Opposition Brief — Summers v. State Street Bank & Trust Co. (Nos. 06-439, 06-602)

Supreme Court, U.S.

FILED

Y NOV 27 2006

No. 06-439 OFFICE OF THE CLERK

IN THE

Supreme Court of the Wnited States

JERRY SUMMERS, GEORGE T. LENORMAND, JEFFERY D.

CRITES, LOUISE VAN RAENSBURG and JAMES E. SHAMBO,

individually and on behalf of all others similarly situated,

Petitioners,

v.

STATE STREET BANK & TRUST COMPANY,

Respondent.

On PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES Court OF APPEALS

FOR THE SEVENTH CIRCUIT

BRIEF IN OPPOSITION

RANDALL J. SUNSHINE

Counsel of Record

RONALD S. KRAVITZ

Kim ZELDIN

LINER YANKELEVITZ SUMSHINE

& REGENSTREIF LLP

1100 Glendon Avenue, 14th Floor

Los Angeles, California 90024

(310) 500-3500

Counsel for Respondent

205006 g

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

i

QUESTION PRESENTED

Did the Seventh Circuit err in affirming the district

court’s grant of summary judgment, concluding Petitioners

presented insufficient evidence to overcome the presumption

that the directed trustee of an employee stock ownership plan

fulfilled its fiduciary duty by following the directions of the

named fiduciaries to remain invested in employer stock?

li

LIST OF PARTIES AND DISCLOSURE STATEMENT

PURSUANT TO RULE 29.6

In addition to the parties identified in the caption, the

following were parties in the consolidated appeal proceedings

before the Seventh Circuit Court of Appeals: UAL

Corporation Employee Stock Ownership Plan Committee,

Marty Torres, Barry Wilson, Doug Walsh, Ira Levy, Don

Clements, and Craig Musa.

Respondent State Street Bank & Trust Company (“State

Street”) is a wholly-owned subsidiary of State Street

Corporation, a bank holding company with no other business.

iii

TABLE OF CONTENTS

CUBSTIIN PREIS ES 6 ccnccsecssenvecens

LIST OF PARTIES AND DISCLOSURE

STATEMENT PURSUANT TO RULE 29.6 ....

FARE UF CARNE BINED 6 iss cciseevvovecseues

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

TABLE OF APPEOUPIES o cc ccesersccecvewes

STATUTES AND OTHER PROVISIONS

EGET «hk aevka teenie cteuesesmaetennes

STATEMENT OF THE CASE 2. cc cnccccscncene

REASONS FOR DENYING THE PETITION .....

I.

Il.

THERE IS NO INTERCIRCUIT CONFLICT

REGARDING THE FIDUCIARY DUTY OF

DIRECTED TRUSIEES 66sec vec vccesees

A. Petitioners’ Argument Is Procedurally

ON os. baka ewe ed eaeeene

B. The Seventh Circuit Held A Directed

Trustee Has Limited Fiduciary Duties .. .

THE SEVENTH CIRCUIT DID NOT

CREATE A NEW STANDARD ..........

A. The Seventh Circuit Followed The Abuse

OF Discretion Stangerd 5... sce vse

10

10

11

14

14

-

iv

Contents |

The Seventh Circuit Concluded

Petitioners’ Evidence Did Not

Overcome The Presumption That The

Continued Investment In Employer

Stock Was Prudent .............

Summers Did Not Create A Conflict

In Its Application Of The Legal

I oo ine rs te Se

The Seventh Circuit Did Not Create

A Per Se Rule ......... atten ea

B. The Seventh Circuit’s Examples Of

Excessive Risk Did Not Create A New

NS aa UN is een go ig ie

C. The

The

Existence Of Pending Litigation In

Lower Courts Involving “These

Issues” Does Not Require This Court To

COE TOE PINON bv ho been cree ds

CONCLUSION

eae a oe ee ee ee a oe ee ee ee oe ee oe oe oe oe ee

Page

17

18

20

21

22

24

\

TABLE OF CITED AUTHORITIES.

Page

FEDERAL CASES

In re Aquila ERISA Litig.,

237 F.R.D. 202 (W.D. Mo. 2006) ......2--066. 23

Clingman v. Beaver,

Pe sic SOE LOD ok ci oes Hei cede eames 10

In re Elec. Data Sys. Corp. “ERISA” Litig.,

2a Fm O13 (EU. TOR: ZOUF) ooo ee cen ties 23

FirsTier Bank, N.A. v. Zeller,

16 F.3d 907 (Sth Cir. 1994) 2. cece ees 10, 12, 13

Herman v. NationsBank Trust Co..,

$20 P50 1354 CLI Cre, TGF) ivi kian cee ene 12

In re IKON Office Solutions Sec. Litig.,

209 FAD, 94:(E.D. Pa. 2002) ccc cccckwaces 23

Kuper v. lovenko,

66 F.3d 1447 (6th Cir. 1995) . ..... 14, 15, 16, 19, 20

LaLonde v. Textron, Inc.,

SOF Fae 1 CLC FO) ic ik para gavaves 14, 18, 19

Lindheimer v. Illinois Bell Tel. Co.,

ee Ss SR os ba en eke eae ake 10

Maniace v. Commerce Bank, N.A.,

40: F.3d 264 (Oth Cit. 1994) 2. ccc ccesen 10, 12, 13

Martin v. Feilen,

965 F278 G66 Cs Coy. 1958) voi vs 0 oe hoes Be

vi

Cited Authorities

Page

Moench v. Robertson,

er Carel Se CU RA BOOED ovewadecscschudtas passim

NLRB v. Hendricks County Rural Elec.

Membership Corp.,

re als Be CRED 6s 06d ne ea Buceoneysessus 17

Pub. Serv. Comm’n. v. Brashear

Freight Lines, Inc.,

PE NOE hho 63s Rk 0 so oes oheueee 10

In re Qwest Sav. & Inv. Plan ERISA Litig.,

No. 02-RB-464, 2004 U.S. Dist. LEXIS 24693

aes Gs Ss os DOO 6 x6 cee a svnecnyeusee 23

Rankin v. Rots,

No. 02-CV-71045, 2006 U.S. Dist. LEXIS 45706

Cae, Wee, SUN Bes OUD 5 6 oki cwcencetee ans 23

Skidmore v. Swift & Co.,

Bae Ue COLAO 655 5 0b e ce eeeeeseeeebias 14

In re Sprint Corp. ERISA Litig.,

388 F. Supp. 2d 1207 (D. Kan. 2004) ......... 19, 20

Steinman v. Hicks,

Biv eA BC Ey, Se a: een 19, 21

Summers v. State Street Bank & Trust Co..,

SO6 Poe TOS C7 Cor. SSGT) on cae scence cces. 22

Summers v. State Street Bank & Trust Co..,

G53 FF SOC CTIA CH: DAO) ce ececccecvcees

passim

vil

Cited Authorities

Summers v. UAL Corp. ESOP Comm.,

No. 03 C 1537, 2005 U.S. Dist. LEXIS 23918

CED, Bg NE san oes sivaven wetness 3

United States v. Johnston,

268 U.S. 220 (1925) .......- Pease re Pay ae 17

United States v. Mitchell,

FOS Va Soe CP BD ke eee eeescaedece 17

In re WorldCom, Inc. ERISA Litig.,

354 F: Supp. 2d 423 (S.D.N.Y. 2005) ........ 12, 13, 19

In re WorldCom, Inc. ERISA Litig.,

No. 02 Civ. 4816, 2004 U.S. Dist. LEXIS 20671

RE ® Re ere ere 23

Wright v. Oregon Metallurgical Corp.,

300 F.36 1090 (9G Cir. 2008) cn ccc cence. 13,14

FEDERAL STATUTES

SRE A I a is eek 1

I ee 1,2, 11

POUR CI oe aoe oe ec 15

129 Cong. Rec. $16629, S$16636 ............... 15

vill

Cited Authorities

Page

RULES OF PROCEDURE

ere ree rene ens my 17

pte ee Prep oe rt Terr rere 1, 16-17

BOOKS & TREATISES

Restatement (Second) of Trusts (1957) ........... 16

Robert L. Stern et al., Supreme Court Practice

CO BR a 6 os Seer eee 10

ix

TABLE OF APPENDICES

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

Appendix B — 29 U.S.C.S. § 1102(a)(2).........

Appendix C — Federal Rule Of Civil Procedure

RS © Pairs U5A8b yb. vie +h Oke bee aces

l

STATUTES AND OTHER PROVISIONS INVOLVED

Statutes at issue in this case include the Employee

Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C.

§§ 1002(21)(A), 1102(a)(2) (Resp. App. A and B), 1103(a)(1),

1104(a)(1), 1109(a), and 1132(a) (Pet. App. C, D, F and G).

Also at issue is U.S. Department of Labor Employee Benefits

Security Administration, Fiduciary Responsibilities of Directed

Trustees, Field Assistance Bulletin 2004-03 (Dec. 17, 2004)

(Pet. App. H), Federal Rule of Civil Procedure 56(c) (Resp.

App. C), and Seventh Circuit Rule 40(e) (Resp. App. D).

STATEMENT OF THE CASE

After UAL Corporation (“UAL”)! declared bankruptcy at

the end of 2002, the participants of the UAL employee stock

ownership plan (the “Plan”) sued the fiduciaries of the Plan,

claiming the fiduciaries breached their duties under ERISA by

failing to divest the Plan of UAL stock and to override the terms

of the Plan, which required that the assets be invested exclusively

in UAL stock, fourteen months prior to the bankruptcy filing.

Summers v. State Street Bank & Trust Co., 453 F.3d 404, 405

(7th Cir. 2006).

The ESOP Committee (the “CCommittee”’) and its members,

the only named fiduciaries in the Plan, 29 U.S.C. § 1102(a)(2),

settled with Petitioners. The remaining defendant and

Respondent in these proceedings, State Street Bank & Trust

Company (“State Street’), was the directed trustee and a co-

fiduciary of the Plan.

The Plan’s Trust Agreement (the “Trust Agreement”)

obligated State Street, as directed trustee, to follow the

Committee’s directions and gave State Street no discretion

regarding the disposition of the Plan’s assets.? The Trust

' UAL Corporation is the holding company whose primary

subsidiary is United Airlines.

2 R.Doc.130, Ex. 2, Ex. A (Trust Agreement at § 3.1).

2

Agreement required State Street to invest the assets of the trust

fund “exclusively” in UAL stock at the “direction of the ESOP

Committee.” * Under the Trust Agreement, State Street had to

follow the directions of the Committee as long as such direction

was in accordance with the terms of the Plan, proper within the

meaning of 29 U.S.C. § 1103(a), and not contrary to ERISA.*

State Street monitored the financial condition of its clients,

including UAL, whose ESOPs held the respective client’s stock

(“Employer Securities”), irrespective of whether State Street

was the named fiduciary or the directed trustee.° CitiStreet LLC

(“CitiStreet”) performed this monitoring function on State

Street’s behalf. CitiStreet had two committees that met regularly

to review Employer Securities: the Fiduciary Committee and

the Watchlist Committee. (The latter reported to the former.) If

an Employer Security were deemed to be “at-risk,” the Watchlist

Committee placed it on a watchlist, to be reviewed more closely

by the Watchlist Committee.°

On December 20, 2001, the Watchlist Committee placed

UAL on the watchlist after evaluating information concerning

UAL’s financial condition, including: an Octover 17, 2001 letter

from then-Chief Executive Officer James Goodwin to UAL’s

employees asking for wage concessions following the tragic

events of September 11, 2001 (the “Goodwin Letter”); analyst

reports; and a benchmark deviation report showing that UAL

stock deviated from its established benchmark three times within

a four-week period.’

3 R.Doc.130, Ex. 2, Ex. A (Trust Agreement at § 3.3).

4 R.Doc.130, Ex. 2, Ex. A (Trust Agreement at § 3.6.3).

> R.Doc.124 (State Street Statement of Undisputed Facts in support

of Summary Judgment (“SUF”) 4 4); R.Doc.130, Ex. 11 (Declaration

of Susan Daniels (“Daniels Decl.”), 4 22).

° R.Doc.124 (SUF 4 6); R.Doc.130, Ex. 11 (Daniels Decl.,

G4 7-20).

7 R.Doc.124 (SUF 4 11); R.Doc.130, Ex. 11 (Daniels Decl.,§ 23),

Ex. C (December 20, 2001 Watchlist Minutes).

3

Petitioners argue placement on the watchlist was insufficient

and that, following issuance of the Goodwin Letter, State Street

should have overridden the Plan, Trust Agreement, and the

directions of the named fiduciary, and should have sold the UAL

stock held by the ESOP. Petitioners contend the Goodwin Letter

was a clear “sign” or “warning” that UAL would shortly file

bankruptcy. State Street did not agree.

The Goodwin Letter was issued in the context of labor

negotiations and was understood by many, including analysts

and the machinists’ union, to be a negotiating ploy.* The

Goodwin Letter was a rallying call to the employees and the

unions to come to the bargaining table and threatened that if

various events and agreements were not reached, UAL would

“perish some time next year.” The phrase “some time next year”

“clearly indicates that any such problems could very easily have

been far off in 2002.” Summers v. UAL Corp. ESOP Comm.,

No. 03 C 1537, 2005 U.S. Dist. LEXIS 23918, at *17 (N.D. Ill.

Oct. 12, 2005). Moreover, the Goodwin Letter concluded in an

upbeat and hopeful manner: “The sooner we get to break even,

the sooner we’ll remove the doubts about our future.” The

machinists’ union sharply criticized the letter.'° Goodwin

subsequently resigned, and his successor Jack Creighton

immediately and unequivocally stated that UAL was not

considering bankruptcy."

* R.Doc.124 (SUF 4 34); R.Doc.130, Ex. 8 (Declaration of Gary

Sbona (“Sbona Decl.”), Ex. A (Expert Report of Gary Sbona (“Sbona

Report”), ¢ 27); R.Doc.158 (Plaintiffs’ Response To State Street’s

Statement of Undisputed Facts (“PR”) 4 37).

* R.Doc.130, Ex.2 (Declaration of Marian M. Durkin (“Durkin

Decl.”) ¢ 42), Ex. E (“Goodwin Letter”’).

R.Doc.129, Exhibits to UAL ESOP Committee Defendants’

Statement of Undisputed Facts (“Committee Def.”) Ex. 41 (Wash. Post

Article, undated).

" R.Doc.129, Committee Def. Ex. 39 (WSJ.Com Article, 10/29/

2001).

4

During the next nine months, the Watchlist Committee

actively monitored UAL’s performance and regularly provided

the Fiduciary Committee with benchmark deviation reports on

UAL’s stock.” While State Street monitored the UAL stock, it

knew that the named fiduciaries on the Committee also reviewed

financial information about UAL. State Street was aware that

Houlihan Lokey Howard & Zukin (“Houlihan Lokey”) (outside

consultants) presented investment advice to the Committee,

including copies of annual valuation reports, analyses of UAL’s

financial condition, and presentations regarding the value of

UAL stock." The oral aud written presentations included

summaries of analyst recommendations, a general industry and

economic overview, and information about UAL’s financial

status. "4

Of the approximately 110 analyst reports dated from

October 17, 2001 through August 13, 2002 (including all those

Petitioners cite),'° none recommended selling during the relevant

time period and at least one recommended “accumulate.”’* None

said UAL’s bankruptcy was highly probable and none said

bankruptcy was going to occur in the near or short term.'’ One

2 R.Doc.124 (SUF 4 12); R.Doc.130, Ex. 11 (Daniels Decl., ¥4

24-26), Ex. D-F (Watchlist and Fiduciary Committee Minutes; Deviation

Reports).

3 R.Doc.130, Ex. 9 (Declaration of Ben Bucttell (“Buettell Dec!.”’),

4] 9-12); R.Doc.167 (State Street’s Statement of Additional Facts In

Opposition to Plaintiffs’ Motion For Partial Summary Adjudication

(“SAF”), ¥ 91).

'* R.Doc.167 (SAF ¢ 91); R.Doc.130, Ex. 9 (Buettell Decl., ¥§ 17-

20), Ex. D-I (Draft Presentation & Draft Discussion Materials); Ex. 10

(Declaration of Kelly Q. Driscoll (“Driscoll Decl.) 4 10).

'S R.Doc.167 (SAF § 71); R.Doc.130, Ex. 15 (Declaration of

Ronald S. Kravitz (“Kravitz Decl.”’), §| 6-7), Ex. F (Analyst Reports).

© R.Doc.167 (SAF 4 66); R.Doc.130, Ex. 15 (Kravitz Decl., 4 6-

7), Ex. F (Analyst Reports).

'7 R.Doc.167 (SAF 4 71); R.Doc.130, Ex. 15 (Kravitz Decl., 4 6-

7), Ex. F (Analyst Reports).

commentary specifically noted that the Goodwin Letter did not

mean UAL was facing bankruptcy.’*

As part of its monitoring duties, State Street, CitiStreet,

and Houlihan Lokey met with a representative of UAL’s investor

relations department in April 2002, to evaluate UAL’s progress

in implementing its recovery plan.'? In May 2002, the Fiduciary

Committee issued a report noting that UAL had billions of

dollars in reserves; analyst reports recommended a “buy” or

“hold”; benchmark deviation reports remained favorable; and

UAL was actively involved in ongoing negotiations with its

unions, the primary goal of which was to reduce costs.”

Although the report stated that there was a “high risk” that UAL

would not be able to gain the “wage concessions” it was

requesting of the unions, it also noted that “[a]t the end of June,

2002, UAL stated its daily losses were significantly lower than

in the First Quarter” of 2002.’!

“In a sharp reversal from its previous stance,” UAL issued

a press release on August 14, 2002, warning that it may file

bankruptcy that autumn unless “employees and vendors agree

to dramatic wage and cost concessions.’ State Street responded

immediately by requesting a meeting with the Committee.’

'§ R.Doc.16, (SAF | 65); R.Doc.130, Ex. 15 (Kravitz Decl.,

4{ 6-7), Ex. F (Analyst Reports).

'? R.Doc.124 (SUF § 15); R.Doc.130, Ex. 11 (Daniels Decl.,§ 26).

*” R.Doc.124 (SUF 4 16); R.Doc.130, Ex. 11 (Daniels Decl.,

| 27-28), Ex. H (May, 2002, State Street Report).

21 R.Doc.130, Ex. 11 (Daniels Decl.,4§ 27-28), Ex. H (May, 2002,

State Street Report).

2 R.Doc.184, Plaintiffs’ Exhibits In Opposition To State Street’s

Motion For Summary Judgment (‘Pfs.” Ex.”) 58 (Chicago Tribune

Article, 8/15/02).

3 R.Doc.130, Ex. 10 (Driscoll Decl., 4 15); Ex. 9 (Buettel Decl.,

4 16); Ex. 2 (Durkin Decl., 4 46).

6

On August 20, 2002, State Street and the Committee met.

State Street asked the Committee whether it had come to any

conclusions about the prudence of continuing to hold UAL

stock.”* The Committee’s lawyers attended this meeting, as well

as the previous meetings, and knew that the Committee had an

obligation to consider whether it was prudent to retain UAL

stock in the Plan. State Street did not have any reason to believe

that the Committee and its lawyers had not previously discussed

selling the UAL stock in the Plan.”

On August 30, 2002, the Committee responded, on the

advice of its counsel, by asking State Street to become

Investment Manager of the Plan.” State Street agreed and

became Investment Manager effective September 7, 2002.7’

Shortly thereafter, State Street evaluated alternative investments

for the Plan and consulted with Houlihan Lokey, investment

bankers, investment analysts, union representatives (who -

expressed optimism about labor negotiations), and UAL’s Chief

Financial Officer (who was hopeful that a solution could be

found).”8

4 R.Doc.124 (SUF § 18); R.Doc.130, Ex. 10 (Driscoll Decl.,

q 17).

25 R.Doc.124 (SUF 94 59-60, 62); R.Doc.130, Ex. 6 (Declaration

of Bonnie Levitt (“Levitt Decl.”’), 4 7, 12-14, 20), Ex. 12 (Declaration

of Marty Torres (“Torres Deci.”), {4 14-21), Ex. 13, (Declaration of

Barry Wilson (“Wilson Decl.”), 4 15-22).

76 R.Doc.130, Ex. 10 (Driscoll Decl., § 20); Ex. 2 (Durkin Decl.,

q4% 45-49); Ex. 4 (Declaration of Wayne Jacobsen (“Jacobsen Decl.’’),

94 16-17), Ex. B (8/29/02 Committee minutes).

27 R.Doc.124 (SUF 4 19); R.Doc.130, Ex. 10 ((Driscoll Decl.,

q 20); Ex. 2 (Durkin Decl., 4 49), Ex. H (Investment Manager

Engagement Letter).

8 R.Doc.124 (SUF 4 20); R.Doc.130, Ex. 10 (Driscoll Decl.,

§ 25) and Ex. B; Ex. 9 (Buettell Decl., 4 19), Ex. F (Draft Discussion

Materials).

7

On September 25, 2002, State Street determined that it was

no longer prudent for the Plan to hold UAL stock and authorized

appropriate actions to sell the stock as soon as possible.” On

September 27, 2002, State Street began divesting the Plan of

UAL stock.*® On December 9, 2002, a few days after the Air

Transportation Stabilization Board loan was denied, UAL filed

its chapter 11 bankruptcy petition.*' As a result of State Street’s

efforts, the Plan sold over $40 million of UAL stock before

UAL commenced its bankruptcy case.*

REASONS FOR DENYING THE PETITION

The petition for certiorari should be denied because it is

procedurally defective, there is no intercircuit conflict, and the

petition fails to satisfy any of the criteria specified by Supreme

Court Rule 10 for issuance of a writ.

The petition is procedurally defective because it improperly

requests the Court to affirm a lower court ruling on the

responsibilities of directed trustees, and the argument that

directed trustees and named fiduciaries have identical duties

was never raised below and cannot be raised for the first time

in a petition for certiorari.

Contrary to petitioner’s claims, there is no intercircuit

conflict as the Seventh Circuit’s opinion in Summers is the only

court of appeals to decide, based upon the evidence in the record,

whether a directed trustee of an ESOP has a fiduciary duty to

* R.Doc.130, Ex. 10 (Driscoll Decl., § 37), Ex. F (9/25/02

Fiduciary Committee Minutes).

* R.Doc.124 (SUF 4 22); R.Doc.130, Ex. 10 (Driscoll Decl.,

q 38).

*} R.Doc.124 (SUF € 23); R.Doc.130, Ex. 1 (Declaration of Andrew

Carron (“Carron Decl.”)), Ex. A (Expert Report of Andrew Carron

(“Carron Export Report”), 4 18).

* R.Doc.124 (SUF ¥ 24); R.Doc.130, App. 10 (Driscoll Decl.,

§ 38).

8

replace the employer’s stock with another investment, and if

so, what evidence would be sufficient to overcome the

presumption that directed trustees of an ESOP fulfill their

fiduciary duties by following the directions of the named

fiduciaries to remain invested in employer stock.

To fabricate a conflict, Petitioners argue for the first time

in these proceedings that directed trustees and named fiduciaries

have identical fiduciary duties, that Summers concluded directed

trustees and named fiduciaries have identical duties, and that a

conflict exists as a result of the purported differences between

Summers and the courts of appeals decisions determining

whether and when named fiduciaries breach their fiduciary

duties in failing to diversify an ESOP.

Petitioners’ logic fails because they premise their argument

on misstatements of law and the Summers holding. ERISA’s

statutory framework distinguishes the responsibilities of named

fiduciaries and directed trustees, requiring directed trustees to

follow the directions of the named fiduciaries and/or the plan

as long as the directions are consistent with ERISA. Summers

follows this law, noting that the key word in the statute is

“directed.” The named fiduciaries make the fiduciary decision

to remain invested in employer stock. The directed trustee may

override the decision of the named fiduciaries and the terms of

the ESOP if the decision is imprudent. It does not make fiduciary

decisions in the first instance. No court of appeals has held that

directed trustees’ fiduciary duties are identical to those of the

named fiduciaries.

After misstating both the law and the Summers holding,

Petitioners compare Summers with the four courts of appeals

that have considered when a named fiduciary has a duty to

diversify an ESOP’s investment and argue that the Seventh

Circuit did not follow these cases because it created a new per

se rule that the presumption that the fiduciary acted reasonably

cannot be overcome by evidence of a stock drop, evidence that

the stock would certainly drop further, and evidence that the

9

company was spending large amounts of money (as Petitioners

contend they presented). In fact, the Seventh Circuit’s holding

is consistent with the four court of appeals decisions and the

Seventh Circuit did not create a per se rule, but rather held that

Petitioners failed to present sufficient evidence of risk to

overcome the presumption of prudence.

In dicta, the Seventh Circuit suggested that Petitioners could

have overcome the presumption with evidence that at the time

UAL formed the ESOP, the creators of the Plan (the settlors)

reasonably could not have intended to place risk-averse

employees into a plan that provided for only one investment

alternative. The Seventh Circuit correctly noted that the

Petitioners never explored what the settlors’ intent may have

been and whether the financial condition of UAL reached a point

where it would have been appropriate to diversify the ESOP

because of excessive risk beyond that which settlors reasonably

intended. Petitioners argue that the Seventh Circuit’s

“formulation” of the risk standard improperly requires an ad

hoc analysis of the risk borne by individual plan participants.

Petitioners are wrong. Petitioners distort and misinterpret the

Seventh Circuit’s decision, as it only suggests consideration of

wages and other benefits of all employees in the context of

evaluating the risk of an ESOP, the settlor’s intent, and whether

Petitioners had overcome the presumption of prudence.

In sum, the petition should be denied because it is

procedurally defective and because there is no intercircuit

conflict concerning the fiduciary duty of directed trustees and

what constitutes sufficient evidence to overcome the

presumption that directed trustees act prudently when they

follow the directions of the named fiduciary and remain invested

in employer stock.

10

I. THERE IS NO INTERCIRCUIT CONFLICT

REGARDING THE FIDUCIARY DUTY OF

DIRECTED TRUSTEES

A. Petitioners’ Argument Is Procedurally Defective

Mischaracterizing the Seventh Circuit’s decision,

Petitioners argue that Summers correctly held that directed

trustees and named fiduciaries have identical duties. Petition at

22-23. Petitioners argue that this conflicts with a 1994 Eighth

Circuit decision that this Court should overrule. Petitioners’

argument is procedurally defective. Petitioners ask this Court

to accept certiorari in order to affirm the Seventh Circuit’s

decision on the responsibilities of directed trustees, follow

FirsTier Bank, N.A. v. Zeller, 16 F.3d 907 (8th Cir. 1994), and

overrule Maniace v. Commerce Bank, N.A., 40 F.3d 264 (8th

Cir. 1994). Certiorari should not be granted to affirm a holding

of the lower court.”

Moreover, Petitioners’ argument that directed trustees and

named fiduciaries have identical fiduciary duties was not raised

below and cannot be raised for the first time in a petition for

certiorari. See Clingman v. Beaver, 544 U.S. 581, 597-98 (2005).

% Robert L. Stern et al., Supreme Court Practice § 6.16 at 385

(8th Ed. 2002); see also Lindheimer v. Illinois Beli Tel. Co., 292 U.S.

151, 176 (1934) (“The Company was successful in the District Court

and has no right of appeal from the decree in its favor. The Company is

not entitled to prosecute such an appeal for the purpose of procuring a

review of the findings of the court below with respect to the valuc of

the Company’s property or the other findings of which it complains.”);

Pub. Serv. Comm'n. v. Brashear Freight Lines, Inc., 306 U.S. 204, 206-

207 (1939) (citations omitted) (“The Public Service Commission as the

successful party below has no standing to appeal from the decree denying

the injunction. And as no appeal has been taken to review the decree

denying the injunction, this Court is without jurisdiction.”).

11

B. The Seventh Circuit Held A Directed Trustee Has

Limited Fiduciary Duties

The Seventh Circuit acknowledged State Street was a

““ directed’ trustee, [pursuant to 29 U.S.C. § 1103(a)(1)] because

the Committee (the fiduciary named in the plan), in accordance

with the plan language . . . , directed State Street to invest the

ESOP’s assets exclusively in stock of United Air Lines.”

Summers, 453 F.3d at 406. Title 29 U.S.C. § 1103(a)(i)

specifically recognizes that trustees have limited authority or

discretion when:

the plan expressly provides that the trustee or trustees

are subject to the direction of a named fiduciary who

is not a trustee, in which case the trustees shall be

subject to proper directions of such fiduciary which

are made in accordance with the terms of the plan

and which are not contrary to [ERISA].

Recognizing § 1103(a)(1) limits the discretion of directed

trustees, the Seventh Circuit first addressed whether this

statutory provision eliminated a directed trustee’s fiduciary duty

entirely or merely limited it. The Seventh Circuit set forth the

issue as follows: “We must first decide whether a directed trustee

of an ESOP has any fiduciary duty with respect to the choice of

trust assets, specifically any duty ever to replace the employer’s

stock — the normal holding of an ESOP — with some other

security.” Summers, 453 F.3d at 406 (emphasis added).

The Seventh Circuit held that a directed trustee is a fiduciary

because the statute pertaining to directed trustees, § 1103(a)(1),

specifies that the directed trustee cannot rely upon directions

that are contrary to ERISA. Quoting § 1103(a)(1), the Seventh

Circuit held: “the directed trustee ‘shall be subject to proper

directions of [the named] fiduciary which are made in

accordance with the terms of the plan and which are not contrary

to [ERISA].’” Summers, 453 F.3d at 406 (emphasis and

alterations in original).

12

Focusing on the statutory language, the Seventh Circuit

stated: “‘[D]irect’ is the critical word. . . the trustee can disobey

the named fiduciary’s directions when it is plain that they are

imprudent.” Summers, 453 F.3d at 406 (alteration in original).

Summers held that the language of the statute makes clear that

a directed trustee has no “‘direct obligation to determine the

prudence of a transaction’ entrusted by the plan to another

fiduciary.” Summers, 453 F.3d at 406 (quoting U.S. Department

of Labor Employee Benefits Security Administration, Fiduciary

Responsibilities of Directed Trustees, Field Assistance Bulletin

2004-03 (Dec. 17, 2004) (the “DOL Bulletin”) at 4). In arguing

directed trustees and named fiduciaries have identical duties,

and that Summers held the duties were identical, Petitioners

fail to explain § 1103(a)(1).

In analyzing the question whether trustees have any

fiduciary duties concerning the choice of trust assets, the Seventh

Circuit noted a “split” of opinion between (a) those courts that

have suggested that directed trustees have no fiduciary duties

(citing Herman v. NationsBank Trust Co., 126 F.3d 1354, 1361-

62 (11th Cir. 1997) (noting in dicta that directed trustees do not

have any fiduciary duties) and Maniace, 40 F.3d at 267-68

(finding that directed trustee did not have any fiduciary duty to

diversify the plan assets because of specific language in the

plan)), and (b) those courts that hold directed trustees are

fiduciaries (citing FirsTier, 16 F.3d at 911 and Jn re WorldCom,

Inc. ERISA Litig., 354 F. Supp. 2d 423, 444-45, 449 (S.D.N_.Y.

2005)). Summers, 453 F.3d at 406.

Petitioners mischaracterize the “split” mentioned by the

Seventh Circuit to assist them in misconstruing the Seventh

Circuit’s holding. The Third and Eleventh Circuits have “stated

their views” “in dicta in cases that did not involve directed

trustees” (as Petitioners acknowledge at p. 24), indicating that

directed trustees are not fiduciaries. Herman, 126 F.3d at 1361

(stating a directed trustee “is not subject to the fiduciary

requirement in § 1104(a) to act prudently”); and Moench v.

13

Robertson, 62 F.3d 553, 571 (3d Cir. 1995). In Maniace, the

Eighth Circuit held that the directed trustee was a fiduciary,*

but that plaintiffs failed to demonstrate that the purchase of the

employer’s stock violated the plan or was contrary to ERISA.

Maniace, 40 F.3d at 268. In reaching this conclusion, the court

noted that the underlying fiduciary direction was not a violation

of ERISA. /d. See also Wright v. Oregon Metallurgical Corp.,

360 F.3d 1090, 1103 (9th Cir. 2004) (“If the underlying fiduciary

direction itself is not in violation of ERISA, the directed trustee’s

compliance with that direction cannot serve as a basis for

liability.”’).

Petitioners argue that FirstTier, which the Seventh Circuit

relied upon in concluding that directed trustees are fiduciaries,

held that directed trustees are identical to named fiduciaries.

Petitioners fail to discuss WorldCom, which the Seventh Circuit

also relied upon in reaching its conclusion that directed trustees

are fiduciaries. Neither FirstTier nor WorldCom held that

directed trustees’ fiduciary duties are identical to named

fiduciaries,

WorldCom and FirsTier recognize that although “directed

trustees” are fiduciaries, not all ERISA fiduciaries are the same,

and the fiduciary duties of directed trustees are ““‘significantly

narrower than the duties generally ascribed to a discretionary

trustee under common trust principles.’” WorldCom, 354

F. Supp. 2d at 446 (quoting the DOL Bulletin at 2); FirsTier, 16

F.3d at 911 (finding that § 1103(a)(1) “modifies” the extent of a

4 The opinion contains language stating that the directed trustec

does not “fit within the ERISA definition of a fiduciary,” and its conduct

is governed exclusively by § 1103(a)(1). Maniace, 40 F.3d at 268.

However, the Eighth Circuit also implicitly acknowledged the directed

trustee was a fiduciary when it analyzed whether the directed trustee

was liable as a co-fiduciary. /d. It concluded the directed trustee was

not liable as a co-fiduciary because the named fiduciary had not breached

its fiduciary duties and therefore plaintiffs could not show that the

directed trustee either participated in said breaches or knew of the

breaches and did nothing to remedy them. /d.

14

directed trustee’s fiduciary duties). A directed trustee has no

duty to render investment advice or “investigate the wisdom of

[the named fiduciary’s investment] choices or any obligation to

render advice regarding the choices.” WorldCom, 354 F. Supp.

2d at 449.

The Seventh Circuit’s holding in Summers is consistent with

other courts of appeals decisions and the position of the

Department of Labor. See Wright, 360 F.3d at 1103 (discussion

of trustee’s limited liability under ERISA assumes a directed

trustee is a fiduciary); LaLonde v. Textron, Inc., 369 F.3d 1, 7

(1st Cir. 2004) (same); DOL Bulletin at 2 (directed trustees have

“significantly narrower’ fiduciary responsibilities designed to

ensure that the directions it receives from the named fiduciary

are in accordance with the plan and not contrary to ERISA).*

il. THE SEVENTH CIRCUIT DID NOT CREATE A

NEW STANDARD

A. The Seventh Circuit Followed The Abuse Of

Discretion Standard

Beginning with Moench, courts of appeals that have

considered whether and when a fiduciary has a duty to diversify

employer stock in an ESOP have uniformly held that a duty

exists, but that the decision to remain invested in employer stock

is limited to a review for an abuse of discretion. Moench, 62

F.3d at 571. See, e.g., LaLonde, 369 F.3d at 4; Kuper v. Iovenko,

66 F.3d 1447, 1459 (6th Cir. 1995); cf Wright, 360 F.3d at 1097-

98 (questioning whether any duty existed at all, but ultimately

applying the abuse of discretion standard). Petitioners argue that

the Seventh Circuit did not follow Moench and its progeny, but

instead set forth a “new standard,” thereby creating a split in

** Courts grant “considerable and in some cases decisive weight”

to interpretive bulletins depending on, among other things, the

“thoroughness evident in its consideration, the validity of its reasoning,

[and] its consistency with earlier and later pronouncements... .”

Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).

15

the circuits. Petition at 14. A brief explanation of the

development of the standard illustrates why the Seventh Circuit’s

decision is consistent with the four other courts of appeals that

have considered the issue.

Employee stock ownership plans like the Plan, are, in

accordance with 29 U.S.C. § 1104(a)(2), exempt from ERISA’s

duty to diversify the investments of the plan “‘so as to minimize

the risk of large losses, unless under the circumstances it is

clearly prudent not to do so... .” 29 U.S.C. § 1104(a)(1)(C).

The Seventh Circuit held that § 1104(a)(2) and the language of

a plan cannot “be interpreted to include a per se prohibition

against diversifying an ESOP,” because an ESOP fiduciary still

has a duty of prudent investment that can override plan

restrictions and § 1104({a)(2) in “special circumstances.”

Summers, 453 F.3d at 407 (quoting Kuper, 66 F.3d at 1457).

In developing the standard, the courts of appeals noted there

are two competing concerns at issue: “Congress expressly

intended that the ESOP would be both an employee retirement

benefit plan and a ‘technique of corporate finance’ that would

encourage employee ownership.” Martin v. Feilen, 965 F.2d

660, 664 (8th Cir. 1992) (quoting 129 Cong. Rec. $16629,

$16636 (Daily ed. Nov. 7, 1983) (statement of Sen. Long)).

The courts of appeals attempted to find “‘a way for the competing

concerns [of ERISA fiduciaries and ESOPs] to coexist.”

Moench, 62 F.3d at 570. Normally fiduciaries’ investment

decisions are subject to a strict standard of review, but such

scrutiny in the context of an ESOP “would render meaningless

the ERISA provision excepting ESOPs from the duty to

diversify.” /d.

The courts of appeals therefore apply a deferential standard

to the fiduciary’s decision not to diversify assets of an ESOP: a

fiduciary’s decision to remain invested in employer stock is

presumed to be proper and that presumption can only be

overcome by showing an “abuse of discretion.” Moench, 62

F.3d at 571. “In attempting to rebut the presumption, the plaintiff

16

may introduce evidence that ‘owing to circumstances not known

to the settlor and not anticipated by him [the making of such

investment] would defeat or substantially impair the

accomplishment of the purposes of the trust.’” /d. (alteration in

original) (quoting Restatement (Second) of Trusts § 227 cmt. g

(1957)).

The Seventh Circuit set forth the standard it intended to

follow to review the alleged failure to diversify the Plan.

Fiduciaries may be required to:

begin diversifying the ESOP’s assets at the point at

which an increase in the riskiness of the assets, had

it been foreseen, would have induced the creators

of the ESOP either to have not created it at all or to

have required at least partial diversification. (.. . .)

Or, as Kuper v. lovenko, supra, 66 F.3d at 1459,

puts it, “the plaintiff must show that the ERISA

fiduciary could not have reasonably believed that

the plan’s drafters would have intended under the

circumstances that he continue to comply with the

ESOP’s direction that he invest exclusively in

employer securities.” See also Moench v. Robertson,

62 F.3d 553, 571-72 (3d Cir. 1995).

Summers, 453 F.3d at 410 (emphasis added).

By first setting forth its articulation of the standard it

intended to apply, and then using the word “or” and quoting the

standard from Kuper and Moench, the Seventh Circuit did not

intend to announce a “new” standard. Summers did not criticize

Moench or its progeny, or otherwise state that it would deviate

from the standard set forth in Moench. Significantly, the Seventh

Circuit did not state that it was creating a split in the courts of

appeals by rendering its decision. If the Seventh Circuit intended

to create, or believed its decision created, an intercircuit conflict,

it was obligated to circulate its opinion sua sponte to the full

court in advance of publication pursuant to Seventh Circuit Rule

17

40(e), which it did not do. See, e.g., United States v. Mitchell,

353 F.3d 552, 561 n.9 (7th Cir. 2003) (“Because this opinion

will create a conflict among the Circuit Courts, it has been

circulated to all of the judges of this court in regular active

service pursuant to Circuit Rule 40(e).”).

1. The Seventh Circuit Concluded Petitioners’

Evidence Did Not Overcome The Presumption

That The Continued Investment In Employer

Stock Was Prudent

The Seventh Circuit affirmed the grant of summary

judgment in State Street’s favor because of Petitioners’ “failure

of proof.” Summers, 453 F.3d at 411. Petitioners “made no

effort” to establish the point at which the ESOP trustee should

sell in order to protect the employee-shareholders against

“excessive risk.” /d. Petitioners cobble together a circuit

“conflict” based not on any difference in the legal standard, but

rather on the application of a contextually-based test that leads

to different results depending on the underlying factual

circumstances and the evidence in the record. See Petition at

15-16 (agreeing with the Seventh Circuit’s statement of the rule

or the court’s “basic concept,” but criticizing the “formulation”

or application of the standard). This Court should not grant

“certiorari to review evidence and discuss specific facts.” United

States v. Johnston, 268 U.S. 220, 227 (1925). See also NLRB v.

Hendricks County Rural Elec. Membership Corp., 454 U.S. 170,

176 n.8 (1981) (finding improvident grant of cross-petition that

presented “primarily . . . a question of fact, which does not merit

Court review”); Sup. Ct. R. 10 (noting the Court will “rarely”

grant review where lower court has arguably misapplied “a

properly stated rule of law”).

Petitioners argued that the Goodwin Letter and the drop in

UAL’s stock price shortly thereafter demonstrated UAL’s

impending collapse, thus requiring diversification of the Plan.

They also argued that State Street should have started selling

the UAL stock within 30 days after the issuance of the Goodwin

18

Letter. The Seventh Circuit found that the evidence did not

support Petitioners’ erroneous factual conclusion, 1.e., the drop

in the stock price did not reflect UAL’s impending collapse. As

the Seventh Circuit noted:

The plaintiffs say the letter should have alerted State

Street that United was going into the tank. That is

wrong. After the market “read” the letter, it valued

United stock at $15.05 a share. Had the market

thought that United would be bankrupt by the end

of 2002, it would not have priced its stock that high

in October 2001, implying a market capitalization

for the company of more than $800 million.

Summers, 453 F.3d at 408. The Seventh Circuit found that it

was not imprudent for State Street to assume that a major stock

market “provides the best estimate of the value of the stocks

traded on it,” and it was not “required to act on the assumption

that the market was overvaluing United.” /d. Moreover, the

argument that State Street “should have outsmarted the

market...is not a correct interpretation of the duty of prudent

management of trust funds. . . .” /d. at 412.

2. Summers Did Not Create A Conflict In Its

Application Of The Legal Standard

The cases Petitioners cite do not conflict regarding the

application of the “abuse of discretion” standard to the

underlying facts. First, Summers involved the application of the

abuse of discretion standard to the decision of a directed trustee

not to override the decision of the named fiduciary to remain

invested in employer stock. Only one case upon which

Petitioners rely applied the Moench standard to directed trustees,

and Petitioners do not rely upon or reference that portion of the

decision — nor could they. The application of the abuse of

discretion standard in Lalonde to the actions of the directed

trustee are consistent with the Seventh Circuit’s Summers

decision. As noted above, in Lalonde, the First Circuit held

19

that the plaintiffs failed to state a claim against the directed

trustee because the allegations were only that the directed trustee

knew the company’s stock price and profits were declining and

that the company was undergoing a restructuring. LaLonde, 369

F.3d at 6-7.

Second, there are no guidelines specifying what is and what

is not an abuse of discretion. In applying the abuse of discretion

test, no court of appeals has ever held that an ESOP fiduciary

abused its discretion by failing to diversify the plan assets, and

only one other court of appeals has had the opportunity to

consider whether the evidence presented was sufficient to state

a claim. See generally, Kuper, 66 F.3d 1447.

Courts of appeals have, in dicta, suggested factual scenarios

that might be sufficient to trigger a duty to diversify. For example

some courts have suggested that evidence of a company’s

impending collapse would be sufficient. Moench, 62 F.3d at

$72. Other courts have suggested that there may be situations

where defendant fiduciaries have knowledge of some

impropriety such as misrepresentation, fraud or accounting

irregularities and that these situations in combination with the

financial condition of the company might trigger a duty to

diversify. See, e.g., WorldCom, 354 F. Supp. 2d at 449-50

(accounting fraud); /n re Sprint Corp. ERISA Litig., 388 F. Supp.

2d 1207, 1223-24 (D. Kan. 2004) (misrepresentation). In

Steinman v. Hicks, the Seventh Circuit noted the following

factual scenario might trigger the duty:

[If the; ESOP was [the employees’] principal

retirement asset . . . and was entirely invested in the

stock of their employer. . . , and their employer was

bought in a stock-for-stock deal—so that all the

assets of the ESOP became stock in the acquirer—

by a company that had a much higher debt-equity

ratio than their (former) employer and as a result

its stock price was much more volatile and its

bankruptcy risk greater. Then, even if the trustees

20

did not predict the company’s “impending collapse,”

they might be required in the interest of the

participants either to diversify the plan’s

stockholdings or to exchange the ... stock for

Treasury bills.

352 F.3d 1101, 1106 (7th Cir. 2003).

Other than Summers, Kuper is the only one of the cases

cited by Petitioners that decided the merits of a district court’s

judgment for the defendants. Kuper, 66 F.3d 1447. Kuper

affirmed the district court’s trial judgment, noting that while

plaintiffs presented evidence that the employer stock was

declining and defendants were aware of events that would

continue to cause the stock to decline in value, defendants

presented evidence that the stock fluctuated and several

investment advisors recommended holding the stock. /d. at 1460.

Kuper’s holding is consistent with Summers.

3. The Seventh Circuit Did Not Create A Per Se

Rule

Petitioners argue that the Seventh Circuit announced a new

per se rule that evidence that stock “plummet[ed],” “the

underlying company” continued to “hemorrhage money,” and

the company failed to address the problems causing the decline

in the stock price were insufficient to overcome the presumption

of prudence. Petition at 14. Petitioners do not quote or point to

any language in the Seventh Circuit’s decision that could support

this claim of a new “rule.”

The Seventh Circuit did not conclude that the evidence

Petitioners presented demonstrated that the stock was

“plummeting,” would continue to plummet, that the company

was “hemorrhaging money,” and that UAL was not addressing

problems that were causing a decline in its stock price.

In addition, Petitioners’ argument that the Seventh Circuit’s

new per se rule excluded consideration of “the intentions of the

21

Plan’s settlor” is incorrect. Petition at 15. The Seventh Circuit

noted that the Moench presumption could be overcome by

evidence that the increase in the riskiness of the assets, “had it

been foreseen, would have induced the creators of the ESOP

[the settlors] either to have not created it at all or to have required

at least partial diversification.” Summers, 453 F.3d at 410

(emphasis added). Petitioners did not present any evidence of

the settlor’s intent, nor do they point to such evidence in the

record.

B. The Seventh Circuit’s Examples Of Excessive Risk

Did Not Create A New Rule

To determine what constitutes excessive risk sufficient to

require an ESOP fiduciary to override the terms of the plan to

fulfill its duty of prudence, the Seventh Circuit contemplated

possible approaches a court may utilize depending on the facts

and circumstances of each case. For example, in Steinman, in

dicta, the Seventh Circuit considered how to evaluate the impact

of a merger on an ESOP, concluding that it may be appropriate

to evaluate the merged company’s debt-to-equity ratio and the

nature and character of the post-merger stock. Steinman, 352

F.3d at 1106. Applying basic economic principles, the court

noted that the ESOP now held stock whose price was more

volatile and the company’s risk of bankruptcy was greater,

thereby increasing the risk of the ESOP. /d.

Turning to Summers, the Seventh Circuit suggested possible

criteria to consider in a stock drop case to evaluate the risk of

investing in company stock in a market where the stock is

declining, including benefits received by employees in the form

of income derived from continued employment and other fringe

benefits.*° Because Petitioners did not explore these issues or

demonstrate facts sufficient to show excessive risk during the

%6 The evidence in this case showed United provided participants

with a diversified 401(k) plan and a defined benefit plan. See R.Doc.129,

Committce Def. Ex. 5 (Deposition of Craig Musa (“Musa Depo”), 20:09-

23:02).

22

relevant time period, the Seventh Circuit found there was a

failure of proof.

Petitioners misstate that the Seventh Circuit created a new

fiduciary liability standard requiring the court to the consider

the individual assets of each participant and the projected wealth

of the employees/participants outside of the ESOP. Petitioners

confuse the analysis of the settlor’s intent and whether the settlor

would have established an undiversified plan in light of

conditions reflecting excessive risk to the employees/participants

(and which may include an evaluation of the assets of employees

outside the plan, including wages, other plans, and fringe

benefits) with the analysis of fiduciary liability (which focuses

on whether the fiduciaries were acting in the best interests of

the plan as a whole and precludes a fiduciary from being partial

to any one group of beneficiaries). Under Kuper; to determine

whether to disregard the terms of the plan, the plaintiff must

examine the settlor’s intent and show that the ERISA fiduciary

could not have reasonably believed that the plan’s drafters would

have intended under the circumstances that he continue to

comply with the ESOPs direction to invest exclusively in

employer securities. Kuper, 66 F.3d at 1459. This evaluation

may include consideration of the wages and benefits of UAL’s

employees outside of the plan. See Summers v. State Street Bank

& Trust Co., 104 F.3d 105, 107-109 (7th Cir. 1997) (the settlors

of the UAL ESOP intended to create a retirement plan that would

get voting control of the company and majority equity ownership

in exchange for accepting lower wages and fringe benefits for a

substantial period).

C. The Existence Of Pending Litigation In The Lower

Courts Involving “These Issues” Does Not Require

This Court To Grant The Petition

Petitioners claim that there is “massive ongoing litigation

in the lower courts,” involving the “issues” raised in the petition,

requiring this Court to accept the petition to provide a “uniform

standard” to guide the lower court’s decisions. Petition at

23

21-22. Petitioners cite fourteen district court cases decided in

2006 and a law review article discussing approximately fifty

court decisions.

Petitioners do not argue that these decisions create a conflict

requiring this Court to grant certiorari, or identify any other

reason these cases require review under Rule 10. The majority

of the cases Petitioners reference are district court decisions.

Petitioners fail to explain why cases pending in the district courts

warrant this Court’s review of Summers. Furthermore, not all

of the cases Petitioners reference are currently “pending.”

See, e.g., Rankin v. Rots, No. 02-CV-71045, 2006 U.S. Dist.

LEXIS 45706 (E.D. Mich. June 28, 2006) (approval of

settlement); Jn re IKON Office Solutions Sec. Litig.,209F.R.D. —

94 (E.D. Pa. 2002) (same)); In re WorldCom Inc. ERISA Litig.,

No. 02 Civ. 4816, 2004 U.S. Dist. LEXIS 20671 (S.D.N.Y. Oct.

18, 2004) (same).

Nor do Petitioners identify the “issues” these cases decided

that are allegedly raised in the petition. Many of the cases involve

issues that are not relevant here. For example, some of the cases

involved class certification issues. See, e.g., In re Aquila ERISA

Litig., 237 FR.D. 202 (W.D. Mo. 2006); Jn re Elec. Data Sys.

Corp. “ERISA” Litig., 224 F.R.D. 613 (E.D. Tex. 2004); In re

Qwest Sav. & Inv. Plan ERISA Litig., No. 02-RB-464, 2004

U.S. Dist. LEXIS 24693 (D. Colo. Sept. 27, 2004). Other

decisions involved approvals of settlement. See, e.g., Rankin v.

Rots, No. 02-CV-71045, 2006 U.S. Dist. LEXIS 45706 (E.D.

Mich. June 28, 2006) (approval of settlement); Jn re IKON Office

Solutions Sec. Litig., 209 F.R.D. 94 (E.D. Pa. 2002) (same); Jn

re WorldCom Inc. ERISA Litig., No. 02 Civ. 4816, 2004 U.S.

Dist. LEXIS 20671 (S.D.N.Y. Oct. 18, 2004) (same).

24

CONCLUSION

For these reasons, the petition for a writ of certiorari should

be denied.

Respectfully submitted,

RANDALL J. SUNSHINE

Counsel of Record

RONALD S. KRAVITZ

Kim ZELDIN

LINER YANKELEVITZ SUNSHINE

& REGENSTREIF LLP

1100 Glendon Avenue, 14th Floor

Los Angeles, California 90024

(310) 500-3500

Counsel for Respondent

APPENDIX

la

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

§ 1002. Definitions

For purposes of this title:

(21) (A) Except as otherwise provided in

subparagraph (B), a person is a fiduciary with

respect to a plan to the extent (1) he exercises any

discretionary authority or discretionary control

respecting management of such plan or exercises

any authority or control respecting management

or disposition of its assets, (11) he renders

investment advice for a fee or other compensation,

direct or indirect, with respect to any moneys or

other property of such plan, or has any authority

or responsibility to do so, or (111) he has any

discretionary authority or discretionary

responsibility in the administration of such plan.

Such term includes any person designated under

section 405(c)(1)(B) [29 USCS § 1105(c)(1)(B)].

2a

APPENDIX B — 29 U.S.C.S. § 1102(a)(2)

§ 1102. Establishment of plan

(a) Named fiduciaries.

(1) Every employee benefit plan shall be

established and maintained pursuant to a written

instrument. Such instrument shall provide for one

or more named fiduciaries who jointly or severally

shall have authority to control and manage the

operation and administration of the plan.

(2) For purposes of this title, the term “named

fiduciary” means a fiduciary who is named in the

plan instrument, or who, pursuant to a procedure

specified in the plan, is identified as a fiduciary

(A) by a person who is an employer or employee

organization with respect to the plan or (B) by

such an employer and such an employee

organization acting jointly.

3a

APPENDIX C —- FEDERAL RULE OF CIVIL

PROCEDURE 56(c)

Rule 56. Summary Judgment

Motion and Proceedings Thereon. (c) The

motion shall be served at least 10 days before the

time fixed for the hearing. The adverse party prior

to the day of hearing may serve opposing

affidavits. The judgment sought shall be rendered

forthwith if the pleadings, depositions, answers

to interrogatories, and admissions on file, together

with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the

moving party is entitled to a judgment as a matter

of law. A summary judgment, interlocutory in

character, may be rendered on the issue of liability

alone although there is a genuine issue as to the

amount of damages.

4a

APPENDIX D — SEVENTH CIRCUIT RULE 40(e)

Circuit Rule 40. Petitions for Rehearing

(e) Rehearing Sua Sponte Before Decision. A

proposed opinion approved by a panel of this court

adopting a position which would overrule a prior

decision of this court or create a conflict between

or among circuits shall not be published unless it

is first circulated among the active members of

this court and a majority of them do not vote to

rehear en banc the issue of whether the position

should be adopted. In the discretion of the panel,

a proposed opinion which would establish a new

rule or procedure may be similarly circulated

before it is issued. When the position is adopted

by the panel after compliance with this procedure,

the opinion, when published, shall contain a

footnote worded, depending on the circumstances,

in substance as follows:

This opinion has been circulated

among all judges of this court in regular

active service. (No judge favored, or, A

majority did not favor) a rehearing en

banc on the question of (e.g., overruling

Doe v. Roe.)