading standard for duty-of-prudence

claims, requiring plaintiffs to plead that “special circumstances” beyond publicly available information

made investment in a particular stock imprudent. Id.

at 424-26.

This case presents the next generation of duty-ofprudence claims. Here, Plaintiff did not contend that

any investment option in the retirement plan was

imprudent due to its price, but instead claimed that

by allowing plan participants to invest in a singlestock fund—that is, by including a single-stock fund

on a diversified menu of investment options—

Defendants breached the diversification requirement

of the duty of prudence, as well as ERISA’s standalone diversification requirement. In allowing Plaintiff’s claim to proceed, the Fourth Circuit candidly

created a circuit split regarding the scope of ERISA’s

diversification requirement and, in permitting Plain-

tiff’s claim for breach of the duty of prudence to proceed absent allegations of “special circumstances,”

ruled in conflict with this Court’s decision in Dudenhoeffer. The petition should be granted to resolve

these questions and ensure predictability and uniformity in the law governing ERISA retirement

plans.

Defendant Gannett Co., Inc. offers its employees a

defined contribution 401(k) savings plan, which permits employees to allocate their investments among a

menu of investment options. After Gannett’s spinoff

from TEGNA, Inc., one of these options was a fund of

TEGNA stock in which participants were previously

invested. While participants were free to divest from

this fund at any point and were not permitted to invest more money in it after the spinoff, the Committee did not begin winding down the fund until two

years after the spinoff. Plaintiff alleges that Defendants breached their duties of prudence and diversification by not closing the fund earlier because a nonemployer single-stock fund is not appropriately diversified to limit investment risk.

Over the dissent of Judge Niemeyer, the Fourth

Circuit reversed the district court’s dismissal of these

claims under Federal Rule of Civil Procedure 12(b)(6).

The panel majority held that the diversification requirement of the duty of prudence requires not only

diversification of investment options in the plan, but

also of each individual option. In doing so, the Fourth

Circuit expressly disagreed with the Fifth Circuit’s

decision in Schweitzer v. Investment Committee of the

Phillips 66 Savings Plan, 960 F.3d 190, 195 (5th Cir.

2020), which held that the duty requires only diversification of the overall menu of investment options in a

defined contribution plan. Indeed, as the panel majority acknowledged, this case and Schweitzer address

“near-identical facts and claims”—yet reach opposite

conclusions. App. 14a. The petition should be granted

to resolve this split.

Additionally, even though Plaintiff alleged that the

single-stock TEGNA fund was an imprudent investment based on publicly available information, the

Fourth Circuit concluded that Dudenhoeffer did not

apply. That holding conflicts with this Court’s precedent. In Dudenhoeffer, this Court held that, absent

“special circumstances,” a fiduciary may “rely on the

security’s market price as an unbiased assessment of

the security’s value in light of all public information.”

573 U.S. at 426 (quoting Halliburton Co. v. Erica P.

John Fund, Inc., 573 U.S. 258, 273 (2014)). Plaintiff

did not plead special circumstances here; as a result,

the Fourth Circuit’s decision to allow Plaintiff’s claim

for breach of the duty of prudence to proceed conflicts

with the decision of this Court.

Both of these issues are exceptionally important to

the efficient operation of defined contribution plans

under ERISA. If the Fourth Circuit’s decision is left

standing, plan fiduciaries will be forced to choose between closing their non-employer single-stock funds

or risking significant litigation costs. In fact, if fiduciaries face a duty of diversification that applies at the

fund level, they may be compelled to close singlesector funds and brokerage windows, further limiting

the options available to plan participants. This looming uncertainty benefits neither plan participants nor

fiduciaries.

STATEMENT OF THE CASE

A. Legal Background

“ERISA is a comprehensive statute designed to

promote the interests of employees and their benefi-

ciaries in employee benefit plans.” Shaw v. Delta Air

Lines, Inc., 463 U.S. 85, 90 (1983). These benefit

plans include retirement plans.

One way ERISA promotes employees’ interests is

by imposing fiduciary duties on “anyone … who exercises discretionary control or authority over the plan’s

management, administration, or assets.” Mertens v.

Hewitt Assocs., 508 U.S. 248, 251 (1993); see 29

U.S.C. § 1002(21)(A). These duties are derived from

“the common law of trusts,” Cent. States, Se. & Sw.

Areas Pension Fund v. Cent. Transp., Inc., 472 U.S.

559, 570 (1985), and two, in particular, are relevant

here: the duty of prudence and the duty of diversification, see 29 U.S.C. § 1104(a)(1)(B)-(C).

Prudence. The ERISA duty of prudence requires a

fiduciary to “discharge his responsibility ‘with the

care, skill, prudence, and diligence’ that a prudent

person ‘acting in a like capacity and familiar with

such matters’ would use.” Tibble v. Edison Int’l, 135

S. Ct. 1823, 1828 (2015) (quoting 29 U.S.C.

§ 1104(a)(1)(B)). In recent years, after the Private Securities Litigation Reform Act limited avenues for securities fraud lawsuits following stock price drops,

there has been a significant increase in stock-drop

lawsuits claiming that ERISA retirement plan fiduciaries invested plan assets imprudently. These cases

have often arisen in connection with employee stock

ownership plans (“ESOPs”), which have substantial

holdings in the stock of a single company—the employer. In the wake of this movement, this Court has

repeatedly been called to weigh in on what is required to state a claim for breach of the duty of prudence in a stock-drop case.

In Dudenhoeffer, this Court rejected the notion that

ESOP fiduciaries were entitled to any “presumption

of prudence” because the statute “makes no refer-

ence” to any such presumption. 573 U.S. at 418-19.

The Court instead clarified that “the same standard

of prudence applies to all ERISA fiduciaries,” id., but

that Rule 12(b)(6) allows courts to perform the “important task” of “divid[ing] the plausible sheep from

the meritless goats,” id. at 425. In particular, the

Court explained that a plaintiff may not rely on generalized allegations that a fiduciary should have predicted a stock price drop: “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 426 (cleaned

up).

Since Dudenhoeffer, confusion has persisted as to

the pleading requirements for a duty-of-prudence

claim in the stock-drop context. In 2016, the Court

reversed a decision of the Ninth Circuit allowing a

duty-of-prudence claim to proceed because that court

had insufficiently scrutinized “whether the complaint

in its current form ‘has plausibly alleged’ that a prudent fiduciary in the same position ‘could not have

concluded’ that the alternative action ‘would do more

harm than good.’” Amgen Inc. v. Harris, 136 S. Ct.

758, 759-60 (2016) (per curiam) (quoting Dudenhoeffer, 574 U.S. at 429-30). And last Term, the Court

granted review in Retirement Plans Committee of

IBM v. Jander to address “what it takes to plausibly

allege an alternative action ‘that a prudent fiduciary

in the same circumstances would not have viewed as

more likely to harm the fund than to help it,’” but the

case was remanded without resolving the question to

allow the Second Circuit to consider new arguments.

140 S. Ct. 592, 594-95 (2020) (per curiam) (quoting

Dudenhoeffer, 573 U.S. at 428). In separate concur-

ring opinions, Justices Kagan and Gorsuch indicated

lingering disagreement as to how Dudenhoeffer would

apply. See id. at 597 (Gorsuch, J., concurring) (“I do

not read Dudenhoeffer so broadly” as Justice Kagan).

Diversification. The duty of diversification requires a fiduciary to “diversify[] the investments of

the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not

to do so.” 29 U.S.C. § 1104(a)(1)(C). The duty of diversification is both an independent requirement and an

element of the duty of prudence (because ensuring

diversification

prudent).

See 29

U.S.C.

§ 1104(a)(2).1

How the duty of diversification applies depends on

whether the plan is a “defined benefit” plan or a “defined contribution” plan. In a defined benefit plan,

participants do not make their own investment decisions, but instead “receive a fixed payment each

month, and the payments do not fluctuate with the

value of the plan.” Thole v. U. S. Bank N.A., 140 S.

Ct. 1615, 1618 (2020); see also 29 U.S.C. § 1002(35).

In this context, the duty of diversification governs the

plan fiduciaries’ decisions as to how to invest the entire spectrum of plan assets.

In a defined contribution plan, by contrast, “participants’ retirement benefits are limited to the value of

their own individual investment accounts.” Tibble,

135 S. Ct. at 1826. Participants direct the investment

of assets associated with their individual accounts,

and the value of those accounts “is determined by the

1 Neither the independent duty of diversification nor the di-

versification element of the duty of prudence applies to ESOPs,

which by design invest heavily in employer stock. See 29 U.S.C.

§ 1104(a)(2).

market performance” of participants’ selected investments. Id. In this context, fiduciaries “only select

investment options; the participants then choose how

to allocate their assets to the available options. These

fiduciaries therefore need only provide investment

options that enable participants to create diversified

portfolios.” Schweitzer, 960 F.3d at 196. ERISA further directs plan administrators to provide in each

benefit statement to participants “an explanation …

of the importance … of a well-balanced and diversified

investment

portfolio.”

U.S.C.

§ 1025(a)(2)(B)(ii)(II). But the duty of diversification

does not require fiduciaries of a defined contribution

plan to “ensure that participants actually diversify

their portfolios.” Schweitzer, 960 F.3d at 196.

ERISA provides plan participants a cause of action

for breach of both the duties of prudence and diversification. 29 U.S.C. § 1109(a). “To state a claim under

this section, a plaintiff must plausibly allege that a

fiduciary breached one of these duties, causing a loss

to the employee benefit plan.” Schweitzer, 960 F.3d at

195. A fiduciary held liable for breach of the duty of

prudence or diversification “shall be personally liable

to make good to such plan any losses to the plan resulting from each such breach,” and “shall be subject

to such other equitable or remedial relief as the court

may deem appropriate.” 29 U.S.C. § 1109(a).

B. Factual Background

1. At its start early in the last century, Gannett Co.,

Inc. was a newspaper chain. It later acquired television stations and digital media, making it one of the

largest mass media companies in the country.

In June 2015, the company “spun off” its publishing

businesses into a separate publicly traded company

also named Gannett Co., Inc. The company that re-

tained the television and digital businesses changed

its name to TEGNA, Inc. Today, Gannett continues to

operate newspapers in cities and small towns across

the country, papers such as USA Today, The Arizona

Republic, and The Des Moines Register.

2. Before the spinoff, Gannett offered a 401(k) savings plan to its employees. This defined contribution

plan provided a tax-advantaged way for employees to

save money for retirement. App. 4a. The plan contained a menu of investment options. Employees and

the company contributed to the plan, and then the

employees determined how to invest their money

from a menu of options. App. 4a-6a. One available option was a fund consisting solely of the company’s

own stock, and the company’s contributions to employees’ accounts were in the form of employer stock.

App. 6a.

When the company split in two, its 401(k) plan was

split as well. In their new plan, Gannett employees

continued to hold the assets they had acquired before

the spinoff. These assets included any investments in

company stock, which due to the spinoff now comprised two separate funds: one holding stock in Gannett and the other holding stock in TEGNA.2 Employees were permitted to keep their TEGNA stock in

light of “the historical relationship” between TEGNA

and Gannett. App. 7a. However, the Gannett Plan

“froze” this single-stock fund, meaning that neither

the company nor employees could invest additional

assets in it. Id. Employees could choose to keep their

existing holdings or move those investments into other funds within the plan. Id.

2 Employees

remaining with TEGNA were transferred to a

new TEGNA 401(k) plan. App. 6a.

At the time of the spinoff, midway through 2015,

“the Plan held $269 million invested in TEGNA

common stock, representing more than 21.7% of the

Plan’s total assets.” App. 118a ¶ 32. By the end of

that year, the Plan held $178 million in TEGNA stock

(15.8% of the Plan’s assets), and at the end of 2016,

the Plan’s holdings of TEGNA stock were down to

$115 million (10.7% of the Plan’s assets). App. 82a

¶ 32; App. 86a-87a ¶¶ 43, 45. This decline was the

result of, one, employees’ decisions to shift their investments into other funds and, two, drops in TEGNA’s stock price.

The Gannett Benefit Plans Committee monitored

the Plan throughout this time period. See App. 51a. A

few months after the spinoff, the Committee hired an

investment consultant. The Committee and the consultant discussed the TEGNA single-stock fund, but

given that employees could transfer their investments and the Committee’s belief that those invested

in TEGNA “knew the company well,” App. 127 ¶ 57,

the Committee declined to force the sale of TEGNA

stock—though it still provided the mandatory advisements warning of the risks of overconcentration

of investments, see App. 95a ¶ 76. In the Spring of

2017, after hiring another consultant, the Committee

revisited the single-stock fund and decided to sunset

the fund in one year. App. 9a. If employees did not

shift their investments from the TEGNA single-stock

fund by July 2018, the fund would be closed and the

investments moved elsewhere. The Committee provided notice of this change to employees on July 31,

2017. Id.

3. Plaintiff Jeffrey Quatrone participated in the

Gannett Plan after the spinoff and ultimately sold his

remaining TEGNA stock sometime before July 1,

2016. On March 22, 2018, he filed his complaint, al-

leging that Gannett and the Committee breached

their fiduciary duties of prudence and diversification

under ERISA by not forcing the divestment of the

TEGNA single-stock fund more quickly.3 Specifically,

Plaintiff alleged that Defendants allowed too much

investment in TEGNA stock, a supposedly volatile

stock on which investment banks were “bearish,” and

then failed to decrease these holdings quickly enough

after the spinoff, making the plan too heavily invested in one company and one industry. See App. 75a76a ¶¶ 2, 4, 6; App. 99a ¶ 95. Mr. Quatrone purports

to bring these claims on behalf of the Plan and similarly situated individuals who remained invested in

the TEGNA single-stock fund after the spinoff.

C. Prior Proceedings

1. On April 16, 2018, Gannett and the Committee

moved to dismiss the complaint for failure to state a

claim. The district court granted that motion on September 26, 2018.

Applying Dudenhoeffer, the district court rejected

Plaintiff’s claim that Defendants breached their duty

of prudence by allowing participants to invest in TEGNA when “publicly available information (e.g.[,]

TEGNA’s poor stock performance) should have informed the fiduciaries that investment into a single

stock was an unnecessary risk.” App. 58a. The district court reiterated this Court’s holding that “allegations that a fiduciary should have recognized from

publicly available information alone that the market

was over- or undervaluing [a publicly traded] stock

are implausible as a general rule, at least in the ab3 The Committee has not contested Plaintiff’s claim that it is a

fiduciary under ERISA. However, Gannett disputes that it qualifies as a fiduciary. See App. 4a n.1, 58a n.2.

sence of special circumstances.” App. 60a (quoting

Dudenhoeffer, 573 U.S. at 426). The court found that

Mr. Quatrone had not alleged “any ‘special circumstances’ sufficient to support the contention that the

market price was not an unbiased assessment of the

security’s value.” App. 64a.

The district court also rejected Plaintiff’s duty-todiversify claim. The court recognized that “Plaintiff’s

claim is not that the Plan failed to offer investment

options sufficient to allow participants to diversify

their investments but rather that the Defendants

were required to force the participants to diversify

their investments.” App. 65a-66a. The court rejected

this theory, holding that § 1104(a)(1)(C)’s duty to diversify requires only that a fiduciary provide a diverse menu of options and does not impose an obligation to ensure each participant has diversified their

investments. App. 66a.

Shortly thereafter, Plaintiff moved to amend the

complaint to (1) swap Ms. Christina Stegemann for

Mr. Quatrone as the class representative and

(2) “conform the allegations to the facts learned

through discovery.” App. 48a. In these new allegations, Plaintiff changed his theory of when Defendants should have divested from the TEGNA singlestock fund: instead of claiming that Defendants

should have closed the fund shortly after the spinoff,

the amended complaint contends the fund should

have been closed roughly a year after the spinoff,

compare App. 76a-77a ¶ 6 with App. 125a-126a ¶ 52.

The district court denied this motion because the allegations did not cure the original complaint’s deficiencies. App. 51a.

2. In a divided opinion, the Fourth Circuit reversed

dismissal of the complaint. Relying on a prior Fourth

Circuit decision, the panel majority first explained

that “the duty of prudence’s included duty of diversification” requires that “each available fund on a

menu [of investment options] must be prudently diversified.” App. 19a-20a (emphasis added) (citing

DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 423-24

(4th Cir. 2007)). The court concluded that Plaintiff

stated a viable claim for breach of this duty by alleging that Defendants had permitted Plaintiff and other participants to retain their investments in the

TEGNA single-stock fund after the spinoff, which (as

a single-stock fund) was not diversified. App. 22a23a.4

The panel reached this conclusion even though participants in a defined contribution plan, like the

Gannett Plan, have complete freedom to move their

investments into different funds. App. 26a-27a. It

was undisputed that the Plan offered a diverse menu

of options, and that Plaintiff could have avoided excessive concentration in the TEGNA Stock Fund—

and in fact could have avoided investing in that fund

at all. The panel openly acknowledged that its ruling

created a square split with the Fifth Circuit, which

had ruled in favor of the fiduciaries in “a case with

near-identical facts and claims.” App. 14a; see App.

26a-28a. The Fifth Circuit had reasoned that “where

a fund is frozen, participants may divest if they

choose to, and the plan distributes statutorily mandated warnings that portfolios are better if diversified, a plaintiff cannot state a claim that alleges a fi4 The

majority also held that Plaintiff stated a claim for

breach of the duty of diversification by alleging that the Gannett

Plan was excessively concentrated in media sector funds, as a

result of participants’ retained investments in the TEGNA Stock

Fund in combination with investments in the Gannett ESOP

fund. App. 22a-23a.

duciary should have forced divestment.” App. 26a-27a

(citing Schweitzer, 960 F.3d at 199). But, contrary to

the Fifth Circuit, the panel majority concluded that

each fund must be diversified if fiduciaries are to satisfy the duties of prudence and diversification. App.

27a. To the extent that participants’ ability to choose

from a diverse menu of options enters the analysis,

the majority said, it comes not when a court reviews

the sufficiency of the complaint, but instead when it

addresses an affirmative defense, presumably at

summary judgment or at trial. App. 29a-30a (citing

29 U.S.C. § 1104(c)(1)(A)(ii)).

Further, the panel concluded that Dudenhoeffer

does not require Plaintiff to plead “special circumstances” to state a claim that the TEGNA single-stock

fund was imprudent based on its “composition” as opposed to its “performance.” App. 32a (emphasis omitted). The panel accepted the “efficient market hypothesis,” App. 31a n.13, but nevertheless permitted

Plaintiff’s claim, based on publicly available information, that TEGNA stock was volatile—and, thus,

an imprudent investment—to survive.

3. Judge Niemeyer dissented. First, he explained

that the duty of diversification “is imposed with respect to ‘the plan,’ not with respect to each investment

offered by the plan.” App. 40a (quoting 29 U.S.C.

§ 1104(a)(1)(C)). Like the Fifth Circuit, he noted that

in defined contribution plans, as opposed to defined

benefit plans, participants choose whether to invest

in a particular fund, which means “the cause of any

overconcentration in TEGNA stock was individual

Plan participants’ decisions to retain their assets in

the TEGNA Stock Fund”—not a failure by Defendants to diversify the plan. App. 41a.

Second, while Judge Niemeyer recognized that a

plaintiff could potentially state a claim if the TEGNA

single-stock fund was an imprudent option, he determined that Plaintiff’s effort to state such a claim

here was foreclosed by Dudenhoeffer. App. 41a-42a.

Because Plaintiff failed to plead “special circumstances,” “his allegation that the TEGNA stock’s volatility made the inclusion of the TEGNA Stock Fund

an imprudent investment vehicle simply fails to state

a claim in light of Dudenhoeffer.” App. 44a.

Finally, Judge Niemeyer warned of the consequences of the panel’s holding. Permitting a claim to

proceed on these allegations “necessarily leads to the

conclusion that no non-employer, single-stock investment option offered under an ERISA plan could

ever satisfy the duty of prudence.” App. 43a. Thus, if

the Fourth Circuit’s decision stands, fiduciaries of a

defined contribution plan may not permit participants to invest in any non-employer, single-stock

fund without risking liability under ERISA.

4. Defendants petitioned for rehearing and rehearing en banc. On September 22, 2020, the Fourth Circuit denied the petition. Six judges voted to deny the

petition, three judges voted to grant the petition, and

six judges recused. App. 69a.

On September 28, 2020, Defendants moved to stay

the mandate pending this petition for certiorari, arguing that a stay was appropriate because the panel,

by its own admission, created a split with the Fifth

Circuit, and because the decision conflicts with

Dudenhoeffer. The court granted the motion on October 16, 2020.

REASONS FOR GRANTING THE PETITION

The Court’s review is appropriate here for at least

three reasons. First, the Fourth Circuit’s decision has

created a square conflict with the Second and Fifth

Circuits on whether fiduciaries face a duty to diversify each investment option in a defined contribution

plan, or whether the duty of diversification is limited

to the overall menu of investment options in the plan.

See Sup. Ct. R. 10(a). Second, the Fourth Circuit contradicted Dudenhoeffer when it held that, without

pleading special circumstances, Plaintiff stated a valid claim by alleging that public information about

TEGNA’s volatility rendered the single-stock fund

imprudent. See Sup. Ct. R. 10(c). Third, this case

presents issues of exceptional importance to the operation of defined contribution plans under ERISA.

See id. The petition should be granted.

I. THE COURTS OF APPEALS ARE SPLIT AS

TO WHETHER ERISA REQUIRES DIVERSIFICATION OF EACH INDIVIDUAL INVESTMENT OPTION OR DIVERSIFICATION OF THE OVERALL PLAN MENU.

This case presents an acknowledged conflict between the federal courts of appeals concerning the

duties of prudence and diversification under

§ 1104(a)(1). The Second and Fifth Circuits have held

that, under ERISA, a plan fiduciary has a duty to ensure adequate diversification of the menu of investment options in a defined contribution plan—but not

to ensure that each individual option is diversified.

See Schweitzer, 960 F.3d at 195; Young v. Gen.

Motors Inv. Mgmt. Corp., 325 F. App’x 31, 33 (2d Cir.

2009). However, in “a case with near-identical facts

and claims” as Schweitzer, the Fourth Circuit held

that the duties of prudence and diversification required both, rejecting the Fifth Circuit’s holding outright and attempting to distinguish Young. App. 14a,

21a-22a, 29a. The decision below acknowledged that

it created this conflict, and this case warrants the

Court’s review.

1. Outside the Fourth Circuit, the federal courts

uniformly hold that a plaintiff does not state a claim

for breach of fiduciary duty solely by alleging that a

defined contribution plan includes a single-stock investment option on a diverse menu of options.

In Schweitzer, the Fifth Circuit rejected a materially identical claim to the one allowed by the Fourth

Circuit here. That case presented the same basic

facts as this case: following Phillips 66’s separation

from ConocoPhillips, the Phillips 66 defined contribution plan offered participants the choice of keeping

their holdings in ConocoPhillips single-stock funds or

transferring their investments into other funds. 960

F.3d at 193. Just like Defendants here, the plan

managers did not permit new investments in the

ConocoPhillips funds, but plaintiffs alleged that the

plan fiduciaries violated their duty of diversification

by not immediately forcing the sale of ConocoPhillips

stock after the spinoff. Id.

The Fifth Circuit rejected this claim. First, agreeing

with the Second Circuit’s decision in Young, Schweitzer held that § 1104(a)(1)(C)’s duty of diversification,

on its face, applies only to the menu of investment

options in a defined contribution plan—not to each

individual fund on its own. Id. at 195 (“This duty

looks to a pension plan as a whole, not to each investment option.”); see id. at 195 & n.25 (citing

Young). Second, the court held that the duty of diversification contained in the duty of prudence does not

“prohibit[] … individual account plans’ offering single-stock funds.” Id. at 197. In fact, as the court noted, such a “per se rule against single-stock funds

would … conflict with the fact-specific focus of the duty of prudence, as well as with ERISA’s legislative

history and implementing regulations, which clarify

that single-stock investments can be a prudent in-

vestment option.” Id. at 198 (footnote omitted). Further, the court explained that, even accepting that

single-stock funds can be risky, “it does not follow

that the Fiduciaries were obligated to force Plan participants to divest from the Funds” because defined

contribution plans provide “employees the responsibility and freedom to choose how to invest their

funds” and “ERISA does not require fiduciaries … to

act as personal investment advisers to plan participants”—particularly when the plan provides notice

that diversification lessens risk. Id. at 198-99. Because the Phillips 66 fund was diversified at the plan

level—and because the plaintiff did not allege special

circumstances that would support a “prudence” challenge to the decision to permit participants to retain

their investments in the ConocoPhillips single-stock

funds—the claim failed. Id. at 199-200.

The Second Circuit in Young likewise rejected a

breach of fiduciary duty claim based on allegations

that fiduciaries offered “undiversified single-equity

funds that [defendants] ‘knew or should have known

[were] ... too risky and volatile.’” 325 F. App’x at 32

(omission and second alteration in original). The panel (including then-Judge Sotomayor) explained that

ERISA “requires a fiduciary to ‘diversif[y] the investments of the plan” and that plaintiffs’ “narrow

focus on a few individual funds, rather than the plan

as [a] whole, is insufficient to state a claim for lack of

diversification” under 29 U.S.C. § 1104(a)(1)(C). 325

F. App’x at 33 (first alteration in original) (emphasis

added). Bare allegations that individual funds were

undiversified—like the claims allowed by the Fourth

Circuit here—were insufficient. See id.

The district courts that have addressed this issue

have similarly concluded that the duty of diversification focuses on the menu of options and does not pro-

hibit offering non-employer single-stock funds in defined contribution plans. See, e.g., Harmon v. FMC

Corp., No. 16-6073, 2018 WL 1366621, at *5 (E.D. Pa.

Mar. 16, 2018) (‘“The language of § 1104(a)(1)(C) contemplates a failure to diversify claim only when a

plan is undiversified as a whole, not when ‘individual

funds within the plan are undiversified’”) (brackets

omitted) (quoting Young, 325 F. App’x at 33); Yates v.

Nichols, 286 F. Supp. 3d 854, 864 (N.D. Ohio 2017)

(“[E]valuating the plan as a whole makes good sense

when the plan at issue is, like the Marathon Petroleum plan, a defined-contribution plan where each participant has his or her own account”), appeal dismissed, No. 18-3075, 2018 WL 1888998 (6th Cir. Apr.

17, 2018). According to each of these courts, therefore, a plaintiff does not avoid dismissal under Rule

12(b)(6) merely by alleging that fiduciaries of a defined contribution plan included a single-stock, nonemployer fund on a diverse menu of investment options.

2. The decision below unsettled this uniform approach. As explained above, pp. 13-14, supra, the

Fourth Circuit recognized that this case and the Fifth

Circuit’s decision in Schweitzer concern “nearidentical facts and claims,” App. 14a, but the panel

expressly “disagree[d] with that court,” App. 29a. The

panel here concluded that providing an adequately

diversified menu of options for participants to choose

from is insufficient to satisfy the diversification component of the duty of prudence; instead, “each available fund on a menu must be prudently diversified.”

App. 19a. Here, Plaintiff’s claim that the TEGNA

Stock Fund was “inherently unduly risky because it

put all the eggs in one basket,” App. 9a, was sufficient to state a claim for breach of the diversification

requirement

the

duty

prudence—

notwithstanding Plaintiff’s concession that Defendants provided a diversified menu of options to choose

from.

Having expanded the duty to diversify beyond the

bounds previously recognized by the federal courts,

the panel further held that plaintiffs could state a

claim based on a fiduciary’s failure to close a frozen

non-employer single-stock fund in a defined contribution plan. App. 26a-27a. The panel expressly rejected

the Fifth Circuit’s reasoning that the duty of prudence does not require such an action where participants in defined contribution plans could choose, at

any point, to move their investments from the singlestock fund, and were appropriately informed of the

risks of concentrated investments. App. 28a-30a. Rather, the Fourth Circuit concluded that participant

choice was relevant only to the affirmative defense

recognized in § 1104(c), not the scope of the duty itself. App. 29a-30a.

The sharp break between the Fourth and Fifth Circuits is not softened by the panel’s suggestion that

Defendants might avoid liability through an affirmative defense under § 1104(c). See App. 29a-30a; 29

U.S.C. § 1104(c)(1)(A)(ii) (providing that a fiduciary is

not liable for “any loss, or by reason of any breach,

which results from such participant’s or beneficiary’s

exercise of control”). There is a profound difference

between imposing pleading requirements on plaintiffs, as Schweitzer did, and imposing the burden of

proving an affirmative defense on Defendants, as the

panel here did. Dudenhoeffer acknowledged “the

threat of costly duty-of-prudence lawsuits” and emphasized that “the motion to dismiss for failure to

state a claim” represents an “important mechanism

for weeding out meritless claims.” 573 U.S. at 423,

425.

The Fourth Circuit’s approach—which does not

“weed[] out meritless claims,” but instead forces Defendants to remain embroiled in litigation until an

affirmative defense can be proved and adjudicated—

provides no comparable relief from “meritless, economically burdensome lawsuits.” Id. at 424. And

more fundamentally, fiduciaries pursuing an affirmative defense under § 1104(c) must show significantly

more than that plan participants had an adequately

diversified menu of options from which to select: the

defense is available only if fiduciaries satisfy over

twenty-five “intricate requirements of 29 C.F.R.

§ 2550.404c-1.” App. 30a. In short, the divide between

the decision below and Schweitzer is no mere pleading technicality, but a fundamental disagreement as

to the breadth of fiduciary duties imposed by ERISA.

3. The Fourth Circuit’s departure from the uniform

rule was wrong for two main reasons. First, requiring

diversification of individual funds is contrary to

ERISA’s text. Section 1104(a)(1)(C), by its own terms,

requires fiduciaries to “diversify[] the investments of

the plan.” 29 U.S.C. § 1104(a)(1)(C) (emphasis added).

As Judge Niemeyer explained, “[t]his duty is imposed

with respect to ‘the plan,’ not with respect to each investment offered by the plan.” App. 40a; see Schweitzer, 960 F.3d at 195; Young, 325 F. App’x at 33.

Rather than reconcile its ruling with the statute’s

plain language, the panel majority suggested that

there is a material difference between “the

§ 1104(a)(1)(C) duty of diversification and the

§ 1104(a)(1)(B) duty of prudence to the extent it requires diversification.” App. 21a-22a (emphasis omitted). Although the panel acknowledged the holding of

the Second Circuit in Young that the duty of diversification under § 1104(a)(1)(C) must be analyzed at

the plan level, it purported to “distinguish that case

as not addressing § 1104(a)(1)(B)’s requirement of

prudence.” Id. But neither the panel nor Plaintiff has

articulated any coherent reason why this prudencebased duty to diversify applies to individual investment options when the statute’s explicit diversification duty does not. Indeed, such a requirement would

render § 1104(a)(1)(C)—and its express reference to

diversification of “investments of the plan”—

superfluous. See Obduskey v. McCarthy & Holthus

LLP, 139 S. Ct. 1029, 1037 (2019) (“[W]e ‘generally

presume[e] that statutes do not contain surplusage.’”)

(second alteration in original) (quoting Arlington

Cent. Sch. Dist. Bd. of Educ. v. Murphy, 548 U.S. 291,

299 n.1 (2006)).

Second, the panel’s decision erodes the freedom of

participants in defined contribution plans to choose

how best to invest their savings—including in undiversified, single-stock funds. This result contravenes

the aims of ERISA and drastically shrinks the distinction between defined contribution plans, where

participants can customize their investment portfolio,

and defined benefit plans, where the plan manager

controls all aspects of investment. Compare 29 U.S.C.

§ 1002(34), with id. § 1002(35).

4. Regardless of the merits, this acknowledged split

in the courts of appeals is stark. Schweitzer and this

case present the same fact pattern. Indeed, plaintiffs

in both cases are represented by the same counsel.

Yet—fully aware of the split—the panel majority allowed Plaintiff’s suit to proceed, even after the Fifth

Circuit had “weeded out” an identical claim.

There is little likelihood that the Fourth Circuit

will reverse course without this Court’s intervention.

The panel majority indicated that its decision was

compelled by DiFelice, where the Fourth Circuit earlier “observed that [single-stock funds] ‘would seem

generally imprudent for ERISA purposes.’” App. 16a

(quoting DiFelice, 497 F.3d at 424). The decision here

thus represents firmly established law in that circuit.

Moreover, the en banc court declined to review the

panel’s ruling, notwithstanding Judge Niemeyer’s

dissent and the panel majority’s acknowledgment of a

circuit split. This Court’s intervention is necessary to

ensure a uniform national rule.

II. THE FOURTH CIRCUIT’S DECISION IS

INCONSISTENT WITH DUDENHOEFFER.

In Dudenhoeffer, this Court explained how pleading

standards apply in cases alleging breach of the duty

of prudence. 573 U.S. at 425-26. The decision below

disregards those standards.

1. When this Court addressed the pleading standards for duty-of-prudence claims in Dudenhoeffer, it

recognized 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 426. Put another way,

this Court held that the only way to plead a claim for

breach of the duty of prudence based on public information is by alleging “special circumstance[s] rendering reliance on the market price imprudent.” Id. at

427. The Court further explained that a “special circumstance” is one that “affect[s] the reliability of the

market price as an unbiased assessment of the security’s value in light of all public information.” Id.

(quoting Halliburton Co., 573 U.S. at 273).

The plaintiff in Dudenhoeffer premised his challenge to a single-stock fund on publicly available information that the company engaged in risky lending

practices, that the defendants “were aware of the

risks of such investments,” and that “such risks made

[the company’s] stock an imprudent investment.” Id.

The Court determined that—absent allegations of

“special circumstances”—relying on the market price

was not imprudent. Id.

2. Plaintiff’s claims here are similar in that they allege, based on publicly available information, that

Defendants should have known that investment in

the single-stock TEGNA fund was imprudent because

the company’s stock was “45.5% more volatile than

the stock market.” App. 92a ¶ 62. And like the

Dudenhoeffer plaintiff, Plaintiff here failed to allege

special circumstances that “would make reliance on

the market’s valuation imprudent.” Yates, 286 F.

Supp. 3d at 859-60 (quoting Dudenhoeffer, 573 U.S.

at 427).

The Fourth Circuit nevertheless concluded that

Dudenhoeffer was inapplicable to Plaintiff’s claims for

breach of the duty of prudence. The panel distinguished between a claim based on “reading tea leaves

to predict the performance of a stock,” which it recognized Dudenhoeffer foreclosed, and a claim “based on

the fund’s composition.” App. 32a. The court acknowledged that “a fund’s composition might be informed

by publicly available information about the stocks

that it contains and therefore that a plaintiff’s allegations might reference such publicly available information,” but concluded that “those references do not

shift an imprudent non-diversification claim into the

ambit of Dudenhoeffer.” App. 32a-33a.

3. This ruling is inconsistent with Dudenhoeffer’s

reasoning. Dudenhoeffer emphasized the need to

“weed[] out” meritless claims at the motion to dismiss

stage when plaintiffs allege only that publicly available information showed that a stock was too risky and

there are no special circumstances that would pre-

vent the market from adequately pricing this risk.

573 U.S. at 425-27. Here, Plaintiff has not alleged

any special circumstances that satisfy Dudenhoeffer’s

standard. As Judge Niemeyer stated in dissent, “because [Plaintiff] has pleaded no special circumstances, his allegation that the TEGNA stock’s volatility

made the inclusion of the TEGNA Stock Fund an imprudent investment simply fails to state a claim in

light of Dudenhoeffer.” App. 44a. Indeed, the Eighth

Circuit affirmed dismissal of a duty-of-prudence

claim on facts similar to those presented here, where

plaintiffs alleged that fiduciaries of a defined contribution plan acted imprudently by permitting participants to retain existing investments in the stock of a

former affiliate after a spin-off. Usenko v. MEMC

LLC, 926 F.3d 468, 471-72 (8th Cir.), cert. denied, 140

S. Ct. 607 (2019). The Eighth Circuit held that allegations about the former affiliate’s declining stock price

and liquidity problems were insufficient to establish

that defendants “could not rely on the market’s valuation” of that stock, and thus failed to state a claim

under Dudenhoeffer. Id. at 473-74. The Fourth Circuit should have held the same here.

Moreover, the panel majority’s effort to distinguish

between claims based on a stock’s performance and

its composition disintegrates under its own weight.

Either the panel concluded that a non-employer single-stock fund, regardless of its characteristics, is inherently imprudent for defined contribution plans, or

it concluded that the TEGNA single-stock fund, based

on its characteristics, was imprudent because it was

too risky or too volatile. If it is the former, the ruling

departed from the uniform position on the duty of diversification even further than discussed above, see

pp. 16-21, supra, running afoul of ERISA. If it is the

latter, then there is little distinction between Plain-

tiff’s claim here and the one at issue in Dudenhoeffer.

Fundamentally, both assert that an investment was

imprudent due to the stock’s publicly known risks,

which an efficient market would capture in the stock

price. Dudenhoeffer requires Plaintiff to plead special

circumstances that would suggest that “both fiduciaries and plan participants could [not] ‘rely on the security’s market price as an unbiased assessment of the

security’s value in light of all public information.’”

App. 44a (Niemeyer, J., dissenting) (quoting Dudenhoeffer, 573 U.S. at 426). Plaintiff has not done so,

and the Fourth Circuit’s decision to let this claim

nevertheless proceed contradicts the reasoning of this

Court’s unanimous decision in Dudenhoeffer.

III. THE QUESTION PRESENTED IS EXCEPTIONALLY IMPORTANT TO THE EFFICIENT OPERATION OF ERISA DEFINED

CONTRIBUTION PLANS.

Certiorari is also warranted because the question

presented is exceptionally important.

1. If left unreviewed, the Fourth Circuit’s expansion

of the duty of diversification will have wide-ranging

impacts on the administration and management of

defined contribution plans.

At a minimum, this decision calls into question

whether or in what circumstances a defined contribution plan may offer non-employer single-stock investment options. As Judge Niemeyer observed, the

panel never explained “how plan fiduciaries could ever prudently offer a single-stock, non-employer fund.”

App. 43a. Prudent plan fiduciaries may accordingly

close any single-stock funds to avoid significant litigation risk. Indeed, this risk has already been realized for defined contribution plans across the country

that have been sued as a result of allowing partici-

pants to retain investments in legacy or affiliated

company stock funds, as the Gannett Plan did. See,

e.g., Schweitzer, 960 F.3d 190; Yates, 286 F. Supp. 3d

854; Usenko, 926 F.3d 468; Reidt v. Frontier Commc’s.

Corp., No. 3:18-cv-01538 (D. Conn. filed Sept. 11,

2018). More such claims are sure to follow the Fourth

Circuit’s decision.

But the impact of the Fourth Circuit’s opinion is not

limited to employer spin-off cases like this one. Imprudent funds under the Fourth Circuit’s rationale

would include not only those comprised of legacy or

affiliated company stock in which employees are already invested, but also funds containing the stock of

one landmark American company or another, such as

Coca-Cola, Apple, or Facebook.

A fund-level duty of diversification equally calls into question whether plan fiduciaries can prudently

offer other forms of non-diversified funds. This could

include funds with particular investment strategies.

See, e.g., Muri v. Nat’l Indem. Co., No. 8:17-CV-178,

2019 WL 2513695, at *1 (D. Neb. June 18, 2019)

(claim alleging that fiduciaries breached the duty of

prudence by including on the menu of a defined contribution plan “a non-diversified, long-term growth,

mutual fund” that “invests in ‘common stocks it believes are undervalued’”), appeal dismissed, No. 192408 (8th Cir. July 18, 2019). Or sector funds—those

made up of stocks from companies in the same industry—which pose risks, as all investments do, but also

offer opportunities for significant returns. See, e.g.,

Vanguard Sector & Specialty Funds, Vanguard,

https://investor.vanguard.com/mutual-funds/sectorspecialty (last visited October 28, 2020). The same is

true for brokerage windows, which are a mainstay for

many 401(k) plans and allow plan participants to invest in select individual stocks of their own choosing.

The Fourth Circuit’s decision calls all of these types

of funds into question. To avoid the risk of litigation,

plan fiduciaries may simply close such funds, leaving

participants with fewer good choices.

Congress enacted ERISA “to create a system that is

[not] so complex that administrative costs, or litigation expenses, unduly discourage employers from offering [ERISA] plans in the first place.” Conkright v.

Frommert, 559 U.S. 506, 516-17 (2010) (alterations in

original) (quoting Varity Corp. v. Howe, 516 U.S. 489,

497 (1996)). In furtherance of that goal, ERISA seeks

to “assur[e] a predictable set of liabilities, under uniform standards of primary conduct.” Id. at 517 (quoting Rush Prudential HMO, Inc. v. Moran, 536 U.S.

355, 379 (2002)). The Fourth Circuit’s decision upsets

these goals. The Court should grant review to clarify

fiduciaries’ obligations and ERISA’s requirements.

2. This case presents an ideal vehicle to address

these recurring issues. As mentioned above, this case

and Schweitzer present the same fact pattern and

reach opposite conclusions as to whether the duty of

diversification applies at the fund level. The parties

fully developed the arguments below, and the Fourth

Circuit directly addressed the issue and Schweitzer’s

contrary reasoning. There is no obstacle that would

prevent the Court from addressing the questions presented.

CONCLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be granted.

Respectfully submitted,

CHRISTOPHER A. EISWERTH

SIDLEY AUSTIN LLP

1501 K St., N.W.

Washington, D.C. 20005

(202) 736-8000

LAURIN H. MILLS

SAMEK|WERTHER|MILLS LLC

2000 Duke St., Ste. 300

Alexandria, VA 22314

(703) 547-4693

TACY F. FLINT*

ERIC S. MATTSON

SIDLEY AUSTIN LLP

One S. Dearborn St.

Chicago, IL 60603

(312) 853-7000

tflint@sidley.com

Counsel for Petitioners Gannett Co., Inc. and

The Gannett Benefit Plans Committee

October 30, 2020

* Counsel of Record

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.