Donna Marie Coburn v. Evercore Trust Company, N.A.
844 F.3d 965
D.C. Cir.2016Background
- Coburn, a former J.C. Penney employee and ESOP participant, sues Evercore alleging breach of fiduciary duty under ERISA §§ 409, 502(a)(2)-(3) for failing to act as J.C. Penney stock declined.
- Evercore was designated fiduciary/investment manager of the Penney Stock Fund (ESOP) starting December 17, 2009, with authority to restrict or eliminate the fund and to sell company stock.
- From 2012 to 2013, J.C. Penney’s stock price plummeted amid strategic missteps and management turmoil, and Evercore did not divest or otherwise alter the Penney Stock Fund.
- The district court dismissed Coburn’s complaint under Rule 12(b)(6), relying on Dudenhoeffer to require “special circumstances” when challenging publicly available information about a stock’s value.
- Coburn appeals, arguing her theory fits a risk-based or Tibble-based duty rather than Dudenhoeffer’s market-value framework; the district court’s reasoning is affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Dudenhoeffer controls pleading for risk-based stock claims | Coburn contends Dudenhoeffer’s special-circumstances rule does not apply to her risk-exposure theory | Evercore contends Dudenhoeffer governs all public-information-based claims | Yes, Dudenhoeffer controls and requires special circumstances |
| Whether Coburn preserved a separate duty-to-monitor claim under Tibble | Coburn argued Tibble supports a duty to monitor investments | Evercore argues Tibble does not save the claim and Coburn forfeited on appeal | Forfeited; Tibble not addressed on appeal |
| Whether risk aversion theory survives under Dudenhoeffer framework | Coburn asserts ESOP investors’ risk tolerance should affect prudence analysis | Evercore maintains market efficiency and Dudenhoeffer bar such claims absent special circumstances | Rejected; Dudenhoeffer controls; risk-based theory not saved |
Key Cases Cited
- Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (U.S. 2014) (requires special circumstances for claims based on publicly available information)
- Rinehart v. Lehman Bros. Holdings Inc., 817 F.3d 56 (2d Cir. 2016) (confirms Dudenhoeffer’s approach to risk-based claims)
- In re Lehman Bros. Sec. & ERISA Litig., 113 F. Supp. 3d 745 (S.D.N.Y. 2015) (early authority interpreting Dudenhoeffer; affirmed by Rinehart)
- Pfeil v. State Street Bank & Trust Co., 806 F.3d 377 (6th Cir. 2015) (reiterates efficiency-based approach to ESOP risk claims)
- Tibble v. Edison International, 135 S. Ct. 1823 (U.S. 2015) (duty to monitor investments; concept discussed but not preserved on appeal)
- Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 (U.S. 2014) (efficient-market theory context for public information)
- Basic Inc. v. Levinson, 485 U.S. 224 (1988) (market price reflects all publicly available information)
- Amgen Inc. v. Harris, 136 S. Ct. 758 (U.S. 2016) (discusses ESOP fiduciary duties and market efficiency)