Yates v. Nichols, 286 F. Supp. 3d 854

Background

In 2011 Marathon Petroleum spun off from Marathon Oil and established a 401(k) defined-contribution plan offering multiple tiers of funds; Tier 4 included Marathon Oil common stock as a "frozen" option (participants could keep or sell existing shares but not buy more).
At plan inception the plan held $88 million in Marathon Oil stock, about 6.5% of roughly $1.5 billion in plan assets.
Marathon Oil operates in the volatile oil-and-gas sector; its share price fell substantially after the spin-off (from ~$33 to under $13 by mid-2017), and plaintiff alleges defendants should have foreseen declines based on public market information.
Plaintiff Jefferey Yates sued under ERISA for breach of fiduciary duties (prudence, failure to investigate, and failure to diversify) and for co‑fiduciary liability, seeking class relief; defendants moved to dismiss under Rule 12(b)(6).
The court applied Iqbal/Twombly pleading standards and dismissed all claims with prejudice, holding the complaint implausible under Supreme Court and Sixth Circuit precedent.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Prudence: Did offering/retaining Marathon Oil stock violate ERISA duty of prudence?	Yates: Marathon Oil stock was excessively risky/volatile and thus an imprudent option for the plan.	Defs: Reliance on publicly available market price was reasonable; no special circumstances to overcome market-reliance rule.	Dismissed — Dudenhoeffer bars prudence claims based solely on public info absent special circumstances; none alleged.
Investigation: Did fiduciaries fail to conduct an adequate investigation?	Yates: Defendants merely "mirrored" Marathon Oil's plan and did not properly investigate continued holdings.	Defs: Any investigation would have only revealed public information; reliance on market price would still be prudent.	Dismissed — even if investigation were inadequate, plaintiff fails to show causation because public info would not have compelled different action under Dudenhoeffer.
Diversification: Did defendants breach duty to diversify by holding 6.5% in a single-stock frozen option?	Yates: A single-stock option in a volatile sector was an undiversified, imprudent allocation.	Defs: The plan as a whole was diversified (many options plus brokerage window); single-option focus is insufficient.	Dismissed — court evaluates diversification at plan level in defined-contribution plans; 6.5% frozen single-stock option did not plausibly make the plan undiversified.
Co‑fiduciary liability: Can co‑fiduciary liability attach?	Yates: Co‑fiduciary liability for failing to remedy or monitor other fiduciaries.	Defs: Underlying fiduciary claims fail, so co‑fiduciary claim fails.	Dismissed — co‑fiduciary claim fails as a matter of law because underlying breaches were not plausibly pled.

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard: plausible allegations required)
Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (ERISA fiduciaries may rely on market price; public‑info claims implausible absent special circumstances)
Tibble v. Edison Int'l, 575 U.S. 523 (continuing duty to monitor investments)
Pfeil v. State Street Bank & Trust Co., 806 F.3d 377 (6th Cir. discussion of ERISA prudence standard)
Saumer v. Cliffs Nat. Res., Inc., 853 F.3d 855 (6th Cir. — public‑info/Dudenhoeffer application; failure‑to‑investigate/causation)
Pension Benefit Guar. Corp. v. Morgan Stanley Inv. Mgmt., Inc., 712 F.3d 705 (process‑focused pleading and circumstantial allegations)
Tatum v. RJR Pension Inv. Comm., 761 F.3d 346 (4th Cir. — diversification and acceptability of single‑stock options in DC plans)