Bunch v. W.R. Grace & Co.

United States Court of Appeals
For the First Circuit

No. 08-1406

LAWRENCE BUNCH, individually and on behalf of all others
similarly situated and on behalf of the W.R. Grace & Co.
Savings and Investment Plan; JERRY L. HOWARD, SR., individually
and on behalf of all others similarly situated and on behalf of
the W.R. Grace & Co. Savings and Investment Plan; DAVID MUELLER,
individually and on behalf of all others similarly situated and
on behalf of the W.R. Grace & Co. Savings and Investment Plan,

Plaintiffs, Appellants,

KERI EVANS, on behalf of herself and
a class of all others similarly situated,

Plaintiff,

v.

W.R. GRACE & CO.; W.R. GRACE INVESTMENT AND BENEFITS COMMITTEE;
ROBERT M. TAROLA; FRED E. FESTA; STATE STREET BANK AND TRUST
COMPANY; JOHN F. AKERS; RONALD C. CAMBRE; MARYE ANNE FOX;
OFFICER JOHN J. MURPHY; PAUL J. NORRIS; THOMAS A. VANDERSLICE;
H. FURLONG BALDWIN,

Defendants, Appellees,

BRENDA GOTTLIEB; W. BRIAN MCGOWAN; MICHAEL PIERGROSSI;
UNKNOWN FIDUCIARY DEFENDANTS 1-100; MARTIN HUNTER; REN LAPADARIO;
DAVID NAKASHIGE; ELYSE NAPOLI; EILEEN WALSH; FIDELITY
MANAGEMENT TRUST COMPANY; STATE STREET GLOBAL ADVISORS;
INVESTMENTS AND BENEFITS COMMITTEE; ADMINISTRATIVE COMMITTEE,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. William G. Young, U.S. District Judge]
 Before

Torruella, Stahl, Circuit Judges,
and García-Gregory,* District Judge.

Paul M. DeMarco, with whom James R. Cummins, Terrence L.
Goodman, Jane H. Walker, and Waite, Schneider, Bayless & Chesley
Co., L.P.A., were on brief for plaintiffs-appellants.
Scott M. Flicker, with whom Thomas A. Rust, Paul, Hastings,
Janofsky & Walker LLP, Sean T. Carnathan, and O'Connor, Carnathan,
Mack LLC, were on brief for defendant-appellee State Street Bank
and Trust Company.
Nancy S. Heermans, with whom Carol Connor Cohen, Caroline
Turner English, Valerie N. Webb, and Arent Fox LLP, were on brief
for defendants-appellees.

January 29, 2009

*
Of the District of Puerto Rico, sitting by designation.

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 TORRUELLA, Circuit Judge. This appeal is from a summary

judgment granted by the district court dismissing consolidated

suits1 filed by various participants in the W. R. Grace Retirement

and Savings Plan ("Plan").2 These actions allege breach of the

fiduciary duty owed appellants pursuant to the Employee Retirement

Income Security Act of 1974 ("ERISA"). 29 U.S.C. §§ 1109, 1132.

Appellants sued their employer and retirement fund manager, W.R.

Grace & Co. ("Grace"), as well as their delegated fiduciary, State

Street Bank ("State Street").3 The latter was engaged by Grace to

advise it regarding the soundness of retaining certain stock assets

1
Evans v. Akers, No. 04-11380 (D. Mass. filed June 17, 2004) and
Bunch v. W.R. Grace & Co., No. 05-11602 (D. Mass. filed Aug. 2,
2005), consolidated into No. 04-11380 on May 18, 2006. The
procedural history prior to consolidation is long and complicated,
and mostly irrelevant to the merits of this appeal. Except where
necessary, it will be by-passed for present purposes. See Bunch v.
W.R. Grace & Co., 532 F. Supp. 2d 283 (D. Mass. 2008).
2
Certified as a class by the district court, comprising "all W.R.
Grace Stock Plan participants and entities who owned shares of W.R.
Grace's publicly traded common stock through the Grace Stock Plan
at any time from April 14, 2003, through April 30, 2004." The class
is represented in this case by Lawrence Bunch, Jerry L. Howard,
Sr., David Mueller, and Keri Evans, hereinafter referred to
collectively as "appellants".
3
In addition to Grace and State Street, individually named
defendants included the W.R. Grace Investment and Benefits
Committee, Robert M. Tarola, Fred E. Festa, John F. Akers, Ronald
C. Cambre, Marye Anne Fox, Officer John J. Murphy, Paul J. Norris,
Thomas A. Vanderslice, H. Furlong Baldwin, Brenda Gottlieb, W.
Brian McGowan, Michel Piergrossi, Unknown Defendants 1-100, Martin
Hunter, Ren Lapadario, Davis Nakashige, Elyse Napoli, Eileen Walsh,
Fidelity Management Trust Company, State Street Global Advisors,
Investments and Benefits Committee, and Administrative Committee.
When appropriate they shall be included in the collective term
"appellees".

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of the Plan and to act independently on said advice. In synthesis,

appellants claim that Grace and State Street breached their

fiduciary duty to appellants when State Street sold the Plan's

holdings in Grace stock at an imprudently low price while Grace was

in bankruptcy reorganization. They claim that Grace failed to

properly monitor State Street in the performance of its delegated

fiduciary duties. Because we conclude that the granting of summary

judgment in favor of appellees was appropriate as a matter of law,

we affirm the decision of the district court.

I. Facts4

Since at least 1976, Grace has sponsored the Plan, a

defined contribution 401(k) plan which offers participants an

opportunity to invest wages in anticipation of retirement benefits.

The Plan was administered by the Investments and Benefits Committee

("IBC") composed of Grace officers. The IBC was responsible for

selecting and changing investment options offered under the Plan.

Each Plan member, however, had the power to determine in which fund

to invest at any given time. The Plan offered participants twenty

4
The parties stipulated to all the relevant facts, and thus the
district court decided the matter as a case stated. Bunch, 532 F.
Supp. 2d at 285. We follow this lead and recite the facts based
principally on the recompilation contained in the decision of the
district court. Id. at 285-86. These findings are binding upon us
absent clear error. Watson v. Deaconess Waltham Hosp., 298 F.3d
102, 108 (1st Cir. 2002) (on review of a case stated, the district
court's factual findings and any inferences drawn from the
stipulated facts are subject to review only for clear error). The
district court's legal conclusions are, of course, subject to de
novo review. Id.

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eight different options, including the Grace Stock Fund, which

invested in Grace stock. The Grace Stock Fund owned approximately

12% of Grace's outstanding shares.

Commencing in the 1970s, Grace, which was a global

manufacturer and supplier of catalysts and silica products, became

a defendant in industry-wide asbestos-related personal injury

suits. Because of potential massive liability, on April 2, 2001,

Grace filed voluntary petitions for reorganization under Chapter 11

of the U.S. Bankruptcy Code in the District of Delaware.5

In the meantime, from September 1999 until the bankruptcy

proceedings were initiated in April 2001, the market price of Grace

stock fell from approximately $19 per share to $1.50 per share.

During this period, Grace continued to maintain the Grace Stock

Fund and to offer Grace stock as an investment option in the Plan.6

Thereafter, while the bankruptcy proceedings continued their

course, and during the certified class period, the stock price more

or less stabilized at between $2.00 to $5.00 per share.

On March 17, 2003, Brian McGowen, a member of the IBC,

wrote the Plan's participants informing them that the Grace

fiduciaries were "seriously consider[ing]" naming an independent

5
See In re W.R. Grace, No. 01-01139 (Bankr. D. Del. filed
April 2, 2001).
6
As so happens, the failure to divest under those circumstances
was itself the subject of a case before this court. See Evans v.
Akers, 534 F.3d 65, 68 (1st Cir. 2008).

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fiduciary to operate the Grace Stock Fund in order to avoid any

potential conflict of interest arising out of the reorganization

plan in Grace's bankruptcy. Thereafter, Grace proceeded to amend

the Plan to allow the IBC to appoint an independent investment

manager for the Grace Fund. The amendment provided that:

[T]he Independent Investment Manager shall
have the following authority and duties:
. . .
(i) the continuous authority and
duty to determine the extent
that the continued retention of
shares of Grace Stock within the
Grace Stock Fund is not
inconsistent with the applicable
provisions of [ERISA], and to
take actions in this regard that
it deems appropriate; including
the authority to dispose of
Grace Stock held within the
Grace Stock Fund and to close
the Grace Stock Fund to
participant trading.

Pursuant to this provision, in December 2003, after due

deliberation, the IBC decided to resolve the potential conflict of

interest conundrum by appointing State Street as an independent

investment manager, granting it the powers and discretion

authorized by the amended Plan. In this respect the independent

investment manager was charged with determining the risks inherent

in continued ownership of the Grace stock, including the extent of

the contingent asbestos litigation liability, an analysis that was

itself partially dependent on assessing the likelihood of enactment

by Congress of the Fairness in Asbestos Injury Resolution Act of

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2003. S. 1125, 108th Cong. (2003) (designed to provide economic

relief to the litigation-ridden asbestos industry).

Upon its appointment, State Street itself proceeded to

seek expert advice by retaining Duff and Phelps LLC ("D&P") for the

purpose of obtaining an opinion regarding Grace's financial

prospects, and the firm of Goodwin Procter LLP to provide

appropriate legal counsel. After due consideration, D&P prepared

a report that concluded that the value of Grace stock was between

$0.73 and $3.02 per share, with a midpoint value of $1.88 per

share. Considering that the approximate market price of Grace

stock was $3.51 per share at that time, the State Street Fiduciary

Committee ("Fiduciary Committee"), charged with exercising the

discretion assigned to State Street by Grace, entertained D&P's

findings and recommendations that the Grace stock be sold at its

January 2004 meeting. The Fiduciary Committee, however, requested

further findings.

Upon reconvening in February, the Fiduciary Committee

concluded that the Grace stock was an inappropriate investment

because of the risks inherent to the price of the stock by reason

of the potential liability extant in the continuing asbestos

litigation. Concomitantly, it also found that "the market price of

W.R. Grace stock [was] not a good indication of its long term

value." Thus, it decided that the best course to follow was to

sell the Grace holdings on the open market.

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 Before doing so, however, State Street gave advance

notice to Grace of its decision to begin selling the Plan's Grace

stock. It then notified the Plan's participants of its decision,

but advised them that, notwithstanding this decision, it would

"continue to monitor the situation" and might decide to end the

sales effort if the circumstances required it. The Grace

fiduciaries did not question State Street about why it decided to

sell the Plan's Grace stock, in part because Robert Tarola

("Tarola") considered such inquiry "off limits" in view of the

conflict of interest potential that led to delegation of the

independent power to act to State Street.

Relying in part on D&P's valuation of the stock, State

Street proceeded to sell 13% of its Grace stock holdings at between

$2.86 and $3.09 per share.

Approximately a month or two later, an independent third

party investor, D.E. Shaw & Co.("Shaw"), sought to buy the Plan's

remaining Grace stock. Shaw offered to buy this block at $3.50 per

share, although the stock was then selling at $2.96 per share.

State Street informed Grace of the offer and asked Tarola if there

was anything that State Street should know about Grace before

making a decision on this offer. Tarola responded that everything

that State Street should know about Grace was available in the

public domain.

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 On April 12, 2004, State Street sold substantially all of

the Plan's holdings in Grace stock to Shaw at $3.50 per share, and

notified the Plan participants of its action. The balance of the

Grace stock was passed to Shaw one week later, on April 17, 2004.

II. Discussion

Although packaged in a more legalistic wrapping, the

essence of appellants' allegations of fiduciary misconduct by Grace

can be reduced to faulting Grace for its failure or refusal to

insert itself into State Street's decision-making process. This

may be an accurate statement of Grace's actions, or rather

inactions; however, under the circumstances of this case, this did

not constitute a breach of Grace or State Street's fiduciary duties

to appellants under ERISA.

A. The Decision of the District Court

Before the district court, appellants argued that because

Grace's stock traded in an efficient market,7 absent evidence of

eminent collapse of the stock price, State Street ought to have

relied more heavily on market prediction of the stock's value, and

"Grace's solid potential in the future," before deciding to sell

7
The efficient market theory hypothesizes that the best indicator
of a stock's potential, as well as its risks and liabilities, is
the price at which it is traded in the open market. See In re
Xcelera.com Sec. Litig., 430 F.3d 503, 508 (1st Cir. 2005)
(discussing the efficient market theory in a securities case, and
explaining that "'an efficient market is one in which the market
price of the stock fully reflects all publicly available
information.'" (quoting In re PolyMedica Corp. Sec. Litig., 432
F.3d 1, 14 (1st Cir. 2005))).

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the Grace stock portfolio. Bunch, 532 F. Supp. 2d at 287. Rather

than selling this stock, appellants contended that the efficient

market theory established that the only action consistent with

ERISA was the retention of the Grace stock. Id. Because the Grace

stock was traded in an efficient market, placing a different price

than the market price into the valuation process, as was done by

State Street, constituted "second guessing" the market and thus,

according to appellants, imprudent fiduciary conduct. Appellees

did not dispute that Grace stock traded in an efficient market but

in contravention to appellants' position, Grace argued that the

current market price of Grace stock constituted only one of the

factors that a prudent fiduciary under ERISA needed to consider in

deciding whether to retain or divest the stock from its portfolio.

The district court agreed that "the market was the best

indicator of the stock's present value." Id. (emphasis in

original). Nevertheless, it rejected appellants' notion that the

efficient market was the standard by which the court should measure

State Street's actions. The court concluded that the applicable

standard was ERISA's prudent person standard. It ruled that ERISA

did not require that a fiduciary maximize the value of investments,

as Appellants seemed to imply by their arguments. Rather, what

ERISA calls for from a fiduciary is that it use the "care, skill,

prudence, and diligence under the circumstances then prevailing

that a prudent man acting in a like capacity and familiar with such

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matters would use in the conduct of an enterprise of a like

character and with like aims." 29 U.S.C. § 1104(a)(1)(B). As the

district court aptly stated, "in common parlance, [what] ERISA

fiduciaries owe participants [are] duties of prudence and loyalty,"

Bunch, 532 F. Supp. 2d at 288 (citing Moench v. Robertson, 62 F.3d

553, 561 (3d Cir. 1995)). The district court noted that other

courts faced with allegations similar to those of appellants in

this case had looked at the totality of the circumstances involved

in the particular transaction. Id. Among the key decisions relied

upon by the district court for reaching this conclusion was

DiFelice v. U.S. Airways, Inc., in which that court stated:

[W]e examine the totality of the
circumstances, including, but not limited to:
the plan structure and aims, the disclosures
made to participants regarding the general and
specific risks associated with investment in
company stock, and the nature and extent of
challenges facing the company that would have
an effect on stock price and viability.

497 F.3d 410, 418 (4th Cir. 2007).

Thus, the district court concluded, the relevant inquiry

was not whether the market price was the best predictor of share

value, as claimed by appellants, but whether State Street took into

account all relevant information in carrying out its fiduciary

duties under ERISA. Bunch, 532 F. Supp. 2d at 288. The district

court then enumerated the various factors considered by State

Street, in addition to the D&P report, in making its divestment

decision, namely: the market price of the stock, information about

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the Plan, the bankruptcy proceedings, the financial outlook of the

company, and the potential liability by reason of the asbestos

litigation. State Street's analysis of these factors convinced the

district court that there was a potential for loss of value of the

Grace stock which was comparable to knowledge of an impending

collapse, a conclusion which negated the presumption that retention

of company stock was prudent under ERISA. Id. at 289; see also

Moench, 62 F.3d at 572. In any event, as the district court noted,

because the shares in question were sold at a higher price than the

then-existing market price, the best that appellants could claim

was that they could have earned more money had State Street not

sold the Grace shares until a later date. The district court ruled

that the test was not whether the best possible action was taken by

State Street, but whether it had considered all relevant factors at

the time of the divestment decision. Id. at 290.

Although appellants exert strenuous efforts to have us

conclude otherwise, we can find little to disagree with in the

decision of the district court. We are nevertheless duty bound to

consider appellants' contentions before us.

B. The Case on Appeal

On appeal appellants present us with two general

complaints regarding the decision of the district court: first,

they allege "misapplication" of the law concerning the presumption

that the retention of company stock in a retirement plan is

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consistent with ERISA, and second, they claim error in the district

court's "mistaken" equation of State Street's process for deciding

to sell the Grace stock, which the court said "took into

consideration the totality of circumstances surrounding [said]

stock," with a substantively sound and reasoned analysis of all

relevant circumstances. Id. We shall discuss these contentions in

inverse order of presentation because resolution of the second

claimed error easily disposes of the first alleged fault.

Considering the thorough investigative and decisional

process that preceded the divestment of the Grace stock by the

fiduciaries in this case, it is difficult, indeed impossible, given

the standard of review which we are bound to follow, to legally

challenge their actions in this appeal. Notwithstanding the re-

framing of the issues before us, as stated above, it is clear from

a reading of appellants' briefs that they continue to base their

contentions of breach of fiduciary duty by State Street on the

mistaken application of the efficient market theory to the facts of

this case, a contention that was rejected by the district court.

Specifically, this contention is the erroneously framed argument

that State Street breached its duty by not giving sufficient weight

to the market price in determining the value of the Grace stock.

Reiterating what was decided by the district court, this

position is plainly wrong. As cogently stated by that court, the

efficient market is not the standard by which State Street's

-13-
actions are to be judged. Rather, under ERISA, a fiduciary is

required to act with "'the care, skill, prudence and diligence

. . . that a prudent man acting in a like capacity and familiar

with such matters would use.'" Beddall v. State St. Bank & Trust

Co., 137 F.3d 12, 18 (1st Cir. 1998) (quoting 29 U.S.C.

§ 1104(a)(1)(B)). "[T]he test of prudence -- the Prudent Man Rule

-- is one of conduct, and not a test of the result of performance

of the investment." Donovan v. Cunningham, 716 F.2d 1455, 1467

(5th Cir. 1983) (emphasis added) (quotation marks omitted).

"[W]hether a fiduciary's actions are prudent cannot be measured in

hindsight . . . ." DiFelice, 497 F.3d at 424. The "test [is] how

the fiduciary acted viewed from the perspective of the time of the

challenged decision rather than from the vantage point of

hindsight." Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915, 917-18

(8th Cir. 1994) (quotation marks omitted). Furthermore, prudence

"involves a balancing of competing interests under conditions of

uncertainty." Armstrong v. LaSalle Bank Nat'l Ass'n, 446 F.3d 728,

733 (7th Cir. 2006). Rather than emphasizing one factor, the

market price, as proposed by appellants, State Street correctly

considered "the totality of the circumstances," including, of

course, the market price of the Grace stock. See DiFelice, 497

F.3d at 418; Keach v. U.S. Trust Co., 419 F.3d 626, 636-37 (7th

Cir. 2005).

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 Under the circumstances of this case, the actions of both

Grace and State Street, with relation to the divestment of the

Grace stock held by the Plan, unquestionably meet the prudent man

standard embodied in ERISA.

First of all, upon concluding that the decisions required

of Grace management in connection with the reorganization

proceedings augured a potential conflict of interest with Grace's

fiduciary duties, Grace took the eminently correct decision of

insulating itself from that possibility. It amended the Plan,

after duly notifying the participants of its intended action and

notifying them of the reasons for its action. It then delegated

the relevant decisional power to an independent third party, State

Street, to render its expert, unbiased assessment of the Grace

stock, and to execute its autonomous determination based on its

conclusion regarding whether the Fund's retention or sale of Grace

stock was appropriate. See 29 U.S.C. § 1104(a)(1) (requiring a

fiduciary to act "solely in the interest of the participants and

beneficiaries"). State Street itself sought further assessment

from two non-partisan professional entities, D&P and Goodwin

Procter LLP, whose expertise in their respective fields of

knowledge is not questioned by appellants.

State Street, as well as these two firms, in addition to

closely monitoring the price fluctuations of the Grace stock on the

market, compiled and studied Grace's financial performance and

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outlook, in particular analyzing how developments in the Grace

bankruptcy and the process of reorganization could impact the value

of Grace's common stock. Of prime importance was whether Grace's

contingent asbestos liabilities in the bankruptcy could approach or

exceed the value of equity in the company, thus diluting or

altogether wiping out the value of the Grace stock in the Plan's

portfolio. Among the factors considered by the State Street team

at the various meetings and conferences regarding the asbestos

contingent liability were: (1) the asbestos-related bodily injury

claims being filed and pending against Grace; (2) the outcome of

class action litigation pending against Grace regarding a product

called Zonolite attic insulation material; (3) the availability of

insurance coverage to pay asbestos claims; and (4) the probability

of passage of legislation pending in Congress, the Fairness in

Asbestos Injury Resolution Act of 2003, which, if enacted, could

reduce or cap Grace's liability for asbestos bodily injury claims.

Thereafter, based on its investigations and analysis of

the facts that it found, D&P prepared and presented to State Street

a detailed 88-page financial and valuation analysis of Grace, which

included a determination of what it considered "a reasonable

pricing range for the [Grace] stock given the factors we believe

should impact the value to equity investors." Based on these

factors, the recommendation was made to State Street to commence

selling the Grace stock holdings. Nevertheless, the Fiduciary

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Committee requested further analysis from its advisors, which led

to additional meetings and a further formal presentation, attended

by representatives of both D&P and Goodwin Procter LLP. At this

presentation, a summary was made of the due diligence and analysis

to date, which included the following summary of its

recommendation:

Unresolved asbestos litigation and potential
asbestos legislation will affect the
determination of whether Grace stock remains
a prudent investment. The uncertainty and
consequence of unfavorable events occurring as
a result of litigation probabilities or of
legislation not being enacted timely or at
all, has resulted in the IFG8 recommendation
that the Committee override Plan documentation
and begin to reduce the holdings of Grace
stock.

The recommendation to commence a selling
program is based upon the IFG's determination
that the continued holding by the Trust of all
of its shares of Grace stock would be
imprudent and therefore inconsistent with the
requirements of Section 404(a)(1)(B) of ERISA.
Such determination reflects the input of [D&P]
and Goodwin [Procter LLP] and has been made
after careful consideration of all of the
facts and circumstances determined to be
relevant by IFG.

(emphasis added).

Thereafter, the Fiduciary Committee met again and

unanimously approved this recommendation, establishing as a minimum

sales price the midpoint valuation range found by D&P of $1.88 per

8
"IFG" refers to State Street's Independent Fiduciary Group,
itself composed of investment professionals experienced in managing
company stock funds for ERISA-covered pension plans.

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share. The divestment decision was communicated to the Plan's

participants, who were also informed that the situation would

continue to be monitored in case a change in strategy became

necessary by reason of changed circumstances.

Between February 25 and April 6, 2004, State Street sold

approximately 900,000 shares of Grace stock in the open market

transactions at then-prevailing New York Stock Exchange trading

prices, ranging from $2.86 to $3.00 per share. During this period,

State Street continued to monitor the Grace stock and received

regular updates from D&P regarding its equity valuation conclusion

for Grace.

On April 2, 2004, Shaw, an independent investor, made

State Street an unsolicited offer to purchase the remaining 6.2

million shares of Grace stock still in the Plan's portfolio. The

offer was for the entire lot at $3.50 per share, which was 8%

higher than the closing price of $3.24 per share on April 1, and

almost twice the mid-point equity valuation of $1.36 per share

assessed by D&P as of March 31, 2004. In the meantime,

developments in the proposed legislative settlements required

further investigation by D&P and additional meetings with State

Street, but ultimately it was concluded that there was no further

need for D&P to re-evaluate the equity valuation for Grace. This

hiatus led to Shaw lowering its offer to $3.25 per share, after

which Goodwin Procter LLP advised the Fiduciary Committee on recent

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events regarding Grace's exposure to asbestos liabilities. The

Fiduciary Committee reaffirmed the basis for its conclusion that

Grace stock was an inappropriate investment for the Plan because of

the factors already considered, including the bankruptcy status of

the company, the uncertainty that equity holders would receive

value for the stock, and the outstanding asbestos litigation. The

fundamentals regarding the Grace stock remaining unaltered from

when the question was previously considered, the Fiduciary

Committee voted unanimously to sell the remaining shares to Shaw

provided that the original offer price of $3.50 was reinstated and

that the sale did not burden the Plan with any commission expenses.

The sale to Shaw was effectuated in two transactions, on April 12

and 19, 2004, at $3.50 per share, approximately 18% higher than the

market closing price on those dates.

There can be little doubt on this record that the state

of Grace's corporate health was thoroughly studied by experts who

debated and considered ad nauseam the pros and cons of retaining or

selling the stock held in the Plan's portfolio. The unanimous

conclusion of those charged with making the decision was that

divestment of this stock was the only action consistent with the

prudence required of a responsible fiduciary under ERISA. Without

question, State Street engaged in a substantively sound, reasonable

analysis of all relevant circumstances appropriate to the decision

-19-
to sell the Grace stock. We cannot say that the district court's

approval of these actions was in error.

Appellants seek to induce us to reject State Street's

actions by having us apply a presumption of prudence which is

afforded fiduciaries when they decide to retain an employer's stock

in falling markets, first articulated in Kuper v. Iovenko, 66 F.3d

1447, 1459 (6th Cir. 1995) and Moench, 62 F.3d at 571-72. The

presumption favoring retention in a "stock drop" case serves as a

shield for a prudent fiduciary. If applied verbatim in a case such

as our own, the purpose of the presumption is controverted and the

standard transforms into a sword to be used against the prudent

fiduciary. This presumption has not been so applied, and we

decline to do so here, as it would effectively lead us to judge a

fiduciary's actions in hindsight. Although hindsight is 20/20, as

we have already stated, that is not the lens by which we view a

fiduciary's actions under ERISA. DiFelice, 497 F.3d at 424; Roth,

16 F.3d at 917-18. Rather, given the situation which faced it,

based on the facts then known, State Street made an assessment

after appropriate and thorough investigation of Grace's condition.

Katsaros v. Cody, 744 F.2d 270, 279 (2d Cir. 1984).9 This

9
A fiduciary charged with making investment decisions on behalf
of an ERISA plan is required (1) to "employ[] the appropriate
methods to investigate the merits of the investment and to
structure the investment;" (2) to "act[] in a like capacity [of
others] familiar with such matters;" and (3) to conduct an
"independent investigation of the merits of a particular
investment", id. (quotation marks omitted).

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assessment led it to find that there was a real possibility that

this stock could very well become of little value or even worthless

to the Plan. It is this prudent assessment, and not a presumption

of retention, applicable in another context entirely, which

controls the disposition of this case. See also LaLonde v.

Textron, Inc., 369 F.3d 1, 6-7 (1st Cir. 2004) (expressing

hesitance to apply a "hard-and-fast rule" in an ERISA fiduciary

duty cases, and instead noting the importance of record development

of the facts).

III. Conclusion

The decision of the district court is affirmed.

Costs are imposed on appellants.

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