Amicus Curiae Brief — Hecker v. Deere & Co (No. 09-447)

Supreme Court, US. |

FILED

No. 09-447 NOY 16 2009

OPE OF FE Tien

Sn The

Supreme Court of the Gnited States

DENNIS HECKER, JONNA DUANE,

AND JANICE RIGGINS,

Petitioners,

Vv

DEERE & COMPANY,

Respondent.

*

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

®

BRIEF OF AMICUS CURIAE FRANK S. RAVITCH

AND MARCIA L. McCORMICK IN SUPPORT

OF THE PETITION FOR WRIT OF CERTIORARI

+

PROFESSOR FRANK S RAVITCH DEBRA HAYES

MICHIGAN STATE UNIVERSITY REICH AND BINSTOCK, LLP

College of Law Of Counsel

Room #315 4265 San Felipe, Ste 1000

Law College Bldg. Houston, TX 77027

East Lansing, MI 48824 (713) 622-7271

(517) 432-6973

Counsel of Record

November 16, 2009

COCKLE LAW BRIEF PRINTING CO (800) 225-6964

OR CALL COLLECT (402) 342-2831

TABLE OF CONTENTS

Page

TABLE OF AUITHORITIBGS «nc ccccscccs cscs cee ee cece ce)

INTEREST OF THE AMICUS. ....ccsccccvcee oso as eves ; 1

IEE sae: cecias as. tees asercennneutee 2

I The Seventh Circuit’s Decision 1n this Case

Will Foster Confusion for Employers and

Employees Whose Plans are Subject to

ERISA Because it is Inconsistent with

the Nature of ERISA, Department of

Labor Interpretations, and Significant

IEEE, x. hc: sitessates is wasnt aes

A The Seventh Circwt Panel Decision

B

Disregards this Court’s Holdings Re-

garding the Purpose and Interpreta-

GNU I I ices te ox Ses S ce es

The Department of Labor’s Interpreta-

tions Are Consistent with this Court’s

Holdings Regarding the Purpose and

Interpretation of ERISA... .. .... 20.2.0...

Decisions by the United States Court

of Appeals for the Fourth Circwt and

Several United States District Courts,

that Reject the Interpretation Set

Forth in the Panel’s Decision 1n this

Case, Are Consistent With This Court’s

Holdings Regarding the Purpose and

Interpretation of ERISA .... .. . .. 22.2.0...

TABLE OF CONTENTS — Continued

Page

Ii The Seventh Circuit’s Decision In this

Case Conflicts with Fundamental Princi-

RE SURES B WOCOGUTO .0. 6. 5 oe sc oe v00 09 13

EE . 16

11

TABLE OF AUTHORITIES

Page

CASES

Abbott v Lockheed Martin, 2009 WL 839099

(S.D. 1 Mar. 31, 2009).. BI Ape: ae

Ashcroft v. = __. ;U'S. __, 129 8.Ct. 1937

(2009) .. 5 as de ean pene ee ..13, 14, 15, 16

Bell Atlantic - Corp. U Twombly, 550 U.S. 544

(2007)... sas aa ae ica deed .13, 14, 15

Central States v Central Transport, Inc , 472

a OE: obs a ene eee ee

Chevron U.S.A. Inc. v. Natural Res. Def.

Council, 467 U.S. GST CIDE) «occ os os acs scvcceccocee 0s seed

Commussvoner v. Clark, 489 U S. 726 (1989)... .. .. ..3, 9

DiFelice v U.S —- Inc., 497 F.8d 410

(4th Cir. 2007) . Wisavinds Suamee sae tak 2 Ce ee

Egelhoff v. Egelhoff. 5382 US 141 (2001).. ee

Fort ada er v. —— 482 U.S. 1

(1987). . cee tae mien eas ss ves ov sueesan ene

Hecker v. Hae. 556 F.3d 575 (7th Cir. 2009),

suppl by Hecker v Deere, 569 F.3d 708 (7th

as ce x, Seceneeeeeh uses ee 2, 3, 8, 14

In re Tyco Intl, Ltd Multidistrict Litigatuwn,

606 F. Supp. 2d 166 (D.N.H. 2009)........... 3, 8,11, 12

In re Washington Mut, Inc., Sec Derivative &

ERISA Lit., 2009 WL 3246994 (W.D. Wash..,

Oct. 5, 2009) .. ER et : es

Ingersoll-Rand Co v. McClendon, 498 U.S 133

(1990).. Kibale hal ue eee ; SL er

1V

TABLE OF AUTHORITIES — Continued

Page

John Hancock v. Harris Trust and Savings

Banh, SID US. BE CIBGS) once cess oc cs se ve 00s 00s soech, 0,9

Langbecker v. Electronic Data Sys Corp., 476

oe ee I ED enccnencccusens se v0 avon x6 5 ms 11, 12

Lingis v Motorola, Inc., 2009 WL 1708097

Ce a Bs ic ID sinisnicgabass: wakes nk Ae aed bo ane os 11

Page v Impac Mortgage Holdings, Inc., 2009

WL 890722 (C.D. Cal., Mar. 31, 2009)... ....6, 11, 12

Phillips v Walling, 324 U.S. 490 (1945).... .. 3, 5, 6,9

Scheuer v Rhodes, 416 U.S. 282 (1974)... 15

Swierkiewicz v. Sorema, 534 U S. 506 (2002).... ....15

Tatum v. R J. Reynolds Tobacco Co , 254 FR D

SP CE Bees HE ix caine: eesncone as se oy ves orc Oe By OO

Tibble v. Edison Intl, 2009 WL 2382340 (C D

Cal. July 16, 2009), clarified on other

grounds, 2009 WL 2382348 (C.D. Cal. July

Re A RRR TEES AEE TY Beano tio tees outs ah 21> 11, 12

Varity Corp. v Howe, 516 U S. 489 (1996)......... passim

STATUTES, REGULATIONS, AND RULES

29 C.FR. Part 2550.404c-1(d)(2) ceececcsccsececerccseeeseseeceees 3

te oe ee

ERISA 8404(c)...0....000- Le

U.S Sup. Cr. R. 10(a) (2009).. ae

TABLE OF AUTHORITIES — Continued

Page

ADMINISTRATIVE MATERIALS

57 Fev. REG. 46,906, 46,922 (October 13, 1992)..... 3,5

OTHER MATERIALS

Munneli & Sunden, COMING UP SHoRT: THE

CHALLENGE OF 401(K) PLANS (Brookings Inst.

PP EE 4 cn. ccmsaklane & dh aped oe

S. Benartzi & R.H. Thaler, Heuristics and

Biases in Retirement Savings Behavior, 21 J.

OF THCONOMIC PERSP GI (BOT). .. 22. nsec 20 vees e G

on

1

INTEREST OF THE AMICUS’

Amicus, Frank S. Ravitch and Marca L.

McCormick, are scholars at American law schools

whose interests focus on labor law, employee rights,

or the law of investment funds.’ Amicus have no

financial stake in the outcome of this case but are

interested in ensuring a uniform and _ coherent

interpretation of ERISA We file this brief to urge this

Court to clarify the proper scope of the fiduciary

duties that plan fiduciames owe to employee/

beneficiaries with respect to the menu of options

defined contribution or 401(k) plans supply to their

employees. We are prompted to submit this brief

because the decision in the case below, and the

conflict among the circuits which it augments, has

wide-ranging consequences for millions of Amencan

employees and the hundreds of billions of dollars

invested in 401(k) plans

* No counsel for any party has authored this bnef in whole

or in part, and no person or entity other than amucus curiae and

their counsel has made a monetary contribution to the

preparation or submission of this bnef See Sup CT R 376

Counsel for petitioners filed a letter with the Clerk granting

blanket consent to the filing of Amicus briefs A letter reflecting

the consent of respondent to the filing of this brief has been filed

with the Clerk of the Court The parties were notified ten days

prior to the due date of this bnef of the intention to file

* Frank S Ravitch 1s a Professor of Law at Michigan State

University College of Law Marcia L McCormick 1s an Associate

Professor of Law at Saint Louis University School of Law

2

ARGUMENT

I. The Seventh Circuit’s Decision in this

Case Will Foster Confusion for Employers

and Employees Whose Plans are Subject

to ERISA Because it is Inconsistent with

the Nature of ERISA, Department of

Labor Interpretations, and Significant

Precedent

Petitioners Dennis Hecker, Jonna Duane, and

Janice Riggins alleged in their well pleaded com-

plaint that respondent violated its fiduciary duties

under ERISA by delegating the operation of respon-

dent’s plan to Fidelity. Second Amended Complaint

for Breach of Fiduciary Duty, Hecker, et al v. Deere &

Co., et al (W.D. Wis., No 06-C-719-S, decided June 21,

2007) (complaint filed March 6, 2007). In doing so

respondents failed to adequately monitor the plans,

failed to assess whether fiduciary choices for the plan

were appropriate for a plan of respondent’s size,

failed to determine the reasonableness of fees charged

by Fidelity, and failed to address fiduciary’s self

dealing within the plan Jd As a result, petitioners

assert that respondent failed to live up to its fiduciary

duties under §1132’s requirements for plan fiduci-

aries. Id Given the increasing shift from defined

benefit plans to defined contribution plans through-

out the nation, the need for prudent management of

401(k) plans has never been more important, and

confusion over the duties owed to plan beneficiaries

by plan fiduciarnes under ERISA has never been more

risky to the health of our economy. Yet, the Seventh

3

Circuit panel upheld dismissal of petitioners’ com-

plaint on the pleadings with prejudice. Hecker v

Deere, 556 F.3d 575 (7th Cir. 2009), suppl. by Hecker

vu. Deere, 569 F.3d 708 (7th Cir. 2009). The panel did

so based on its reading of the so called “safe harbor”

provision contained in ERISA §404(c), and by dis-

regarding conflicting interpretations and precedent,

including the interpretation of the “safe harbor” pro-

vision by the Department of Labor (DOL).

By artificially constraining the DOL’s considered

interpretation of the “safe harbor” provision in ERISA

§404(c), Final Regulation Regarding Participant

Directed Individual Account Plans (ERISA Section

404(c) Plans), 57 Fep. REG 46,906, 46,922 (October

13, 1992), 29 CFR Part 2550.404c-1(d\(2) (“safe

harbor” provision does not apply to “the act of desig-

nating investment alternatives”), ignoring long un-

derstood interpretations of ERISA, Varity Corp. v.

Howe, 516 U.S. 489, 513 (1996) (“Given [Section

404(a)’s] objectives, 1t 1s hard to imagine why Con-

gress would want to immunize breaches of fiduciary

obligation that harm individuals by denying injured

beneficiaries a remedy”); Fort Halifax Packing v.

Coyne, 482 U.S. 1, 15 (1987) (ERISA’s focus “is on the

administrative integrity of benefit plans — which pre-

sumes that some type of administrative activity 1s

taking place”), see also, Commussioner v. Clark, 489

U.S. 726, 739-40 (1989) (when considering an excep-

tion to a general policy, courts “usually read the

exception narrowly” to “preserve the pmmary

operation of the policy”); Phillips v. Walling, 324 U.S

A

490, 493 (1945) (holding in context of the Fair Labor

Standards Act that “[aJny exemption from such

humanitarian and remedial legislation must there-

fore be narrowly construed... . To extend an exemp-

tion to other than those plainly and unmistakably

within its terms and spirit is to abuse the interpretive

process and to frustrate the announced will of the

people”), and rejecting conflicting precedent on a

motion to dismiss, DiFelice v. U.S. Airways, Inc,

497 F3d 410, 418 n.3 (4th Cir. 2007) (§404(c) “safe

harbor” does not preclude claims based on imprudent

selection of investment alternatives”); In re Tyco Int’,

Ltd Multidistrict Litigation, 606 F Supp. 2d 166, 169

(D.N H. 2009) (same); Tatum v. R.J Reynolds Tobacco

Co., 254 F.R.D. 59, 65-66 (M.D.N.C. 2008) (same), the

Seventh Circuit panel’s decision creates confusion for

employees and employers.

Employers in a variety of jurisdictions may now

act based on the Seventh Circuit’s decision only to

find that their jurisdiction interprets the relevant

provisions of ERISA differently from the Seventh

Circuit based on the principles that ERISA is meant

to be interpreted broadly in favor of plan benefi-

ciaries. John Hancock v. Harris Trust and Savings

Bank, 510 U.S. 86, 96 (1993) (noting connection

between ERISA’s “broadly protective purposes” and

its fiduciary standards); Central States v Central

Transport, Inc , 472 U.S. 559, 570 (1985) (“In general,

trustees’ responsibilities and powers under ERISA

reflect Congress’ policy of ‘assuring the equitable

character of the plans.’ Thus, rather than explicitly

5

enumerating all of the powers and duties of trustees

and other fiduciaries, Congress invoked the common

law of trusts to define the general scope of their

authority and responsibility”). ERISA exemptions

should be construed narrowly. Varity Corp., 516 US.

at 513; Fort Halifax Packing, 482 U.S. at 15;

Commissioner v. Clark, 489 U.S at 739-40; Phillips v

Walling, 324 U.S. at 493 The Seventh Circuit failed

to heed that precedent in this case, and did so in

direct contravention of the DOL’s considered inter-

pretation. 57 FED. REG. 49,906, 46,922 (Oct. 13, 1992);

Brief of the Secretary of Labor, Elaine L. Chow, as

Amicus Curiae in Support of Plaintiffs-Appellants,

Hecker v. Deere, No. 07-3605, 08-1224 (7th Cir Mar.

19, 2008); Brief of the Secretary of Labor, Hilda L

Solis, as Amicus Curiae in Support of Panel

Rehearing, Hecker v. Deere, No. 07-3605, 08-1224 (7th

Cir. Mar. 20, 2009).

The Seventh Circuit panel’s failure to interpret

the “safe harbor” exemption narrowly 1s also signifi-

cant because as a practical matter most employees do

not have the resources to make the best bargain with

employers regarding the menu of options available to

them under 401(k) plans, and these resources de-

crease as education levels among employees decrease.

S Benartzi & R.H. Thaler, Heuristics and Biases

in Retirement Savings Behavior, 21 J. OF ECONOMIC

PERSP 81 (2007). Munnell & Sunden, COMING UP

SHORT: THE CHALLENGE OF 401(K) PLANS (Brookings

Inst. Press 2004). Thus, this Court’s holdings that

exemptions to genera] fiduciary duties under ERISA

6

are to be interpreted narrowly, Varity Corp , 516 U.S.

at 513; Fort Halifax Packing, 482 U S. at 15; Commis-

stoner v. Clark, 489 U.S. at 739-40, Phillips v.

Walling, 324 U.S. at 493 (1945), are not only consis-

tent with ERISA, but also with the practical reality

faced by employees in defined-contrbution plans

throughout the nation

This reality is further complicated by the fact

that employers currently have different duties under

29 U S.C. §1132 depending on where they are located

Likewise, employees have different rights under that

provision depending on where they live. Significantly,

this 1s because of a split among the circuits regarding

the interpretation of the “safe harbor” provision. Jn re

Washington Mut, Inc., Sec. Derivative & ERISA Lit ,

2009 WL 3246994 at *7 (W.D. Wash., Oct. 5, 2009)

(acknowledging split between the circuits); Page v

Impac Mortgage Holdings, Inc., 2009 WL 890722,

at *4 (CD. Cal., Mar 31, 2009) (same). Under such

circumstances, there is a compelling reason for this

Court to grant the petition of certiorari in this case

U.S Sup. CT. R 10(a) (2009).

Were petitioners located within the jurisdiction of

the United States Court of Appeals for the Fourth

Circuit or within the jurisdiction of a number of

Federal District Courts, petitioners would have easily

survived a motion to dismiss. The same would be true

in any jurisdiction that analyzed the motion to

dismiss consistently with the DOL’s guidance and the

longstanding interpretation of ERISA by this Court,

which requires that the statute should be interpreted

7

broadly in favor of plan beneficiaries and that ERISA

exemptions, such as the “safe harbor” provision,

should be construed narrowly.

A. The Seventh Circuit Panel Decision Dis-

regards this Court’s Holdings Regard-

ing the Purpose and Interpretation of

ERISA

This Court has explained that ERISA was

designed to be interpreted broadly in favor of plan

beneficiaries Varity Corp, 516 U.S. at 513; John

Hancock, 510 U.S. at 96; Central States, 472 U.S. at

570. The Court has held that ERISA was designed

with the purpose of protecting employee pension

benefits and with the purpose of making clear what is

required of employers so that they know their duties

and rights throughout the nation. Varity Corp , 516

U.S. 489; Fort Halifax Packing, 482 U.S. at 15;

Central States, 472 U.S. 559. This national pre-

dictability of rights and duties is further backed by

the strong rules set forth by this Court regarding

ERISA preemption. Egelhoff v Egelhoff, 532 U.S. 141,

149-50 (2001); Fort Halifax, 482 U.S. at 8-11 This

predictability and uniformity benefits both employers

and employees. Kgelhoff, 532 U.S. at 149-50 (“Re-

quiring ERISA administrators to master the relevant

laws of 50 States and to contend with htigation would

undermine the congressional goal of ‘minimizfing] the

administrative and financial burden([s]’ on plan

administrators — burdens ultimately borne by the

beneficiaries”) (brackets in onginal); Jngersoll-Rand

8

Co v. McClendon, 498 US. 133, 142 (1990) (“Par-

ticularly disruptive is the potential for conflict in

substantive law.... Such an outcome is_ funda-

mentally at odds with the goal of uniformity that

Congress sought to 1mplement.”); Fort Halifax, 482

U.S. at 9 (“The most efficient way to meet [employer]

responsibilities [under ERISA] is to establish a

uniform administrative scheme, which provides a set

of standard procedures. ... Such a system 1s difficult

to achieve, however, if a benefit plan is subject

to differing regulatory requirements in differing

states.”) (brackets added).

Contrary to this Court’s holdings, the Seventh

Circuit panel’s decision construes respondent’s plan

and respondent’s duties in the manner least pro-

tective of plar. beneficiaries. Hecker v. Deere, 556 F.3d

575 (7th Cir 2009), suppl. by Hecker v Deere, 569

F.3d 708 (7th Cir. 2009) This is not a case where the

law clearly dictated a particular outcome on the

motion to dismiss. In this case the petitioners’ argu-

ments had the support of the DOL and were consis-

tent with a number of court decisions. Brief of the

Secretary of Labor, Elaine L. Chow, as Amicus Curiae

in Support of Plaintiffs-Appellants, Hecker v Deere,

No. 07-3605, 08-1224 (7th Cir. Mar. 19, 2008); Brief of

the Secretary of Labor, Hilda L. Solis, as Amicus

Curiae in Support of Panel Rehearing, Hecker uv.

Deere, No. 07-3605, 08-1224 (7th Cir Mar 20, 2009),

DiFelice, 497 F.3d 410; In re Tyco Int'l, 606 F. Supp.

2d 166; Tatum vu R.J Reynolds Tobacco Co., 254

FR.D. 59; see also Hecker, 569 F 3d 708 (addressing

9

DOL’s support of petitioners’ interpretation of the

“safe harbor” provision 1n this matter). By rejecting

these arguments on a motion to dismiss the Seventh

Circuit panel failed to heed this Court’s message that

ERISA was intended to be construed broadly in favor

of plan beneficiaries, Varity Corp., 516 U.S. at 513;

John Hancock, 510 US. at 96; Central States, 472

U.S. at 570, and that exemptions to such a

‘humanitarian and remedial” statutory framework

should be interpreted narrowly. Varity Corp., 516 U.S.

at 513; Fort Halifax Packing, 482 U.S. at 15;

Commissioner v Clark, 489 U.S at 739-40; Phillips v

Walling, 324 U.S. at 493.

B. The Department of Labor’s Interpreta-

tions Are Consistent with this Court’s

Holdings Regarding the Purpose and

Interpretation of ERISA

The Seventh Circuit panel, on a motion to

dismiss, rejected the guidance of the DOL regarding

the applicability of the so called “safe harbor”

provision set forth in §404(c) of ERISA. It did so

ostensibly because the directly relevant statement in

the DOL regulations was contained in the preamble.

Hecker, 556 F.3d at 589; Hecker, 569 F.3d 708. Yet, the

DOL promulgated these regulations after consider-

able public comment and consideration and has

asserted that the preamble reflects DOL’s consistent

interpretation of the “safe harbor” provision which is

entitled to deference under, Chevron U.S.A Inc vu

Natural Res Def Council, 467 US 837 (1984) See

10

Brief of the Secretary of Labor, Elaine L. Chow, as

Amicus Curiae in Support of Plaintiffs-Appellants at

15-17, Hecker v. Deere, No. 07-3605, 08-1224 (7th Cir

Mar. 19, 2008).

The Seventh Circuit panel’s new rule that a

court, on a motion to dismiss, can disregard directly

relevant language in regulations promulgated by the

agency charged by Congress to enforce a law —

language that narrowly construes an exemption — 1s

inconsistent with this Court’s guidance set forth

above that ERISA exemptions should be construed

narrowly, and with this Court’s holdings addressed

below in Section II, that a motion to dismiss should

not be granted under Rule 12(b)(6) where the

nonmoving party has a plausible argument (as will be

explained below petitioner’s argument was more than

plausible). See supra Section I, 1 A.; infra Section II.

Moreover, the DOL filed a _ bnef supporting

petitioner’s position on the §404(c) “safe harbor”

provision. Brief of the Secretary of Labor, Elaine L.

Chow, as Amicus Curiae in Support of Plaintiffs-

Appellants, Hecker v. Deere, No. 07-3605, 08-1224

(7th Cir. Mar. 19, 2008); Brief of the Secretary of

Labor, Hilda L. Solis, as Amicus Curiae in Support of

Panel Rehearing, Hecker v Deere, No. 07-3605, 08-

1224 (7th Cir. Mar. 20, 2009). Therefore, the DOL

itself argued in this htigation that its regulations

support petitioners’ case. Jd. at 15-17.

11

C. Decisions by the United States Court

of Appeals for the Fourth Circuit and

Several United States District Courts,

that Reject the Interpretation Set

Forth in the Panel’s Decision in this

Case, Are Consistent With This Court’s

Holdings Regarding the Purpose and

Interpretation of ERISA

The Seventh Circuit panel’s decision conflicts

with decisions by the United States Court of Appeals

for the Fourth Circuit, DiFelice, 497 F.3d 410, and

several district court opinions. Tibble v. Edison Int'l,

2009 WL 2382340 (C.D. Cal., July 16, 2009), clarified

on other grounds, 2009 WL 2382348 (C.D. Cal., July

31, 2009); Page v Impac Mortgage Holdings, Inc.,

2009 WL 890722 (Mar. 31, 2009); In re Tyco Int'l, 606

FE. Supp. 2d 166; Tatum v. R.J. Reynolds Tobacco Co.,

254 F.R.D. 59. It 1s consistent with a decision by a

divided panel of the United States Court of Appeals

for the Fifth Cirewmt, Langbecker v. Electronic Data

Sys Corp , 476 F.3d 299 (5th Cir. 2007), and with

District Court opinions in the Seventh Circuit, which

must follow the decision below in this matter. Lingis

v Motorola, Inc., 2009 WL 1708097 (N.D. Ill., June

17, 2009); Abbott v. Lockheed Martin, 2009 WL

839099 (S D Ill., Mar. 31, 2009). Notably, there was a

strong dissent from the Fifth Circuit panel’s decision,

and that dissent is consistent with the Fourth

Circurt’s decision in DiFelice and with the DOL

regulations. Langbecker, 476 F 3d at 319 (Reavley, J.,

dissenting) This demonstrates a split among the

12

circuits that this Court should address. US Sup Cr

R. 10a) (2009).

The Fourth Circuit, DiFelice, 497 F.3d 410,

several United States Distnct Courts, 7Tibble, 2009

WL 2382340; Page, 2009 WL 890722; In re Tyco Int’,

606 F. Supp. 2d 166; Tatum v. R.J. Reynolds Tobacco

Co, 254 F.R.D. 59; the DOL, 57 FEp. Rea. 49,906,

46,922 (Oct. 13, 1992); Brnef of the Secretary of Labor,

Elaine L Chow, as Amicus Cunae in Support of

Plaintiffs-Appellants at 15-17, Hecker v. Deere, No.

07-3605, 08-1224 (7th Cir. Mar. 19, 2008), a judge

dissenting from the Fifth Circuit decision relied upon

by the Seventh Circuit in the present matter,

Langbecker, 476 F.3d at 319 (Reavley, J., dissenting),

and petitioners argue that the so called “safe harbor”

provision does not apply to claims of imprudent

selection of investment options. That interpretation 1s

more consistent with this Court’s holdings that

ERISA should be interpreted broadly in favor of plan

beneficiaries, and that ERISA exemptions should be

construed narrowly See supra Section I, ].A,1i.B The

decision by the Seventh Circuit panel in this case and

the majority of the Fifth Circuit panel in Langbecker,

476 F.3d 299, construe the “safe harbor” provision

broadly — especially when compared to the DOL and

Fourth Circuit’s interpretations — and in a manner

that is most harmful to plan beneficiaries. This Court

should grant the petition for certiorari 1n this case to

clarify the conflict among the lower courts and

overturn the Seventh Circuit panel’s opimion in this

case.

13

Il. The Seventh Circuit’s Decision In this Case

Conflicts with Fundamental Principles of

Civil Procedure

In Ashcroft v. Iqbal, U.S. __, 129 S.Ct. 1937

(2009) and Bell Atlantic Corp. v Twombly, 550 U.S.

544 (2007), this Court set forth the standards

applicable to motions to dismiss on the pleadings.

This Court held that where a complaint states a

“plausible” basis for relief the complaint survives a

motion to dismiss. Jgbal, ___ US __, 129 S.Ct. at

1949; Twombly, 550 U.S. at 556-59. A court still must

construe factual allegations in the complaint as true,

Iqbal, U.S. __, 129 S.Ct. at 1949-50; Twombly,

550 U.S. at 555, but this does not apply to legal

allegations. [d. The reasons for this holding were

clearly set forth by this Court in Jgbal, namely,

requiring complainants to do more than list the

elements of a legal claim without any factual support

to suggest that the elements have been violated.

Igbal,_ US __,129S Ct. at 1949-50, 1953-54.

Without stating such a plausible claim, this

Court held, a complainant should not be able to

proceed to the costly discovery process. Jd. Sigmifi-

cantly, the converse 1s also true. Where a complainant

sets forth a plausible claim in the complaint a motion

to dismiss on the pleadings should not be granted

and the case should be allowed to move forward.

Twombly, 550 U.S. at 556 (“Asking for plausible

grounds to infer an agreement does not impose a

probability requirement at the pleading stage; it

simply calls for enough fact to raise a reasonable

14

expectation that discovery will reveal evidence of

illegal agreement” [a central issue in Twombly]); Id

(“A well-pleaded complaint may proceed even if it

strikes a savvy judge that actual proof of those facts

is improbable, and ‘that a recovery is very remote and

unlikely.’ ”).

Iqbal and Twombly do not alter the fact that a

motion to dismiss on the pleadings 1s a gate-keeping

motion, that is, when such a motion is granted with

prejudice (as in this case) the complainant is locked

out of court and precluded from seeking justice on the

matter. Thus, under Jgbal and Twombly, as before,

complaints should not be dismissed at the pleading

stage on what ultimately would be the merits of the

case. That is exactly what the Seventh Circuit panel

did in this matter.

Petitioners set forth specific allegations in their

complaint and connected those allegations to the legal

claims asserted. Second Amended Complaint for

Breach of Fiduciary Duty, Hecker, et al v Deere & Co.,

et al (WD. Wis, No. 06-C-719-S, decided June 21,

2007) (complaint filed March 6, 2007). The complaint

asserted more than a plausible claim as is evidenced

by the fact that the DOL, the Fourth Circuit and

several district courts support the actionability of

such claims. See supra Section IC. The Seventh

Circuit panel argued that because the complaint

anticipated the “safe harbor” defense under ERISA

§404(c) 1t was brought into play for purposes of

respondents’ 12(b)(6) motion Hecker, 556 F.3d at 588-

89. This may be true, but it simply means that the

15

Seventh Circuit panel could dismiss the case if the

claims were implausible. Twombly, 550 U.S at 556. It

does not mean that the Seventh Circuit panel should

dismiss a plausible claim simply because it disagrees

with it on the merits prior to discovery, and interprets

the facts in a manner that supports the panel’s own

legal presuppositions as happened in this case. See

Swierkvewicz v. Sorema, 534 U.S. 506, 513 (2002)

(Rule 8(a) establishes a pleading standard without

regard to whether a claim will succeed on the

merits.); Scheuer v Rhodes, 416 US. 232, 236 (1974)

(“Indeed 1t may appear on the face of the pleadings

that a recovery is very remote and unlikely but that

is not the test.”), Cf Twombly at 556 (“a well-pleaded

complaint may proceed even if it strikes a savvy judge

that actual proof of those facts 1s improbable, and

‘that a recovery 1s very remote and unhikely.’”).

Simply put, the complaint in this case set forth

adequate facts to support the plausibility of the legal

allegations therein. See Second Amended Complaint

for Breach of Fiduciary Duty, Hecker, et al v Deere &

Co., et al (W.D. Wis., No 06-C-719-S, decided June 21,

2007) (complaint filed March 6, 2007) As noted

above, there 1s a substantial amount of law that

demonstrates the plausibility of petitioners’ claims.

See supra Sections I., 1 A., 1.B,1IC. The gate-keeping

function for a motion to dismiss on the pleadings set

forth in Igbal and Twombly is not served by pre-

venting complainants from seeking justice on plau-

sible claims Twombly, 550 US. 556 Those cases do

not stand for the proposition that courts should

16

dismiss potentially successful claims because at the

pleading stage a court does not agree with the legal

assertions in the complaint. /d.; Iqbal, ___ US. __,

129 S.Ct. at 1949-50, 1953-54. This Court should

grant the petition for certiorari in this case to correct

the grave injustice created by the Seventh Circuit

panel’s dismissal of the complaint with prejudice and

to clarify the law due to the conflicting decisions of

the United States Courts of Appeals on this impor-

tant issue.

¢

CONCLUSION

For the reasons stated above, amicus curiae

respectfully request that this Court grant the writ of

certiorari in this matter.

Respectfully submitted,

PROFESSOR FRANK 8S. RAVITCH

MICHIGAN STATE UNIVERSITY

College of Law

Room #315

Law College Bldg.

East Lansing, MI 48824

(517) 432-6973

Counsel of Record

November 16, 2009