Coburn v. Evercore Trust Company, N.A.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
________________________________________
)
DONNA MARIE COBURN, )
on behalf of herself and )
all others similarly situated, )
)
Plaintiff, )
)
v. ) Civil Action No. 15–49 (RBW)
)
EVERCORE TRUST COMPANY, N.A., )
)
Defendant. )
________________________________________)

MEMORANDUM OPINION

The complaint in this putative class action alleges that the defendant, Evercore Trust

Company, N.A., in its capacity as the plan fiduciary of an employee stock ownership plan

governed by the Employment Retirement Income Security Act (“ERISA”), breached its duty of

prudence by failing to prevent plan participants, such as the plaintiff, from purchasing or holding

J.C. Penney Corporation, Inc. (“J.C. Penney” or “Company”) stock in their retirement plans once

it allegedly became clear that J.C. Penney’s transformation strategy was doomed to fail.

Complaint (“Compl.”) ¶¶ 1–9. Currently pending before the Court is Defendant Evercore Trust

Company, N.A.’s Motion To Dismiss (“Def.’s Mot.”), ECF No. 14, which seeks dismissal of the

complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which

relief can be granted. See Def.’s Mot. Upon consideration of the parties’ submissions, the Court

concludes that it must grant the defendant’s motion to dismiss the complaint. 1

1
In addition to the filings already identified, the Court considered the following submissions in rendering its
decision: (1) the Memorandum in Support of Defendant Evercore Trust Company N.A.’s Motion To Dismiss
(“Def.’s Mem.”); (2) the Plaintiff’s Memorandum of Law in Opposition to Defendant’s Motion To Dismiss
(continued . . . )
 I. BACKGROUND

The plaintiff, Donna Marie Coburn, is a former employee of J.C. Penney, a retail

department store, who purchased and held J.C. Penney common stock in her retirement account

through the J.C. Penney Savings Profit-Sharing and Stock Ownership Plan (the “Plan”) during

the class period. 2 Compl. ¶¶ 13, 15, 17, 24. The defendant is the Plan’s designated fiduciary and

investment manager under a 2009 trust agreement between J.C. Penney and the defendant.

Compl. ¶¶ 6, 21; Def.’s Mem., Exhibit (“Ex.”) 3 ¶ 1 (“[J.C. Penney] hereby appoints [the

defendant] as the named fiduciary and investment manager for the assets of the Plan . . . .”). The

plaintiff contends, and the defendant does not dispute, that the Plan is an “employee pension

benefit plan” and an individual account plan governed by the ERISA. See Compl. ¶ 15; Def.’s

Mem. at 2; see also 29 U.S.C. §§ 1002(2)(A), 1107(d)(3) (2012). The Plan is intended to qualify

as an employee stock ownership plan, or “ESOP,” under Section 401(k) of the Internal Revenue

Code, and to hold J.C. Penney common stock as a “permanent feature” of the Plan. Def. Mem.,

Ex. 3 ¶¶ 1, 2. As of January 2012, the Plan held approximately $515 million in J.C. Penney

stock, which represented more than 14% of the Plan’s assets. Compl. ¶ 19.

Following the installation of its new chief executive, Ron Johnson (“Johnson”), J.C.

Penney, in January 2012, initiated a transformation plan spearheaded by Johnson and intended to

improve the Company’s performance following the 2008 financial downturn. Id. ¶¶ 4, 25–29,

( . . . continued)
(“Opp’n”); (3) the Reply Memorandum in Support of Defendant Evercore Trust Company N.A.’s Motion To
Dismiss (“Reply”); (4) the defendant’s August 5, 2015 letter notifying the Court of new case authority bearing on
the issues presented in its motion to dismiss, ECF No. 19 (“Def.’s First Notice”); (5) the plaintiff’s August 6, 2015
letter responding to the defendant’s notice of new case authority, ECF No. 20 (“Pl.’s Response to Def.’s First
Notice”); (6) the defendant’s February 9, 2016 letter notifying the Court of new case authority bearing on the issues
presented in its motion to dismiss, ECF No. 21 (“Def.’s Second Notice”); and (7) the plaintiff’s February 9, 2016
response to the defendant’s notice of new case authority, ECF No. 22 (“Pl.’s Response to Def.’s Second Notice”).
2
The class period alleged in the complaint is May 15, 2012, to January 13, 2015 (the date the complaint was filed).
Compl. ¶ 1.

2
34–37. Johnson’s transformation plan included eliminating J.C. Penney’s use of “sales, coupons,

and rebates” in favor of “a new ‘Fair and Square Pricing’ policy where three and only three

prices would be offered: (1) the ‘everyday’ price; (2) a month-long ‘value’ price; and (3) a ‘best’

price offered on the first and third Fridays of every month.” Id. ¶ 36. In addition, the

transformation plan would change the physical appearance of J.C. Penney stores by

implementing a “store within a store” layout to replace the “traditional organization of confusing

and seemingly endless racks found in [J.C. Penney] department stores,” changing the selection of

brands offered in the stores, and updating the Company’s logo. Id. ¶ 37.

On May 15, 2012, J.C. Penney released its first quarter 2012 financial results, reporting a

loss of $163 million, id. ¶ 39, which resulted in the Company’s chief operating officer admitting:

“We did not realize how deep some of the customers were into [coupons],” id. ¶ 40. Johnson

also stated that the discontinued coupons “were a drug” that “really drove traffic.” Id. J.C.

Penney also “cancel[ed] its dividend” for only the second time since 2006. Id. ¶ 41. Following

this announcement, the Company’s performance continued to decline, with double-digit

percentage reductions in revenue every quarter from the beginning of 2012 to the middle of

2013. Id. ¶¶ 44–45. In January 2013, Johnson stated in a Businessweek magazine article that the

“core [J.C. Penney] customer . . . was much more dependent and enjoyed coupons more than

[he] understood.” Id. ¶ 50. The Company’s negative performance was chronicled in public

regulatory filings and news articles, and was discussed by market analysts. See id. ¶¶ 45–49

(detailing revenue results reported in the Company’s quarterly and annual reports, and providing

examples of analyst downgrades of J.C. Penney stock). Johnson was terminated in April 2013.

See id. ¶ 49. J.C. Penney’s stock price dropped from $36.72 at the end of the first quarter of

2012 to $17.26 a year later, and its stock closed 2013 at $5.92. Id. ¶¶ 45, 47.

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 The plaintiff contends that because the failure of J.C. Penney’s transformation strategy

was evident from publicly available information, “Evercore knew that continued investment in

[the Company’s] stock was imprudent under its fiduciary obligations imposed by ERISA.” Id.

¶ 42; see also id. ¶ 46 (“Even looking to the Company’s stock price . . . , the grim truth was

crystal clear no later than the beginning of the Class Period and became more disturbing with

every quarter.”); id. ¶ 51 (“Despite the red flags . . . , Evercore Trust did nothing to protect the

assets of the Plan and the interest of its participants and beneficiaries . . . .”). Based on these

allegations, the plaintiff claims that the defendant is liable for losses to the Plan under Sections

409 and 502 of the ERISA, 29 U.S.C. §§ 1109(a), 1132(a)(3). Id. ¶ 10.

II. STANDARD OF REVIEW

For a complaint to survive a motion to dismiss under Federal Rule of Civil Procedure

12(b)(6), the allegations in the complaint must state a facially plausible claim for recovery.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

(2007). The court, which is required to assume that all well-pleaded allegations in the complaint

are true, must find that the complaint is sufficient to “raise a right to relief above the speculative

level.” Twombly, 550 U.S. at 555; see Iqbal, 556 U.S. at 678 (“To survive a motion to dismiss, a

complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is

plausible on its face.’”) (quoting Twombly, 550 U.S. at 570)). “The plausibility standard is not

akin to a probability requirement, but it asks for more than a sheer possibility that a defendant

has acted unlawfully.” Iqbal, 556 U.S. at 678 (quotation marks omitted). Legal conclusions

masquerading as factual allegations are not enough to survive a motion to dismiss. Browning v.

Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). Although the court must, in general, limit its

review to the allegations in the complaint, it may consider “documents upon which the complaint

4
necessarily relies even if the document is produced not by the plaintiff in the complaint but by

the defendant in a motion to dismiss.” Ward v. D.C. Dep’t of Youth Rehabilitation Servs., 788

F. Supp. 2d 117, 119 (D.D.C. 2011) (quoting Hinton v. Corr. Corp. of Am., 624 F. Supp. 2d 45,

46 (D.D.C. 2009) (internal quotation marks omitted)).

III. ANALYSIS

The plaintiff asserts that the defendant, despite publicly available information

demonstrating the “shockingly bad” state of J.C. Penney’s revenues and floundering

revitalization plans, breached its fiduciary duty by (1) failing to monitor the propriety of

continuing to offer J.C. Penney stock as an investment option for the Plan and (2) failing take

any action to “[s]top[] Plan participants from continued investment in Company stock” or

liquidate the Plan’s holdings of the Company’s stock. Compl. ¶¶ 39, 52–54. The defendant

responds that the allegations in the complaint, based entirely on the defendant’s knowledge of

and alleged failure to act upon publicly available information, are insufficient to state a claim for

breach of the duty of prudence under the Supreme Court’s decision in Fifth Third Bancorp v.

Dudenhoeffer, __ U.S. __, 134 S. Ct. 2459 (2014). Upon consideration of Dudenhoeffer and its

application to the plaintiff’s allegations, the Court concludes that the complaint fails to state a

plausible claim for relief.

A. The Application of the Dudenhoeffer Pleading Standard

Dudenhoeffer, like this case, involved an ESOP that held stock of Fifth Third Bancorp

(“Fifth Third”). __ U.S. at __, 134 S. Ct. at 2464. The plaintiffs there, former employees of

Fifth Third and participants in the ESOP, claimed that the defendants violated their duty of

prudence by failing to shield plan participants from Fifth Third stock despite publicly available

information indicating that the subprime mortgage market, in which Fifth Third had a significant

5
financial stake, was on the brink of collapse. Id. Dudenhoeffer announced two seminal holdings

applicable to ESOPs such as the Fifth Third retirement plan at issue in that case. 3 Critical to the

resolution of the issue before the Court in this case was the Supreme Court’s holding that “where

a stock is publicly traded, allegations that a fiduciary should have recognized from publicly

available information alone that the market was over- or undervaluing the stock are implausible

as a general rule, at least in the absence of special circumstances.” Id., __ U.S. at __, 134 S. Ct.

at 2471 (emphasis added). In reaching this conclusion, the Court explained that “[m]any

investors take the view that ‘they have little hope of outperforming the market in the long run

based solely on their analysis of publicly available information,’ and accordingly they ‘rely on

the security’s market price as an unbiased assessment of the security’s value in light of all public

information.’” Id. (quoting Halliburton Co. v. Erica P. John Fund, __ U.S. __, __, 134 S. Ct.

2398, 2411 (2014), and Amgen Inc. v. Conn. Retirement Plans & Trust Funds, __ U.S. __, __,

133 S. Ct. 1184, 1192 (2013)). Because “a fiduciary usually ‘is not imprudent to assume that a

major stock market provides the best estimate of the value of the stocks traded on it that is

available to him,’” id. (quoting Summers v. State Street Bank & Trust Co., 453 F.3d 404, 408

(7th Cir. 2006) (ellipsis omitted)), a plaintiff must “point[] to a special circumstance affecting the

reliability of the market price as ‘an unbiased assessment of the security’s value in light of all

public information’ that would make reliance on the market’s valuation imprudent,” id., __ U.S.

at __, 134 S. Ct. at 2472 (quoting Halliburton, __ U.S. at __, 134 S. Ct. at 2411, and Amgen, __

U.S. at __, 133 S. Ct. at 1192).

3
The Supreme Court also rejected the “presumption of prudence” applied in some circuits when reviewing claims
for breach of the duty of prudence against ESOP fiduciaries, concluding that this presumption is inconsistent with
the ERISA’s intended protections of ESOP participants and beneficiaries. Dudenhoeffer, __ U.S. at __, 134 S. Ct. at
2467–71.

6
 The defendant argues that Dudenhoeffer is indistinguishable from this case and that the

Supreme Court’s holding therefore requires dismissal of the complaint. Def.’s Mem. at 6. The

plaintiff, in opposition, asserts that because her complaint is devoid of any allegation that J.C.

Penney stock was “artificially inflated,” Dudenhoeffer’s holding is inapplicable to this case.

Opp’n at 10–11. The Court does not share the plaintiff’s reading of Dudenhoeffer.

As noted earlier, the Supreme Court held:

In our view, where a stock is publicly traded, allegations that a fiduciary should
have recognized from publicly available information alone that the market was
over- or undervaluing the stock are implausible as a general rule, at least in the
absence of special circumstances.

Dudenhoeffer, __ U.S. at __, 134 S. Ct. at 2471 (emphasis added). The plaintiff’s position that

Dudenhoeffer is limited to cases in which an “artificially inflated” stock price is alleged, see

Opp’n at 10, ignores the Supreme Court’s specific rejection of the argument that a fiduciary

should have known from publicly available information alone that a stock’s price was “over- or

under[]”-valued, i.e., that the stock was valued either too high or too low. 4 Dudenhoeffer, __

U.S. at __, 134 S. Ct. at 2471. The Supreme Court’s inclusion of both scenarios in its ultimate

holding is consistent with its observation that ESOP fiduciaries often find themselves caught

between the proverbial rock and hard place, being exposed to litigation both when, on the one

hand, they fail to take advantage of an allegedly undervalued stock, and on the other hand, when

they fail to discard an allegedly overvalued stock. Id., __ U.S. at __, 134 S. Ct. at 2470

(acknowledging an ESOP fiduciary’s exposure to litigation “if he keeps investing and the stock

4
It bears noting that the phrase “artificially inflated” or similar terminology does not appear anywhere in the
Dudenhoeffer opinion. See generally __ U.S. at __, 134 S. Ct. at 2463–74. The only reference to an “inflated”
stock price in the Dudenhoeffer opinion is the Supreme Court’s recapitulation of the complaint’s allegation that the
defendants could have prevented losses to the fund by, inter alia, disclosing certain inside, i.e., nonpublic,
information so that the plan “could continue to buy Fifth Third stock without paying an inflated price for it.” Id., __
U.S. at __, 134 S. Ct. at 2472. The Supreme Court’s discussion of the pleading standard applicable to claims based
on nonpublic information is irrelevant to the claims made here.

7
goes down” and “if he stops investing and the stock goes up”). 5 The Court therefore finds

nothing in Dudenhoeffer that supports the plaintiff’s contention that the Supreme Court’s

reasoning is “only relevant in cases where the stock price is alleged to have been artificially

inflated.” Opp’n at 10.

The plaintiff appears to seize on language in the opinion of the United States District

Court for the Western District of New York in Gedek v. Perez, 66 F. Supp. 3d 368 (W.D.N.Y.

2014), to support her argument regarding the scope of Dudenhoeffer’s application. The Gedek

court summarized the complaint in Dudenhoeffer as alleging “that the fiduciaries knew or should

have known that the company’s stock was overvalued.” Id. at 375 (emphasis added).

Distinguishing the factual allegations in Dudenhoeffer, the Gedek court stated that “[t]he

question [before it was] not whether [the] defendants paid an artificially inflated price for Kodak

stock, but whether they should have realized that Kodak stock represented such a poor long-term

investment that they should have ceased to purchase, hold, or offer Kodak stock to plan

participants.” Id. at 376 (emphasis added). While the Court respects its sister court’s reasoning,

the Court is unpersuaded that the Gedek court’s characterization of Dudenhoeffer supports the

proposition that the Dudenhoeffer pleading standard is “only relevant in cases where the stock

price is alleged to have been artificially inflated.” Opp’n at 10.

The Court concludes that the complaint falls entirely within the ambit of the general rule

adopted by the Supreme Court in Dudenhoeffer. At the outset of the complaint, the plaintiff

limits her claims to the central allegation that the defendant “knew through public information

that continued investment in [J.C. Penney] stock . . . was imprudent.” Compl. ¶ 2. The

5
Indeed, the Supreme Court’s ultimate holding arose from its decision to “consider more fully one important
mechanism for weeding out meritless claims, the motion to dismiss for failure to state a claim.” Id., __ U.S. at __,
134 S. Ct. at 2471.

8
complaint relies on J.C. Penney’s falling stock price as demonstrating the imprudence of J.C.

Penney stock as an investment. See id. ¶ 6 (“After the release of the Company’s first quarter

2012 results . . . , the Company experienced its greatest single-day loss in 40 years when it

plunged 19.7% dropping from $33.32 to $26.75 . . . .”); id. ¶ 39 (referencing the same stock price

drop); id. ¶ 47 (chart showing decline of J.C. Penney’s stock price from the beginning of 2012 to

the end of 2013). The complaint also cites J.C. Penney’s public regulatory filings detailing its

falling revenues in the wake of the Company’s transformation plan, id. ¶ 45 (chart showing

declining revenues from the beginning of 2012 to the end of 2013), and financial analysts’

negative assessments of J.C. Penney’s performance, id. ¶ 48 (“Analysts were unanimous in their

denunciation of the Company’s performance throughout Johnson’s tenure.”); id. ¶ 49 (describing

financial analysts’ downgrades of J.C. Penney stock in early 2013). Given the complaint’s

exclusive reliance on public information as the basis for the plaintiff’s allegation that the

defendant should have known that continued investment in J.C. Penney stock was imprudent, the

Court agrees with the defendant that this claim is indistinguishable from the types of allegations

that the Dudenhoeffer Court held are implausible as a general rule.

B. Special Circumstances and Gedek

The Dudenhoeffer Court did not identify what “special circumstances” a plaintiff could

allege that would “render[] reliance on the market price imprudent,” see __ U.S. at __, 134 S. Ct.

at 2472, and this Circuit has not had an opportunity to address the question. 6 Here, the plaintiff

6
The Court is aware of two post-Dudenhoeffer opinions that have squarely analyzed whether certain allegations in a
complaint constitute “special circumstances” rendering a fiduciary’s reliance on the stock’s market price imprudent.
In In re Lehman Bros. Sec. & ERISA Litig., 113 F. Supp. 3d 745 (S.D.N.Y. 2015), the court concluded that certain
Securities and Exchange Commission orders, which were issued in July 2008 and warned that rumors regarding the
financial health of Lehman Brothers may artificially depress the price of that company’s stock, were insufficient to
establish that “special circumstances” existed to alert the fiduciaries that Lehman Brothers stock was an imprudent
investment. 113 F. Supp. 3d at 745–46. More recently, in In re 2014 Radioshack ERISA Litigation, the United
States District Court for the Northern District of Texas concluded that the plaintiffs’ contention that Radioshack’s
(continued . . . )

9
expressly disclaims any need to plead special circumstances, as the court concluded in Gedek,

because, as she asserts, her complaint does not rely on allegations that the price of J.C. Penney

stock was inflated. Opp’n at 10–11; see generally Pl.’s Response to Def.’s First Notice at 2

(“[B]ecause plaintiff Coburn does not allege that the price of J.C. [Penney] stock was inflated at

any time during the class period, . . . Dudenhoeffer’s requirement that ‘special circumstances’ be

[pleaded] to explain inefficiencies in the market is inapposite here.”).

The plaintiff’s decision not to plead special circumstances is fatal to her claim that the

defendant should have known, solely from public information, that continued investment in J.C.

Penney stock was imprudent. See Smith v. Delta Airlines, Inc., 619 F. App’x 874, 876 (11th Cir.

2015) (affirming dismissal of the complaint because the plaintiff failed to allege any special

circumstances that made the fiduciary’s reliance on the price of Delta Airlines stock imprudent,

such as “fraud, improper accounting, illegal conduct[,] or other actions that would have caused

Delta stock to trade at an artificially inflated price”); Mem. Op. & Order, In re 2014 Radioshack

ERISA Litig., Def.’s Second Notice, Ex. A at 15–18 (rejecting Gedek’s reasoning and holding

that the plaintiffs in stock drop case alleging breach of the duty of prudence by ESOP fiduciary

of a plan must allege special circumstances as required by Dudenhoeffer if claims are based on

publicly available information); In re Citigroup ERISA Litig., 104 F. Supp. 3d 599, 616

(S.D.N.Y. 2015) (“Because the plaintiffs have not identified any special circumstances rendering

reliance on the market price of the stock imprudent, Dudenhoeffer requires that their duty-of-

prudence claim based on publicly available information be dismissed.”).

( . . . continued)
slide into bankruptcy made continued investment in that stock excessively risky did not sufficiently allege “special
circumstances” that rendered reliance on the market price of Radioshack stock unreliable as required by
Dudenhoeffer. Mem. Op. & Order, In re 2014 Radioshack ERISA Litig., Master File No. 4:14-cv-959-O (N.D. Tex.
Jan. 26, 2016), Def.’s Second Notice, Ex. A at 18.

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 Even assuming the validity of the Gedek court’s application of Dudenhoeffer, the

plaintiff’s claim fails under that analysis. The Gedek plaintiffs held stock of the once-prominent

Eastman Kodak Company (“Kodak”) through, inter alia, an employee benefit plan not dissimilar

to the J.C. Penney ESOP. See 66 F. Supp. 3d at 371. The Gedek court, summarizing the

complaint, stated that Kodak stock was on a steady decline due to “fundamental problems with

the company itself,” and that Kodak’s downward path was “so obvious and unstoppable that

regardless of whether the market was ‘correctly’ valuing the stock, the fiduciaries should have

halted or disallowed further investment in it.” Id. at 375. Specifically, the Gedek plaintiffs

alleged that the defendants should have known that Kodak stock was an imprudent investment

because Kodak

(a) depended on a dying technology and the sale of antiquated products no longer
sought by the consumer; (b) was unable to bring new products to the market to
counter the rapidly declining profits from the sales of its antiquated products; (c)
was unable to generate sufficient cash-flow from its short term business strategy of
initiating lawsuits, which would presumably garner settlements, to maintain
[Kodak’s] cash flow; (d) was suffering from a severe lack of liquidity; and (e) its
stock price collapsed because of the above dire circumstances.

Id. (quoting the Amended Complaint ¶ 100).

The ominous circumstances surrounding Kodak in Gedek are distinguishable from the

allegations made by the plaintiff about J.C. Penney here. The Gedek plaintiffs alleged that

Kodak had come to rely on “a dying technology,” “antiquated products,” and short-term

strategies, such as initiating lawsuits to enforce Kodak’s patents in an effort to generate

settlement payments from alleged infringers, to maintain a dwindling cash flow. See 66 F. Supp.

3d at 375, 377–78 (listing news reports and analysts predictions chronicling the failure of

Kodak’s core business and its imminent bankruptcy). In other words, in Gedek, the plaintiffs

alleged sufficient facts to state a plausible claim that Kodak’s publicly reported troubles

11
demonstrated that it no longer had a viable business model in an industry in which Kodak had

failed to keep pace.

The plaintiff here does not make any allegation that, according to publicly available

information, J.C. Penney’s business as a retail department store was no longer viable in the

industry. Instead, the complaint focuses on two business strategy changes announced by J.C.

Penney in January 2012: J.C. Penney’s decision to “abandon [its] prior practice of sales,

coupons, and rebates” in favor of a different pricing strategy, and its decision to modify the

appearance of J.C. Penney stores and its logos, and the brands available for purchase. Compl. ¶¶

36, 37. At most, the plaintiff alleges that J.C. Penney’s transformation plan was the “ill-

conceived” idea of its chief executive, later ousted, who did not understand J.C. Penney’s

customer base. See id. ¶¶ 31, 40, 49–51. The Court is not convinced, nor has the plaintiff cited

any authority supporting the proposition, that the mere failure of an allegedly “ill-conceived”

business plan alone provides sufficient grounds to trigger an ESOP fiduciary’s duty to remove

company stock from an ESOP. Cf. Pfeil v. State Street Bank & Trust Co., 806 F.3d 377, 387

(6th Cir. 2015) (observing that “an ESOP’s investment goals are to maintain, within reason,

ownership of a particular employer’s security” and that “[a] benefit of employees investing in

their employer is that when the employer does well, the employees do well. A risk is that when

the employer goes bankrupt, the employees do poorly.”); DiFelice v. U.S. Airways, Inc., 497

F.3d 410, 424 (4th Cir. 2007) (recognizing Congress’s “strong policy and preference in favor of

investment in employer stock” through employee stock ownership plans under the ERISA, and

holding that the plaintiffs “cannot succeed in this lawsuit simply by demonstrating that U.S.

Airways offered the Company Fund during a time of grave uncertainty for the company, no

matter how significant the [plaintiffs’] ultimate financial losses”) (quoting Fink v. Nat’l Sav. &

12
Trust, Co., 772 F.2d 951, 956 (D.C. Cir. 1985)). The plaintiff’s reliance on Gedek is therefore

misplaced and does not rescue the complaint from its failure to allege special circumstances as

required by Dudenhoeffer.

C. The Application of the “Continuing Duty” Principle Stated in Tibble

The plaintiff also argues that, Dudenhoeffer notwithstanding, the defendant violated its

duty of prudence as recognized by the Supreme Court in Tibble v. Edison International, __ U.S.

__, 135 S. Ct. 1823 (2015), which stated that “a [fiduciary] has a continuing duty to

monitor . . . investments and remove imprudent ones,” that “[t]his continuing duty exists separate

and apart from the [fiduciary’s] duty to exercise prudence in selecting investment at the outset,”

and therefore, a “plaintiff may allege that a fiduciary breached the duty of prudence by failing to

properly monitor investments and remove imprudent ones.” Id., __ U.S. at __, 135 S. Ct. at

1828–29; see Opp’n at 9. In support of this argument, the plaintiff asserts that the defendant

“took no steps to protect Plan participants from the damage they suffered from the continuing

and dramatic decrease in the value of Company stock . . . despite [the defendant’s] awareness” of

J.C. Penney’s declining stock price and financial performance, and financial analysts’

“unanimously negative” sentiment about the company. Opp’n at 9.

The Court has already concluded that, under the standard adopted in Dudenhoeffer, the

complaint fails to state a claim for breach of the duty of prudence. The Supreme Court’s

decision in Tibble does nothing to alter that conclusion, because, as another district court

recognized in a case involving a similar factual pattern, “Tibble did not involve claims based on

a drop in an employer’s stock price, and thus did not discuss [Dudenhoeffer’s] holding.” 7 In re

7
Tibble involved claims brought by beneficiaries of a 401(k) savings plan alleging that the defendants breached
their fiduciary duties by offering higher-priced, retail-class mutual funds bearing higher administrative costs, when
lower-priced, institutional-class funds, with lower administrative costs, were available to the plan. __ U.S. at __,
135 S. Ct. at 1826.

13
Citigroup ERISA Litig., 112 F. Supp. 3d 156, 159 (S.D.N.Y. 2015). 8 Even before Tibble, courts

recognized that “a fiduciary has an ongoing duty to manage [an] investment with reasonable

diligence because the ‘fiduciary duty under [the] ERISA is continuous,’” Chao v. Trust Fund

Advisors, Civ. A. 02-559 (GK), 2004 WL 444029, at *4 (D.D.C. Jan. 20, 2004) (quoting United

States v. Mason Tenders Dist. Council of Greater N.Y., 909 F. Supp. 882, 888 (S.D.N.Y. 1995));

however, this principle provides no support for the plaintiff’s claims as alleged because the entire

complaint is based upon what the defendant allegedly should have done “in light of all relevant

public information,” including the company’s declining stock price. Compl. ¶ 54; see id. ¶ 47

(charts illustrating drop in J.C. Penney’s stock price from the first quarter of 2012 to the last

quarter of 2013); ¶ 51 (“Despite the . . . free fall in [J.C. Penney] stock . . . , [the defendant] did

nothing to protect the assets of the Plan and the interests of its participants and

beneficiaries . . . .”). Thus, the complaint fails to state a plausible claim for relief under

Dudenhoeffer, and the Court must therefore grant the defendant’s motion to dismiss.

CONCLUSION

For the reasons set forth above, the Court grants the defendant’s motion to dismiss, and

the complaint shall be dismissed without prejudice. 9

SO ORDERED this 17th day of February, 2016.

REGGIE B. WALTON
United States District Judge

8
The plaintiffs in In re Citigroup, who were Citigroup employees who held Citigroup stock through an ESOP,
alleged that the defendants “acted imprudently by continuing to allow the plaintiffs to invest in Citigroup common
stock at a time when Citigroup stock was falling drastically.” 112 F. Supp. 3d at 156.
9
The Court will contemporaneously issue an Order consistent with this Memorandum Opinion.

14