In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 15‐3569
LISA ALLEN and MISTY DALTON,
Plaintiffs‐Appellants,
v.
GREATBANC TRUST CO.,
Defendant‐Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 15 C 3053 — James B. Zagel, Judge.
____________________
ARGUED APRIL 12, 2016 — DECIDED AUGUST 25, 2016
____________________
Before WOOD, Chief Judge, and FLAUM and WILLIAMS, Cir‐
cuit Judges.
WOOD, Chief Judge. GreatBanc is the fiduciary for an em‐
ployee stock ownership plan (“the Plan”) for employees of
Personal‐Touch, a home‐health‐care company. In that role, it
facilitated a transaction in which the Plan purchased a num‐
ber of shares in the company with a loan from the company
itself. Unfortunately, the shares turned out to be worth much
2 No. 15‐3569
less than the Plan paid, leaving the Plan with no valuable as‐
sets and heavily indebted to the company’s principal share‐
holders. The Plan’s participants, all employees of Personal
Touch, wound up being on the hook for interest payments on
the loan. Employees Lisa Allen and Misty Dalton brought this
action under section 502 of the Employee Retirement Income
Security Act (ERISA), 29 U.S.C. § 1132, raising two theories of
recovery: first, that GreatBanc engaged in transactions that
section 406 of ERISA prohibits, see 29 U.S.C. § 1106; and sec‐
ond, that GreatBanc breached its fiduciary duty under ERISA
section 404, 29 U.S.C. § 1104, by failing to secure an appropri‐
ate valuation of the Personal‐Touch stock. The district court
initially dismissed the complaint without prejudice, but it
later converted the judgment to one with prejudice after
plaintiffs opted not to amend their complaint. Because the
plaintiffs plausibly alleged both a prohibited transaction and
a breach of fiduciary duty, we reverse the judgment of the dis‐
trict court and remand for further proceedings.
I
At this stage, we present the facts as alleged in the com‐
plaint in the light most favorable to plaintiffs. Employee stock
ownership plans (ESOPs) are meant to be a way for compa‐
nies to provide employees with a stake in the enterprise. See
29 U.S.C. § 1002. Personal‐Touch, a privately held entity, is the
sponsor of the Plan at issue here. See 29 U.S.C. § 1002(16)(B).
Sponsors are responsible for administering ESOPs and often
appoint independent trustees to carry out that job. Personal‐
Touch appointed GreatBanc as Trustee of the Plan in 2010 for
the purpose of representing the Plan in the proposed stock‐
purchase transaction.
No. 15‐3569 3
On December 9, 2010, GreatBanc instructed the Plan to ac‐
quire an unknown amount of stock from Personal‐Touch’s
shareholders for $60 million. Before this acquisition, Personal‐
Touch’s principal shareholders owned 100 percent of its
shares. The plaintiffs do not know whether GreatBanc hired
any financial advisors to review the transaction. The principal
shareholders arranged for the Plan to finance this transaction
through a loan they gave to the Plan at a 6.25% interest rate;
the record does not reveal why the Plan did not use outside
funding.
The ink was hardly dry on the acquisition papers when
the value of Personal‐Touch’s stock began to tank. Twenty‐
two days later, the complaint asserts and GreatBanc accepts
for present purposes, the Plan’s stock was estimated to be
worth some $13 million (almost 22%) less than what the Plan
paid for it. By late 2011, the estimated value of the stock had
declined by almost 50%, and by December 31, 2013, the Plan’s
shares were worth only around $26.6 million. The selling
shareholders, however, were relatively untouched by these
developments. Rather than holding a rapidly depreciating as‐
set in the form of the stock, they had become creditors of the
Plan (and thus indirectly the employees) and the recipients of
a secure flow of principal and interest payments on the origi‐
nal $60 million loan. The plaintiffs felt that they had drawn
the short straw: they sued GreatBanc, alleging that it violated
its fiduciary responsibilities under ERISA by approving a
purchase of stock at too high a price and by facilitating two
prohibited transactions: (1) the Plan’s purchase of stock from
the company, and (2) the loan to the Plan that funded the pur‐
chase. See 29 U.S.C. § 1106(a) and (b).
4 No. 15‐3569
The complaint alleges that GreatBanc did not conduct any
inquiry into whether whoever was responsible for Personal‐
Touch’s financial projections had a conflict of interest, did not
undertake an independent investigation of Personal‐Touch’s
revenues, and failed to seek any remedy for the overpayment
for the stock. The complaint originally alleged that 4.25% was
the customary interest rate for an ESOP transaction such as
the one that took place, but it retracted that detail in sur‐reply.
Last, the complaint notes that GreatBanc entered into a settle‐
ment with the Department of Labor in 2014 (after the transac‐
tion), binding it to specific policies and procedures for analyz‐
ing stock valuation in ESOP transactions; the settlement,
plaintiffs imply, was designed to address its record of short‐
comings as a fiduciary.
The district court dismissed the complaint, finding that
the plaintiffs had not sufficiently pleaded breach of fiduciary
duty according to the standard outlined in Fifth Third Bancorp
v. Dudenhoeffer, 134 S. Ct. 2459 (2014). Dudenhoeffer held 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. at 2471 (emphasis added). A plaintiff in
this type of case must therefore point to those “special circum‐
stances” in her complaint, in order to survive a motion to dis‐
miss. Believing that this rule applied and that no special cir‐
cumstances existed, the district court dismissed the breach‐of‐
fiduciary‐duty claim. It rejected the prohibited‐transaction
claim for much the same reason, finding that the question
whether the Plan paid a fair price for the stock was not
properly alleged.
No. 15‐3569 5
II
We apply the usual de novo standard of review to the dis‐
trict court’s rulings and accept the facts as alleged for present
purposes. Wilczynski v. Lumbermens Mut. Casualty Co., 93 F.3d
397, 401 (7th Cir. 1996); Alexander v. United States, 721 F.3d 418,
423 (7th Cir. 2013). No heightened pleading standard applies
here; it is enough to provide the context necessary to show a
plausible claim for relief. See Dudenhoeffer, 134 S. Ct. at 2471
(citing Ashcroft v. Iqbal, 556 U.S. 662, 677–80 (2009), and Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 554–63 (2007)). We con‐
sider first the plaintiffs’ prohibited‐transaction argument, and
then their broader claim for breach of fiduciary duty.
A
ERISA identifies a number of transactions that are flatly
prohibited between a plan and a party in interest, or a plan
and a fiduciary. See ERISA § 406, 29 U.S.C. § 1106. The provi‐
sion at issue here are the prohibitions in section 406(a), which
provides as follows:
Except as provided in section 1108 of this title:
(1) A fiduciary with respect to a plan shall not
cause the plan to engage in a transaction, if he
knows or should know that such transaction
constitutes a direct or indirect–
(A) sale or exchange, or leasing, of any
property between the plan and a party in
interest;
(B) lending of money or other extension
of credit between the plan and a party in
interest;
6 No. 15‐3569
(C) furnishing of goods, services, or facil‐
ities between the plan and a party in in‐
terest;
(D) transfer to, or use by or for the benefit
of a party in interest, of any assets of the
plan; or
(E) acquisition, on behalf of the plan, of
any employer security or employer real
property in violation of section 1107(a) of
this title.
(2) No fiduciary who has authority or discretion
to control or manage the assets of a plan shall
permit the plan to hold any employer security
or employer real property if he knows or should
know that holding such security or real prop‐
erty violates section 1107(a) of this title.
29 U.S.C. § 1106(a). The exceptions found in section 408, 29
U.S.C. § 1108, include the acquisition of employer stock if it is
for “adequate consideration.” 29 U.S.C. § 1108(e)(1). Section
408(b)(3) exempts a loan to an ESOP if the loan is primarily
for the benefit of plan participants and beneficiaries and at an
interest rate “not in excess of a reasonable rate.” 29 U.S.C.
§ 1108(b)(3).
The complaint alleges a purchase of employer stock by the
Plan and a loan by the employer to the Plan, both of which are
indisputably prohibited transactions within the meaning of
section 406. GreatBanc can prevail only if it can take ad‐
vantage of one of section 408’s exemptions. It never raised any
such affirmative defense, however; it took the position in‐
stead that the plaintiffs have the burden of pleading facts that
No. 15‐3569 7
would negate the applicability of section 408’s exemptions and
that they failed to do so. Plaintiffs counter that GreatBanc had
the burden of both pleading and proving the applicability of
a section 408 exemption.
The district court noted, correctly, that GreatBanc would
carry the burden at trial of proving that the Plan had paid ad‐
equate consideration for the Personal‐Touch stock. But at that
point, it jumped ahead and found that both the prohibited‐
transaction and the fiduciary‐breach claim would turn on the
same question: whether the Plan paid a fair price for the stock.
It found the complaint deficient on that point, criticizing it for
failing adequately to allege that the interest rate provided by
Personal‐Touch was unreasonable. This, it concluded, was fa‐
tal to both theories plaintiffs were presenting.
There are a number of problems with this approach, but
we will focus primarily on the procedural ones. A plaintiff al‐
leging a claim arising out of a prohibited transaction involv‐
ing an exchange of stock between a plan and a party in inter‐
est need not plead the absence of adequate consideration, and
so here plaintiffs were under no obligation to say anything
about the interest rate on the inside loan GreatBanc received
from the stockholders. It was enough that the transaction was
a prohibited one; fair consideration enters the picture only
through section 408(b)(3) and (e)(1).
GreatBanc defends the district court’s reasoning by blend‐
ing plaintiffs’ two theories together. It argues (on the assump‐
tion that the fiduciary‐duty claim is inadequate) that allowing
a prohibited‐transaction claim to proceed based on the same
facts as a dismissed fiduciary‐breach claim would cause the
“perverse result … [that] a complaint may fail to state suffi‐
8 No. 15‐3569
cient facts to support a breach of fiduciary duty claim, yet sur‐
vive a motion to dismiss as to a companion prohibited trans‐
action claim notwithstanding those same deficient facts.” But
there is nothing perverse about this at all. Congress saw fit in
ERISA to create some bright‐line rules, on which plaintiffs are
entitled to rely. Nothing compelled Congress to mimic the
common law of breach of fiduciary duty in the statute.
More fundamentally, an ERISA plaintiff need not plead
the absence of exemptions to prohibited transactions. It is the
defendant who bears the burden of proving a section 408 ex‐
emption, Fish v. GreatBanc Trust Co., 749 F.3d 671, 685 (7th Cir.
2014); Keach v. U.S. Trust Co., 419 F.3d 626, 633 (7th Cir. 2005),
and the burden of pleading commonly precedes the burden
of persuasion. See Gomez v. Toledo, 446 U.S. 635, 640 (1980)
(burden of pleading defense rests with the defendant). The
fact that this court may not have had the occasion to label the
section 408 exemptions as affirmative defenses is of no mo‐
ment. GreatBanc itself argued in Fish that section 408 exemp‐
tions are affirmative defenses, and therefore a plaintiff need
not have actual knowledge of facts constituting a section 408
exemption in order for the statute of limitations to begin run‐
ning. Evidently it has had a change of heart in this case, but it
was right the first time. We now hold squarely that the section
408 exemptions are affirmative defenses for pleading pur‐
poses, and so the plaintiff has no duty to negate any or all of
them. See Stuart v. Local 727, Int’l Bhd. of Teamsters, 771 F.3d
1014, 1018 (7th Cir. 2014) (“A plaintiff is not required to negate
an affirmative defense in his or her complaint[.]”).
Five of our sister circuits agree with the position that sec‐
tion 408 exemptions are affirmative defenses, or that the de‐
fendant bears the burden of proof, or both. See Braden v. Wal‐
No. 15‐3569 9
Mart Stores, Inc., 588 F.3d 585, 601 n.10 (8th Cir. 2009) (“[A]
plaintiff need not plead facts responsive to an affirmative de‐
fense before it is raised[.]”); Harris v. Amgen, Inc., 788 F.3d 916,
943 (9th Cir. 2015), revʹd on other grounds, 136 S. Ct. 758 (2016)
(“[T]he existence of an exemption under § 1108(e) is an affirm‐
ative defense[.]”); Elmore v. Cone Mills Corp., 23 F.3d 855, 864
(4th Cir. 1994) (proper allocation of § 408 burden waived by
plaintiffs by not raising at trial); Lowen v. Tower Asset Mgmt.,
Inc., 829 F.2d 1209, 1215 (2d Cir. 1987) (burden on fiduciary to
prove exemption); Donovan v. Cunningham, 716 F.2d 1455,
1467–68 (5th Cir. 1983) (“[W]e hold that the ESOP fiduciaries
will carry their burden to prove that adequate consideration
was paid[.]”). Although some of these decisions from other
circuits predate Twombly and Iqbal, Dudenhoeffer post‐dates
those cases and makes it clear that there is no special pleading
regime for this part of ERISA.
GreatBanc attempts to differentiate the section 408 exemp‐
tions from affirmative defenses by reference to Twombly’s dis‐
tinction between an affirmative defense and an “obvious al‐
ternative explanation.” Twombly, 550 U.S. at 567. In the latter
case, the plaintiff needs to include enough to dispel the alter‐
native story (or more accurately, to indicate that a rational
trier of fact could so find). But the exemptions from prohibited
transactions do not provide alternative explanations; they as‐
sume that a transaction in the prohibited group occurred, and
they add additional facts showing why that particular one is
acceptable. That is how affirmative defenses work. In our
case, it would make little sense to characterize payment of a
fair price for employer stock or lending money to the Plan at
a reasonable interest rate as an “obvious alternative explana‐
tion,” rather than as an additional fact justifying the otherwise
troublesome deal.
10 No. 15‐3569
GreatBanc’s last argument here is an appeal to policy: it
argues that there will be a flood of prohibited‐transaction lit‐
igation if all that must be alleged is the occurrence of a section
406 transaction. This strikes us as overwrought. Rational
plans will sue only when (taking Rule 11 constraints into ac‐
count, among others) there is a reason to do so. If an ESOP
transaction is successful, employees who have invested in the
ESOP will not have any motive to bring an ERISA lawsuit
over the exchange of stock between the company and the
Plan. If it fails, they are likely to give it closer scrutiny, but not
all failures stem from ERISA violations. A district court has
ample tools to screen frivolous claims, and the Twombly‐Iqbal
pleading standards require the plaintiffs to cross the line from
the “possible” violation to the “plausible.”
GreatBanc fears that our holding will allow a suit any time
a trustee so much as purchases something as trivial as a chair
for a person to sit in, or pays a financial adviser for investment
advice. But why would a beneficiary sue the trustee over a
chair? And a beneficiary would have reason to sue over in‐
vestment advice only if she had no reason to believe the trans‐
action was exempt under section 408; otherwise, it would be
a waste of time and resources. As the attorney for amicus cu‐
riae Department of Labor pointed out at oral argument, po‐
tential plaintiffs’ cost‐benefit analyses will also weigh against
bringing suits where the plaintiff cannot point to any actual
harm that was caused by the prohibited transaction. Sanctions
under Federal Rule of Civil Procedure 11 serve as an addi‐
tional deterrent against obviously exempt prohibited‐transac‐
tion claims.
If there is an administrative problem to be worried about,
it is the chance that courts would start requiring plaintiffs to
No. 15‐3569 11
negate all section 408 exemptions in their complaints. Plead‐
ing the absence of the exemption in subsection (b)(19), for ex‐
ample, would be particularly burdensome: it exempts “cross
trading” between a plan and an account managed by the same
investment manager where nine specific conditions are met,
some of which have further exceptions contained within
them. 29 U.S.C. § 1108(b)(19). Requiring a plaintiff to demon‐
strate that subsection (b)(19) is not met in order to bring a pro‐
hibited‐transaction claim would prematurely defeat many
claims where the plaintiffs lack access to detailed information
about the plan manager’s dealings with other entities. Alt‐
hough GreatBanc contended at oral argument that it is a Rule
11 violation “not to even ask” a defendant for information
about, for instance, how stock was valued, we find it implau‐
sible that any would‐be defendant would voluntarily turn
over confidential financial information of that kind without
the protections of the discovery process. We decline to add a
pre‐pleading requirement that plaintiffs ask nicely for infor‐
mation they need—but cannot compel access to—before filing
their complaint.
ERISA is a “remedial statute to be liberally construed in
favor of employee benefit fund participants.” Kross v. W. Elec.
Co., Inc., 701 F.2d 1238, 1242 (7th Cir. 1983). Section 408 ex‐
emptions are affirmative defenses for the defendant, not items
that a prohibited‐transaction plaintiff must address in her
complaint.
B
In order to state a claim for breach of fiduciary duty under
ERISA, the plaintiff must plead “(1) that the defendant is a
plan fiduciary; (2) that the defendant breached its fiduciary
duty; and (3) that the breach resulted in harm to the plaintiff.”
12 No. 15‐3569
Kenseth v. Dean Health Plan, Inc., 610 F.3d 452, 464 (7th Cir.
2010) (citing Kannapien v. Quaker Oats Co., 507 F.3d 629, 639
(7th Cir. 2007)). The first and third elements are not at issue
here; we need address only whether the plaintiffs sufficiently
pleaded breach. The facts alleged must “provide sufficient de‐
tail to present a story that holds together.” Alexander, 721 F.3d
at 422 (internal quotation marks omitted).
ERISA imposes duties of loyalty and prudence on a plan
fiduciary. 29 U.S.C. § 1104(a)(1)(A)–(B). Loyalty requires a fi‐
duciary to act “for the exclusive purpose” of providing bene‐
fits to participants. Id. (“[A] fiduciary shall discharge his du‐
ties with respect to a plan solely in the interest of the partici‐
pants and beneficiaries[.]”). Prudence requires the fiduciary
to act “with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent [person] acting
in a like capacity and familiar with such matters would use in
the conduct of an enterprise of a like character and with like
aims.” Id. This includes choosing wise investments and mon‐
itoring investments to remove imprudent ones. Tibble v. Edi‐
son Int’l, 135 S. Ct. 1823, 1828–29 (2015). In order to assess the
prudence of the fiduciary’s actions, they must be evaluated in
terms of both procedural regularity and substantive reasona‐
bleness. Fish, 749 F.3d at 680.
1
The central allegation in the present complaint is that
GreatBanc failed to conduct an adequate inquiry into the
value of Personal‐Touch’s stock. See Armstrong v. LaSalle Bank
Nat. Assʹn, 446 F.3d 728 (7th Cir. 2006) (reversing district court
summary judgment order on triable issue of fact of whether
ESOP trustee exercised prudence in stock valuation for pur‐
poses of setting a redemption price). Although the plaintiffs
No. 15‐3569 13
could not describe in detail the process GreatBanc used, no
such precision was essential. It was enough to allege facts
from which a factfinder could infer that the process was inad‐
equate. As the Eighth Circuit explained in Braden, a district
court errs in making the “assumption that [the plaintiff] was
required to describe directly the ways in which appellees
breached their fiduciary duties”; rather, it is “sufficient for a
plaintiff to plead facts indirectly showing unlawful behav‐
ior.” 588 F.3d at 595. This is particularly true in ERISA cases
because “ERISA plaintiffs generally lack the inside infor‐
mation necessary to make out their claims in detail unless and
until discovery commences.” Id. at 598. We agree with the
Eighth Circuit: an ERISA plaintiff alleging breach of fiduciary
duty does not need to plead details to which she has no access,
as long as the facts alleged tell a plausible story.
The plaintiffs met this burden: they alleged that the stock
value dropped dramatically after the sale (implying that the
sale price was inflated), that the loan came from the employer‐
seller rather than from an outside entity (indicating that out‐
side funding was not available), and that the interest rate was
uncommonly high (implying that the sale was risky, or that
the shareholders executed the deal in order to siphon money
from the Plan to themselves). These facts support an inference
that GreatBanc breached its fiduciary duty, either by failing
to conduct an adequate inquiry into the proper valuation of
the shares or by intentionally facilitating an improper trans‐
action.
This was enough to permit the plaintiffs to move ahead
with their case. GreatBanc remains free to move for summary
judgment after discovery on the grounds that its process for
conducting a valuation of the stock was adequate. It can also
14 No. 15‐3569
argue that a fiduciary need not be prescient about future
stock‐value movements. See DeBruyne v. Equitable Life Assur‐
ance Soc’y of the United States, 920 F.2d 457, 465 (7th Cir. 1990).
But plaintiffs will be free to compare whatever steps Great‐
Banc actually took with the procedures that a prudent fiduci‐
ary would use.
GreatBanc’s (and the district court’s) reliance on Duden‐
hoeffer is unwarranted. In Dudenhoeffer, the Supreme Court
held that ERISA fiduciaries conducting ESOP transactions can
generally prudently rely on the market value of publicly traded
stock, absent special circumstances. Dudenhoeffer, 134 S. Ct. at
2471. The Court suggested that the special circumstances
might include something like available public information
tending to suggest that the public market price did not reflect
the true value of the shares. Id. at 2472. As we have just em‐
phasized, however, the Court’s holding was limited to pub‐
licly traded stock and relies on the integrity of the prices pro‐
duced by liquid markets. Private stock has no “market price,”
for the obvious reason that it is not traded on any public mar‐
ket. The transaction between Personal‐Touch and the Per‐
sonal‐Touch ESOP was an exchange involving only private
stock. There is no market price to explain away, and so no rea‐
son to apply any “special circumstances” rule. Additionally,
another part of Dudenhoeffer’s rationale—the need to protect
fiduciaries from running up against insider trading law by re‐
lying on non‐public information for stock valuation—has no
application to the private stock context.
GreatBanc responds that Dudenhoeffer’s rationale should
be extended to the private‐stock situation because “an unbi‐
ased, independent trustee[’s]” assessment of the value of
stock is at least as reliable as the stock market’s, and therefore
No. 15‐3569 15
the special circumstances pleading requirement should apply
to private stock as well. But saying so does not make it so, and
GreatBanc has assumed things that may or may not be true in
a particular case. Was the trustee unbiased? Was it independ‐
ent? Did it have solid data behind its assessment? None of
those questions is important in the case of public markets; all
of them and more are for private holdings. The inference from
the plaintiffs’ complaint is that GreatBanc did not rely on an
unbiased, independent assessment, nor did it use an assess‐
ment that started with a trustworthy benchmark. We note as
well that the Secretary of Labor, although he takes no position
on the question whether the facts pleaded here are sufficient
to allege a breach of fiduciary duty, urges that Dudenhoeffer
does not apply to sales of non‐public shares.
The district court said that in order for the complaint to
survive, the plaintiffs needed to allege “special circumstances
regarding, for example, a specific risk a fiduciary failed to
properly assess.” Allen v. GreatBanc Trust Co., No. 15 C 3053,
2015 WL 5821772, at *3 (N.D. Ill. Oct. 1, 2015). There is no sup‐
port, however, for such a stringent pleading requirement. All
the plaintiff must do is to plead the breach of a fiduciary duty,
such as prudence, and to explain how this was accomplished.
Plaintiffs here accused GreatBanc of failing to conduct an in‐
dependent assessment of the value of stock and relying in‐
stead on an interested party’s number. This is enough to give
notice of the claim and to allow the suit to proceed.
2
GreatBanc maintains that the facts on which plaintiffs
rely—the post‐transaction decline in stock value and the
6.25% interest rate—are equally consistent with acceptable
performance and breach of fiduciary duty and so not enough
16 No. 15‐3569
under Twombly and Iqbal. If drop in price were enough, Great‐
Banc argues, every ESOP transaction where there was any de‐
cline in value after the transaction would be subject to suit.
But the complaint says more than this. It alleges that Great‐
Banc did not engage in a reasonable and prudent process, and
notes in particular the absence of outsider financing (or any
other objective benchmark of pricing) for the deal.
While the plaintiffs originally claimed that GreatBanc was
aware that 4.25% was the customary interest rate for a trans‐
action of the kind it was facilitating, they retracted that spe‐
cific number in their sur‐reply, which said more generally that
the 6.25% interest rate was exorbitant. This was not such an
outlandish allegation that it could be dismissed out of hand.
We note that on December 15, 2010, the Federal Reserve prime
interest rate was 3.25%. See https://www.comptrol‐
ler.tn.gov/shared/pdf/interesttable.pdf. That aside, the retrac‐
tion of the specific number is unimportant. At this stage, we
are obliged to take as true the plaintiffs’ alleged facts in deter‐
mining the sufficiency of the complaint, and one of the alleged
facts is that the interest rate on the loan from the principal
shareholders was unreasonably high. The district court
should not have dismissed this claim as “conclusory,” be‐
cause this was a factual claim, not a legal one. If the plaintiffs
are unable after discovery to show that the rate was indeed
high, GreatBanc may be entitled to summary judgment
(though that will depend on the entire record at that time).
GreatBanc argues that the post‐transaction decline in stock
value is precisely what economists predict should happen af‐
ter an ESOP transaction, and therefore it is not evidence of fi‐
duciary breach. But whether the 22% decline in value—a de‐
cline that lasted not months but years and ballooned to nearly
No. 15‐3569 17
50%—was the result of normal economic forces or something
more sinister is a matter for a later stage of litigation. We need
not answer whether any post‐ESOP transaction decline in
stock value is enough for a complaint; the decline here was
significant and accompanied by other indications of a breach
of fiduciary duty.
C
We note, finally, that the 2014 settlement agreement be‐
tween GreatBanc and the Department of Labor, in which
GreatBanc agreed to a specific set of policies and procedures
for analyzing stock valuation in ESOP transactions because of
its history of failing properly to execute its fiduciary duties,
has no effect on the motion to dismiss. GreatBanc points out
that a settlement agreement is sometimes just a rational busi‐
ness decision and not an admission of any wrongdoing, that
the complaint does not identify what the agreed‐upon poli‐
cies and procedures were, and that the complaint does not al‐
lege that GreatBanc was not previously following those poli‐
cies and procedures.
Even though it may seem odd for a party to enter into a
settlement agreement in which it undertakes to do exactly
what it has been doing, that is neither here nor there at this
stage. The plaintiffs would like to use the agreement as evi‐
dence from which an absence of prudence could be inferred,
but the plaintiffs do not need such particular evidence yet. We
leave it to the district court to determine, if and when neces‐
sary, whether the settlement is admissible for evidentiary
purposes.
18 No. 15‐3569
III
Because the district court erred in dismissing the plaintiffs’
claims of breach of fiduciary duty and prohibited transactions
in violation of ERISA, we REVERSE its judgment and REMAND
for additional proceedings consistent with this opinion.