# Appendix — Foltz v. U. S. News & World Report, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_1282%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1989 - **Citation:** 490 U.S. 1108 ## Text No. Supreme Court, U.S, FILE: IN THE OCTOBER TERM, 1988 CHARLES S. FOLTZ, et al., V. NEWS & WORLD REPORT, INC., et al., U.S. Petitioners, Respondents. APPENDIX TO PETITION FOR WRIT OF CERTIORARI Alan Raywid Counsel Of Record Margaret E. Haering John D. Seiver Susan Paradise Baxter COLE, RAYWID & BRAVERMAN 1919 Pennsylvania Avenue, N.W. Second Floor Washington, D.C. 20006 (202) 659-9750 Attorneys for Foltz Petitioners May 1, 1989 George A. Bangs Joseph M. Butler BANGS, MecCULLEN, BUTLER, FOYE & SIMMONS P.O. Box 2670 Rapid City, South Dakota 57709 (605) 340-1040 Jerome K. Walsh, Jr. LANE & MITTENDORF 99 Park Avenue New York, New York 10016 (212) 972-3000 Atiorneys for Richardson and Kirby Petitioners PRESS OF BYRON 8. ADAMS, WASHINGTON, D.C. (202) 347-8203 TABLE OF CONTENTS APPENDIX A Opinion Of The Court Of Appeals 1. Foltz, et al. v. U.S. News & World Re- port, Inc. et al., 865 F.2d 364 (D.C. Cir. WE decd sti aand dees oer adeatentd Ace Diente cite APPENDIX B Opinions And Orders Of The District Court A. Memorandum Opinion And Final Order of Judgment 1. Foltz, et al. v. U.S. News & World Re- port, Inc., et al., 663 F. Supp. 1494 FRc SENET becinnniencoanseceetaereaaaieeancaies 2. Foltz, et al. v. U.S. News & World Re- port, Inc., et al., Final Order of Judg- Wee, PSE ZO; TOE cccisricaceseisspesecss 3. Foltz, et al. v. U.S. News & World Re- port, Inc., et al., Amended Final Order of Judgment, September 4, 1987 ........ B. Interlocutory Orders And Opinions 1. Foltz, et al. v. U.S. News & World Re- port, Inc., et al., 627 F. Supp. 11438 (D. D.C. 1986) (granting in part and de- nying in part Motions for Summary PID pcasocinrcacissdcnceri ieee 2. Richardson, et al. v. U.S. News & World Report, Inc., et al., Order of March 4, 1986 (dismissing certain claims) .......... 3. Richardson, et al. v. U.S. News & World Report, Inc., et al., 639 F. Supp. 595 (D.D.C. 1986) (granting in part and de- nying in part Motions for Summary PIMINIIIIEE, cos caccxcc pants ccouisccsnsvaunedeainniaciers Page 2la llla cod 115a 117a 190a 4, ii Foltz, et al. v. U.S. News & World Re- port, Inc., et al., Order of January 12, 1987 (Dismissing Claims Against Cer- tain Defendant Directors in Foltz and RsGRGGUIGR) kicks eee APPENDIX C Orders Of The Court Of Appeals On Rehearing iy 9 Foltz, et al. v. U.S. News & World Re- port, Inc., et al., February 14, 1989 (De- nying Petition for Rehearing) .............. Foltz, et al. v. U.S. News & World Re- port, Inc., et al., Februrary 14, 1989 (Denying Suggestion for Rehearing En BODO) nc netisccsraccaaceasanscuneeeeneuareeaea APPENDIX D Statutory And Regulatory Provisions Involved £. Employee Retirement Income Security Act Of 1974 29 USL. 29 U.S.C. 29 U.S.C. 29 U.S.C. 29 U.S.C. U.S.C. U.S.C. U.S.C. U.S.C. 29 U.S.C. 29 U.S.C. § 1108 Vcc 29 U.S.C. § TURD viscera cor — =) — — COOH REET HEHEHE EHH EE Je) Tee Pee eee eee eee eee eee eee Je) bo bh bo bo Je) Je) CO? tO? (OP LP Cr CP? LD CL LE —_— — =, co Treasury Regulations 26 C.F.R. § 1.410) ncaa. 26 C.F.R. § 2020818 Gansta 224a 226a 229a 23la 232a 233a 236a 237a 238a 239a 240a 248a 250a 250a 25la 252a il 3. PBGC Regulations 29 C.F.R. § 2620 inicieh aucena penuh bsucodeuekies 253a 4. Revenue Rulings Rev. Rul. 59-60, 1959-1 C.B. 287 ......... 254a Rev. Rul. 70-125, 1970-1 C.B. 87 ......... 258a Rev. Rul. 80-155, 1980-1 C.B. 84 260a la APPENDIX A United States Court of Appeals For The District of Columbia Circuit Nos. 87-7151 to 87-7153. Charles S. FOLTZ, et al., Appellants, v. U.S. NEWS & WORLD REPORT, INC., et al. Charles S. FOLTZ, et al.., John KIRBY, Appellant, Vv U.S. NEWS & WORLD REPORT, INC., et al. David B. RICHARDSON, et al., Appellants, Vv U.S. NEWS & WORLD REPORT, INC., et al. Argued Oct. 3, 1988. Decided Jan. 13, 1989. Appeals from the United States District Court for the District of Columbia (Civil Actions No. 84-00447 and 85-02195) Before EDWARDS, BUCKLEY and WILLIAMS, Circuit Judges. Opinion for the Court filed by Circuit Judge WILLIAMS. 2a STEPHEN F. WILLIAMS, Circuit Judge: Appellants are former employees of U.S. News & World Report, Inc. All retired between 1974 and 1982. At their retirements, U.S. News exercised its option to purchase the shares in the company that each had received as part of a stock bonus program. In addition, the U.S. News Profit-Sharing Plan issued retirement benefits to each of them, computed on the basis of their proportional interests in U.S. News stock held by the Plan (virtually its sole asset). The stock was not publicly traded, and in valuing the relevant stock interests for both purposes, the defendants treated them as minority interests, rather than including a “‘control’’ premium. The gap between minority and majority valuation proved great because U.S. News, through a subsidiary (Madana ~ Realty), owned a 3.8-acre parcel of real estate in a rapidly developing office district in Washington, D.C., known as the West End. The company used more than half of this land for employee parking, III Joint Appendix (‘‘J.A.”) 1044, and carried it on its books at a fraction of its market value. Foltz v. U.S. News & World Report, Inc., 663 F.Supp. 1494, 1503 (D.D.C.1987). U.S. News annually engaged American Appraisal to value the company’s stock for purposes of exercising its option to buy the holdings of retiring employees. American Appraisal almost entirely discounted the potential value of the real estate, at least until 1981, because its talks with the company’s management convinced it that development plans remained remote and speculative. 663 F.Supp. at 1502-03. The Plan in turn used American Appraisal’s share val- uation in calculating the severance benefit to be paid to employees who retired, died, or separated from U.S. News in each year. The sale of all of U.S. News’s stock in 1984 revealed the significance of these valuation decisions, exposing an 3a immense gulf between the per share realizations of the plaintiff retirees and the beneficiaries of the company’s sale. The total sale price was $176 million, or $2,842 per share. Employees who were in active service at the date of the sale, and who held U.S. News stock interests either directly or through the Plan, benefited accordingly. So did company directors, through what the litigants call “‘phan- tom stock” holdings'—in essence, bonuses in the form of promises by the company to pay the recipient at retire- ment the per share value of the company’s stock at that date, multiplied by the number of “‘phantom”’ shares issued to the director.2 By contrast, valuations for the plaintiff retirees ranged from $65 per share in 1973 to $470 in 1981. In the district court the plaintiff retirees claimed that _the defendants’ valuation decisions (along with related statements or omissions) breached fiduciary duties imposed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001, et seg. (1982) (““ERISA’’), and violated ' Officers as such may also have received phantom shares. The record is unclear. Though phantom shares were evidently conceived as a device for rewarding and encouraging persons who could not hold stock, the record is confusing as to who fell into this category. Compare III J.A. 953 (directors may not buy stock); Appellee’s Br. at 5 n. 4 (only di- rectors got phantom shares); and 663 F.Supp. at 1508 (neither directors nor officers may buy, giving no citation for proposition), with U.S. News Certificate of Incorporation, Article Fifth, ¢ 1 (employees may buy stock), and id. at Article Fifth (a) (employee defined to include directors and officers). * The phantom share program had a ceiling of 2400 shares per di- rector. In 1981, part of the period in which share prices increased rapidly, the directors accelerated the award rate in a manner which had the effect of ensuring that every director, including the new Pres- ident and Treasurer, who had two and one years of service respectively, reached the 2400-share cap before the sale. This put each director in line to receive about $7 million at the sale price of $2,842 per share. In fact, however, the directors ultimately redeemed their phantom shares at a “price considerably less than” that paid for ordinary stock. See 663 F.Supp. at 1508. 4a the securities laws.’ They brought claims against the Plan, the company, Madana Realty, and American Appraisal and also against several former directors of U.S. News (as directors and as Plan fiduciaries). See 663 F.Supp. at 1498 n. 3 (listing. individual defendants). The trial court ruled for defendants on each count of the complaints. We affirm. Our analysis proceeds through these steps: 1. U.S. News’s purchase of stock from retiring employ- ees were clearly purchases of minority interests and, under Article Fifth (e) of its Certificate of Incorporation, could not have been valued otherwise. 2. For the Plan’s computation of retiring employees’ interests in the Plan’s U.S. News stock, the governing Plan document directed the Plan to use “‘the fair market value established’ under Article Fifth (e). That valuation technique, further, accorded with one of the key purposes of the Plan—to perpetuate employee ownership of the com- pany. Thus minority valuation complied with the explicit directive of the Plan document and also tended to fulfill its general purposes. 3. As ERISA instructs fiduciaries to carry out the aims of the Plan that they administer, it did not prohibit the fiduciaries’ action. Nothing in ERISA contradicts the di- rective of the Plan document or the congruence of minority valuation with its purposes.‘ I. U.S. NEWS’S EXERCISES OF ITS PURCHASE OPTION A 1962 reorganization of U.S. News created two classes of shares, Common and Class A. All shares of both classes * The securities_claims are based on alleged nondisclosure by the defendants of the basis on which the valuation was made. We find no error in the trial court’s rejection of this claim on the facts. See below at p. 20. ‘Our holding on these issues makes it unnecessary for us to reach the statute of limitations defenses. 5a had equa: voting rights. The only difference was that Class A shares had a non-cumulative dividend preference of $2.00 per share per year and could be held only by the U.S. News Profit-Sharing Plan. III J.A. 936. Class A shares were designed to convert automatically to Common if they were acquired by anyone other than the Plan. U.S. News Certificate of Incorporation, Article Fourth (d\Xii). As part of the 1962 reorganization, those employees who owned shares in the predecessor corporation were issued a total of 108,000 shares in the new company. About two- thirds of the shares in the predecessor company had be- longed to the company’s founder, David Lawrence, and to his family; the company purchased these shares for cash and for notes that it repaid by 1967. After the reorganization, employees could acquire ad- ditional direct ownership of shares only through U.S. News’s stock bonus plan. All employees were eligible to participate. I J.A. 168. U.S. News gave bonus shares to employees in the fifth year of their employment, and every five years thereafter. It calculated the dollar value of the shares to be awarded according to a consistent formula: the longer an employee’s length of service, and the greater his salary, the larger the dollar value of the quinquennial bonus. U.S. News then divided this dollar figure by the current appraised value of a share to arrive at the number of bonus shares it would award the employee that year. In order to keep the beneficial ownership of the com- pany lodged among its active employees, Article Fifth of the U.S. News Certificate of Incorporation required em- ployees to offer to sell their shares back to the company if the employee left for any reason, including retirement. The option price was to be established by an independent appraiser, according to a procedure spelled out in Article Fifth, paragraph (e): 6a (e) Option Price. The option price of stock shall be its fair market value as of the date of exercise of the option. ... Fair market value as of any date shall be the fair market value agreed upon by the parties, or in the absence of such agreement, determined as follows: The board of directors of the corporation shail select each year a qualified appraiser of national standing, who shall, as soon after the close of each fiscal year of the corporation as complete financial statements are available, determine the fair market value of the | stock of the corporation as of the close of such fiscal year. Such fair market value shall be determined with- out regard to the restrictions on transfer of stock con- tained in this Article. In making such appraisal the - appraiser shall use methods and standards recognized by the regulations of the United States Internal Rev- enue Service as appropriate for determining fair mar- ket value of corporate stock.... The market value per share so determined shall be the option price Article Fifth (e), III J.A. 918-19 (emphasis added). Article Fifth (e) also included a procedure by which aggrieved employees could contest the appraisal, but the parties agree that no employee invoked it during the period over which plaintiffs retired. Appellants’ Joint Br. at 8, Appellees’ Joint Br. at 25. Between 1962 and the retirement of the last retiring plaintiff, U.S. News always exercised its Ar- ticle Fifth (e) purchase option. 663 F.Supp. at 1500-01. Although plaintiffs make a game try, it seems quite plain that U.S. News acted properly in adopting a minority val- uation for the small lots of bonus stock that it purchased from employees. Article Fifth (e) gives the appraiser two instructions on the subject. The appraiser is to assume that the stock could trade freely (i.e., ignore the fact that the Certificate of Incorporation limited stockholders’ power of alienation), and to ‘‘use methods and standards recog- ee nized by the regulations of the United States Internal Rev- enue Service as appropriate for determining fair market value of corporate stock.’’ Neither point provides any basis for valuing on a majority basis lots that were obviously minority. The parties and the trial court all agreed that whatever enlightenment is available from the IRS was embodied in Rev.Rul. 59-60, 1959-1 Cum.Bul. 287, and in the cases interpreting this pronouncement on the valuation of stock for estate tax purpeses. We shall revisit Rev.Rul. 59-60 and those cases shortly, but for present purposes it is enough to say that no one here even argues that it could require assignment of a control premium to non-control stock. Plaintiffs argue that because Article Fifth (a) defines ‘‘stock’” as comprising both Class A and Common stock, it follows that the phrase ‘“‘stock of the corporation,’ as used in Article Fifth (e), must refer to all the company’s stock and that the entirety of its stock would necessarily entail control. Support for the notion that the valuation is to encompass all of the company’s stock lies in the fact that Class A stock could be held only by the Plan, not by an individual, so that the phrase in Article Fifth (e) seems to encompass stock that in the nature of things would never be directly covered by the purchase option. We think the reading very strained. Plaintiffs suggest no reason whatsoever why the framers of the clause could possibly want minority shares valued on a majority basis. Other circumstances also cut against such a reading. It is clear from the Certificate of Incorporation and is con- ceded by plaintiffs that the framers of the arrangement sought to perpetuate employee ownership and control. Val- uation on a majority basis would be inconsistent with the implicit assumption that the company would not be sold, as a control premium is in the nature of things realized only at the moment of sale. In addition, the liquidity prob- oe 8a lems that plaintiffs’ reading might engender for the com- pany could imperil continued employee ownership. Rejecting plaintiffs’ strained reading of Article Fifth, we conclude that U.S. News quite properly valued the stock bonus shares on a minority basis. The plaintiffs further argue that even if valuation of the shares on a minority basis was proper, the huge discount that American Appraisal applied to the potential value of U.S. News’s West End real estate was unreasonable. After reviewing the testimony of the expert witnesses, the dis- trict court found that American Appraisal’s decision to give some, but very limited, weight to the value of the real estate ‘‘adequately took account of the Company’s underlying assets.”’ 663 F.Supp. at 1531. We find no error here. In view of U.S. News’s often-stated unwillingness to develop the West End real estate, a purchaser of a mi- nority interest in the company would likely have drastically discounted the possibility of a change of mind. And only a decision to develop the real estate in the fairly near future would enable it to contribute very substantially to the discounted present value of the expected returns on a minority share of U.S. News stock. See Citizens Bank & Trust Co. v. Commissioner of Internal Revenue, 839 F.2d 1249, 1251, 1254 (7th Cir.1988) (discussing propensity of investors to heavily discount future returns, especially those beyond their control). Cf. Estate of Watts v. Com- missioner of IRS, 823 F.2d 483 (11th Cir.1987) (arms-length transaction would value interest in partnership at ‘‘going concern value’ not higher “‘liquidation value’”’ when liq- uidation was unlikely and interest transferred did not carry power to force liquidation). Il. VALUATION OF PROFIT-SHARING PLAN SHARES: The Plan’s Mandate All employees with one or more years of service par- ticipated in the Profit-Sharing Plan and thereby enjoyed 9a a derivative interest in the Plan’s U.S. News stock. Their interests vested fully after ten years’ employment. 663 F.Supp. at 1501. Although each Member had an individual ‘“‘account”’ representing his or her share of the Fund, the Plan Document clearly defined each participant’s interest as “‘the value of his undivided share’ of the Fund. III J.A. 926 (emphasis added). The Plan purchased 30,000 Class A shares in 1962 on the cecasion of its creation and U.S. News’s reorganiza- tion. At the time that amounted to about a 23 percent interest in the company. 663 F.Supp. at 1500. Although U.S. News continued to issue stock bonuses thereafter, repurchases evidently exceeded issuances; in any event, the Plan’s percentage of outstanding stock gradually in- creased. In 1966 it bought 20,000 more Class A shares (at $80 a share), bringing its holdings to 50,000 shares, or 45 percent of the 110,574 shares then outstanding. Jd. at 1501. In 1971 the Plan’s 50,000 share block became a majority of U.S. News’s outstanding shares. Jd. The rel- ative size of the Plan’s block continued to grow. By April 1975, for example, employees’ direct holdings were only 17,444 shares. III J.A. 935. The Plan document explicitly provided that, for purposes of computing a departing employee’s retirement benefit, the Plan Trustee should use ‘‘the fair market value es- tablished under Article Fifth, Paragraph (e)” of U.S. News’s Certificate of Incorporation: For all purposes of the Plan, the market value of shares of stock of the Employer, which are held by the Trustee as a part of the Fund, shall be the fair market value established under Article Fifth, Para- graph (e), of the Certificate of Incorporation of U.S. News & World Report, Inc. ... The Committee shall be fully justified and exonerated in relying on the figures so provided by the Board of Directors and/or the appropriate financial or accounting officer of the 10a Employer, and the Trustee shall be fully justified and exonerated in relying on the figures so provided by the Committee, as to the accuracy of the figures and as to the compliance with the aforesaid provisions of the Certificate of Incorporation. Profit-Sharing Plan, Art. VI, § 6.3, III J.A. 924-26 (em- phasis added). Each year the Plan in fact used the per share dollar value that American Appraisal had computed for U.S. News under Article Fifth (e). The plaintiffs agree that the Plan cross-referenced the Certificate of Incorporation, and that therefore as a matter of trust and contract law the fiduciaries were right to adopt the company’s valuation; as we have seen, however, they thought that the latter should have been on a majority basis. Our rejection of the latter view of course dooms their claim that the Plan doc- ument required valuation on a majority basis. It is true that the Plan’s reference to each participant’s ‘‘undivided”’ share in the whole suggests that the Plan’s assets could have been totalled up—on a majority basis—and then ap- portioned to each employee in pro rata shares. But the Plan’s express direction to accept the valuation made by the company for purchase of bonus stock—a direction not merely conceded but embraced by plaintiffs—clearly con- trols over any emanations from the choice of these terms for description. As a matter of contract and trust law, therefore, the Plan correctly used a figure computed on a minority basis. Ill. THE EFFECT OF ERISA We turn now to the plaintiffs’ argument that if the Plan be construed to permit valuation on a minority basis, it violates ERISA. The parties agree that the Plan is subject to ERISA, which preempts state law governing employee benefit plans (with limited exceptions not relevant here). See ERISA § 514, 29 U.S.C. § 1144 (1982); Pilot Life lla Insurance Co. v. Dedeaux, 481 U.S. 41, 54, 107 S.Ct. 1549, 1556, 95 L.Ed.2d 39 (1987) (ERISA’s civil enforcement remedies in § 502(a), 29 U.S.C. § 1182, are exclusive). Thus ERISA frames the duties that the Plan’s manage- ment owned participants. ERISA creates a cause of action for benefits due, whether under the terms of the Plan itself or because some term of the Plan conflicts with ERISA. Pilot Life, supra. While trust documents cannot excuse trustees from ER- ISA duties, Central States, SE & SW Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559, 568, 105 S.Ct. 2833, 2839, 86 L.Ed.2d 447 (1985), rights under ERISA are largely defined by the plan document, Alessi v. Ray- bestos-Manhattan, Inc., 451 U.S. 504, 511, 401 S.Ct. 1895, 1900, 68 L.Ed.2d 402 (1981). Plaintiffs claim to find in ERISA, however, three sources of a duty to use a majority valuation, strong enough in their view to overcome the terms of the U.S. News Plan: (1) an implied incorporation of IRS valuation techniques, which in their view compelled valuation on a majority basis; (2) ERISA’s mandate that a plan fiduciary “discharge his duties ... solely in the interest of the participants and beneficiaries,’ ERISA § 404(aX1), 29 U.S.C. § 1104(aX1); and (3) ERISA’s require- ment that it file an annual report containing a statement of its assets and liabilities ‘‘valued at their current value,”’ ERISA § 103(b), 29 U.S.C. § 1023(bX3\A) (1982). We work through them in that order. Internal Revenue Service rules. Although ERISA at no point relevant here incorporates the Internal Revenue Code or IRS regulations, courts have on occasion found the reg- ulations of useful guidance in addressing problems under ERISA that parallel issues under the Code. See, e.g., Tul- ley v. Ethyl Corp., 861 F.2d 120, __ (5th Cir.1988); Rose v. Long Island R.R. Pension Plan, 828 F.2d 910, 917-18 (2nd Cir.1987) (adopting IRS definitions of ‘“‘agency’”’ and “instrumentality” into ERISA); see also Alessi, 451 U.S. at 517-21, 101 S.Ct. at 1903-05 (interpreting ERISA pro- 12a vision against discrimination in pension plans as endorsing view taken in Treasury regulations and IRS rulings ap- plying Internal Revenue Code’s parallel non-discrimination requirement for plans to qualify for favorable tax treat- ment). We will assume potential relevance here and con- sider the possible import of Rev.Rul. 59-60. The ruling unquestionably suggests that control] may jus- tify higher valuations for a specific block of shares: The size of the block of stock itself is a relevant factor to be considered. Although it is true that a minority interest in an unlisted corporation’s stock is more dif- ficult to sell than a similar block of listed stock, it is equally true that control of a corporation, either actual or in effect, representing as it does an added element of value, may justify a higher value for a specific block of stock. Rev.Rul. 59-60 at § 4.02(g), 1959-1 Cum. Bul. 237, 238- 39. In the estate tax context for which Rev. Rul. 59-60 was drafted, the courts have taken the view that valuation of a decedent’s control block of shares should include a con- trol premium. This applies even though the will itself may split the control block among legatees. See Estate of Curry v. United States, 706 F.2d 1424, 1428 (7th Cir.1983) (ap- plying control valuation to decedent’s non-voting shares because of his ability to sell them as a block with voting shares). It thus represents a decision that for estate tax purposes control at the moment before death calls for im- putation of a control premium even if death and the will or intestacy will destroy control. In that context, as Curry pointed out, any other rule would enable decedents to ar- tificially reduce estate taxes by splitting interests in an- ticipation of the legatees’ reassembling them. Jd.; see also Citizens Bank & Trust Co. v. Commissioner of Internal Revenue, 839 F.2d 1249 (7th Cir.1988); Ahmanson Foun- dation v. United States, 674 F.2d 761, 767-69 (9th 13a Cir.1981). Moreover, the estate tax is ordinarily conceived as falling on the decedent’s passage of property, not upon the legatees’ receipt. See, e.g., Ahmanson Foundation, 674 F.2d at 768. Here the reigning conception is quite different. As we noted in our original consideration of Article Fifth (e) of the Articles of Incorporation, the architects of U.S. News’s 1962 reorganization, which included the Plan, saw as a major objective the establishment and perpetuation of em- ployee ownership. Foltz, 663 F.Supp. at 1500; see also U.S. News’s Articles of Incorporation, Article Fifth at 7-12, III J.A. 916-21. A control premium is realized by sale of a controlling block of stock; the trial court found that the Plan fiduciaries believed that they were not going to make such a sale, and that finding is supported by ample evi- dence. So long as they expected to carry out the Plan’s employee-ownership purpose, it seems clear that the con- text underlying valuation of the Plan’s shares was dia- metrically opposed to that of the estate tax. We pause to note some tension between this conclusion and some of the explanations for the very existence of control premiums. A leading analysis argues that bidders offer a premium for control because it will enable them to eliminate or reduce ‘‘agency costs’’—the costs associated with the managers’ failure to realize the maximum value of the firm’s assets. See, e.g., Michael C. Jensen and Wil- liam H. Meckling, Theory of the Firm: Managerial Behav- ior, Agency Costs and Ownership Structure, 3 J.Fin.Econ. 305, 308-10, 329, 351-52 (1976); see also Saul X. Levmore, A Primer on the Sale of Corporate Control, 65 Tex.L.Rev. 1061 (1987). There is some irony in allowing plan fiduci- aries—who here overlap largely with corporate manage- ment—to deny retiring employees the benefit of firm assets that could have been realized by management’s pursuing a course of conduct that was clearly available—and the avail- ability of which induced the ultimate purchaser to pay a control premium for all the company’s stock. l4a Ultimately, however, we are not persuaded that this view of control premiums undermines our conclusion. In the first place, the existence of a control premium should not be conceived as necessarily proving the incumbent managers delinquent: the winning bidder’s readiness to offer a premium may stem from its possession of special assets or skills that are uniquely able to enhance the firm’s value, and the costs of identifying the synergistic oppor- tunity may have been lower for the winning bidder than for anyone else. Second, even if the control premium is due to incumbent management’s lack of acumen, the law provides a remedy for extreme cases—albeit only extreme cases, as the business judgment rule allows the firm’s man- agers great leeway. Most important, however, is that where the controlling instruments contemplate employee ownership, all partici- pants are on notice that maximization of the firm’s pe- cuniary value is not to serve as an exclusive goal. The market for corporate control provides incumbent manage- ment a critical incentive to perform well: inadequate per- formance will induce outsiders to bid for control of the company and to oust them. See Edgar v. MITE Corp., 457 U.S. 624, 633, 102 S.Ct. 2629, 2636, 73 L.Ed.2d 269 (1982) (noting congressional finding that ‘“‘takeover bids . serve a useful purpose in providing a check on en- trenched but inefficient management’’); see also id. at 643- 44, 102 S.Ct. at 2641-42 (recognizing that tender offer mechanism gives management incentive to perform well). To the extent that the investor-workers establish a pref- erence for employee ownership, they blunt the operation of the market for corporate control and diminish the force of its incentive effects. Accordingly, we see no reason why the courts’ quite appropriate use of Rev.Rul. 59-60 for estate tax valuations should preclude a plan’s use of minority valuation where the Plan document so provides and where the controlling instruments effect a clear preference for employee own- 15a ership. The Fifth Circuit has observed that plan fiduciaries do not breach their ERISA duties merely because they fail to follow Rev.Rul. 59-60 ‘“‘jot and tittle,’’ Donovan v. Cunningham, 716 F.2d 1455, 1473 (5th Cir.1983), cert. denied, 467 U.S. 1251, 104 S.Ct. 3533, 82 L.Ed.2d 839 (1984), and we think the point entirely apt here. Thus we find no error in the district court’s conclusion that, as applied to this Plan, Rev.Rul. 59-60 does not re- quire a majority valuation. See 663 F.Supp. at 1525-29. The fiduciaries’ “exclusive” duty to provide benefits: The retirees rely heavily on ERISA § 404(aX1), 29 U.S.C. § 1104(aX1) (1982), which requires a plan fiduciary to: discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and— (A) for the exclusive purpose of: (i) providing _— to participants and their be- neficiaries; and . (B) with the care, skill, prudence, and diligence un- der 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; (D) in accordance with the documents and instru- ments governing the plan insofar as such documents and instruments are consistent with the provisions of [ERISA]. 29 U.S.C. § 1104(aX1) (1982) (emphasis added). The retirees read the italicized phrase as meaning that the Plan fiduciaries had a duty to maximize pecuniary benefits; moreover, they believe that such a duty would invalidate Plan decisions that, effectively, favored later dis- 16a tributees over earlier ones such as themselves. Both steps of the argument fail. Section 404 creates no exclusive duty of maximizing pecuniary benefits. Under ERISA the fiduciaries’ duties are found largely in the terms of the plan itself. See Alessi, 451 U.S. at 511, 101 S.Ct. at 1900; see also Edwards v. Wilkes-Barre Pub. Co. Pension Trust, 757 F.2d 52, 56-57 (3d Cir.1985). In using a minority basis for stock valuation, the fiduciaries here sought to pursue the Plan’s goal of continued employee ownership. As we have already noted, the control premium is normally realized by sale, an event that would obviously thwart one of the Plan’s purposes— perpetuation of employee ownership. Moreover, while ob- viously evaluation on the basis of a hypothetical sale could co-exist with employee ownership, it could create liquidity problems that would jeopardize that purpose. ERISA, far from manifesting any intention to discourage long-term employee ownership, specifically favors that pattern by ex- empting Employee Stock Ownership Plans from ERISA’s 10 percent cap on plans’ holdings of ‘‘employer securities.” See 29 U.S.C. § 1107(bX1) (1982) (exempting any “eligible individual account plan,”’ which is defined in id. § 1107(dX3) as including ESOPs). See also Donovan v. Cunningham, 716 F.2d 1455, 1465-67 (5th Cir.1983). While U.S. News’s Plan was not an ESOP, see 663 F.Supp. at 1518 n. 33,° ERISA’s evident approval of ESOPs precludes any claim that it forbids employee ownership as a legitimate plan objective. Further, even if we supposed that § 404 called for ex- clusive pursuit of pecuniary advantages for plan benefici- aries, the disputed valuation decisions are consistent with such an aim. The plaintiffs were not the only beneficiaries of the Plan. Plan wealth that was not distributed to them * U.S. News’s Plan itself was apparently exempt from the 10 percent cap by virtue of 29 U.S.C. § 1107(dK3XA\ii), including profit-sharing plans as eligible individual account pians. 17a was available for distribution to other Plan beneficiaries. Indeed, the worst that can be said of the Plan is that it was administered to favor a rolling class of future bene- ficiaries over those present and past. Nothing in § 404 requires that one set of beneficiaries be favored over an- other. See, e.g., Edwards, 757 F.2d at 56-57. Plaintiffs would also infer from § 404(aX1\B)’s require- ment that plan fiduciaries exercise the ‘‘care, skill, prud- ence and diligence”’ of a ‘‘prudent man’’ that we owe their valuation decision no deference, since, they say, the fi- duciary standard exacted is “‘the highest known to law.” In support of this view they cite Donovan v. Cunningham, 716 F.2d 1455 (5th Cir.1983), cert. denied, 467 U.S. 1251, 104 S.Ct. 3533, 82 L.Ed.2d 839 (1984), and Donovan v. Bierwirth, 680 F.2d 263 (2d Cir.), cert. denied, 459 U.S. 1069, 103 S.Ct. 488, 74 L.Ed.2d 631 (1982). In fact, how- ever, courts have reviewed ERISA fiduciaries’ decisions as to the allocation of benefits among beneficiaries by an “arbitrary or capricious” standard so iong as the decisions involved no conflict of interest. See, e.g., Bruch v. Fire- stone Tire & Rubber Co., 828 F.2d 134 (3d Cir.1987), cert. granted, _.. 17.8. __., 108 S.Ct. 1288, 99 L.Ed.2d 498 (1988); Edwards, 757 F.2d at 56; Struble v. New Jersey Brewery Employees’ Welfare Trust Fund, 732 F.2d 325, 333-34 (3d Cir.1984). Plaintiffs appear to recognize that principle as governing application of the “arbitrary or capricious” standard, but argue that the fiduciaries were subject to a conflict because they sought to continue ownership of U.S. News by its employees. But that interest was not some ‘“‘outside”’ con- cern; rather, by the terms of the Plan, it was an interest that Plan beneficiaries shared, inseparable from their in- terests in the Plan itself. This contrasts sharply with Cun- ningham, where the plan fiduciaries (identical with the firm’s board of directors) used plan assets to buy stock from one of their number (chairman of the board of di- rectors and until the purchase the firm’s sole shareholder), 18a allegedly at inflated prices, and with Bierwirth, where the fiduciaries and firm insiders acted to defeat a tender offer for the firm’s shares that, if successful, would have mark- edly increased the value of the plan’s assets but have jeopardized their personal positions. It is also clearly dis- tinct from the facts of Pilon v. Retirement Plan for Sa- laried Employees of Great Northern Nekoosa Corp., 861 F.2d 217 (9th Cir.1988), where the court, apparently as- suming that more generous payments to a particular re- tiree might ultimately come from the corporate treasury, see id. at 219, noted that ‘“‘divided loyalty’’ increased the likelihood that a decision would be found arbitrary and capricious, id. at 219. In any event, as we regard the fiduciaries’ reading of the Plan document as correct and as not countermanded by anything in ERISA, application of even the severest type of scrutiny would not lead us to overturn it. Plaintiffs further invoke Maggard v. O'Connell, 671 F.2d 568, 571 (D.C.Cir.1982), for the proposition that to satisfy even the ‘“‘arbitrary or capricious” test an ERISA trustee must have taken a “hard look’ at salient problems and engaged in “‘reasoned decisionmaking.’’ We have some hes- itation about a wholesale incorporation of administrative law doctrine into judicial review of fiduciary decisions, and note that the issue at stake in Maggard was a factual one—whether an applicant for benefits had worked in coal mines for the requisite number of years. In any event, while it is true here that the Plan fiduciaries here never recorded any deliberations and appear to have pursued the minority-basis valuation more on the basis of inertia than explicit decisionmaking, that is no basis for overturning a decision that is entirely consistent with the Plan document and with ERISA’s substantive requirements. ERISA’s reporting requirements: § 103(b) of ERISA re- quires all ERISA plans to publish an annual report con- taining a statement of the plan’s assets and liabilities ei Once —.. 19a “valued at their current value.”’ 29 U.S.C. § 1023(b\38\A) (1982). Section 3(26) of ERISA in turn defines “current value”’ as [1] fair market value where available and [2] other- wise the fair value as determined in good faith by a trustee or a named fiduciary ... pursuant to the terms of the plan and in accordance with the regulations of the Secretary, assuming an orderly liquidation at the time of such determination. 29 U.S.C. § 1002(26) (1982). The Plan, of course, valued itself on a minority basis, while the liquidation value, ar- guably, would be computed on a majority basis. Since the terms of the Plan by no means contemplated a liquidation, § 103(b)’s directive to ‘“‘assum[e] an orderly liquidation” is to a degree inconsistent with the require- ment of valuation “‘pursuant to the terms of the plan.” Moreover, as § 103(b) is a reporting requirement, we are far from clear that it applies at all to benefit calculations. In any event, assuming the defendants’ benefit calculation method deviates from that of § 103(b), we think such a deviation permissible so long as the fiduciaries have not concealed from the beneficiaries the critical facts that ex- pose the possible deviation. Here there was no conceal- ment. The evidence introduced below demonstrates beyond doubt that all employees were aware, or at the very least were on inquiry notice, as to the great gap between the book value of U.S. News’s West End real estate and its true value. To take just one example, this disparity was often discussed—though not always at great length—at the annual employee lunch. Written transcripts of these dis- cussions between employees and management were avail- able on request to all employees who were unable to attend. 663 F.Supp. at 1510. As there was no concealment, and as the Plan in good faith reported one measure of its “‘fair value,’’ we were unable to find an ERISA violation in any 20a possible deviation of the Plan’s benefit calculation from the methods appropriate to § 103’s reporting requirements. * = * The filings below are reputed to be the largest in any civil case in the history of the district court for the District of Columbia. The district court threaded its way through the maze with patience and skill. We affirm on all counts. SO ORDERED. 2la APPENDIX B UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA Civ. A. Nos. 84-0447, 85-2195. Charles S. FOLTZ, et al., Plaintiffs, v. U.S. NEWS & WORLD REPORT INC., et al., Defendants. David B. RICHARDSON, et al., Plaintiffs, v. U.S. NEWS & WORLD REPORT, !NC., et al., Defendants. June 22, 1987. MEMORANDUM OPINION BARRINGTON D. PARKER, Senior District Judge: This memorandum opinion sets forth the Court’s final ruling on the claims of former employee shareholders of U.S. News and World Report, Inc. (‘‘U.S. News”’ or ‘“‘Com- pany’’) to proceeds from the sale of the corporation. The Company was purchased in 1984 by Mortimer Zuckerman, a Boston real estate developer, for a price of $176 million. Plaintiffs contend that during the period prior to the sale, when they were entitled to and did receive their share of the value of the Company’s stock, the true worth of the stock was wrongfully concealed, that its appraised value was otherwise manipulated and _ miscalculated by defendants, and that they were deprived of the stock ben- 22a efits and profit-sharing interests to which they were en- titled. The litigation has been hotly contested. Serious and unsettled questions arising under the Employee Retire- ment Income Security Act of 1974 (““ERISA”’), 29 U.S.C. §§ 1001 et seg., are involved in this proceeding. While other legal issues are also presented under federal securities law, and the common law of fraud, breach of fiduciary duty, unjust enrichment and negligence, the questions arising under ERISA clearly predominate. Throughout the course of the proceeding, counsel have ably briefed -a din both their written memoranda and oral presenations the factual and legal issues involved. The questions presented for resolution have been fully con- sidered. For the reasons set forth below in its factual findings and conclusions of law, entered pursuant to Fed.R.Civ.P. 52(a), the Court determines that plaintiffs have failed to support their claims, that judgment should be granted defendants on all counts, and the consolidated complaints dismissed. I. INTRODUCTION Course of the Litigation The Complaints. and Pretrial Motions This litigation involves two consolidated complaints brought against U.S. News and several other defendants. Charles S. Foltz and others are plaintiffs in the first; David B. Richardson and others are plaintiffs in the second. At all relevant times, the Company produced and published the weekly news magazine, U.S. News and World Report. The Company also operated book and newsletter divisions; they were not particularly profitable and are of no great consequence to these proceedings. Foltz, conditionally certified as a class action, presents the claims of some 230 former U.S. News employees. See Foltz v. U.S. News & World Report, Inc., 106 F.R.D. 338 23a (D.D.C.1984). The class includes all persons who retired or were otherwise separated from employment with the Company during the eight-year period from 1974 through 1981, other than several former directors who have been specifically excluded upon a finding that their interests were not typical of the class. Mr. Foltz and seven other named plaintiffs are the designated representatives for the class period. The Richardson action is brought by former employees who retired or separated from U.S. News in 1982.1 During their employment, the plaintiffs in both ac- tions participated in the U.S. News Profit-Sharing Plan (‘‘Plan’’). They were also beneficial owners of stock in the Company under its stock bonus plan. Upon retirement or separation, they liquidated their Plan accounts and re- deemed their stock interests. In both actions, plaintiffs seek recovery of benefits they claim are owned them by virtue of an alleged undervaluation of the Company’s stock during the class period. Defendant U.S. News, organized at all relevant times under the corporate laws of the State of Delaware.” is headquartered in the District of Columbia. Other named defendants are certain former directors of U.S. News: the ‘Unless otherwise noted, the phrase “‘class period’’ shall be deemed to cover the period included in both the Foltz and Richardson com- plaints. *On September 30, 1985, a plan of reorganization was compieted that transformed the Company into a limited partnership. The plan was carried out in the aftermath of the Company’s 1984 sale to Mr. Zuck- erman and has been the subject of a supplemental complaint brought in this proceeding. See 640 F.Supp. 1184 (D.D.C.1986). ‘The director-defendants are John Sweet, Samuel Keker, Marvin Stone, William Dunn, Wester Tanzer, John Tuohey, Raymond Naimoli and James Mclihenny. Mr. Sweet succeeded U.S. News founder David Lawrence as Chairman of the Board and served in that capacity throughout the class period. U.S. News and its former directors are collectively referred to as the U.S. News defendants. 24a Madana Realty Company (‘‘Madana’’), a wholly-owned U.S. News subsidiary; the U.S. News Profit-Sharing Plan, an employee benefit plan as defined by ERISA § 3(34), 29 U.S.C. § 1002(34); and American Appraisal Associates, Inc. (‘American Appraisal’’), an appraisal firm transacting busi- ness in the District and organized under the laws of the State of Delaware. American Appraisal performed the year- end appraisals of the U.S. News stock that are at issue here. A group designated as Save the Fund was allowed to intervene as defendants. The group includes currently employed or recently separated or retired U.S. News em- ployees- interested in preserving and eventually receiving that portion of the sale proceeds held back from distri- bution from the Plan by order of this Court.‘ Over the three-year period during which these consoli- dated proceedings have been pending, discovery efforts have been thorough and extensive. Even so, many of the factual and legal issues originally presented were signifi- cantly narrowed by pretrial proceedings and motions for summary judgment.’ By agreement and consent of all counsel, issues of liability and damages were bifurcated for separate trial. ‘The Foltz plaintiffs moved for a preliminary injunction against dis- tribution of the sale proceeds in August 1984, which relief was denied upon receipt of assurances from defendants that plaintiffs and the Court would be given notice in advance of any intended distribution. Such notice was given in January 1985 and was followed in February by a renewed motion for preliminary injunction. The Court again denied the motion initially, 608 F.Supp. 1332 (D.D.C.1985), but upon review the Court of Appeals, 760 F.2d 1300 (D.C.Cir.1985), ordered a partial hold- back of funds. 613 F.Supp. 634 (D.C.C.1985). Upon motion of the Rich- ardson plaintiffs, the Court held back an additional sum. Order of July 15, 1985. The funds subject to the two injunctions together total ap- proximately $47.5 million, exclusive of accrued interest. ‘Prior decisions of this Court granted defendants partial summary judgment as to a number of the claims originally brought by plaintiffs. See 639 F.Supp. 595 (D.D.C.1986) (Richardson) and 627 F.Supp. 1143 (D.D.C.1986) (Foltz). 25a The claims remaining after entry of partial summary judgment in each case were considered in an extended bench trial. The matters remaining in Foltz included: (1) claims for benefits due and owing from the Plan, under ERISA § 502(aX1XB), 29 U.S.C. § 1132(aX1\B);* (2) claims for breach of fiduciary duty against U.S. News, the di- rector-defendants and American Appraisal, under ERISA § 502(aX3), 29 U.S.C. § 1132(aX3);’ (3) claims against U.S. News, the director-defendants, and American Appraisal for violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78}(b), and Rule 10b-5 of the Secu- rities and Exchange Commission, 17 C.F.R. § 240.10b-5;° (4) claims for common-law fraud against U.S. News, the director-defendants, and American Appraisal; and (5) claims for common-law breach of fiduciary duty, unjust enrich- ment, negligence and negligent misrepresentation against U.S. News and the director-defendants. The matters remaining in Richardson included: (1) claims for benefits due against the Plan under ERISA § * Section 502(aX1\B) provides that a participant or beneficiary of a plan may bring an action ‘‘to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan{.]”’ ’ Section 502(aX3) allows a plan participant, beneficiary or fiduciary to bring an action for equitable relief to enforce the terms of the plan in question and of the statute, to enjoin violations thereof, and to obtain redress for such violations. * Section 10(b) of the 1934 Act makes it unlawful for anyone {tlo use or employ, in connection with the purchase or sale of any security ..., any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe... . Commission Rule 10b-5 makes it unlawful for persons to engage in deceptive, fraudulent, or misleading practices in connection with the purchase or sale of securities. Subsection (b) prohibits persons from making false or misleading statements, or from omitting to state certain facts ‘‘necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. .. .”’ 26a 502(aX1\B); and (2) claims against U.S. News and the director-defendants for negligence and negligent misrepre- sentation. At the conclusion of plaintiffs’ case-in-chief on the issue of liability, defendants filed motions for dismissal and judg- ment, pursuant to Fed.R.Civ.P. 41(b). In addition to op- posing those motions, plaintiffs in the two actions filed motions to amend their complaints, under Fed.R.Civ.P. 15(b), on the theory that the facts actually litigated tended to support additional causes of action. The motion to amend the Foltz complaint was denied. The Richardson plaintiffs were granted leave to add section 502(aX3) ERISA claims against the U.S. News defendants for their alleged failure to have the Plan’s holdings of U.S. News Class A stock properly appraised.’ In an oral bench ruling, the Court granted in part defendants’ motions, thus limiting the claims in both proceedings to those against the Plan for benefits due under ERISA § 502(aX1\B) and against U.S. News and the director-defendants for breach of fiduciary duty under section 502(aX3) and for negligence. See Tran- script of Proceedings, vol. 54 at 10,316-36.!° All claims against American Appraisal were dismissed. An extended discussion of the ruling is presented infra pp. 25 ff. As discussed above, plaintiffs in the consolidated actions seek to recover retirement benefits allegedly owed them under the Company’s profit-sharing and stock bonus plans. Because ERISA affords an aggrieved plaintiff a right of *The motion of the Richardson plaintiffs was prompted by an invi- tation, extended by the Court in its summary judgment decision, to seek leave to add such a claim at trial. See 639 F.Supp. at 608. The Court’s subsequent bench ruling also reinstated a number of claims that had been previously ruled time-barred on summary judgment. 10 All subsequent references to the transcript of trial proceedings are cited in the following form: (vol). Tr. (page(s)). Plaintiffs’ and defendants’ exhibits are referred to as PX—and DX-, respectively. Defense exhibits used only in Richardson are designated RDX—. action against a covered plan, plaintiffs brought an action for unpaid benefits directly against the Plan. With respect to their bonus stock interests, however, they must and they do seek recovery of monies allegedly owed them from U.S. News itself. In addition, plaintiffs charge that the director- defendants, in concert with American Appraisal, acted both deliberately and negligently to cause their retirement ben- efits to be undervalued. Accordingly, plaintiffs seek re- covery in the alternative from those defendants. In the discussion that follows, the Court presents, pur- suant to Rule 52(a), Fed.R.Civ.P., the basic and controlling facts developed during the liability phase of the trial, in- cluding the relevant history and operation of U.S. News. In then turns to a legal analysis of the claims and con- tentions advanced by the parties. II. FACTUAL FINDINGS History of U.S. News and World Report, Inc. A. Events Occurring Before the Class Period U.S. News & World Report, Inc. was formed on June 1, 1962 from the reorganization of the U.S. News Pub- lishing Corporation (“‘U.S. News Publishing’’), a Company established in 1933 by David Lawrence. Prior to the 1962 reorganization, all voting stock of U.S. News Publishing was held by Lawrence’s three adult children, subject, how- ever, to a voting trust, controlled by Mr. Lawrence as sole voting trustee. The non-voting stock was: held in part by two trusts established for the benefit of Lawrence family members, and in part by certain employees who had been afforded an opportunity to buy stock. By 1962, 28 em- ployees or members of their families owned 34 percent of the outstanding shares of the 1933 corporation. The 1962 reorganization was undertaken with the intent and purpose that U.S. News would be owned entirely by 28a its employees. Mr. Lawrence and_the Cempany’s Wash- ington, D.C. counsel, the firm of Covington & Burling,” took the necessary steps to achieve that end, including an independent appraisal of the fair market value of the cor- porate shares and the submission of a request to the In- ternal Revenue Service that the proposed reorganization would not result in the loss of the tax-qualified status of the Plan, which Mr. Lawrence had established prior to 1962. The U.S. News Certificate and Articles of Incor- poration (‘Articles of Incorporation’’) also assured that the Company would remain employee-owned. Article Fifth, PX 2 at 7-12. Under the reorganization plan, U.S. News pur- chased the shares of U.S. News Publishing held by mem- bers of the Lawrence family at a price of $50 per share, determined by an appraisal performed by American Ap- praisal as of May 31, 1962. Consideration was paid partly in cash and partly in notes. Employees who individually held stock, in U.S. News Publishing exchanged their stock for shares in U.S. News equivalent in value to what they had previously owned. The value of the U.S. News shares received by the employee stockholders was also determined to be $50 per share by the May 31 appraisal. U.S. News then sold to the Plan 30,000 shares of stock, again at a price of $50 per share. After the reorganization, U.S. News had two classes of stock, ‘“‘Class A’’ and ‘‘common.”’ Each class had the same voting and liquidation rights. All Class A stock was owned by the Profit-Sharing Plan, and the stock would automat- ically be converted to common stock if it passed into the hands of anyone other than the Plan. Mr. Don Harris, a Covington & Burling partner, was immediately involved in developing the reorganization plan and the necessary papers and documentation. Lamentably, he is the only person who, at this late date, is able to testify as to events surrounding the reorganization. His testimony was not opinion or expert in nature, but rather he offered historical testimony on matters of objective fact. He did not construe any documents in a legal sense. _——— SS La | ee Immediately following the reorganization, 130,800 shares of U.S. News stock were outstanding: 30,000 shares of Class A stock were held by the Profit-Sharing Plan, and 100,800 shares were held directly by the employees who had previously owned stock in U.S. News Publishing. The 30,000 shares purchased by the Plan constituted approx- imately a 23 percent interest in U.S. News. It was con- templated, however, that the Plan would own a larger percentage with the passage of time and that it would eventually own nearly all the outstanding stock. This was so because shares owned by the 28 key employees would be redeemed as they reached the retirement age of 65, with each redemption increasing the Plan’s percentage of the reduced amount outstanding, until ultimately the Plan would own all but the relatively small number of common shares. In 1966, the Plan purchased an additional 20,000 shares of Class A stock at a value of $80.00 per share, again determined by American Appraisal. This gave the Plan approximately 45 percent of the 110,574 shares then out- standing. During 1971, the 50,000 shares came to consti- tute a majority of the outstanding stock of the company, due to the repurchase by the company of outstanding com- mon stock from employees who retired, died, or otherwise terminated their employment. The reorganization plan did not contemplate any change in the actual control and management of the company, since all the common stock was placed in a voting trust with Lawrence as sole voting trustee. Thus, as sole voting trustee, he had the legal] authority to elect the directors, both before and after reorganization. Mr. Lawrence served in that position until his death in 1973, at which time substitute trustees were named, in accordance with the voting trust instrument. In 1967, the Plan’s Class A hold- ings were placed in the voting trust as well. 30a The persons responsible for the reorganization antici- pated that employee ownership of U.S. News would take several forms: (1) the 28 employees who had been stock- holders of U.S. News Publishing would hold shares of U.S. News & World Report (“‘key employee stock’’); (2) since more widespread ownership by employees was desired, the Plan, in which most of the employees participated, would hold all the Class A stock; (3) the Company would institute a “‘stock bonus’’ program, issuing shares to employees every fifth year. The U.S. News Profit-Sharing Plan provided income to employees upon their retirement, death, or separation from U.S. News.'? Each employee who had attained the age of 25 and who had served for at least one year was entitled to participate. An employee became fully vested in the Plan after 10 years’ service. The Plan was the primary means through which each employee secured an ownership interest in the Company. The employees could not, without the financial resources of the Plan, purchase all of the stock of U.S. News Publishing previously held by members of the Lawrence family. Thus the Plan’s purchase of U.S. News stock permitted all employees to participate in the beneficial or economic ownership of the Company even though they did not have legal title to any shares indi- vidually. The Plan was always regarded as a conduit through which employees generally could participate in the growth of the Company. Benefits statements instructed Plan participants how to calculate the number of shares equivalent to their undivided interests in the Plan. See, e.g., DX 94, 95. In addition to the Class A stock, the assets of the Plan also included other investments made with funds received in the form of cash contributions from U.S. News. The value of those investments is not at issue here. 2 An employee could normally elect either to receive a lump-sum payment, to have an annuity purchased on his behalf, or to leave his account to ride with the future investment fortunes of the Plan. 3la Under the stock bonus program, common stock was is- sued to employees at five-year intervals beginning after the fifth anniversary of employment, and in amounts based on salary and length of service and on the appraised value of the Company’s stock. The stock bonus program was thought to have psychological advantages over indirect ownership through the Plan, although each employee’s bo- nus stock holdings were of a much lesser value than his Plan account. In 1968, Mr. Lawrence instituted a deferred compen- sation program under which a specified number cf shares of “phantom stock”’ were awarded to certain senior Com- pany executives. The program was designed to give senior managers a greater incentive for superior performance. That program is discussed further, infra pp. 1508-09. Because the stock of U.S. News was not publicly traded, it was necessary to determine the value of the stock—for the purpose of awarding and redeeming the bonus shares— by appraisal. In addition, because the Plan’s major asset was a 50,000 share block of Class A stock, such appraisals were necessary to determine the value of the Plan’s assets each year, in which value separating employees shared ratably when they settled their account balances.'* The bonus and Class A shares were always valued equally. B. Events Occurring During the Class Period 1. Real Estate Acquisitions At the time of the 1962 reorganization, Madana had acquired three to four acres of partially developed real estate in the West End of Washington. Madana owned the land until late 1981, and approximately 75-80 percent of the holdings were used for U.S. News business oper- ‘* An employee settling his Pian account or redeeming his bonus stock in a given year would do so on the basis of the stock’s value as of the close of the previous year. 32a ations, including a headquarters building, an employee caf- eteria, and employee parking facilities. 26 Tr. 5089 (Sweet); 31 Tr. 6272-73 (Naimoli). The remaining portion was sub- ject to commercial leases to third parties. Before 1973, development of the real estate was not feasible because of zoning uncertainties, the character of the neighborhood, and the pendency of various proposals that would have required public use of portions of the land. See, e.g., DX 118 at 2; PX 371 at 2. During the early 1970s, U.S. News and other West End property owners actively participated in proposing to local government of- ficials a coherent development plan. In December 1974, the District of Columbia Zoning Commission promulgated zoning law revisions, changing a substantial portion of the Company’s holdings from commercial to commercial-resi- dential, while increasing the permissible ‘‘floor area ratio (““FAR’’).\4 The remainder of its property continued to be zoned residential. U.S. News was not wholly satisfied with some aspects of the Commission’s decision, for example, height restrictions on certain residential real estate adja- cent to Rock Creek Park. Challenges to the rezoning de- cisions generally, including the height restriction, and lawsuits by other dissatisfied landowners continued for years after the decision was rendered, through late 1977. In any event, during 1974 and immediately thereafter, the Company had no definite development plans for the real estate. While its directors and management were aware of the potential value of the real estate, they had no intention of selling those assets at that point in time. The appraiser who performed the year-end valuation for 1974, Mr. C.E.O. Walker, called as a witness by the Foltz “Floor area ratio’ is the figure which expresses the total gross floor area as a multiple of the area of the building lot (or parcel). This figure is determined by dividing the gross floor area of all buildings on a lot by the area of that lot. In other words, a greater permissible FAR allows the owner to build more densely on his property. 33a plaintiffs, offered convincing testimony and cautioned, as an experienced professional, that any realizable value should be attributed to the real estate only “if it was evident that the controlling interest had a firm and clear intent to dispose of the real estate within a very short or reasonable period of time[, that is,] absolute evi- dence. .. .not mere development plans.’”’ 23 Tr. 4524. See also 23 Tr. 4505-12. Mr. Walker was highly qualified to give this opinion. He had previously served as international president of the American Society of Appraisers and was also a member of the College of Fellows of that organi- zation. 23 Tr. 4493-95. In February 1976, the Oliver T. Carr Company, a rep- utable real estate development firm, responded to a re- quest to provide advice on the development potential of the U.S. News’ real estate and the construction of a new headquarters facility. The Carr report and study noted that there were many possibilities for development of the prop- erty, but at the same time commented that the ultimate choice as to the character and timing of any project would depend on such unpredictable factors as market conditions and the Company’s corporate objectives. The Carr Com- pany completed construction documents for a proposed headquarters building, following which U.S. News con- sulted with architectural planning and space design firms in anticipation of building. Nevertheless, no firm construc- tion commitments materialized under the project devel- opment agreement with Carr. In 1977, U.S. News management further explored with officers in the mortgage and trusts department of Riggs National Bank the financial feasibility of developing its real estate. Riggs advised that the Company’s financial con- dition was not sufficiently strong and cautioned against undertaking any significant real estate developments at the time. On the strength of that advice, the Company de- ferred further consideration of building a new corporate headquarters and of pursuing any other development plans. 34a Management discussed its hesitancy about immediate de- velopment with the employees, explaining further that if such developments were undertaken, they wanted to be certain that they would protect the Company from uncer- tain swings in its publishing-related business and assure source of profits from which contributions could be made to the Plan. See, e.g., PX 11 at 23, Question and Answer Session (““Q & A”) at 2. In early 1978, U.S. News again discussed real estate development plans with Carr Company representatives. Several alternatives were considered including develop- ment of part of the land, a partnership arrangement with a developer, and relocation of U.S. News headquarters elsewhere. These alternatives did not materialize into bind- ing development plans. During the class period the U.S. News directors kept American Appraisal fully informed of all real estate ac- quisitions and their considerations regarding development of the property. American Appraisal representatives were familiar with the location, size and use of the property; knew that the property had great potential and unrealized value; and discussed in their annual interviews with U.S. News officers the plans and considerations regarding pos- sible development. The working papers of the appraisers referenced con- templated developments of the property as presented in the 1976 Carr report. Their subsequent work papers and annual reports leading up to the 1981 joint partnership agreement with Boston Properties, Inc. likewise reflected full knowledge and awareness of those important events. However, until the development plans matured into a firm and clear intent to build within a reasonably certain ‘* The question and answer session referred to was one of many that took place at the annual shareholder luncheons held throughout the class period. PX 11 is the transcript of the 1978 meeting. 35a time frame, the realizable value of the real estate was not reflected in American Appraisal’s annual reports or the Company’s financial statements. This approach was sup- ported by credible testimony of representatives from American Appraisal. See, e.g., 23 Tr. 4505-12, 4524 (tes- timony of C.E.O. Walker). When more precise decisions were reached and it became certain that plans and dis- cussions had ripened and definite goals and timetables were set, these facts were reflected in the annual valuations performed by American Appraisal in the last several years of the class period. In interviews with the appraisers who performed the 1979 valuation, U.S. News announced that it expected to make a decision on developing its real estate within the next year. PX 77. Indeed, the appraisers were told that there was a strong likelihood that the Company would participate in some type of venture and that real estate prospects were very promising. Jd. The 1979 Amer- ican Appraisal report reflected these discussions, noting that management has recently begun studying various al- ternatives in the development of the company-owned real estate. There is a good possibility that after de- velopment, U.S. News will have a significant income producing property(s). While the development oi the real estate, and income therefrom, may be several years away, some weight must be given to this po- tential income source in valuing the common stock shares of U.S. News. PX 19 at 10. In preparing the 1979 report, American Appraisal under- stood that U.S. News might decide to develop its real estate, and it considered the realizable value of the real estate not currently needed in U.S. News’ publishing busi- ness to be a reasonable ‘“‘proxy”’ for estimating the effect that possible future development might have on an inves- 36a tor’s assessment of the value of U.S. News stock. Jd. at 15-16. Throughout this litigation, plaintiffs have challenged the uses to which the West End real estate was put. They charge that the U.S. News defendants should have re- garded the property as an excess asset—beyond the Com- pany’s reasonable needs—and that instead they purposely decided and otherwise failed to utilize the land at its high- est and best economic use. All of this, plaintiffs assert, was accomplished to their detriment and financial loss. Defendants have responded that the original real estate purchases were made ‘‘to protect [the Company’s] right to grow.” See, e.g., PX 38, Q & A at 4. Several of plaintiffs’ experts offered testimony as to what they regarded as excess real estate, which in their view the Company could have developed without interfering with its publishing busi- ness. Their testimony and analysis, however, was incom- plete and flawed; they failed to consider fully the problems and uncertainties encountered by U.S. News before 1973 and continuing in lesser degree until the mid-70’s, as dis- cussed supra, pp. 1502-03. Those problems precluded any type of realistic development plans. Much more important and significant was the fact that their testimony presup- posed that the interests of the plaintiffs and other share- holders similarly situated should have been valued on a control basis. See infra pp. 1514-30. One of the plaintiffs’ several contentions is that the defendant-directors, as fiduciaries, were derelict in failing to discharge their duties in determining and deciding U.S. News policy and keeping abreast of and knowledgeable about corporate affairs. This, they assert, was particularly true with respect to the annual appraisals performed by American Appraisal. The Court finds that such a claim is not supported by the record. The directors as a whole possessed varied abilities, training, and experience. Ac- cordingly, they appropriately relied upon each other and, 37a where necessary, on each other’s particular expertise. This was true in many areas of the Company’s business affairs. Other than John Sweet, two other members of the board of directors were particularly knowledgeable, important and active participants in the day-to-day operating and long- range development of corporate affairs. Bert Padrutt and his successor, Raymond Naimoli, played central roles dur- ing the class period in their position as treasurer and chief financial officer. Their fellow board members recognized the training, experience, intelligence and expertise that they brought to their office. The other directors who tes- tified at trial all asserted that they relied upon Padrutt’s, and then Naimoli’s, judgment and advice in matters re- lating to the requirements of the assignments undertaken by American Appraisal, major decisions relating to use of the real estate, corporate finances, and other matters in- volving business decisions as they related to and impacted on the employee shareholders and Plan beneficiaries. Padrutt was a certified public accountant with more than 15 years experience when he entered on duty as controller and later treasurer. Before joining U.S. News, he had worked with the Ernst & Ernst accounting firm (now Ernst & Whinney) and had been involved in their annual audits of U.S. News. During his tenure as chief financial officer, he regularly conferred with representatives of American Appraisal when they undertook their assignments, and he made the department heads and other directors available for conferences with the appraisers. He also reviewed and discussed with the appraisers their final reports to ensure that he understood their basic assumptions, that they were appropriate and well documented and that the final report could be supported and defended. The Court was left with the impression that Mr. Padrutt was a methodical, thorough and knowledgeable executive who knew what was required as chief financial officer under the circumstances. He understood he methodology 38a employed by the appraisers and believed that their ap- proach was appropriate. When it was required and dictated by the circumstances, he consulted with outside counsel, Don Harris of Covington & Burling, on matters relating to the Profit-Sharing Plan and employees’ stock interests. Naimoli was hired as chief financial officer in mid-1980. Like Mr. Padrutt. he possessed academic credentials and prior professional experience which equipped him for the position. As an accredited public accountant he had a pre- vious and widening work experience with a major account- ing firm, the Arthur Young Company. He also served for approximately 10 years as corporate controller for Scho- lastic Magazine, a reputable publication. Because U.S. News was experiencing unusual changes when he entered on duty and because of his recent introduction to U:S. News and to the appraisal of its closely held stock, he proceeded cautiously but with a recognition of immediacy. As did his predecessor, Naimoli consulted with Don Harris about the facts surrounding the 1962 reorganization, par- ticularly the methodology to be employed in valuing U.S. News’ stock.'® As a first assignment he reviewed prior efforts of the Company to develop its real estate with the hope of placing such efforts on a firmer track. See 30 Tr. 5982-84. In this connection U.S. News retained the law firm of Arnold & Porter in late 1980 to study development possibilities. In turn, Arnold & Porter hired the Julien Studley Company, a marketing consultant group, to assist in planning and to estimate current and projected values from development ‘© In addition, members of the Board, throughout the class period, relied upon the audits of the Plan’s financial statements by the ac- counting firm of Ernst & Whinney. Two of the auditors testified at trial that Ernst & Whinney’s review of the appraisal methodology used to calculate the value of the Class A shares was appropriate and rea- sonable. See 59 Tr. 11,398-99, 11,448-49 (McMahon); 60 Tr. 11,607-10 (Dietrich). i 39a of the real estate. In January 1981, Arnold & Porter sub- mitted an analysis of possible avenues for development, together with an optimistic report from Studley. Two al- ternatives were advanced for consideration: an immediate all-cash sale or a joint venture. On April 9, 1981, U.S. News distributed a prospectus developed by Arnold & Por- ter and Studley, soliciting a joint venture partner to de- velop its real estate. The Carr Company did not consider the proposal particularly attractive and did not submit a bid. Even so, on August 11, 1981, U.S. News signed a letter agreement with Boston Properties, Inc., providing for a series of limited partnerships to develop all of U.S. News’ real estate parcels in the West End. In December of 1983, an unsolicited offer was made to purchase the Company for $1,000 per share. The highest value at which the U.S. News stock had been appraised up to that point was only $470 per share. The employee- shareholders were advised and made aware of these de- velopments. Accordingly, with the consent of a majority of the beneficial owners of its stock, U.S. News solicited bids for sale of the corporation during the following spring. The winning bid was that of Mr. Zuckerman, a principal of Boston Properties. The magazine was subsequently sold in October of 1984 for $176 million, or roughly $2,800 per share. 2. Acquisition of Other Assets In addition to is real estate holdings, U.S. News ac- quired in 1975 and 1976 a minority stock interest in Atex, a supplier of photocomposition equipment to the magazine industry. While that stock was carried on the books at cost throughout the class period, when it was exchanged in 1981 at a significant profit for stock in the Eastman Kodak Company, the transaction was in part reflected in the 1981 annual appraisal. In 1978, U.S. News acquired a minority block of stock in Publishers Phototype, Inc., another photocomposition company. In 1981, U.S. News 40a made other investments and acquisitions, primarily in the phototypesetting field. American Appraisal’s treatment of these assets is considered infra, pp. 1530-33. The Foltz complaint was filed in February 1984, when previously retired employees learned from newspaper ac- counts that the December 1983 offer of $1,000 per share had been made. See 2 Tr. 216-18, 274-75 (Folz). The Rich- ardson suit followed and was filed in July of 1985. It was consolidated with Foltz in March of 1986 for pretrial pro- ceedings and trial.’ III. ANALYSIS While sometimes lost sight of, the central issue requiring resolution in this litigation has always been the propriety of the methodology employed in appraising the U.S. News stock. Plaintiffs maintain that the annual stock valuations, performed for U.S. News by American Appraisal, were ‘7 The 1984 sale of U.S. News occasioned a number of other lawsuits. Two of the directors who had been excluded from the class, see supra p. 1497, filed independent actions, John H. Adams v. U.S. News & World Report, Inc., C.A. No. 85-4038, and Estate of Ben Grant v. U.S. News & World Report, Inc., C.A. No. 86-0156. Adams was dismissed by stipulation of the parties, Order of March 13, 1986, while Grant was dismissed upon summary judgment. 639 F.Supp. 342 (D.D.C.1986). On May 12, 1986, a former employee who had retired in 1983 filed suit and hoped to have his case consolidated for trial with Foltz and Richardson, James E. Sacra v. U.S. News & World Report, Inc., C.A. No. 86-1297. That very ambitious request was denied by Order of Au- gust 17, 1986. Sacra is currently awaiting the outcome of Foltz and Richardson. Finally, on January 29, 1987, after trial of Foltz and Richardson, two additional former employees filed suit, represented by the Rich- ardson counsel, Russell W. Fritz v. U.S. News & World Report, Inc., C.A. No. 87-0207 and Gaynelle L. Mallard v. U.S. News & World Report, Inc., C.A. No. 87-0208. Mr. Fritz retired in 1982 and Ms. Mallard in 1983. Those cases are again awaiting a ruling on the claims in these consolidated proceedings. 4la not only grossly inaccurate throughout the class period, but were the result of collusion between those two defendants. Their basic quarrel with the appraisals is that they did not value the Plan’s stock holdings, which con- stituted a majority of the Company’s outstanding stock, on a control basis. This alleged failure, in turn, resulted in the minimization or exclusion from the appraisals of the value of the Company’s non-operating assets, primarily the real estate. As analyzed by the Court in its summary judgment opin- ion entered in Richardson, plaintiffs’ claims in both actions fall more or less neatly into two categories. See 639 F.Supp. at 599. The first comprises claims premised upon inten- tional or fraudulent conduct and includes claims for breach of the fiduciary duty of loyalty under ERISA § 502(aX3), securities and common-law fraud, common-law breach of fiduciary duty, and unjust enrichment. The second encom- passes claims based upon negligent, imprudent, arbitrary or capricious conduct and includes claims for benefits due under ERISA § 502(aX1XB), for breach of the fiduciary duty of care under ERISA § 502(aX3), and for negligence and negligent misrepresentation. The effect of the Court’s summary judgment decision in Richardson and of its ruling on defendants’ Rule 41(b) motions in Foltz was to dismiss all those claims premised upon intentional or fraudulent conduct, on the grounds that there was no evidence in the record that any of the defendants engaged in any course of conduct designed deliberately to undervalue the Com- pany’s stock. See 639 F.Supp. at 603-10; 54 Tr. 10,326- 27, 10,328-33. What remains are plaintiffs’ allegations that U.S. News, the director-defendants, and the Plan acted negligently or unreasonably in accepting American Appraisal’s valuations for each of the class years. The second portion of the trial as to liability, commencing with the beginning of defendants’ case-in-chief, dealt extensively and exclusively with whether the appraised values were reasonable in light 42a of the circumstances. In this connection, plaintiffs and defendants presented several expert witnesses each. Their testimony addressed the issue of whether what was done during the class period conformed to acceptable and rec- ognized procedures and standards and was otherwise ap- propriate and, if not, what should have been done. Defendants also presented an additional expert, Mr. Ches- ter Gougis, who had undertaken an independent, ‘‘blind’’ appraisal of the Company’s stock during each of the class years. His testimony was proffered to corroborate Amer- ican Appraisal’s valuations. After consideration of the expert testimony presented, the Court is not persuaded that the appraisal methodology was improper or flawed, or that the per-share price arrived at each year by American Appraisal did not fall within a reasonable range of acceptable values. Having decided that the appraised values were reasonable, the Court must and does conclude that their acceptance and use by U.S. News was reasonable and thus cannot form the subject of any cause of action. Accordingly, the Court determines that plaintiffs have simply suffered no redressable injury, initial appearances aside. The Court also concludes that, because the Plan stock was reasonably valued on a minority-inter- est basis, the common or bonus stock was necessarily prop- erly so valued. The Court now presents its findings of fact and conclu- sions of law with respect to defendants’ motions under Fed.R.Civ.P. 41(b), which dealt solely with the issue of intentional or fraudulent conduct. It then addresses the controversial and central] issue dealing with the appropriate appraisal methodology. A. Defendants’ Motions to Dismiss and for Judgment Under Rule 41(b), Fed.R.Civ.P. The Court’s bench ruling on defendants’ Rule 41(b) mo- tions served to narrow further the issues remaining to be considered following plaintiffs’ case-in-chief. The initial 43a findings announced from the bench were not detailed. It is thus necessary to flesh out the findings of fact and conclusions of law in greater depth as contemplated under Fed.R.Civ.P. 52(a). In expanding upon its previous oral ruling, the Court again notes that, ‘‘[i]n a case tried with- out a jury, the trial court is not required to consider the evidence in the light most favorable to the plaintiff in determining whether to grant a motion to dismiss under Rule 41 made at the completion of the plaintiff's case.”’ Woods v. North American Rockwell Corp., 480 F.2d 644, 645-46 (10th Cir.1973). ‘‘Rather, the court is required t weigh all the evidence, resolve any conflicts and .. . decide itself where the preponderance lies.”’ Albright v. United States, 558 F.Supp. 260, 264 (D.D.C.1982), affd, 732 F.2d 181 (D.C.Cir.1984). The bench ruling eliminated from Foltz all claims prem- ised upon intentional or fraudulent conduct—that is, claims for securities and common-law fraud, common-law breach of fiduciary duty and unjust enrichment, as well as claims for breach of the fiduciary duty of loyalty under ERISA § 502(aX3). All such claims had previously been considered and eliminated from Richardson on summary judgment, so that the bench ruling in Foltz placed both cases on equal footing. As originally pleaded, plaintiffs’ claims of intentional or fraudulent conduct on the part of the several defendants appeared at first blush to be superficially plausible. Their seeming vitality and strength sprang from an initial per- ception that the class plaintiffs had been treated unfairly compared with those U.S. News employees who had ben- efited from the 1984 multimillion dollar sale of the Com- pany. As the trial unfolded,** however, it became ** While in Richardson defendants challenged the substance of plaintiffs’ claims of fraud or other intentional wrongdoing on summary judgment, resulting in their dismissal, the Foltz summary judgment motions for the most part only dealt with certain threshold legal ques- A Ae ta increasingly apparent that the claims were not supported py reliable and credible evidence. Indeed, with the benefit fa considerable record of discovery and trial testimony, it is clear that the various claims to some degree are mutually contradictory. Plaintiffs charge both that U.S News conspired with American Appraisal to undervalue the Company’s stock and withheld information from the ppraisers. In this way, plaintiffs portray the appraisers both as active wrongdoers and as unwitting dupes. While such a contradiction might have been tolerable at the pleading and discovery stage, its continued existence at trial indicates that plaintiffs simply failed to develop a reasonable and plausible theory of their case in this re- spect. Accordingly, those defendants accused of intentional or fraudulent conduct—that is, U.S. News, the director- iefendants, and American Appraisal—moved to dismiss all claims against them premised on such conduct. 1. Claims Against the U.S. News Defendants jaintiffs have failed to carry their burden of demon- strating that U.S. News conspired with American Ap- praisa] in any way to manipulate the appraisal process and to undervalue the Company’s stock. The same is true of their claim that the U.S. News defendants withheld in- formation from American Appraisal concerning the Com- pany’s real estate development plans, or that the Company and its directors withheld information from the employees concerning those plans and concerning the appraisal meth- odology employed generally. None of these claims finds support in the testimony presented by plaintiffs. a. Conspiracy with American Appraisal To demonstrate a conspiracy between U.S. News and American Appraisal, plaintiffs succeeded in pointing to only two instances of alleged wrongdoing, arising from the year- end 1978 and 1980 appraisals, from which they urge the tions. Therefore, as of the commencement of trial, many claims of fraud or other intentional wrongdoing remained for resolution in Foltz. 45a Court to draw an inference of fraudulent conduct. Such an inference would be completely unwarranted, as is dis- cussed in connection with the claims against American Appraisal, infra. In addition to the absence of any conspiratorial conduct on the part of the U.S. News directors, defendants have pointed to the absence of any motive on their part for undervaluing the Company’s stock. They argue instead that, like any managers, they had every reason to maxi- mize the value of the Company’s stock in each year. Plaintiffs insist, however, that the operation of the de- ferred compensation structure set up for the benefit of the directors supplied a motive for undervaluing the stock. Subsequent to the 1962 reorganization, U.S. News di- rectors and officers were no longer able to purchase shares in the Company.'* Instead, a deferred compensation plan was instituted, briefly noted supra, whereby directors and other key employees were awarded blocks of ‘phantom stock,’’ redeemable upon retirement at the appraised price of the Company’s Class A and common shares. The phan- tom stock shares could not be voted and were subject to forfeiture if the awardee left the Company before normal retirement. ; While such shares were awarded at periodic intervals until each holder received a maximum of 2,400 shares, in 1982, for various reasons that have been fully explored and dealt with elsewhere, see 639 F.Supp. at 604-05, and which with benefit of later trial testimony need not be further discussed, awards to several eligible persons were accelerated by the Board. When the Company was sold in 1984, the phantom stockholders received payment for their shares from Mr. Zuckerman, but at a price considerably less than that paid for the Class A and common stock. '* Neither were they eligible to participate in the stock bonus plan They were eligible to participate in the Profit-Sharing Plan. 46a Throughout this litigation, plaintiffs have maintained that there was something wrongful about the phantom stock awards. Unfortunately, they have failed to articulate ex- actly what it is that the Court should be concerned with. See 627 F.Supp. at 1174. Presently, they argue that the awards created in the director-defendants some perverse incentive for undervaluing the Company’s stock during the class period. Specifically, they have attempted to show that the directors were concerned that a rapid rise in the amount of benefits to be paid separating employees, trig- gered by a “full” valuation of the Company’s stock, would have forced the Company to be prematurely liquidated before they could ‘‘cash in” their phantom stock interests. If anything, however, the natural incentive on the part of the directors would have been to ensure that the Com- pany’s stock be fully valued on whatever date their phan- tom stock obligations were to be redeemed. Defendant Keker, for instance, was concerned that, upon his reaching retirement age in 1982, his key employee shares*’ should not be redeemed until sometime later. 4 Tr. 793-800. If it were only a question of manipulating the appraisal proc- ess, he would have been interested in ‘‘manipulating”’ the 1981 valuation upward, knowing that he faced his normal retirement date in 1982. Similarly, other directors re- deemed stock during the class period and thus would have made unlikely participants in a conspiracy to undervalue the Company’s stock during that time. See Estate of Grant v. U.S. News & World Report, Inc., 639 F.Supp. 342, 345- 46 (D.D.C.1986) (Ben Grant); 25 Tr. 4996 (Howard Flie- ger); PX 1 (Robert Osmond, John Adams).*! Not only does 2 Mr. Keker held 2,400 shares of key employee stock, which he ac- quired before the reorganization. 3 Tr. 428-30. Yet whether he held phantom stock or key employee shares, his incentive not to have those shares undervalued would have been the same. 21 Indeed, former directors Grant, Adams, Osmond, Flieger and Kirby were originally members of the plaintiff class, but were later excluded. See supra pp. 1497-98; see also Estate of Grant, 639 F.Supp. at 344. 47a plaintiffs’ theory appear fanciful and illogical, but more importantly it is contradicted by the only credible testi- mony and documentation in the record. Accordingly, the Court lays to rest, and with finality, any concern that the deferred compensation rights awarded to individuals at U.S. News were somehow wrongful. b. Nondisclosure of Information to American Appraisal It is undisputable that U.S. News gave American Ap- praisal all relevant information regarding the 1981 joint venture agreements. Richardson, 639 F.Supp. at 603-04. While plaintiffs might quarrel with the manner in which American Appraisal treated this information in the 1981 valuation, certainly nothing that was done or not done is in any way reflective of fraud or intentional misconduct. It is true, however, that American Appraisal’s treatment of the U.S. News real estate in 1981 was more involved than usual. But if the appraisers gave less attention to the real estate in prior appraisals, it was not because U.S. News had withheld information from them. In 1981, when the year-end 1980 appraisal was con- ducted, U.S. News had received the Julien Studley report, analyzing the development potential of the Company’s real estate. When chief financial officer Ray Naimoli offered the report to the appraiser, David Marshall, Mr. Marshall indicated that, in the absence of a firm commitment by a developer, such a study would not be relevant to an ap- praisal of the Company’s stock. 31 Tr. 6245, 6247-48 (Nai- moli). Nevertheless, Naimoli told Marshall that Studley had arrived at a FAR value of $53.” The only other real estate plans of note were contained in the 1976 proposal of the Oliver T. Carr Company to * With a FAR of 6, the $53 value works out to $320 per square foot. 48a construct a new headquarters building. The notes of the appraisers who performed the 1975, 1976 and 1977 ap- praisals knew of the Carr plans. PX 782 at 10,875; PX 294. Mr. Marshall, who did the appraisals for 1978 through 1981, contacted the Carr Company himself with regard to the 1978 report and was directed to the Carr Company by U.S. News with respect to the 1979 report. PX 67, 77, 85. Not only did U.S. News not withhold information rel- evant to its real estate development plans, but by the admission of plaintiff's own rea] estate expert, Mr. William Harps, such proposals in the absence of a finalized plan for development would not even be relevant to a real estate appraisal, much less to a stock appraisal. See 33 Tr. 6599; 34 Tr. 6766-69. For that same reason, Marshall's lack of interest in the 1980 real estate analysis offered him by Naimoli was not unjustified. c. Nondisclosure of Information to U.S. News Employees Plaintiffs contend that the U.S. News defendants wrong- fully concealed information about the Company and its appraised value that would have been relevant to them. In its summary judgment ruling, the Court recognized that, if plaintiffs could show that they would have altered their retirement plans upon receipt of information that had been withheld, information indicating that the Company was un- dervalued, they could make out a claim for securities fraud and, by extension, common-law fraud. See 627 F.Supp. at 1159-61. On the present record, however, it is clear not only that there was nothing to conceal—the Company's stock had not been undervalued—but that U.S. News did disclose information relevant to the areas of concern here. First, U.S. News made no attempt to conceal the fact that American Appraisal valued the Company every year on a minority-interest basis. At the annual spring share- holder luncheons beginning in 1974, and at more informal 49a gatherings, Chairman John Sweet and other members of the Board freely disclosed that the Company could be sold for several times the value that one would obtain if one were to multiply the appraised price per share by the number of outstanding shares. Even if this information, spelled out specifically at the 1978 annual shareholder luncheon, see PX 11, Q & A at 11, did not make the matter plain enough, certainly such a revelation would be inconsistent with an attempt to keep the information se- cret. See Richardson, 639 F.Supp. at 603 n. 16. As a general matter, the annual shareholder luncheons afforded employees an opportunity to obtain a fair amount of information about the financial circumstances of the Company. While Mr. Lawrence met with his employees on a regular basis, he tended to be relatively tight-lipped about Company affairs, fearing the leak of information that might prove helpful to competitors. Mr. Sweet, on the other hand, was more forthcoming in answering employees’ queries about their Company. See 2 Tr. 333-35 (Foltz). Beginning with those for year-end 1976, Sweet distributed written summaries of the Company’s financial statements, in ad- vance of the annual luncheons. PX 144-48. At the meetings Sweet would cover the Company’s financial developments during the previous year in some detail. Employees were invited to ask questions at the conclusion of his remarks. There were no limits on the questions that could be asked,” and no one was made to feel inhibited. See 2 Tr. 251 (Foltz). Transcripts were made available for all those who could not attend the meetings, including those persons assigned to stations outside the Washington area. With respect to the treatment of the real estate in the annual appraisals, the absence of any attempt to conceal relevant information is even more striking. At the 1974 ** Mr. Sweet, as a matter of policy, declined to answer employees’ questions concerning the compensation of persons working for the Com- pany. 50a shareholder luncheon, for instance, Mr. Sweet, recently elected Chairman of the Board, told those present that the Company’s real estate was carried on the books at only one-third of its full value. PX 37, Q & A at 12. While in ruling on the Foltz motions for summary judgment, the Court declined to find that that revelation removed any material issue of fact as to notice on the part of plaintiffs, 627 F.Supp. at 1151, the situation is somewhat different in the present posture of this case. First, whether or not Chairman Sweet’s remarks were sufficient to impute notice to the class is a question that must be answered only upon finding that defendants engaged in a course of conduct designed to conceal some alleged wrongdoing. On the pres- ent record, however, it is clear that no such concealment was attempted. Rather, Sweet’s remarks at the 1974 luncheon are merely illustrative of management’s lack of interest in keeping things secret. Second, at the summary judgment stage, the Court was concerned that plaintiffs’ knowledge of how the real estate was treated on the books might shed too little light on their understanding of how it was treated in the appraisals. See 627 F.Supp. at 1151. However, after the conclusion of plaintiffs’ case-in-chief, it became evident that plaintiffs were under no misappre- hension as to whether the Company’s potential real estate bonanza was fully reflected in their appraised value of its stock. In fact, several of the class plaintiffs testified freely at trial that, during the class period, they believed that the real estate was undervalued and not adequately ac- counted for in the annual appraisals. See 2 Tr. 406-08 (Foltz); 24 Tr. 4850 (Edward Castens). In view of such sentiments among its employees, the Company’s disclosure that its real estate was carried at only one-third of value is certainly inconsistent with any plan of concealment. Neither did management attempt to conceal the status of the Company’s plans for the development of its land. See, e.g., 2 Tr. 354-59 (Mr. Foltz was generally aware of the Company’s development plans). Employees were told 5la when plans toward the construction of a new headquarters building were suspended; they were notified when pro- spective joint venture partners were solicited in 1981 and, again, when the joint venture agreements were signed with Boston Properties later that year. At the same time that they were told of the joint venture solicitations, plaintiffs were pointedly advised that they might want to consider leaving their account balances in the Plan so that they might share in and secure the benefits of the anticipated increase in the value of the Company’s stock. PX 50. Plaintiffs point to two instances, however, where man- agement was in their view less than forthright in keeping them advised of relevant information. First, they adduce a December 1980 memorandum to Company department heads from Mr. Sweet, PX 319, which enclosed a second memorandum to be circulated to employees, notifying them of potential development plans. In the cover memorandum, Sweet instructs the department managers not to go be- yond the contents of the enclosed memorandum in their discussions with employees. When the Foltz summary judg- ment motions were considered, it seemed at least plausible that the cover memorandum suggested a secretive attitude on the part of management, consistent with a pattern of concealment. 627 F.Supp. at 1158. After considering the relevant trial testimony, however, the Court has little doubt that Mr. Sweet’s real concern was that employees not be provided with overly optimistic assessments of future de- velopments, which might have led them to act hastily in making their retirement plans. See 25 Tr. 4941 (Sweet). Plaintiffs similarly point to an October 21, 1980 letter from Treasurer Bert Padrutt to outside counsel Don Har- ris, PX 317, in which Padrutt questions Harris about po- tential liability to employees who might retire between the announcement of development plans and the next ap- praisal. Padrutt was concerned that such employees, who would receive benefits based on the value of the Compa- ny’s stock as of the close of the last calendar year, would _ 52a fee] deprived in not benefiting from any increase in the value of the Company’s stock during the current year. In fact, to avoid precisely this contingency, the directors voted subsequent to the signing of the joint venture agreements in 1981 to award benefits to employees retiring between that date and December 31, 1981 based upon the value of the stock as of the latter date. See 42 Tr. 8255-57 (Pad- rutt). 2. Claims Against American Appraisal Upon entry of partial summary judgment for defendants in Foltz, the claims against American Appraisal for in- tentional wrongdoing were reduced to claims for securities and common-law fraud arising out of the conduct of the year-end 1978 and 1980 appraisals and for participation with the U.S. News defendants in a breach of fiduciary duty under ERISA § 502(aX3) with respect to the ap- praisals for 1977 through 1980. On closer inspection, how- ever, the record reveals no such conduct either on the part of U.S. News and the director-defendants or American Appraisal. With respect to the 1978 and 1980 appraisals, plaintiffs point to certain apparent irregularities that they claim in- dicate a deliberate undervaluation of the Company’s stock. In ruling upon defendants’ motions for summary judgment, the Court believed that further inquiry into these matters was merited and, consequently, declined to grant defendants summary judgment as to claims arising out of these instances of apparent misconduct. See 627 F.Supp. at 1152-53, 1156, 1163, 1179-81. With benefit of relevant testimony and a full trial record now before the Court, it is clear that these challenges are lacking in merit. Pointing to the 1978 appraisals, plaintiffs complain that the final value of $105 per share was arrived at after a senior appraiser, not otherwise involved with the valuation * On summary judgment in Richardson, all claims against American Appraisal were dismissed. 53a for that year but who had done appraisals in prior years, provided U.S. News with that figure in advance of the completion of the final report. The two appraisers assigned to the valuation for that year had arrived at a somewhat higher preliminary figure of $117-118, but acquiesced in the $105 value. The more senior of the two appraisers testified that he was actually more comfortable with the second approach and that, in any event, any figure within the range of $105 to $118 would have been reasonable. 28 Tr. 5571-87; 29 Tr. 5913-16, 5950-51 (John Russell). It is undisputed that U.S. News knew only of the $105 num- ber and was not privy to any discussions among the ap- praisers of any other figures. Hence, the final value of $105 could not have been the product of any collusion between U.S. News and American Appraisal and was not the result of a vena] desire to keep the value per share as low as possible. Moreover, because the testimony dem- onstrates, and the Court finds, that the appraised price of $105 per share was within a range of reasonable values, the publication of that value by American Appraisal cannot be seen as the result of any deliberate misconduct, nor its acceptance by U.S. News as unreasonable. With respect to the 1980 appraisal, plaintiffs charge that the appraiser might have been improperly influenced by a remark, made by Mr. Naimoli during a standard interview, that a certain range of values had been given to the Com- pany’s auditors for use in performing some unrelated cal- culations. See 627 F.Supp. at 1153 & n. 12. The uncontroverted testimony is that there was no such influ- ence and that the remark was perfectly innocent. Hence, no possible liability could attach to its utterance. Plaintiffs’ ERISA claims against American Appraisal fare no better. In ruling on that defendant’s motion for summary judgment in Foltz, the Court held that, with respect to claims falling within the statute of limitations period (1.e., those arising out of the 1977 through 1980 appraisals), American Appraisal might be liable for par- 54a ticipating in or furthering a fiduciary breach on the part of U.S. News and the director-defendants. See 627 F.Supp. at 1156, 1168. Yet, as is now apparent, there was no breach of fiduciary duty on the party of U.S. News or its directors. Such a breach would have occurred, under plaintiffs’ theory of the case, if those defendants had sought intentionally to undervalue the Company’s stock to the detriment of the employee participants in the Plan. How- ever, the Court finds that there is no evidence in the record to support a finding that defendants engaged in any sort of deliberate misconduct. Moreover, as discussed infra, the Court further finds that the Company’s stock was not undervalued at all. In sum, plaintiffs have failed to support their claims by a preponderance of the evidence. After months of testi- mony, the record clearly shows that neither U.S. News, its directors, nor American Appraisal engaged in any scheme of deliberate misconduct designed to defraud or otherwise injure plaintiffs in any way. B. The Nature of the Court’s Inquiry—Valuation Issues This litigation is concerned not with fraud, but with the proper apportionment of the proceeds or benefits from the sale of an employee-owned business. As the law stands now, such proceeds will not be distributed to former em- ployees who left the business prior to the sale, unless it can be shown that they would have been entitled to a greater portion of benefits at the time they separated. In other words, the approach to be used is not retrospective, but prospective. One must look at the situation as of the time that each employee separated from the Company. Therefore, the appropriate inquiry is whether the Company was properly valued during the class period, not whether former employees become eligible for a greater share of benefits upon the contingency of a subsequent sale. 55a Employee benefits plans, like the one at issue here, are governed by two spheres of regulation, the private and the public.» Such plans are established by private parties— either by the employer acting alone, or by agreement be- tween the employee and employees—and generally operate according to the terms established by the controlling doc- uments. If, however, one or more of such terms conflicts with any provision of federal regulation, in this case ER- ISA, then those terms are rendered invalid. Hence, in examining whether plaintiffs are owed additional benefits, one must answer two questions. First, under the terms of the documents governing the Profit-Sharing Plan, are plaintiffs owed greater benefits than they received? Sec- ond, if not, are there supervening provisions of federal law that render the relevant Plan provisions invalid and that entitle plaintiffs to greater benefits? Finally, if neither the Plan provisions nor the requirements of ERISA speak directly to the issue here raised—the proper amount of plaintiffs’ benefits—then the Court must satisfy itself that what was done falls within a range of conduct permitted by both spheres of governance. 1. Standard and Scope of Review In the Foltz summary judgment decision, it was unnec- essary to define exactly the appropriate standard against which the conduct of plan fiduciaries should be judged, since it was found that plaintiffs were not entitled to sum- mary judgment on their ERISA claims under even the least deferential standard. 627 F.Supp. at 1169-70. The Court did note that a determination of pension eligibility or of the appropriate level of benefits to be paid appeared to be governed by the ‘‘arbitrary and capricious’ standard *s While state courts are granted concurrent jurisdiction to hear ac- tions for benefits due under ERISA § 502(aX1\B), id. § 502(eX1), 29 U.S.C. § 1132(eX1), with limited exceptions ERISA preempts all state laws governing employee benefit plans. Id. § 514(a}(c), 29 U.S.C. § 1144(a}{c). 56a of review, id. at 1169 & n. 55, even-_though that standard might be applied with a ‘‘stern hand and flinty eye,” id. at 1170 (quoting Maggard v. O'Connell, 671 F.2d 568, 572 (D.C.Cir.1982)). Plaintiffs continue to urge the Court to adopt a stricter “prudent man’”’ standard, found in section 404(aX1\B) of ERISA, 29 U.S.C. § 1104 (aX1\B). That section requires a fiduciary to discharge his duties ‘‘with the care, skill, prudence, and diligence under the circumstances ... that a prudent man ... would use....’’ While that provision does appear, at least superficially, to demand application of a ‘prudent man” standard, the relevant case law makes it fairly clear that it has no application to the present situation. A useful gloss is placed on the requirements of section 404(a) by Struble v. New Jersey Brewery Employees’ Wel- Jare Trust Fund, 732 F.2d 325 (3d Cir.1984). Struble ac- knowledged that courts have generally adopted an ‘arbitrary and capricious’ standard in assessing the denial of personal claims for benefits. Jd. at 333. The court then contrasted such a situation with those presented in Don- ovan v. Cunningham, 716 F.2d 1455 (5th Cir.1983), cert. denied, 467 U.S. 1251, 104 S.Ct. 3533, 82 L.Ed.2d 839 (1984) and Donovan v. Bierwirth, 680 F.2d 263 (2d Cir.), cert. denied, 459 U.S. 1069, 103 S.Ct. 488, 74 L.Ed.2d 631 (1982). In both Cunningham and Birerwirth, the fi- duciary charged with improper conduct could be said to have either subordinated the interests of the plan bene- ficiaries to those of a third party, or to have wasted plan assets. The Struble court concluded that in such situations the appropriate standard of review was that contained in section 404(a) and not the “arbitrary and capricious’”’ standard. 732 F.2d at 333-34; see also Fink v. Natwonal Savings and Trust Company, 772 F.2d 951, 955-56 (D.C.Cir.1985). The ‘‘arbitrary and capricious’ standard does apply, however, where the issue is whether the plan fiduciaries have properly balanced the interests of different 57a classes of beneficiaries. Fiduciaries thus have broad dis- cretion to resolve the often competing concerns of present and future claimants in order to preserve the financial stability of funds while allocating assets to the advantage of all beneficiaries. Jd. A number of courts have followed Struble in its analysis of the proper scope of review, or have otherwise found that the ‘‘arbitrary and capricious” standard is appropriate in assessing a fiduciary’s interpretation or implementation of plan terms, when no outside interests press on the balance. See, e.g., Holland v. Burlington Industries, Inc., 772 F.2d 1140, 1148-49 (4th Cir.1985), cert. denied, —__ U.S. __ , 106 S.Ct. 3271, 91 L.Ed.2d 562 (1986); Edwards v. Wilkes-Barre Pub. Co. Pension Trust, 757 F.2d 52, 55- 57 (3d Cir.1985), cert. denied, 474 U.S. 848, 106 S.Ct. 130, 88 L.Ed.2d 107 (1986); Ganze v. Dart Industries, Inc., 741 F.2d 790, 792-93 (5th Cir.1984). Without discussing the dichotomy posited in Strubdle, our Circuit Court has nevertheless recently held that, where trustees face a choice between reasonable alternatives in interpreting or implementing the terms of a plan ‘‘[cJourts will substitute their judgment for that of trustees only if the trustees’ actions are not grounded on any reasonable basis. Choices between reasonable alternatives, it follows, are for the trustees, not the courts.’ Stewart v. National Shopmen Pension Fund, 795 F.2d 1079, 1088 (D.C. Cir.1986). In Stewart a change in pension calculation, inter alia, reduced monthly pension benefits to a 74-year-old retiree from $80 to $9. Even so, the trustees’ action was reviewed under the arbitrary and capricious standard. In determining whether a fiduciary’s interpretation of the terms of a plan document is arbitrary or capricious, four factors should be considered: (1) whether the inter- pretation is contrary to the language of the plan; (2) whether it is consistent with the purposes of the plan; (3) whether it is consistent with the purposes of the particular ee 58a provision itself; and (4) whether it is consistent with prior interpretations and whether beneficiaries were on notice of the interpretation. Donovan v. Carlough, 576 F.Supp. 245, 249 (D.D.C.1983), affd mem., 753 F.2d 166 (D.C.Cir.1985). With these factors in mind, the Court now turns to a consideration of the controlling documents under which the Plan was operated: the U.S. News Profit-Shar- ing Plan Document, PX 6, (‘‘Plan Document’’) and the Articles of Incorporation, PX 2. 2. The Controlling Documents The U.S. News Profit-Sharing Plan was established as ‘‘a defined contribution plan,’ into which the Company paid contributions on behalf of its employees, based upon their compensation, up to a maximum limit. While each member of the Plan had his own account, Plan Document € 6.2,° the accounts together constituted ‘‘a [single] fund {to] be invested and administered as a unit.” Jd. | 6.3. Those investments included a modest portfolio of market- able securities and, most importantly, the 50,000 shares of U.S. News Class A stock. The net value of a member’s account was stated to be his ‘‘undivided share of the cash, securities and other property in the Fund,” including the Class A stock. Id. ¢ 6.4. No member was deemed to have title to any specific assets of the Plan. Jd. ¢ 6.11. The Plan Document in paragraph 6.3 further provided that the value of the Class A stock was to be determined each year in accordance with Article Fifth (e) of the Ar- ticles of Incorporation. Article Fifth established the mech- anism by which the beneficial ownership of the Company was to vest in its employees, “directly or through the corporation’s profit-sharing trust.” Its provisions thus gov- erned both the Class A and common stock. Under Article Fifth (b), a holder of stock could not sell, transfer or *6 While the original Plan Document was amended from time to time, none of the changes made are material to this litigation. 59a otherwise encumber his shares; if he attempted to do so, the Company at its option could call the shares under Article Fifth (c). That latter provision also gave the Com- pany an option to call the stock in the event that an employee retired, died, or otherwise ceased employment with U.S. News. The value of the stock—both Class A and common—for purposes of Article Fifth was to be its “fair market value’ ‘“‘agreed upon by the parties,”’ or as de- termined by an appraiser to be selected annually by the Board of Directors. Id. ¢ (e).27 The appraiser was to render his annual valuations ‘‘without regard to the restrictions on transfer of stock contained in [the] Article[,]’’ using the ‘“‘methods and standards recognized by the regulations of the United States Internal Revenue Service as appropriate for determining fair market value of corporate stock.” Jd. Article Fifth (g) further provided that the option price was payable in cash or in notes of up to 15 years’ maturity, bearing 5 percent simple interest, and subordinated to other debts of the corporation. As is readily apparent, the two controlling documents are not particularly illuminating on the question of whether the Company’s stock—either Class A or common—was to be valued on a majority- or minority-interest basis. All that one learns upon reading the relevant provisions of the documents is that it was assumed that the Class A and common stock would be valued equally. If that fact had any significance in 1962, at the time the Company was reorganized, it was that the drafters of the documents contemplated that both classes of stock would be valued on a minority-interest basis. This appears to be so in view of the fact that, as of 1962, no shareholder, including the 2 Throughout the history of the Company, it was the practice always to retain an appraiser, rather than to seek an agreement on the proper price. Article Fifth(e) did, however, afford employees the right, under certain conditions, to seek reappraisal of the stock. That provision was reprinted on the reverse side of the voting trust certificates issued to employee-shareholders in lieu of stock. 60a Plan, held more than a minority interest in the Company. Hence, had the Plan sold its holdings back to the Company at any time before 1971, when it became the majority shareholder, it would have been appropriate for it to have done so for a minority price.* Finally, the fact that the fiduciaries charged with ad- ministering the Plan interpreted paragraph 6.3 of the Plan Document and Article Fifth (e) to require that the Class A stock be accorded the same minority value as the com- mon stock was certainly not unknown to the Company’s employees. Account statements and other documents given periodically to the employees made it reasonably clear that the annual appraisals ordered each year yielded a single per-share value, which was then used with respect to both the bonus and Class A stock. Indeed, no plaintiff testified that he was led to believe that there were in fact two such values. In short, the fiduciaries’ interpretation of the relevant documents was not only consistent with the lan- guage of the Plan and its purposes,”* but was consistently used and was understood by the Plan beneficiaries. Car- lough, 576 F.Supp. at 249. Recognizing that the Plan Document and Articles of Incorporation were drawn up long before the enactment of ERISA, and noting too that, by the beginning of the Class period the Plan attained a majority position in the Company, it is necessary then to examine whether the continued valuation of the Plan’s stock on a minority-in- terest basis violated ERISA as a matter of law. * Noteworthy, too, is the fact that the Plan Document nowhere states that Plan members were to share ratably in the value of the Company’s assets as a whole. ** The extent to which the valuation of the Plan stock on a minority basis, by reference to Article Fifth, was consistent with the purposes of the Plan will be discussed further, infra pp. 1524-30. 6la 3. Requirements of ERISA ERISA, enacted in 1974, became effective as of January 1, 1975. The statute was designed to establish uniform, comprehensive and consistently applied protections for the beneficiaries of employee benefit plans. See ERISA § 2, 29 U.S.C. § 1001 (Congressional findings); 120 Cong.Rec. 29933-35 (1974) (remarks of Sen. Javits); id. at 29928, 29933 (remarks of Sen. Williams) (preemption of state law), reprinted in 1974 U.S. Code Cong. & Ad. News 4639, 5177, 5188-89. Congress’ primary concern was with the financial soundness of the plans covered, the conduct of those administering them, and the fair treatment of their beneficiaries. Accordingly, the statute as enacted requires plan administrators to report on fund resources and ac- tivities to the Secretary of Labor and to employee bene- ficiaries, 29 U.S.C. §§ 1021-31; regulates participation and vesting r [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_1282%3A2. Public record. Not legal advice.