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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 2006

## Text

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.)

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_1527%3A3. Public record. Not legal advice.