[00:00:08] Speaker 03:
whenever you're ready.

[00:00:09] Speaker 00:
Thank you.

[00:00:10] Speaker 00:
Good morning, Your Honors.

[00:00:10] Speaker 00:
May it please the court, Nathan Stump, Schlifter Bogard, on behalf of the plaintiffs.

[00:00:15] Speaker 00:
I aim to reserve about three minutes for rebuttal.

[00:00:18] Speaker 00:
I'd like to focus on what are essentially the first two issues that we presented on the appeal.

[00:00:24] Speaker 00:
The fundamental question before this court right now is what burden of proof the plaintiffs must satisfy to prove a loss in an ERISA fiduciary breach case.

[00:00:35] Speaker 00:
And the district court erred

[00:00:36] Speaker 00:
when it found that no loss was proven.

[00:00:39] Speaker 00:
It erred in three ways.

[00:00:41] Speaker 00:
The first way was in failing to recognize that the burden should shift to the defendants after the plaintiffs have established a suitable comparator, and that that comparator needs only to be plausible and possible.

[00:00:56] Speaker 00:
It does not need to be probable.

[00:00:57] Speaker 00:
In other words, it's the burden on the plaintiffs to show how the plan could have performed

[00:01:04] Speaker 00:
if it had been prudently managed, but not to predict what would have happened if the breach had not occurred.

[00:01:10] Speaker 02:
I thought that, I mean, we're post trial.

[00:01:14] Speaker 02:
The district court made findings and weighed the different experts in terms of this issue and found the defense experts more credible.

[00:01:23] Speaker 02:
So I'm not quite sure I understand.

[00:01:25] Speaker 02:
I mean, the argument that you're making now, it relates to the dismissal that you're also challenging.

[00:01:32] Speaker 00:
Or that they are no your honor.

[00:01:34] Speaker 00:
I'm just talking about what happened at trial, okay?

[00:01:36] Speaker 02:
So then what does it matter in terms of a plausibility or not?

[00:01:39] Speaker 02:
We're dealing with evidence that the district court either believed or didn't believe I appreciate that question.

[00:01:45] Speaker 00:
I think the issue is what does a plaintiff have to show to establish a prima facie loss such that the burden should then shift to the defense and And here the district court concluded that there was just no loss, so we didn't

[00:02:00] Speaker 02:
I think the district court just expressly said, I don't have to resolve that legal question of whose burden because there's just no loss.

[00:02:07] Speaker 00:
And that is sort of walking through how the error occurred.

[00:02:10] Speaker 00:
I think that was what I was going to say was sort of the third thing that went wrong was the court's reliance on indexes and comparison to a peer median fund over the life of the class period to say that no loss had occurred.

[00:02:23] Speaker 02:
I'm sorry, I keep interrupting.

[00:02:25] Speaker 02:
I'm just trying to sort of figure out the decision tree.

[00:02:28] Speaker 02:
On that last point that you just talked about, the district court shouldn't have accepted the indices.

[00:02:34] Speaker 02:
In your view, is that a legal question?

[00:02:37] Speaker 02:
Because the district court seems to think that's a weighing of evidence and finding one more convincing or credible than another.

[00:02:43] Speaker 02:
Are you arguing that that's really a legal question?

[00:02:46] Speaker 00:
I think there's maybe a mixed question of fact in law there.

[00:02:50] Speaker 00:
There's a part of it that has to be legal because what we're talking about is taking away something that plan participants had, these Vanguard funds, and then replacing them with something else, with FlexPath.

[00:03:02] Speaker 00:
So shouldn't a plaintiff be able to show a loss by showing that the Vanguard funds on the one hand performed better over the class period?

[00:03:09] Speaker 00:
In other words, how they performed against an index

[00:03:12] Speaker 00:
or peer medians can't negate the losses that were sustained because of the removal of Vanguard.

[00:03:20] Speaker 00:
And the case law is clear that plaintiffs are entitled to, the plaintiff is entitled to, the greater profits that would have been earned if the breach had not occurred.

[00:03:30] Speaker 00:
So what we showed was that there were greater losses associated with our comparators than what the defense offered.

[00:03:38] Speaker 00:
And so at that point, it can't really be a credibility determination.

[00:03:42] Speaker 00:
It should just be, we established suitable comparators to show a loss.

[00:03:47] Speaker 00:
The burden now shifts to the defense to show that their decision was objectively prudent or that those suitable alternatives would not have been chosen.

[00:03:55] Speaker 01:
The whole thing seems to boil down to what's the appropriate comparator.

[00:04:00] Speaker 01:
If you took, I'm just pulling this out of here.

[00:04:03] Speaker 01:
I have no idea what the numbers are, but if you took Warren Buffett's personal, um, results, is that a good comparator?

[00:04:11] Speaker 01:
He did pretty well.

[00:04:14] Speaker 01:
Would that be appropriate?

[00:04:15] Speaker 01:
Would that meet your requirement?

[00:04:18] Speaker 01:
It seems like the district court was not buying your concept that you can pick from one or two different things and say, this is better.

[00:04:26] Speaker 01:
What did he get wrong here?

[00:04:28] Speaker 00:
I think there's a real difference between picking a comparator for showing a breach and picking a comparator for showing a loss.

[00:04:35] Speaker 00:
And this court's decisions, for instance in Anderson versus Intel, talk about what comparators a plaintiff needs to show to say that the underperformance is so bad that a prudent fiduciary would have removed the funds.

[00:04:49] Speaker 00:
But that's not what we're talking about.

[00:04:51] Speaker 00:
We never argued that FlexPath was imprudent because it underperformed Vanguard.

[00:04:55] Speaker 00:
We're saying FlexPath was imprudent for a whole host of other reasons, including disloyal reasons in its selection.

[00:05:02] Speaker 00:
So at that point then what we need to show is how would the plan have fared if it had been prudently managed?

[00:05:08] Speaker 00:
And we didn't cherry pick, you know, sort of outrageous obscure funds based on how they did after the fact.

[00:05:13] Speaker 00:
These were the top rated target date funds on the market.

[00:05:17] Speaker 00:
at the time the selection was made.

[00:05:19] Speaker 00:
And we had sort of a wealth of evidence, including the defendant's own focus list where two of our options appeared.

[00:05:27] Speaker 00:
They had the investment policy statement that required scorecards in the selection of funds.

[00:05:33] Speaker 00:
We showed that one of our suitable comparators, the American funds, had tens across the board for the highest scores you could get.

[00:05:41] Speaker 00:
So there was a whole host of evidence, Judge Smith,

[00:05:44] Speaker 00:
that supported our alternatives, separate and apart from the expert evidence that the judge rejected.

[00:05:51] Speaker 02:
You said something that's intriguing to me, and that is the idea of the evidence necessary on comparators might be different for the breach question than for the loss question.

[00:06:01] Speaker 02:
So I'm going to describe what I understand the district court to be saying, and then I want you to sort of fit that in that dichotomy that you've just set up.

[00:06:08] Speaker 02:
So I understood the district court to be saying, I have one expert that has picked out these individualized funds

[00:06:14] Speaker 02:
and tracked their performance and said, these are the comparators that I should look at.

[00:06:18] Speaker 02:
And I'm not accepting that because it's real easy in hindsight to be able to identify things that did well and say, oh, you should have at the time before we knew how they were going to do picked those.

[00:06:30] Speaker 02:
And so that just seems sort of cherry picking idea.

[00:06:33] Speaker 02:
And then on the other side, I have somebody who's giving me indexes that the market agrees are acceptable indexes.

[00:06:40] Speaker 02:
And that seems more reasonable to look at given this hindsight problem.

[00:06:46] Speaker 02:
And so we're going to go with that because other people in the market do that.

[00:06:50] Speaker 02:
And that's an accepted way to think about planning and prudence and good decision making.

[00:06:54] Speaker 02:
OK.

[00:06:55] Speaker 02:
So if that's how the district court is thinking about it, what does that mean for your dichotomy you're trying to draw between breach and injury or breach and loss?

[00:07:03] Speaker 00:
I think that's a great question because I think the hindsight problem is when you're trying to use funds to show a breach because the question would be at the time that the decision was made, what did the fiduciaries know?

[00:07:16] Speaker 00:
So we evaluate prudence at the time and if you're going to cherry pick a fund down the road and say they should have replaced these funds with this other fund, well that needs to be a very close comparison so that a prudent fiduciary would have recognized at the time

[00:07:32] Speaker 00:
that that was a better option.

[00:07:34] Speaker 00:
The whole cherry-picking thing is I don't think really makes as much sense when you're asking about a loss, because there all we're doing is trying to say could the funds have performed better if they had been prudently managed.

[00:07:48] Speaker 00:
And what we did was we relied on evidence that was available at the time of selection to show that these particular alternatives, if they had been prudently investigated, if a prudent process and a loyal process had been followed, these were potentially

[00:08:02] Speaker 00:
good alternatives for the plan, and that should have been enough.

[00:08:05] Speaker 03:
But there are a lot of potentially good alternatives, and I think that's what Judge Forrest is trying to get at.

[00:08:10] Speaker 03:
All of this is revisionist history, and it's hard to know what a reasonable fiduciary would have done at the time.

[00:08:21] Speaker 03:
I think the part that's not hard is the first part of your argument, which is that there was self-dealing.

[00:08:31] Speaker 03:
Right, so they shouldn't the change shouldn't have been made, but we do have to figure out for purposes of Calculating a loss where the money should have would have been invested, right?

[00:08:41] Speaker 00:
And I think that's a the Second Circuit addressed that a little bit in the sass or Doty opinion The idea of what would have happened if the breach had not occurred It shouldn't be the plaintiff's burden to show that especially to show that

[00:08:54] Speaker 00:
a single particular fund that would have been chosen because as you said, Judge Kristen, there's a wide range of options available to a prudent fiduciary.

[00:09:02] Speaker 00:
That's why we gave four to say here are four options that would have been suitable.

[00:09:07] Speaker 00:
But it puts an incredible onus on plaintiffs if you're going to require a plaintiff to show the fund that would have been chosen.

[00:09:15] Speaker 03:
Do you think the judge did that?

[00:09:17] Speaker 00:
I do think so.

[00:09:18] Speaker 00:
We pointed out in our briefing some of the quotes from the judge's findings that did that to say he could not assume that any one particular fund would have been selected in place of FlexPath

[00:09:31] Speaker 00:
And sort of because of that, he sort of threw up his hands and said, I'm going to go with the indexes.

[00:09:35] Speaker 00:
But that is resolving damages in favor of the breaching fiduciary.

[00:09:40] Speaker 03:
Well, why is it resolving damages in favor of the fiduciary?

[00:09:44] Speaker 03:
The judge has to pick something.

[00:09:45] Speaker 03:
And I'm trying to figure out, what's your strongest argument?

[00:09:48] Speaker 03:
I guess I should say support for your argument that he was wrong there in the comparator.

[00:09:56] Speaker 00:
I think the strongest argument is that we had Vanguard funds.

[00:10:00] Speaker 00:
They were replaced only as a result of the breach, and there were losses there.

[00:10:04] Speaker 00:
So if you go with some other comparator that doesn't produce losses, you're choosing the lower of the two results.

[00:10:10] Speaker 00:
And then that is resolving damages in favor of the breaching.

[00:10:13] Speaker 03:
When you started at the top of your argument, you said the court made a mistake by failing to shift the burden.

[00:10:21] Speaker 03:
Can you circle back and give me the authority for that?

[00:10:24] Speaker 00:
Yeah, I mean, it's the Brotherston case is seminal.

[00:10:29] Speaker 00:
We cited in our briefs the first circuit, second circuit, fourth circuit, et cetera.

[00:10:35] Speaker 03:
I thought you were saying something different at the top of your argument, perhaps not.

[00:10:40] Speaker 00:
No, it wasn't my intention to.

[00:10:42] Speaker 03:
Then I just misunderstood you.

[00:10:45] Speaker 02:
So I'm going to ask one more question here.

[00:10:48] Speaker 02:
I am a little confused by the district court saying, I don't have to determine if there is a breach or not, because there's just no loss.

[00:10:54] Speaker 02:
Because it seems like those two things in this scenario have to go together in a sense of,

[00:10:59] Speaker 02:
If there's a universe of choices to be made by plan managers, and we'll say that some subset of those is within the duty of prudence and your fiduciary obligations to do this well to the best of your ability, then don't we have to know if the thing that we're looking at here is in that smaller universe of prudent choices or not?

[00:11:20] Speaker 02:
Because if it is, and it performed a little bit worse than the thing you already had,

[00:11:26] Speaker 02:
then so what, right?

[00:11:27] Speaker 02:
Because there was no breach.

[00:11:28] Speaker 02:
It was still a prudent choice based on what you knew at the time before we knew how it was all going to play out, right?

[00:11:34] Speaker 02:
So is that the problem, then, that the district court just skipped to loss without just going through the breach analysis?

[00:11:41] Speaker 02:
Because you might lose anyways if we went to the breach analysis and determined based on the expert testimony that was presented that the choice that was made, even though there was some fiduciary stuff going on there, was still financially a prudent choice.

[00:11:55] Speaker 00:
Yes, I think if the defense could show and it would be their burden to show that their Decision to replace vanguard with flex path, so I don't understand that because you're the plaintiff and you have the burden to show breach Well, no not for breach.

[00:12:07] Speaker 00:
I just meant to objective prudence I think it is the defense's burden to show that their decision was objectively prudent and that's only triggered after we show a breach so what we proved was that

[00:12:19] Speaker 00:
a prudent fiduciary would not have made that decision.

[00:12:23] Speaker 00:
And a prudent fiduciary would not have replaced Vanguard with FlexPass at that time.

[00:12:28] Speaker 00:
So if we've done that and we've established our suitable alternative, then I guess it would be up to the defense to say, well, we, you know, prudent fiduciary still would not have picked your alternative or would have picked something that performed worse than FlexPass, so there's no loss.

[00:12:44] Speaker 02:
And your evidence for that would have been what?

[00:12:47] Speaker 02:
That a prudent person wouldn't have made this choice.

[00:12:50] Speaker 00:
Well, we established it through the testimony that it was all through self-dealing.

[00:12:57] Speaker 02:
So you're not relying on the expert evidence on that point.

[00:13:01] Speaker 00:
No, no your honor.

[00:13:02] Speaker 00:
No, we're not okay.

[00:13:03] Speaker 03:
Did the operative complaint seek a?

[00:13:05] Speaker 03:
Disgorgement of fees it did your honor can you give me a record site for that?

[00:13:11] Speaker 03:
Maybe when you come back.

[00:13:12] Speaker 02:
Yeah, maybe when I come back, and I have one last quick question Did you ask ever or raised to the district court ever the possibility of nominal damages?

[00:13:21] Speaker 00:
No, I don't believe we did your honor.

[00:13:24] Speaker 00:
I don't believe it I'll reserve my time.

[00:13:26] Speaker 03:
Thank you you bet

[00:13:33] Speaker 05:
Excuse me.

[00:13:34] Speaker 05:
Good morning, Your Honours.

[00:13:35] Speaker 05:
Catalina Vergara on behalf of Defendants NFP and FlexPath.

[00:13:39] Speaker 05:
And I want to jump right in and respond to the questions Your Honours were asking my esteemed colleague on the other side because they really go to the heart of the issue here.

[00:13:49] Speaker 05:
Counsel kept talking about how this is a case about burden, about a legal issue.

[00:13:53] Speaker 05:
It is not.

[00:13:55] Speaker 05:
This is a case where the deferential standard of review actually makes it a very easy case because what counsel is doing is attacking what are fundamentally factual issues, factual findings that the court made on loss with respect to the comparators.

[00:14:08] Speaker 05:
And Judge Smith had it exactly right.

[00:14:10] Speaker 05:
This case really does come down to what is an appropriate comparator.

[00:14:14] Speaker 05:
Plaintiffs did not meet their burden to show loss, and it is their burden.

[00:14:19] Speaker 05:
I also want to note that there's a mixing of a lot of concepts here.

[00:14:22] Speaker 05:
You've got breach, you have loss, you have lost causation.

[00:14:25] Speaker 05:
Council is speaking mostly about lost causation, which the court did not reach and was very clear in the findings of fact and conclusions of law.

[00:14:33] Speaker 05:
Paragraph 23, because the plan did not suffer any loss, the court need not resolve the party's dispute over the burden, need not get to lost causation.

[00:14:44] Speaker 02:
I asked about nominal damages for this reason, right?

[00:14:46] Speaker 02:
What if the plaintiffs proved that there was a breach of fiduciary duty in terms of the selection and, you know, we can't show that it was caused financial harm to the plan because the performance ended up being fine and it would have been a reasonable choice or whatever.

[00:15:04] Speaker 02:
absent all of the conflicts going on, wouldn't nominal damages be appropriate?

[00:15:09] Speaker 05:
Not in this case.

[00:15:10] Speaker 05:
And let me tell you why.

[00:15:11] Speaker 05:
First, plaintiffs didn't seek nominal damages.

[00:15:13] Speaker 05:
Second, plaintiffs did not.

[00:15:17] Speaker 05:
NFP is not a defendant in this case for reasons we can discuss if your honors have questions, but its last action is beyond the repose period and any finding as to, you know, breach or conflicted advice with respect to the November 2015 decision would have been with respect to NFP who's not a defendant in this case.

[00:15:35] Speaker 05:
So it would not have been appropriate as to FlexPath.

[00:15:37] Speaker 05:
And the other thing that I would note, your honor, this goes to a more fundamental issue.

[00:15:41] Speaker 05:
This case was not pled and not tried as a case about the removal of Vanguard as the TDF This is not a case about whether that was a breach This is a case about whether offering the flux path funds was a breach whether that was a prohibited transaction so I'm like Don't they go together?

[00:16:02] Speaker 05:
Not necessarily, Your Honor.

[00:16:03] Speaker 05:
There was a decision in November of 2015 made by the Molina fiduciary committee based on information that was provided to the committee, objective information that plaintiffs did not question at trial, that the court made no find that was established in the trial record and relied upon by the court in making its factual determinations.

[00:16:23] Speaker 05:
That was information that was provided and the committee made a decision in November of 2015.

[00:16:28] Speaker 02:
So we're talking about sort of the default thing.

[00:16:32] Speaker 02:
If you as a plan member don't make a choice, this is how your money is going to get invested, right?

[00:16:37] Speaker 02:
That's what we're talking about?

[00:16:38] Speaker 05:
Yes.

[00:16:38] Speaker 02:
So there's going to be one choice.

[00:16:39] Speaker 02:
That's the point.

[00:16:40] Speaker 02:
You didn't make a choice, so we have to have a default.

[00:16:42] Speaker 02:
So it's not like you're going to have a menu of defaults.

[00:16:44] Speaker 02:
You're going to have one.

[00:16:46] Speaker 02:
So if you choose this new thing, you're necessarily not choosing the thing you had.

[00:16:50] Speaker 02:
So those go together.

[00:16:52] Speaker 05:
Well, yes and no, your honor.

[00:16:53] Speaker 05:
First, just as a technical issue, these are target date funds, so there is a selection element.

[00:16:57] Speaker 05:
You have to pick your retirement year within the FlexPath funds.

[00:17:02] Speaker 05:
But yes, this is the default option.

[00:17:04] Speaker 05:
The committee, when it decided in November of 2015 that the moderate glide path was more appropriate for its planned participants,

[00:17:12] Speaker 05:
that it wanted to remain in index investing, that was a decision that required moving away from the Vanguard Fund, which indisputably had a more aggressive glide path and was not appropriate given the recent changes in the plan, the implementation of auto-enrollment, auto-escalation that required a more moderate glide path.

[00:17:29] Speaker 05:
So that decision was made.

[00:17:31] Speaker 05:
So then the question is, if that decision is made, what are you moving to?

[00:17:34] Speaker 05:
And options were presented to the committee, and then ultimately FlexPath was retained as the 338,

[00:17:40] Speaker 05:
in April of 2016 to have oversight of the QDIA, of the default option in the plan, and selected the FlexPath funds for the plan.

[00:17:53] Speaker 05:
So they really are separate questions.

[00:17:54] Speaker 05:
First is the decision by the committee to move away from what was a more aggressive glide path that was no longer appropriate.

[00:18:00] Speaker 05:
And then second is, what then are you going to replace it with?

[00:18:04] Speaker 05:
But plaintiffs really are attacking the fact questions made by the court, and they're abandoning the expert whose testimony they proffered at trial on these four but four comparators in favor of looking almost exclusively to the Vanguard Fund.

[00:18:21] Speaker 05:
But the court's decision that the four but four comparators offered by Butow were not appropriate is amply supported by the record.

[00:18:29] Speaker 05:
It was supported by the TDF fit analysis that was presented to the committee in November of 2015.

[00:18:34] Speaker 05:
It was supported by the fact that the Vanguard Fund had been scoring poorly in terms of its performance in the period leading up to that time.

[00:18:43] Speaker 05:
There were many reasons, factual reasons that the court weighed.

[00:18:47] Speaker 05:
And the court also, by the way, weighed the evidence related to the November 2015

[00:18:52] Speaker 05:
presentation to the committee, the alleged conflict in the presentation of the evidence, all of that went into the mix that the court evaluated in determining that the funds that Butal put forward were not appropriate comparators.

[00:19:06] Speaker 05:
All of them used a more aggressive glide path, a glide path that the Molina committee had decided was not appropriate.

[00:19:12] Speaker 05:
Two of them invested in actively managed underlying funds, which also the committee had expressed a preference against.

[00:19:20] Speaker 05:
They wanted index funds, a lower cost alternative.

[00:19:23] Speaker 05:
So there were many reasons to support the court's determination that Butow's four funds were not appropriate comparators.

[00:19:34] Speaker 05:
And that's really what plaintiffs are challenging.

[00:19:36] Speaker 05:
They try to make this about lost causation, but again, that's a separate question.

[00:19:41] Speaker 01:
Council, as you know, your opponent puts much store on the shifting of the burden of proof based upon their having, if you will, presented an acceptable comparator.

[00:19:56] Speaker 01:
What's your best response to that?

[00:19:59] Speaker 05:
That the district court made a factual finding that none of the comparators offered by their expert butow was in fact an appropriate comparator and the standard your honor under Monroe and other authorities is plausibility.

[00:20:11] Speaker 05:
It has to be a plausible alternative.

[00:20:14] Speaker 05:
And here, when you're talking about target date funds, the factors that a court or a finder of fact would weigh in determining whether it's a plausible alternative are exactly the factors that the court weighed here.

[00:20:25] Speaker 05:
You know, the glide path strategy, whether it's index or active, those sorts of things.

[00:20:30] Speaker 05:
And those are the things that the court weighed here.

[00:20:32] Speaker 01:
So from your perspective, your opponent is incorrect.

[00:20:37] Speaker 01:
They never did select a comparator that shifted the burden.

[00:20:40] Speaker 05:
That is correct, Your Honor.

[00:20:41] Speaker 05:
They never proffered a comparator that was comparable.

[00:20:44] Speaker 05:
That's what the district court found.

[00:20:46] Speaker 05:
And with respect to counsel's argument about the district court's reference to the indexes put forward by a defendant's expert,

[00:20:54] Speaker 05:
The court looked to those indexes, which it can do, and Ninth Circuit authorities amply support looking to indexes when you're looking at comparators.

[00:21:04] Speaker 05:
But it really did it as a confirming step.

[00:21:06] Speaker 05:
The real crux of the district court's decision was that plaintiffs had not put forward an appropriate comparator.

[00:21:13] Speaker 05:
They had failed to meet their burden.

[00:21:15] Speaker 05:
And then it looked to the indexes to confirm that, as compared to indexes and as compared to the peer medians, that these funds actually performed very well.

[00:21:24] Speaker 05:
I see that I'm short on time.

[00:21:26] Speaker 05:
Just very briefly on prohibited transactions and on the claims against NFP.

[00:21:31] Speaker 05:
On prohibited transactions, plaintiffs sought disgorgement or seeking disgorgement on that.

[00:21:39] Speaker 05:
And the problem with that here is that they're seeking the disgorgement of FlexPath's fees, the fees that it received for serving as a 338, but the,

[00:21:50] Speaker 05:
Alleged prohibited transaction is the selection of the flex path funds and those two things do not connect Flex path received its fees Irrespective of what of what funds were selected it was going to be paid as a 338 for that service that it provided But its fees were agnostic as to what the underlying fund was selected so for that reason that claim fails and with respect to the claims against NFP

[00:22:14] Speaker 05:
They are time barred as the district court found because the last action that NFP took was in advising the committee in November of 2015 as it considered whether to remove the Vanguard funds as the target date fund in the plan and to replace it with another.

[00:22:30] Speaker 05:
Unless your honors have any other questions, I will yield to Council Member Molina.

[00:22:35] Speaker 03:
It does not appear that we do.

[00:22:39] Speaker 03:
Oh gosh.

[00:22:40] Speaker 03:
Wow.

[00:22:43] Speaker 03:
That's okay.

[00:22:50] Speaker 04:
Good morning, Your Honors.

[00:22:51] Speaker 04:
Kelly Perrigo on behalf of the Molina defendants.

[00:22:55] Speaker 04:
Molina joins in FlexPass arguments as to why the no loss finding should be affirmed.

[00:23:00] Speaker 04:
And as to Molina, affirming that finding requires affirmance of the judgment on all counts.

[00:23:08] Speaker 04:
And that includes the prohibited transaction count, because as to Molina, the sole remedy that plaintiffs alleged for the prohibited transactions was lost to the plan.

[00:23:18] Speaker 04:
And so there's no remedy shown.

[00:23:22] Speaker 04:
So if the court agrees and affirms that fact-finding with respect to no loss, that ends the case as to Molina.

[00:23:28] Speaker 02:
And you agree that nominal damages is not an issue in this case?

[00:23:32] Speaker 04:
I do agree.

[00:23:33] Speaker 04:
And that's because loss is an element of the breach of fiduciary claims.

[00:23:37] Speaker 04:
And indeed, plaintiffs did not seek nominal damages here.

[00:23:41] Speaker 02:
So those are two different grounds.

[00:23:42] Speaker 02:
And I'm curious about that, because I'm not sure I'll agree with you on the legal grounds.

[00:23:46] Speaker 02:
So on waiver, you think waiver applies.

[00:23:49] Speaker 02:
I'm sorry, I think.

[00:23:51] Speaker 02:
Are you relying on a legal ground for that, that nominal damages aren't in this case, or are you relying on waiver?

[00:23:57] Speaker 04:
I'm relying on both, that they were not sought and that loss is an element of the claims.

[00:24:01] Speaker 02:
All right, so on the legal grounds, what do you do with the provision in the statute that talks about an other relief that the district or that the court deems appropriate?

[00:24:10] Speaker 02:
And we could just go back to sort of remedies law, and often nominal damages falls in that kind of a category.

[00:24:18] Speaker 04:
Well here, I think the court looked at that and and and didn't find that there was any relief that was appropriate Can we tell that the district court looked at nominal damages?

[00:24:26] Speaker 04:
I didn't see that in the record It's it's not because again.

[00:24:29] Speaker 04:
It wasn't it wasn't raised by plaintiffs, so that's where they're not specific specifically addressed

[00:24:34] Speaker 04:
There are also a number of alternative arguments that the claim that the judgment as to Molina can be affirmed here And I'm happy to go into those if the court has questions But again, I think that then affirming the no-loss finding does take care of the case as to Molina any additional questions judge Smith I Don't think we have any additional questions.

[00:24:57] Speaker 03:
Thank you.

[00:24:58] Speaker 03:
Thank you.

[00:24:58] Speaker ?:
I

[00:25:04] Speaker 00:
Judge Christin, you asked about whether we sought disgorgement and I think the complaint, I'd say the word disgorgement I don't think appears but I do think it is subsumed both in the account, the previous transaction account where we asked for all losses and other equitable relief and I think in the prayer for relief at the end where we asked for a surcharge against the defendants for all amounts involved in any transactions which violated ERISA.

[00:25:33] Speaker 00:
I want to address mostly the arguments from FlexPath and NFP.

[00:25:40] Speaker 00:
It was not a separate decision in November of 2015 to remove Vanguard and then some later decision to add FlexPath.

[00:25:48] Speaker 00:
The evidence was clear.

[00:25:50] Speaker 00:
The decision was made at the same time on the recommendation of the conflicted advisor, NFP.

[00:25:56] Speaker 00:
We also showed the court, which I don't understand why the court wasn't moved by this,

[00:26:00] Speaker 00:
that there was an effort, an ongoing effort as he recognized, the judge recognized in the findings of fact for NFP to sell FlexPath to the plan before that fit analysis was ever performed.

[00:26:12] Speaker 00:
So that's why we argued that the fit analysis was just sort of a pretext for getting FlexPath into the plan because they had already been trying for a year to do it.

[00:26:21] Speaker 02:
But those are fact finding, right?

[00:26:22] Speaker 02:
And we give some deference to the district court on that.

[00:26:24] Speaker 00:
They are and I meant it only for the purposes of saying it's not, it was not a separate decision.

[00:26:30] Speaker 03:
Are you responding to the, I think you're following up on the request for, was there a request for fees as a result of a breach of a fiduciary duty?

[00:26:39] Speaker 03:
And I think the response, I think you're following up on the response, which is that the fees had already been earned because the funds had been moved, the decision to move had been made.

[00:26:47] Speaker 00:
That's right.

[00:26:48] Speaker 03:
I mean, what I wanted to say is Regardless of where they were moved to or what the alternative was.

[00:26:52] Speaker 00:
Right.

[00:26:53] Speaker 00:
The decision, when they hired FlexPath, the decision was clear.

[00:26:56] Speaker 00:
They had already decided, Molina had decided.

[00:26:58] Speaker 00:
to add these FlexPath funds and they viewed, everyone viewed the investment manager agreement as fund change paperwork that was needed to effectuate that change.

[00:27:08] Speaker 03:
So is that your request for?

[00:27:10] Speaker 03:
Is that the basis for your request for?

[00:27:12] Speaker 00:
Discouragement yes that those fees were not we're not paid flex path to perform some 338 investment manager service It was simply to get the flex path funds into the plan because those fees are intermittently tied to that Equitably they should be discourse you agree with opposing counsel's position that the fee had been earned

[00:27:30] Speaker 03:
once the decision was made to move to a different plan, regardless of where it was moved or what was selected.

[00:27:37] Speaker 00:
And that was a very interesting point.

[00:27:39] Speaker 00:
At trial, there was no one from FlexPath who could testify to what was done for the plan.

[00:27:43] Speaker 00:
There was no one with knowledge of what FlexPath ever did for the Molina plan in particular.

[00:27:49] Speaker 00:
All we had were NFP witnesses.

[00:27:52] Speaker 00:
And FlexPath, of course, was a representative party, but there was a document called Exhibit 910.

[00:27:57] Speaker 00:
I see I'm out of time.

[00:27:58] Speaker 00:
Okay, that said it purported to be a fit analysis that flex path performed a day before the funds were added and in that analysis they analyzed other target date funds including T Rowe price one of our alternatives and Ultimately chose of course their own funds, but that was the only evidence of any work being done by flex path for the plan That's why we said they didn't earn those fees Judge Smith any additional questions no additional questions

[00:28:25] Speaker 03:
Council your time is up.

[00:28:27] Speaker 03:
Did you want to did you want to have any closing remarks?

[00:28:31] Speaker 00:
No, your honors.

[00:28:31] Speaker 00:
I just appreciate the time and encourage you to This was a case involving self-dealing so we really look for some way that there could be a remedy for the participants Thank you.

[00:28:41] Speaker 03:
Thank you all for your advocacy.

[00:28:43] Speaker 03:
We'll take that case under advisement