[00:00:02] Speaker 00: Case number 16-7029, Donna Marie Coburn on behalf of herself and all other similarly situated appellant versus Evercore Trust Company and A. Mr. Overs for the appellant, Mr. Hacker for the appellee. [00:00:15] Speaker 02: Good morning, Mr. Overs. [00:00:17] Speaker 01: Good morning, Your Honors. [00:00:18] Speaker 01: May it please the Court, I'm Peter Overs of Harwood-Pfeffer, counsel for plaintiff appellant. [00:00:25] Speaker 01: This appeal concerns whether special circumstances affecting the reliability of the market price of company stock are always required to be pled when claiming a breach of fiduciary duty under ERISA based on public information alone. [00:00:40] Speaker 01: Plaintiff appellant argues no such requirement applies where the efficiency of the market is not alleged to be at issue. [00:00:47] Speaker 01: Other circuit courts applying Fifth Third versus Dutton-Hopper have held that known risks to company stock do not comprise special circumstances. [00:00:55] Speaker 01: This is not surprising. [00:00:58] Speaker 01: Dudenhoff, for itself, contains repeated statements at special circumstances. [00:01:03] Speaker 04: Counsel, can you do us a favor? [00:01:04] Speaker 04: Talk to us. [00:01:05] Speaker 04: Don't read. [00:01:07] Speaker 04: Okay. [00:01:07] Speaker 04: Seriously. [00:01:09] Speaker 04: That's why we have that rule. [00:01:10] Speaker 04: It's very distracting, and we're not hearing you, and we'd rather engage with you. [00:01:14] Speaker 04: Just talk to us. [00:01:17] Speaker 01: Well, as I said in the beginning, I think it really [00:01:23] Speaker 01: It really comes down to whether when a case involves allegations that do not go to the efficiency of the market, such as inflation of the stock price, whether special circumstances need to be pled. [00:01:37] Speaker 01: I think the short discussion in Dudenhofer that they have on this point [00:01:45] Speaker 01: Every single time the Supreme Court mentions special circumstances or this concept, it's always tied to some concept of market inefficiency or price inflation. [00:01:56] Speaker 01: That's not what we're arguing here. [00:02:00] Speaker 01: specifically did not include any dramatic stock drop, although it is mentioned in the complaint that just prior to the class period, there was a huge stock drop that was worse than Black Monday for the stock. [00:02:13] Speaker 01: But prior to that, the price of the stock had been in steady decline and the company had been not performing up to its peers. [00:02:21] Speaker 03: So the district court had an alternative ruling, didn't it? [00:02:25] Speaker 01: Yeah, its ruling was that regardless of special circumstances, that you still had to plead that the company was, quote, no longer viable in the industry. [00:02:36] Speaker 01: We believe that given Dudenhofer's teaching that dire circumstances aren't needed to be pled anymore, that that's incorrect. [00:02:46] Speaker 02: Do you think you could have brought under Tibble a continuing duty to monitor? [00:02:53] Speaker 01: I don't know that we have statute of limitations problems here. [00:03:00] Speaker 01: We certainly could if we needed to reach back further. [00:03:04] Speaker 01: Well, you did. [00:03:06] Speaker 01: I'm sorry? [00:03:07] Speaker 04: You did. [00:03:08] Speaker 04: You did plead a duty to maintain. [00:03:12] Speaker 01: Well, it was more, to be honest, more rhetoric than anything else to highlight the fact that you can't. [00:03:21] Speaker 04: Are you serious? [00:03:27] Speaker 04: a tibble cause of action. [00:03:31] Speaker 04: No way, I need to understand this because now I'm really confused. [00:03:35] Speaker 04: It clearly includes it. [00:03:37] Speaker 04: The district court responded to it and rejected it, and you're saying, well, it was just rhetoric. [00:03:43] Speaker 01: We didn't really mean to... I believe that tibble, due to the monitor, was [00:03:52] Speaker 01: was enunciated to reach back past the statute of limitations. [00:03:57] Speaker 01: It clarified the duty of prudence, which is that you can't just set it and forget it. [00:04:01] Speaker 01: You can't set up your investment options and then walk away. [00:04:07] Speaker 04: Do you or do you not have a viable duty to monitor Clinton? [00:04:12] Speaker 04: It was certainly pledged. [00:04:14] Speaker 04: Sure. [00:04:15] Speaker 04: Well, wait, your answer [00:04:17] Speaker 04: One of my colleagues was, well, it was rhetoric because he said it. [00:04:20] Speaker 01: It's the duty of prudence. [00:04:21] Speaker 01: The duty of prudence includes the duty to monitor. [00:04:24] Speaker 01: I think that Tipple just clarified that. [00:04:26] Speaker 03: So you want to withdraw your point about it was near rhetoric, correct? [00:04:30] Speaker 01: I guess I misspoke there. [00:04:32] Speaker 01: I'm speaking off. [00:04:33] Speaker 02: But you are not arguing it on appeal. [00:04:36] Speaker 02: I didn't see any argument about Tipple in your brief. [00:04:40] Speaker 01: I didn't know that I had to, considering that we're only talking about a breach of the duty of prudence, which I think includes the duty of monitor. [00:04:48] Speaker 01: I don't know how you separate them. [00:04:52] Speaker 02: Well, maybe we're looking at this in a different way. [00:04:55] Speaker 02: If you did have a separate table claim, which the district judge rejected as an alternative argument, you have not appealed that. [00:05:09] Speaker 02: Is that not the case? [00:05:14] Speaker 01: I don't know. [00:05:16] Speaker 01: Quite honestly, I didn't know that that was pleaded. [00:05:23] Speaker 02: Well, you don't even mention Tibble, do you? [00:05:26] Speaker 01: That's right. [00:05:27] Speaker 01: That's right. [00:05:27] Speaker 02: And so if you had a Tibble claim, or at least if the district court said, I see this as a Tibble claim and I'm rejecting it, [00:05:36] Speaker 02: Is your position, I don't have to mention Tybalt when I appeal it, I just have to argue this continuing duty to monitor or maintain? [00:05:45] Speaker 01: That's right. [00:05:46] Speaker 01: That's right. [00:05:46] Speaker 01: Because it's implied in the duty of prudence. [00:05:49] Speaker 01: Tybalt only clarified with the duty of prudence that it continued. [00:05:56] Speaker 01: That's my understanding of it. [00:05:59] Speaker 03: See, I guess we are a little confused here. [00:06:04] Speaker 03: The district court held on two alternative grounds that you failed to state a claim. [00:06:11] Speaker 03: Is that correct? [00:06:13] Speaker 01: Yes. [00:06:13] Speaker 01: The first was under Dudenhoff, and the second was under its conception of... All right. [00:06:17] Speaker 03: And in the district court, I thought you argued that the interpretation that was being argued on the other side was wrong, and you cited these two other cases. [00:06:34] Speaker 03: And so the district court said, well, even under those standards, you lose. [00:06:39] Speaker 01: That's right. [00:06:40] Speaker 03: So even though your complaint separated out these claims, as the case was tried in the district court, there was essentially only one claim. [00:06:54] Speaker 03: In other words, that one, you didn't need to plead special circumstances [00:07:03] Speaker 03: Because there was a duty to monitor in any event? [00:07:09] Speaker 01: That's right. [00:07:11] Speaker 03: And is that the way you're bringing the case to us? [00:07:15] Speaker 01: If you'll allow me, I'm sorry. [00:07:28] Speaker 01: I just wanted to make sure that I was accurate. [00:07:30] Speaker 01: There's only one count in the complaint for breach of fiduciary duty. [00:07:34] Speaker 03: One count, two theories. [00:07:41] Speaker 01: One count, one theory. [00:07:44] Speaker 04: The duty to monitor is split out in the complaint, and in the response to the motion to dismiss, it was clearly enunciated. [00:08:02] Speaker 04: I mean, you're relying on the Getick approach, which is different, amplifies the Supreme Court's first case. [00:08:12] Speaker 04: And it's the double kind of theory. [00:08:14] Speaker 04: And you raised it. [00:08:15] Speaker 04: It was raised in the complaint. [00:08:17] Speaker 04: It was raised in the response to the motion to dismiss. [00:08:20] Speaker 04: What we're trying to figure out is, have you raised it on appeal? [00:08:26] Speaker 01: I believe, impliedly, that I have them, to the extent that my entire argument is based on the fact that they should have been paying attention to the stock price. [00:08:36] Speaker 03: And that's not an implied argument. [00:08:38] Speaker 03: You state it specifically, don't you? [00:08:40] Speaker 01: That's right. [00:08:44] Speaker 03: You've got to be careful with your words here, counsel, so we know what's before us. [00:08:56] Speaker 04: We're confused. [00:08:57] Speaker 04: How do you not cite that case? [00:08:58] Speaker 04: It's a Supreme Court case. [00:09:00] Speaker 04: Right on point. [00:09:01] Speaker 04: Directly on point. [00:09:04] Speaker 01: My understanding of the import of Tybalt was to affect the statute of limitations. [00:09:09] Speaker 01: And because I didn't have a statute of limitations problem here, that I had to focus on Dudenhofer. [00:09:46] Speaker 03: Well, um, so as you brought the case to us, your only argument is that the district court erred in dismissing your complaint on the grounds that you had failed to plead special circumstances. [00:10:02] Speaker 01: That's right. [00:10:03] Speaker 03: All right. [00:10:04] Speaker 01: That's right. [00:10:05] Speaker 01: And on the alternative ground that I had to plead that the company was no longer viable. [00:10:13] Speaker 01: I thought that's what I was appealing from. [00:10:17] Speaker 01: I don't know that that change, the judge didn't apply the right standard. [00:10:23] Speaker 01: I would like to talk about that if you have any questions about whether that's. [00:10:29] Speaker 01: Go ahead. [00:10:32] Speaker 01: I'm into my rebuttal time now. [00:10:33] Speaker 02: All right. [00:10:34] Speaker 02: If you'd like to say that, that's fine too. [00:10:35] Speaker 01: I'd like to say that. [00:10:36] Speaker 02: All right. [00:10:37] Speaker 02: Mr. Hacker? [00:11:07] Speaker 05: Good morning, Your Honors. [00:11:08] Speaker 05: May it please the Court. [00:11:09] Speaker 05: John Hacker for Evercore. [00:11:11] Speaker 05: However one might read the complaint or the brief below, I think at this point three things are dispositive of the question of a separate claim for duty to monitor. [00:11:20] Speaker 05: One, if you look in the point headings and throughout the brief on appeal, no such argument is made. [00:11:27] Speaker 05: If you look at the table of contents, table of authority... There are some arguments that embrace it. [00:11:41] Speaker 04: embrace the notion of duty and honor. [00:11:43] Speaker 05: I would submit under this Court's precedence on waiver, which haven't been briefed, that you have a duty to identify, specifically argue a case, and go further than just kind of refer to things. [00:11:53] Speaker 05: And the second point I was going to make, I think, supports that, which, as Your Honor pointed out, the table of authorities doesn't cite Tibble, which I think just underscores the proposition that they're not making a Tibble-based continuing duty to monitor argument. [00:12:05] Speaker 05: And the third thing is, I think, has been clarified this morning. [00:12:07] Speaker 04: Well, I think the Senate embraces that theory. [00:12:09] Speaker 05: I think Gettych articulates a different theory, but I think the third point I was going to make... [00:12:18] Speaker 05: I don't want to dismiss anything. [00:12:22] Speaker 05: I will happily address any issue that's properly before this court. [00:12:25] Speaker 05: I submit that the third point I was going to make as counsel this morning has made clear that he doesn't perceive, for whatever reason, whether it's a mistake or not, doesn't perceive a separate duty to monitor argument. [00:12:35] Speaker 05: It hasn't been briefed that way, if one were to brief it. [00:12:38] Speaker 05: So I don't think the court needs to go further. [00:12:40] Speaker 05: say about it among other things is to the extent there is, there of course is a duty to monitor, but to state a claim for breach of the duty to monitor, you have to talk about the process. [00:12:50] Speaker 05: You have to allege facts and the complaint that say, here's what you didn't do. [00:12:53] Speaker 05: You should have had more meetings at those meetings. [00:12:56] Speaker 05: You should have discussed this, that, and the other thing. [00:12:59] Speaker 04: Well, I remember Arbo asked for a lot, but I'm not sure it asked for all of that. [00:13:04] Speaker 04: They certainly pled it. [00:13:06] Speaker 04: So let me, here's what I'd be curious to know. [00:13:11] Speaker 04: We're looking at the same thing the district court looked at. [00:13:22] Speaker 04: In my view, what the district court had to say about the duty to monitor doesn't square with what the case law says. [00:13:28] Speaker 04: The district court simply dismissed it out of hand. [00:13:31] Speaker 04: I don't see how you can possibly do that on the table. [00:13:41] Speaker 04: I mean, Johnson had quite a reputation. [00:13:45] Speaker 04: I even remember that period where, you know, he's going to bring Apple into penny. [00:13:49] Speaker 04: Interesting. [00:13:51] Speaker 04: Everyone thought it was utterly insane. [00:13:52] Speaker 04: It's my best recollection. [00:13:55] Speaker 04: And then the stock kept going down for a very long period of time. [00:13:59] Speaker 04: And what the complaint suggests is, in this kind of a situation, an obligation to monitor if there is such a thing would certainly require [00:14:15] Speaker 05: I'm happy to engage. [00:14:18] Speaker 05: I just don't want to be understood as acknowledging that this is an argument. [00:14:21] Speaker 05: But, you know, by doing so, this is an argument properly before this court. [00:14:25] Speaker 04: You're saying it wasn't raised. [00:14:27] Speaker 04: Right. [00:14:27] Speaker 04: It was raised here. [00:14:28] Speaker 05: Let's pretend it was. [00:14:30] Speaker 05: I'm happy to do that. [00:14:32] Speaker 05: There are a number of problems, none of which have been briefed. [00:14:34] Speaker 05: But first of all, [00:14:35] Speaker 05: Tybalt, unexceptionally, recognizes a duty to monitor. [00:14:39] Speaker 05: There's no question about that, but it wasn't a new duty. [00:14:42] Speaker 05: It was one that had always existed. [00:14:45] Speaker 05: And with respect to what was going on in this case, it's the same kind of thing that was going on in Dudenhofer, in Feil, in Reinhart, in Smith. [00:14:57] Speaker 04: Except that they were resting on the whole notion of risk and watching. [00:15:01] Speaker 04: That's not what these people are resting on. [00:15:03] Speaker 05: Well, I think it's clear that they are resting on that. [00:15:06] Speaker 05: That's what this is about. [00:15:07] Speaker 05: The problem being, with respect to Honor, because their point is that there were risks, threats to the stock because they alleged, paragraph 69 of their complaint is the summary allegation, that the company's strategy, as your Honor just said, was so likely to fail, [00:15:24] Speaker 05: that the fiduciary should have known that and should have taken action and shouldn't have sat idly by. [00:15:29] Speaker 05: That's exactly what was going on in Dudenhofer, exactly what was going on in Reinhardt, exactly what was going to file, that there were risks to the company, threats to the company that the fiduciary should have accounted for. [00:15:39] Speaker 04: And what Dudenhofer says... Not that the day-to-day price was inaccurate. [00:15:45] Speaker 04: That's not what they're arguing with. [00:15:46] Speaker 04: That's not the point. [00:15:47] Speaker 04: I mean, you'll have to explain to me what's your conception of duty tomorrow. [00:15:54] Speaker 04: Which you have every reason to know if you bother to peek at the real world. [00:15:59] Speaker 04: You have every reason to know it's going down. [00:16:01] Speaker 04: Unless you say in response, no our theory is to keep buying as it goes down because our theory is it's coming back and this is good value. [00:16:09] Speaker 04: Now there's no response on those terms. [00:16:12] Speaker 04: Now a duty to monitor doesn't include a situation where everyone in this business understood that Johnson was somewhere strange and what was happening [00:16:24] Speaker 04: was exactly what any reasonable person would have assumed. [00:16:28] Speaker 04: It was going to tank. [00:16:29] Speaker 04: And it did tank. [00:16:30] Speaker 04: At what point? [00:16:32] Speaker 04: It tanked. [00:16:32] Speaker 05: I understand that. [00:16:34] Speaker 05: I know. [00:16:34] Speaker 05: But can I core with the premise? [00:16:37] Speaker 05: If I might, the fundamental premise of the question is everybody knew. [00:16:42] Speaker 05: The answer, Your Honor, is that the market didn't know that. [00:16:44] Speaker 05: Because any investor in the world, everybody would have been shorting. [00:16:47] Speaker 05: The price would have dropped dramatically if, quote, everybody knew that it was going to continue to go down. [00:16:52] Speaker 04: What is the duty to monitoring companies? [00:16:54] Speaker 05: The duty to monitor is a process-based, absolute duty to conduct the right meetings, to look at the kinds of things a reasonable fiduciary would look at to make a determination. [00:17:03] Speaker 04: And when something is taking over many months, do you have a responsibility to take a peek and see what's going on? [00:17:09] Speaker 05: You may have a duty to call a meeting. [00:17:11] Speaker 05: There's no allegation that we didn't do that. [00:17:13] Speaker 05: You don't have a duty. [00:17:14] Speaker 04: How do they know when they call a meeting? [00:17:16] Speaker 04: Wait, equal doesn't require that. [00:17:17] Speaker 04: That's information in your hands, not in their hands. [00:17:20] Speaker 04: No, I think respond by saying we call the meeting. [00:17:22] Speaker 04: I think with respect, you're going to bring it this emotion to dismiss. [00:17:25] Speaker 04: This is not summary judgment. [00:17:28] Speaker 04: So that's my problem with this. [00:17:29] Speaker 04: There is a duty to monitor. [00:17:32] Speaker 04: If there is such a thing, we don't have these cases every day. [00:17:34] Speaker 04: But if there is such a thing, intellectually, I can't comprehend how a case like this wouldn't fit in there somehow. [00:17:42] Speaker 04: You may have great responses, but it seems to me that summary judgment. [00:17:46] Speaker 05: I disagree, first of all. [00:17:48] Speaker 05: I think you have to bring a good faith allegation that the process was not an effective one. [00:17:52] Speaker 05: And there's ways to get that information. [00:17:53] Speaker 05: But more importantly, more importantly, the problem is you can't base that kind of allegation on the proposition that you, you, the ESOP fiduciary, should have seen, predicted that market decline that the market didn't predict. [00:18:06] Speaker 05: And therefore, I know that your process wasn't good. [00:18:07] Speaker 04: No, you should have made some kind of inquiry. [00:18:10] Speaker 04: You should have done something in response [00:18:15] Speaker 05: But there's no allegation that there was no inquiry made. [00:18:19] Speaker 05: As we've heard this morning, the argument is there was a failure to respond by not stopping access to the stock, not liquidating the stock, which is verbatim the same. [00:18:29] Speaker 05: This case is a Dudenhoffer case. [00:18:32] Speaker 05: They are alleging exactly what was alleged in Dudenhoffer, which is that the fiduciary should not have sat idly by. [00:18:37] Speaker 04: What you're saying to me is there's no such thing as a duty to [00:18:52] Speaker 04: we all got brains up here and we're all wondering how this cannot be in the category of duty to monitor on a motion to dismiss. [00:18:59] Speaker 05: because you have to bring any motion, including a claim under ERISA for breach of the duty to monitor under Iqbal, under Twombly, has to allege facts, concrete facts, which, if true, would establish a breach. [00:19:11] Speaker 05: No facts are alleged here. [00:19:12] Speaker 05: I hate to be arguing about this argument that wasn't made. [00:19:15] Speaker 04: The facts that were alleged, you had a market that just tumbled for two years. [00:19:20] Speaker 04: Two years, is that right? [00:19:21] Speaker 05: I'm not sure it's two years, but some period of time, no doubt. [00:19:23] Speaker 04: Big period of time, right? [00:19:28] Speaker 04: 84%? [00:19:29] Speaker 04: Some large amount. [00:19:30] Speaker 04: Huge amount. [00:19:32] Speaker 04: The duty to monitor would seem to me, I can allege that, and you've got to respond. [00:19:40] Speaker 04: Obviously nothing was done, that's in the complaint, and nothing was done. [00:19:44] Speaker 04: If you say something was done, you can say that in response and get yourself a summary judgment and then see how it plays out. [00:19:51] Speaker 04: I don't see why under eggball or anything else, I have to [00:19:55] Speaker 04: assuring anything more than a complaint. [00:19:57] Speaker 04: I'm still in play. [00:19:58] Speaker 05: You may get me out of play quickly, but you didn't do anything. [00:20:02] Speaker 05: I think that shows why this court shouldn't get into the business of addressing arguments that haven't been developed, because this whole issue has not been briefed to the extent to which they have a duty to... No, no, no. [00:20:12] Speaker 03: What we're looking at, if I could say, is the complaint. [00:20:15] Speaker 03: Look at paragraphs 53 and 54. [00:20:18] Speaker 03: All right? [00:20:21] Speaker 03: It alleges a failure to engage in proper monitoring. [00:20:26] Speaker 03: And 54 is an allegation of failing to have in place rudimentary tripwires, et cetera. [00:20:35] Speaker 05: Well, those are two separate points, for sure. [00:20:38] Speaker 05: Tripwires is a substantive point about how they should have gotten out of the stock they had a duty to because it was imprudent. [00:20:43] Speaker 05: Why was it imprudent? [00:20:43] Speaker 05: You have to look at the rest of the complaint. [00:20:45] Speaker 03: No, I know. [00:20:45] Speaker 03: But all I'm getting at is, [00:20:49] Speaker 03: It seems to be very much along the lines of Judge Edwards' saying that just reading the plain language of the complaint under a big heading about breaches of fiduciary duty, there were two theories, all right? [00:21:05] Speaker 03: And they identify them in these two paragraphs. [00:21:08] Speaker 05: With respect, if this had been briefed, what I would have written to you in a brief is... No, I don't mean briefed. [00:21:11] Speaker 03: I mean alleged. [00:21:13] Speaker 05: Now, I understand. [00:21:14] Speaker 05: I'm saying why this is not before this court. [00:21:16] Speaker 05: Because what it would have said to you in a brief, had they made anything like the argument I'm hearing this morning, is look at the first three words of paragraph 53 as a result. [00:21:25] Speaker 05: So it's not a separate one. [00:21:27] Speaker 05: They're saying as a result, there's a breach of duty to monitor. [00:21:30] Speaker 05: Paragraph 52, the key allegation there is stopping planned participants from continued investment in company stock [00:21:36] Speaker 05: and or terminating the company stock fund from the plan by liquidating the plan's position was the only prudent course at the beginning of the class period. [00:21:43] Speaker 03: Let me just be clear so I understand your point. [00:21:47] Speaker 03: I think I do understand your point the way you're arguing it in terms of forfeiture. [00:21:52] Speaker 03: But the point Judge Edwards was making, I thought, was this is de novo review. [00:21:58] Speaker 03: So we're sitting basically as the district court. [00:22:03] Speaker 03: And we're reading the complaint. [00:22:06] Speaker 03: Could we say that it has to be dismissed for failure to state a claim? [00:22:15] Speaker 03: I can't speak for the judge, but that's my understanding of what he was getting at. [00:22:20] Speaker 03: And you want to argue the other point, and we're back at just reading the complaint. [00:22:25] Speaker 04: If I may, two points. [00:22:27] Speaker 04: Wait, wait, add this in your answer, because you seem to be forgetting it. [00:22:31] Speaker 04: Tibble explicitly says a trustee has a continuing duty to monitor trust investments and remove imprudent ones. [00:22:41] Speaker 04: And you're fighting that, but that's what Tibble says. [00:22:43] Speaker 04: A duty to remove, keep looking, and then remove imprudent investments. [00:22:49] Speaker 04: With all due respect, Your Honor. [00:22:50] Speaker 04: If this wasn't an imprudent investment, I can't imagine what is. [00:22:53] Speaker 05: And that is my point. [00:22:55] Speaker 05: And I'll get to exactly why. [00:22:56] Speaker 05: The whole point of the duty to monitor and remove is the key here, because removal is what's going on. [00:23:01] Speaker 05: Let me start, if I may, with the point about de novo review, because it's so critical. [00:23:05] Speaker 05: The fact that it's de novo review doesn't authorize this court to decide any issue. [00:23:09] Speaker 05: It reviews based on what is presented to it, what's been briefed, what's been argued. [00:23:13] Speaker 04: So what's in the complaint? [00:23:15] Speaker 04: What's in the complaint? [00:23:16] Speaker 04: The noble means we're doing the same thing. [00:23:19] Speaker 04: Look, you've got to understand, we're doing the same thing the district court did. [00:23:21] Speaker 04: It's that the district court wasn't there. [00:23:23] Speaker 04: We're now looking at the complaint. [00:23:26] Speaker 04: That's what we do. [00:23:27] Speaker 04: Forget your forfeiture argument. [00:23:29] Speaker 04: That's what we do. [00:23:30] Speaker 04: They clearly raised the duty to monitor. [00:23:32] Speaker 04: The district court blew it off. [00:23:34] Speaker 04: I happen to disagree facially so far. [00:23:37] Speaker 04: on the district court's handling of it in light of my reading and table. [00:23:41] Speaker 04: That's what I'm thinking about when I look at the complaint. [00:23:44] Speaker 05: I'm looking at the complaint, Your Honor, which is my second point, which is the complaint, if you look at paragraph 52, you have to read the complaint for what it says. [00:23:54] Speaker 05: Paragraph 52 tells you their objection. [00:23:57] Speaker 05: The thing they don't like, that they're upset about, that they want a court to give relief for, is the failure to terminate access to the stock and to liquidate the stock. [00:24:05] Speaker 05: As a result, they say, there was a failure to monitor. [00:24:08] Speaker 05: The failure to monitor follows from the substantive failure to remove, Your Honor. [00:24:12] Speaker 03: But counsel, even in paragraph 52, [00:24:17] Speaker 03: The allegation is it is not plausible that approval by Duchery would have done whatever to our trust did here. [00:24:24] Speaker 03: Absolutely nothing. [00:24:26] Speaker 03: And then the next thing in paragraph 53 as a result. [00:24:30] Speaker 03: So I don't see those two paragraphs as somehow [00:24:34] Speaker 05: I understand. [00:24:35] Speaker 05: The absolutely nothing is exactly what the court said in Dudenhofer. [00:24:37] Speaker 05: That was the allegation in Dudenhofer. [00:24:38] Speaker 05: They did nothing as all of these things. [00:24:40] Speaker 05: Your Honor, Judge Edwards, it was exactly the same in Dudenhofer. [00:24:43] Speaker 05: You could throw up your hands and say, are you kidding me? [00:24:45] Speaker 05: Fifth, third was facing the subprime lending crisis that everybody knows was going to destroy that bank. [00:24:51] Speaker 05: Lehman Brothers in file was facing a financial crisis about to destroy the company. [00:24:56] Speaker 05: GM was facing a financial crisis. [00:24:57] Speaker 04: You still haven't answered the question that [00:24:59] Speaker 04: I'm really curious to hear, what is the duty to monitor? [00:25:02] Speaker 05: The duty to monitor covers, it's a process-based claim about what it is a fiduciary is supposed to do in the course of monitoring. [00:25:09] Speaker 05: It's what it says, monitoring the stock. [00:25:11] Speaker 05: How do you do that? [00:25:12] Speaker 05: What indicators do you look at? [00:25:14] Speaker 05: What criteria are applicable? [00:25:16] Speaker 05: To double, not monitor, and remove. [00:25:18] Speaker 05: And then remove, exactly. [00:25:19] Speaker 05: It's a two-part point, and Dudenhofer speaks to the removal point. [00:25:23] Speaker 05: You do not have a duty to remove. [00:25:25] Speaker 05: If the stock based on an allegation that you should have realized Outguess the market after monitoring at the end of that process. [00:25:34] Speaker 05: You should have outguessed the market and said I Think it's gonna decline claim about outguessing the park. [00:25:41] Speaker 04: The market is giving her clear evidence of what's going on [00:25:44] Speaker 04: It's not for the future, your honor. [00:25:46] Speaker 04: It's not. [00:25:47] Speaker 04: No, I mean, over a period of time. [00:25:48] Speaker 04: I agree with you. [00:25:49] Speaker 04: If we were talking about in one week, Johnson put in a plan, and their claim was as soon as Johnson put in that plan, the trustee had an obligation to get out of the stock. [00:25:58] Speaker 04: No, that's not what they're claiming. [00:26:00] Speaker 04: They're saying Johnson put in a plan, and everyone had reason to think it was going to be a disaster. [00:26:05] Speaker 04: And then sure enough, week by week by week, over two years, the disaster appeared. [00:26:11] Speaker 04: At some point, their claim is [00:26:17] Speaker 04: What are you doing? [00:26:18] Speaker 05: It's the duty to remove, they're talking about at this point, and what Dudenhofer answers that. [00:26:21] Speaker 04: Well, you first monitor and then remove. [00:26:23] Speaker 04: Now, if they looked and had meetings and said, no, no, let's write it down. [00:26:28] Speaker 04: That's different than, it seems to me, than you have a very compelling argument. [00:26:31] Speaker 05: But you haven't said anything. [00:26:32] Speaker 05: But focusing on the duty to remove, there's no such thing as, you know, let's ride it down. [00:26:36] Speaker 05: You don't know if it's going to go down. [00:26:37] Speaker 05: The market is telling you it's not going to go down. [00:26:39] Speaker 05: Otherwise, it would already be down. [00:26:41] Speaker 05: That's the whole point of doing it, that's the official market. [00:26:43] Speaker 04: I may not do this every day, but that makes no sense. [00:26:46] Speaker 04: The market's not telling you anything other than, [00:26:49] Speaker 04: Yesterday, it was 10% higher. [00:26:52] Speaker 04: Today, it's 10% lower. [00:26:53] Speaker 04: And then you keep looking. [00:26:55] Speaker 04: And the next day, it's 10% more. [00:26:56] Speaker 04: And how long do you keep looking unless you have a strategy to buy down? [00:27:01] Speaker 05: All I can say, Your Honor, is that the fundamental premise of Dudenhofer is that the market does reflect, internalizes all of the available information about threats to the company. [00:27:10] Speaker 05: And is that decline going to continue? [00:27:11] Speaker 05: On a given day, it's as likely it's going to go up the next day. [00:27:13] Speaker 04: You want to take on a given day, and what I'm saying is I thought that the monitor talks about a longer period of time. [00:27:19] Speaker 05: But then the duty to remove is, at the end of your monitoring process, whatever criteria you're applying and procedures have in place, you then violate the duty to remove and do nothing else. [00:27:28] Speaker 04: They didn't say you didn't do any of that, and you didn't respond. [00:27:30] Speaker 04: They didn't have no... They didn't have a motion to dismiss, and I don't know how you can. [00:27:33] Speaker 05: Your Honor, they have no allegation of a procedural flaw in the process. [00:27:37] Speaker 05: He disclaimed it this morning. [00:27:39] Speaker 05: They don't have any problem with that. [00:27:40] Speaker 05: Their problem is that we didn't outguess the market. [00:27:43] Speaker 04: He didn't acknowledge that. [00:27:44] Speaker 05: I apologize. [00:27:45] Speaker 05: I thought he was disclaiming any duty to monitor claim. [00:27:49] Speaker 05: Well, he says rhetoric. [00:27:50] Speaker 05: But what he said was he doesn't have a duty to monitor claim that's distinct from the failure to remove. [00:27:56] Speaker 05: And Dudenhofer tells you the circumstances under which you have a duty to remove. [00:28:00] Speaker 02: Thank you. [00:28:01] Speaker 02: Let me ask you, if we're sitting as the district court and I ask Mr. Overs, are you making a claim under Tibble? [00:28:09] Speaker 02: And he tells me no. [00:28:13] Speaker 02: Do I then say, well, I think you do. [00:28:16] Speaker 02: And I'm going to go ahead and rule on that. [00:28:18] Speaker 05: I mean, I couldn't agree more, Your Honor. [00:28:20] Speaker 05: The district courts and appellate courts are bound by what's argued before them. [00:28:24] Speaker 05: And this argument has not been raised before this court. [00:28:27] Speaker 05: All right. [00:28:27] Speaker 05: Thank you. [00:28:27] Speaker 02: Is Mr. Overson, he has about four minutes. [00:28:45] Speaker 01: Okay. [00:28:46] Speaker 01: I think that [00:28:48] Speaker 01: that Your Honor's already pointed out the main factual allegations that we had regarding a duty to monitor. [00:28:58] Speaker 01: We did plead that. [00:29:01] Speaker 01: My understanding is that the damages would be measured by the duty to remove, by when they would remove it, exactly what Judge Edwards said. [00:29:12] Speaker 01: When would that happen? [00:29:14] Speaker 01: Of course, [00:29:17] Speaker 01: None of our allegations, well, not none of them, but the gist of the complaint is that, as Judge Edwards said, over a long period of time, including before the class period, you saw the performance of the stock price. [00:29:32] Speaker 01: Now, it's not that you have to guess what's going to happen. [00:29:36] Speaker 01: in the future. [00:29:37] Speaker 01: It's that at some point, you look at the price performance, you have some stock investment discipline in place, and you cut your losses, stop the bleeding at some point. [00:29:49] Speaker 01: That's really what we were trying to plead here. [00:29:54] Speaker 01: Again, my understanding is that the duty of prudence includes the duty to monitor. [00:30:01] Speaker 01: That's why we pled that one claim. [00:30:05] Speaker 01: We were trying to address what we thought was the main problem with the court below, which was the improper application of special circumstances. [00:30:18] Speaker 01: We believe that our claim is viable for all the reasons that Judge Edwards just said. [00:30:24] Speaker 01: All right, thank you. [00:30:26] Speaker 02: Call the next case.