Ellis, et al v. Fidelity Management Trust
Court Docket Sheet

1st Circuit Court of Appeals

2017-01693 (ca1)

MOTION for leave to file amicus curiae brief in support of Appellee filed by Movant(s) The Securities Industry and Financial Markets Association. Certificate of service dated 11/10/2017. [17-1693] (BDN) [Entered: 11/10/2017 01:19 PM]

Case: 17-1693 Document: 00117220376 Page: 1 Date Filed: 11/10/2017 Entry ID: 6131105 No. 17–1693 __________________________________________________________________ UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT __________________________________________________________________ JAMES ELLIS and WILLIAM PERRY, individually, and as representatives of a class of similarly situated persons, Plaintiffs-Appellants, v. FIDELITY MANAGEMENT TRUST CO., Defendant-Appellee. __________________________________________________________________ On Appeal from The U.S. District Court for the District of Massachusetts No. 1:15-cv-14128-WGY __________________________________________________________________ MOTION OF THE SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION FOR LEAVE TO FILE BRIEF AS AMICUS CURIAE IN SUPPORT OF APPELLEE AND AFFIRMANCE __________________________________________________________________ Kevin Carroll Brian D. Netter SECURITIES INDUSTRY AND bnetter@mayerbrown.com FINANCIAL MARKETS MAYER BROWN LLP ASSOCIATION 1999 K Street, NW 1101 New York Avenue, NW Washington, DC 20006 Washington, DC 20005 (202) 263-3000 Nancy G. Ross MAYER BROWN LLP 71 South Wacker Drive Chicago, Illinois 60606 Counsel for The Securities Industry and Financial Markets Association Case: 17-1693 Document: 00117220376 Page: 2 Date Filed: 11/10/2017 Entry ID: 6131105 CORPORATE DISCLOSURE STATEMENT Pursuant to Fed. R. App. P. 26.1, the Securities Industry and Financial Markets Association has no parent corporation, nor does a publicly held corporation own more than 10% of its stock. Case: 17-1693 Document: 00117220376 Page: 3 Date Filed: 11/10/2017 Entry ID: 6131105 MOTION OF THE SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION FOR LEAVE TO FILE BRIEF AS AMICUS CURIAE IN SUPPORT OF APPELLEES AND AFFIRMANCE The Securities Industry and Financial Markets Association (SIFMA) respectfully moves this Court for leave to file a brief as amicus curiae in support of Appellee and affirmance. SIFMA is the voice of the U.S. securities industry, representing the broker-dealers, banks, and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the United States, serving clients with over $20 trillion in assets, and managing more than $67 trillion in assets for individual and institutional clients, including mutual funds and retirement plans. This case concerns matters within SIFMA’s area of interest and expertise. SIFMA’s members manage stable value funds and offer them in the defined-contribution plans that they sponsor and administer for their employees. SIFMA has a strong interest, on behalf of its members, in clarifying the fiduciary obligations of investment managers in selecting and managing investment options. 2 Case: 17-1693 Document: 00117220376 Page: 4 Date Filed: 11/10/2017 Entry ID: 6131105 The proposed amicus brief addresses fundamental flaws in Plaintiffs’ submission to this Court. First, because of the inherent uncertainty of financial decision making, asset management must be judged based on its contemporaneous process; hindsight has no meaningful role to play. Second, an asset manager need not employ the approach suggested by the calculated average of its peers to be prudent. Third, ERISA’s duty of loyalty prevents fiduciaries from competing with plan participants but does not prevent fiduciaries from benefiting when their interests and plan participants’ interests are aligned. These errors are central to Plaintiffs’ thesis; illuminating the errors will therefore materially advance this Court’s consideration of the underlying appeal. Defendant-Appellee has consented to the filing of SIFMA’s amicus brief, but Plaintiffs-Appellants have withheld their consent. This motion is accompanied by the proposed amicus brief. Wherefore, the motion for leave to file a brief as amicus curiae should be granted. 3 Case: 17-1693 Document: 00117220376 Page: 5 Date Filed: 11/10/2017 Entry ID: 6131105 Dated: November 10, 2017 s/Brian D. Netter Kevin Carroll Brian D. Netter SECURITIES INDUSTRY AND 1st Cir. Bar #1172960 FINANCIAL MARKETS bnetter@mayerbrown.com ASSOCIATION MAYER BROWN LLP 1101 New York Avenue, NW 1999 K Street, NW Washington, DC 20005 Washington, DC 20006 (202) 263-3000 Nancy G. Ross nross@mayerbrown.com MAYER BROWN LLP 71 South Wacker Drive Chicago, Illinois 60606 (312) 782-0600 4 Case: 17-1693 Document: 00117220376 Page: 6 Date Filed: 11/10/2017 Entry ID: 6131105 CERTIFICATE OF COMPLIANCE 1. This motion complies with the type-volume limitations of Fed. R. App. P. 27(d)(2)(A) because it contains 321 words, excluding the parts of the motion exempted by Fed. R. App. P. 32(a)(7)(B)(iii). 2. This motion complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using Microsoft Office Word 2007 in Bookman Old Style 14-point font. s/Brian D. Netter 5 Case: 17-1693 Document: 00117220376 Page: 7 Date Filed: 11/10/2017 Entry ID: 6131105 CERTIFICATE OF SERVICE I hereby certify that on October 10, 2017, I electronically filed the foregoing with the Clerk of the Court for the United States Court of Appeals for the First Circuit by using the CM/ECF system, which will electronically serve all registered counsel of record. s/Brian D. Netter 6 Case: 17-1693 Document: 00117220377 Page: 1 Date Filed: 11/10/2017 Entry ID: 6131105 No. 17–1693 __________________________________________________________________ UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT __________________________________________________________________ JAMES ELLIS and WILLIAM PERRY, individually, and as representatives of a class of similarly situated persons, Plaintiffs-Appellants, v. FIDELITY MANAGEMENT TRUST CO., Defendant-Appellee. __________________________________________________________________ On Appeal from The U.S. District Court for the District of Massachusetts No. 1:15-cv-14128-WGY __________________________________________________________________ BRIEF FOR THE SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION AS AMICUS CURIAE IN SUPPORT OF APPELLEE AND AFFIRMANCE __________________________________________________________________ Kevin Carroll Brian D. Netter SECURITIES INDUSTRY AND bnetter@mayerbrown.com FINANCIAL MARKETS MAYER BROWN LLP ASSOCIATION 1999 K Street, NW 1101 New York Avenue, NW Washington, DC 20006 Washington, DC 20005 (202) 263-3000 Nancy G. Ross MAYER BROWN LLP 71 South Wacker Drive Chicago, Illinois 60606 Counsel for The Securities Industry and Financial Markets Association Case: 17-1693 Document: 00117220377 Page: 2 Date Filed: 11/10/2017 Entry ID: 6131105 CORPORATE DISCLOSURE STATEMENT Pursuant to Fed. R. App. P. 26.1, the Securities Industry and Financial Markets Association has no parent corporation, nor does a publicly held corporation own more than 10% of its stock. Case: 17-1693 Document: 00117220377 Page: 3 Date Filed: 11/10/2017 Entry ID: 6131105 TABLE OF CONTENTS Page TABLE OF AUTHORITIES.............................................................. ii STATEMENT OF THE IDENTITY AND INTEREST OF THE AMICUS CURIAE................................................................... 1 ARGUMENT.................................................................................. 3 I. ASSET MANAGEMENT MUST BE JUDGED BY PROCESS, NOT HINDSIGHT................................................. 6 A. Hindsight can play no role in the assessment of asset management........................................................ 6 B. Process is the touchstone for evaluating asset management................................................................. 9 II. TO ENGAGE IN A PRUDENT PROCESS, AN ASSET MANAGER NEED NOT FOLLOW THE HERD....................... 12 A. Asset managers reasonably differentiate their investment offerings from competitors’ funds.............. 13 B. Investing in longer-duration bonds does not provide an opportunity for stable value funds to achieve additional returns without additional risk................... 16 III. ASSET MANAGERS DO NOT BREACH A DUTY OF LOYALTY BY HAVING INCENTIVES TO ADVANCE PARTICIPANTS’ INTERESTS................................................ 18 CONCLUSION............................................................................. 21 CERTIFICATE OF COMPLIANCE................................................. 22 CERTIFICATE OF SERVICE......................................................... 23-i-Case: 17-1693 Document: 00117220377 Page: 4 Date Filed: 11/10/2017 Entry ID: 6131105 TABLE OF AUTHORITIES Page(s) Cases Bunch v. W.R. Grace & Co., 555 F.3d 1 (1st Cir. 2009).......................................................... 9 DeBruyne v. Equitable Life Assurance Soc’y of the U.S., 920 F.2d 457 (7th Cir. 1990).......................................... 8, 13, 14 DiFelice v. U.S. Airways, Inc., 497 F.3d 410 (4th Cir. 2007)................................................ 9, 19 Donovan v. Bierwirth, 680 F.2d 263 (2d Cir. 1982)..................................................... 19 Pegram v. Herdrich, 530 U.S. 211 (2000)................................................................. 20 Rinehart v. Lehman Bros. Holdings Inc., 817 F.3d 56 (2d Cir. 2016)......................................................... 8 Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915 (8th Cir. 1994)........................................................ 9 PBGC ex rel. St. Vincent Catholic Med. Centers Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705 (2d Cir. 2013)..................................................... 10 Sweda v. Univ. of Pa., 2017 WL 4179752 (E.D. Pa. Sept. 21, 2017)............................... 7 In re Unisys Sav. Plan Litig., 74 F.3d 420 (3d Cir. 1996)....................................................... 10 Varity Corp. v. Howe, 516 U.S. 489 (1996)................................................................. 18-ii-Case: 17-1693 Document: 00117220377 Page: 5 Date Filed: 11/10/2017 Entry ID: 6131105 TABLE OF AUTHORITIES (continued) Page(s) Statutes and Regulations 29 U.S.C. § 1104(a)(1).................................................................. 18 29 C.F.R. § 2550.404a-1(b)(1)....................................................... 11 Other Authorities Andrew Apostol, How to Evaluate Stable Value Funds and Their Managers, Dwight Asset Management Company (July 2007)............................................................................... 14 Fed. R. App. P.: Rule 29(a)(4)(D).......................................................................... 1 Rule 29(a)(4)(E)........................................................................... 1 Inv. Co. Inst., Frequently Asked Questions About 401(k) Plan Research, https://www.ici.org/policy/retirement/plan/401k/faqs_401k.............................................. 8 Restatement (Second) of Trusts (1959)......................................... 19-iii-Case: 17-1693 Document: 00117220377 Page: 6 Date Filed: 11/10/2017 Entry ID: 6131105 STATEMENT OF THE IDENTITY AND INTEREST OF THE AMICUS CURIAE1 The Securities Industry and Financial Markets Association (SIFMA) is the voice of the U.S. securities industry. SIFMA represents the broker-dealers, banks, and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the United States, serving clients with over $20 trillion in assets, and managing more than $67 trillion in assets for individual and institutional clients, including mutual funds and retirement plans. SIFMA has offices in New York and Washington, D.C., and is the regional member of the Global Financial Markets Association for the United States. Additional information about SIFMA is available at http://www.sifma.org. 1Pursuant to Fed. R. App. P. 29(a)(4)(E), no party’s counsel authored this brief in whole or in part; no party or party’s counsel contributed money that was intended to fund preparing or submitting this brief; and no person—other than the amicus curiae, its members, or its counsel—contributed money that was intended to fund preparing or submitting the brief. Pursuant to Rule 29(a)(4)(D), this brief is accompanied by a motion for leave to file. Case: 17-1693 Document: 00117220377 Page: 7 Date Filed: 11/10/2017 Entry ID: 6131105 Virtually all companies that offer participant-directed retirement plans permit their participants to elect an income-producing, low risk, liquid fund, such as a money market fund or a stable value fund. SIFMA members manage such funds, and also offer them in the defined-contribution plans that they sponsor and administer for their employees. The rise in the use of defined contribution plans has spawned a rise in lawsuits like this one, in which participants allege that plan fiduciaries breached their duties to plan participants by structuring investment options in a manner that proved, with the benefit of hindsight, to be too risky—or not risky enough. Fund managers must make their decisions, however, before it is known how the investment markets will fare. SIFMA has a strong interest, on behalf of its members, in clarifying the fiduciary obligations of investment managers in selecting and managing investment options in retirement plans governed by ERISA. 2 Case: 17-1693 Document: 00117220377 Page: 8 Date Filed: 11/10/2017 Entry ID: 6131105 ARGUMENT ERISA imposes duties of prudence and loyalty on certain asset managers. The duty of prudence compels covered asset managers to rely on research and judgment to pursue the disclosed objectives of their investment funds; but it does not subject them to judgment by hindsight. The duty of loyalty prevents those asset managers from benefiting at the expense of their investors; but it does not prevent them from benefiting alongside plan participants. In this case, two participants in the Barnes and Noble 401(k) Plan (the "Plan") have challenged the Fidelity Group Employee Benefit Plan Managed Income Portfolio (the "Portfolio"), a stable value fund offered to Plan participants. As the name suggests, a stable value fund is a conservative investment option that is designed primarily to provide stability, as opposed to growth. Plaintiffs do not claim that the Portfolio failed to achieve its desired stability, nor that it lost value. Rather, their theory is that, in the immediate aftermath of the 2008 financial crisis, Fidelity was obligated by ERISA to invest the Portfolio in riskier, longer-term assets in pursuit of greater yield. 3 Case: 17-1693 Document: 00117220377 Page: 9 Date Filed: 11/10/2017 Entry ID: 6131105 Plaintiffs say that Fidelity’s failure to chart a more aggressive course entitles them to proceed to trial on claims that Fidelity breached its duty of prudence (because Fidelity offered a fund that was supposedly less aggressive than the average fund offered by its competitors) and its duty of loyalty (because Fidelity employees were supposedly motivated in their decision making to enhance their bonuses, which were impacted by the Portfolio’s performance). Plaintiffs’ theories—if endorsed by a court—would prove deeply problematic to the financial services industry and to the ERISA plans that it serves. With the benefit of hindsight, it will always be possible to observe that, during any given period, more risk in particular segments was either rewarded or punished. At the point of decision, however, asset managers lack the benefit of hindsight. Instead, asset managers and ERISA fiduciaries must rely on sound processes to offer plan participants the opportunity to elect a specified tradeoff between risk and possible reward. Courts have rightly refused to credit claims, like this one, that rely, inextricably, on hindsight. Rather, courts require ERISA plaintiffs to demonstrate that fiduciary decisions resulted from an imprudent process. Here, the 4 Case: 17-1693 Document: 00117220377 Page: 10 Date Filed: 11/10/2017 Entry ID: 6131105 district court found evidence only of a robust process in which Fidelity employees were constantly evaluating market conditions, subjecting their assumptions to the crucible of analysis and debate—i.e., exactly what fiduciaries are supposed to do. Plaintiffs’ grievance with the decision below is based on the fact that Fidelity’s decisions about how to craft the Portfolio were not unanimous. Again, that is how fiduciaries are supposed to interact. An investment group that reaches all of its decisions without dissent is one that has failed to grapple with the difficult questions that their investors need answered. In the end, then, Plaintiffs’ case amounts to nothing more than the claim that the Portfolio should have looked more like some "average" stable value fund. But ERISA permits—indeed, encourages—fiduciaries to make their own decisions about whether, in any given market segment, they want an average level of risk, or a below-or above-average level of risk, based on their own judgments and on the specific circumstances of their own participants. ERISA permits fund managers to develop a stable value fund—or any other type of fund—with a below-average level of risk. The manager cannot later be subjected to liability because 5 Case: 17-1693 Document: 00117220377 Page: 11 Date Filed: 11/10/2017 Entry ID: 6131105 that below-average level of risk yielded a lower return than a fund that took on more risk. Nor, for that matter, should Plaintiffs be able to advance their claim under a theory of disloyalty. Plaintiffs claim that Fidelity breached its duty of loyalty because it was motivated to increase its capacity to offer stable value products. Plaintiffs’ theory of the duty of loyalty turns on a fiduciary’s subjective motivations. But the law looks to objective measures. It is desirable—not actionable—for fiduciaries to align their interests with the interests of plan participants. So where an investment manager makes decisions that will benefit multiple parties, there is no need to conduct a trial to discern its subjective motivation. I. ASSET MANAGEMENT MUST BE JUDGED BY PROCESS, NOT HINDSIGHT. A. Hindsight can play no role in the assessment of asset management. In hindsight, it is easy to discount low probabilities of catastrophic events that did not occur (or to take for granted low probability events that did occur). But accurately projecting uncertain events beforehand is hard. Indeed, their lack of predictability is what makes the markets function. Investors 6 Case: 17-1693 Document: 00117220377 Page: 12 Date Filed: 11/10/2017 Entry ID: 6131105 demand a premium for taking on risk, so the market prices bonds and stocks based on expectations for their future value combined with the likelihood that the expectations will be realized. In that environment of uncertainty, asset managers employ techniques to manage risks. They assemble portfolios to achieve targets for risk and projected return and monitor the portfolios to ensure continued compliance with those objectives. This approach permits asset managers to offer investors the opportunity to participate in a particular risk-return tradeoff. But, in any given market environment, some strategies will outpace targets, while others will fall short. In aggregate, it is an unavoidable fact of mathematics that one-in-four funds will land in the bottom quartile. ERISA plaintiffs are frequently tempted by that truism to engage in condemnation-by-comparison. As the argument runs, the fact that other investments fared better over some (arbitrary) time period shows that the challenged investments were flawed.2 2 See, e.g., Complaint ¶ 100, Sweda v. Univ. of Pa., 2017 WL 4179752 (E.D. Pa. Sept. 21, 2017) (No. 2:16-cv-04329), ECF No. 1 (alleging that plan fiduciaries breached their duty of prudence by 7 Case: 17-1693 Document: 00117220377 Page: 13 Date Filed: 11/10/2017 Entry ID: 6131105 If this reasoning were enough to take an ERISA claim to trial, it would be a foolproof way to keep the federal courts occupied overseeing the Nation’s 500,000 401(k) plans.3 With the benefit of hindsight, a plaintiff can easily identify the quarter of funds with returns in the bottom quartile, and then identify the investment decisions that most contributed to their lower returns. Plaintiffs’ claim here follows that hindsight selection algorithm. But showing that other stable-value funds generated greater returns—and tying those greater returns to decisions to take on more risk—is not probative of whether the Portfolio’s asset managers made decisions that were reasonable at the time they were made. Accordingly, with good reason, courts have not permitted ERISA claims to be founded on hindsight-based reviews of performance. Rather, they have emphasized that ERISA’s "fiduciary duty of care... requires prudence, not prescience." DeBruyne v. offering a fund that trailed "two other... funds in the same investment style"). Inv. Co. Inst., Frequently Asked Questions About 401(k) Plan 3 Research, https://www.ici.org/policy/retirement/plan/401k/faqs_401k. 8 Case: 17-1693 Document: 00117220377 Page: 14 Date Filed: 11/10/2017 Entry ID: 6131105 Equitable Life Assurance Soc’y of the U.S., 920 F.2d 457, 465 (7th Cir. 1990) (internal quotation marks omitted); accord Rinehart v. Lehman Bros. Holdings Inc., 817 F.3d 56, 64 (2d Cir. 2016). So "whether a fiduciary’s actions are prudent cannot be measured in hindsight." DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 424 (4th Cir. 2007). B. Process is the touchstone for evaluating asset management. Because of the prohibition on judgment by hindsight, courts evaluating ERISA prudence claims do not consider performance— which is inherently a hindsight assessment—but rather focus on whether the manager engaged in a prudent process. As this Court held in Bunch v. W.R. Grace & Co., fiduciary decision-making must be "‘viewed from the perspective of the time of the challenged decision rather than from the vantage point of hindsight.’" 555 F.3d 1, 7 (1st Cir. 2009) (quoting Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915, 917-18 (8th Cir. 1994)). So when an investment decision results from "thorough investigative and decisional process," "it is difficult, indeed impossible, given the standard of review... to legally challenge the[] actions." Id. Other courts 9 Case: 17-1693 Document: 00117220377 Page: 15 Date Filed: 11/10/2017 Entry ID: 6131105 employ similar standards, recognizing that consideration of a fund’s performance sheds no light on whether an investment vehicle was appropriately conceptualized and implemented, and thus must be excluded from the assessment of prudence. See, e.g., PBGC ex rel. St. Vincent Catholic Med. Centers Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 730 (2d Cir. 2013); In re Unisys Sav. Plan Litig., 74 F.3d 420, 434 (3d Cir. 1996) (requiring investment decisions to be reviewed "according to an objective standard, focusing on a fiduciary’s conduct in arriving at an investment decision, not on its results, and asking whether a fiduciary employed the appropriate methods to investigate and determine the merits of a particular investment") (emphasis added). The U.S. Department of Labor has placed the same emphasis on process, interpreting the duty of prudence to be satisfied if the fiduciary’s process is diligent: With regard to an investment or investment course of action taken by a fiduciary of an employee benefit plan pursuant to his investment duties, [ERISA’s prudence] requirements... are satisfied if the fiduciary: (i) Has given appropriate consideration to those facts and circumstances that, given the scope of such fiduciary’s investment duties, 10 Case: 17-1693 Document: 00117220377 Page: 16 Date Filed: 11/10/2017 Entry ID: 6131105 the fiduciary knows or should know are relevant to the particular investment or investment course of action involved, including the role the investment or investment course of action plays in that portion of the plan’s investment portfolio with respect to which the fiduciary has investment duties; and (ii) Has acted accordingly. 29 C.F.R. § 2550.404a-1(b)(1). The Labor Department’s regulations, then, obligate fiduciaries to engage in a deliberative process in which they probe key issues pertaining to their investment duties and make determinations based on their evidence-based assessments. It appears undisputed here that Fidelity did just that—repeatedly assessing, for example, how best to maintain wrap coverage while wrap providers were exiting the market, and challenging, for example, whether another benchmark might prove more effective. Plaintiffs invoke circumstances in which there were heated debates about how best to administer the Portfolio. Plaintiffs’ litigating position is that minority viewpoints should have been adopted—and that a lack of unanimity among Fidelity’s decision makers shows that there is a real issue that merits a full trial. But Plaintiffs are interpreting the internal dissonance completely wrong. Internal debates and 11 Case: 17-1693 Document: 00117220377 Page: 17 Date Filed: 11/10/2017 Entry ID: 6131105 disagreements on tough issues are evidence of sound fiduciary processes—not evidence of fiduciary shortcomings. When fiduciaries encounter difficult decisions—decisions that entail judgments about how best to handle uncertainty—they should challenge each other’s assumptions and they should air out their disagreements. (And after hindsight becomes available, fiduciaries should be expected to look back on their past actions to contemplate what they could have done differently.) A process lacking robust debate is not, ordinarily, a healthy process. Far more often, evidence of disagreement is not indicative of fiduciary breach but rather evidence of sound fiduciary process. II. TO ENGAGE IN A PRUDENT PROCESS, AN ASSET MANAGER NEED NOT FOLLOW THE HERD. Without considering hindsight, there is little left to Plaintiffs’ case. Here, as the district court found, Plaintiffs lack any evidence to dispute that Fidelity "engaged in a comprehensive process of evaluating potential investment strategies and investments for the Portfolio." ADD 30. Rather, Plaintiffs’ theory is that Fidelity was wrong to "increase[] the conservatism" of the Portfolio in the aftermath of the 12 Case: 17-1693 Document: 00117220377 Page: 18 Date Filed: 11/10/2017 Entry ID: 6131105 2008 financial crisis because some other stable value fund managers were willing to keep their money in asset-backed securities, mortgage pass-throughs, and lower-rated corporate bonds. Pls.’ Br. 10. Plaintiffs are wrong to suggest that it is desirable for investment managers to follow the herd and their reasoning is particularly suspect in the stable value fund context. A. Asset managers reasonably differentiate their investment offerings from competitors’ funds. On appeal, Plaintiffs contend that their challenge to the Portfolio is justified because Fidelity’s competitors "worked with less restrictive guidelines and achieved more competitive crediting rates." Pls.’ Br. 13. In so arguing, Plaintiffs suggest that Fidelity was required to adopt laxer guidelines—and to assume greater risk—in order to parallel the strategies of competitor funds. Such was the claim in DeBruyne, where the Seventh Circuit rejected the claim that losses sustained on Black Monday by Equitable’s "Balanced Fund" resulted from imprudence because Equitable’s fund did not reflect the same balance as other "balanced funds." The Seventh Circuit held that "assertions of what a'typical’ 13 Case: 17-1693 Document: 00117220377 Page: 19 Date Filed: 11/10/2017 Entry ID: 6131105 balanced fund portfolio manager might have done in 1987 say little about the wisdom of Equitable’s investments, only that Equitable may not have followed the crowd." 920 F.2d at 465. The DeBruyne approach is the right one. The contrary presumption—that deviations from typicality support an inference of imprudence—would undermine the interests of plan fiduciaries in having choices along the risk/return spectrum. Even if there were such a thing as a typical stable value fund,4 it does not benefit investors to be restricted to investment options that cluster tightly around an "average"; to the contrary, it benefits investors to have investment lineups that reflect conscious decisions about the objectives of the population. That is because 401(k) investors come in all shapes and sizes. Some are old, some are young. Some have considerable wealth, some are dependent on their plan balances to make ends meet. Different plans can be expected to have different populations of plan 4But see, e.g., Andrew Apostol, How to Evaluate Stable Value Funds and Their Managers, Dwight Asset Management Company (July 2007) ("Due to the varying expectations of individual plan sponsors and the range of management techniques used by their stable value managers, there is not a single style or strategy that is common across all stable value funds."). 14 Case: 17-1693 Document: 00117220377 Page: 20 Date Filed: 11/10/2017 Entry ID: 6131105 participants; one would not, for example, expect that the employee population of Barnes and Noble would resemble that of a Silicon Valley startup or a hedge fund. Different investor populations will sometimes indicate different strategies. For example, an older investor may prefer the certainty of a low-risk stable value fund to a more speculative long-term growth fund. Even within a single asset class, the circumstances of the targeted population may counsel in favor of a more aggressive—or a more conservative—posture. It is particularly relevant here that this case involves how an investment option that is typically the most conservative option available to retirement plan participants was invested in the immediate aftermath of the 2008 financial crisis—which highlighted the risks of assets previously thought to be safe. Different investment populations reasonably greeted this "New World Order" with different strategies. Fund managers reasonably crafted funds with different risk profiles to meet the concerns of the marketplace—and many sophisticated plans opted for the risk profile of the Portfolio. See Def.’s Br. 12-13 (identifying some of the participating plans). 15 Case: 17-1693 Document: 00117220377 Page: 21 Date Filed: 11/10/2017 Entry ID: 6131105 As a broader matter, it is a basic tenet of modern investment management that diversification—and a diversity of investment options—expands the horizon of desirable portfolios. Were this Court to accept the theory that Plaintiffs could bring an ERISA claim to trial merely by identifying deviations from industry averages, then the whole financial marketplace would suffer from the reduced choice that would predictably result. If an investment manager that diverges from the average in the level of risk that it assumes or in its general investment strategy has a litigation target on its back, those funds will not long be offered, at least not to retirement plans that are subject to ERISA. B. Investing in longer-duration bonds does not provide an opportunity for stable value funds to achieve additional returns without additional risk. As applied to the stable value context, Plaintiffs’ assertion is that other stable value funds follow the "typical" model because it permits them access to greater returns. But the pursuit of greater returns is not free. Investors who seek greater returns must generally take on additional risks. Sometimes, those risks will be rewarded; sometimes, not. But the key point is that it is inappropriate merely to compare the returns 16 Case: 17-1693 Document: 00117220377 Page: 22 Date Filed: 11/10/2017 Entry ID: 6131105 of different funds without accounting for the disparities in investment risks. Such is the case for stable value funds. Stable value funds have desirable features. By combining bonds and an investment wrap, participants can achieve bond-like returns without the interest-rate volatility present in bond funds. But those features do not eliminate the risk of losses, they just delay them. The stability-enhancing features of a stable value fund mean that, if a stable value fund invests in a bond that defaults, the value of the fund will not take an immediate tumble, but the loss will be amortized over a period of time—unless the wrap provider is insolvent, in which case the losses are experienced immediately. Over the long run, the performance of a stable value fund approaches the performance of the underlying bond portfolio, minus the expenses of maintaining the wrap coverage and administering the fund. Bonds with a longer duration—or a lower credit rating—are likelier to be defaulted, which is why, except in anomalous interest-rate environments, longer and lower-rated bonds have higher yields. So a stable value fund with a longer duration is riskier than a fund with a shorter duration. Were this not so, stable value funds would 17 Case: 17-1693 Document: 00117220377 Page: 23 Date Filed: 11/10/2017 Entry ID: 6131105 be investing primarily in 10-, 15-, and 20-year bonds, rather than in 1-, 2-, and 3-year instruments. III. ASSET MANAGERS DO NOT BREACH A DUTY OF LOYALTY BY HAVING INCENTIVES TO ADVANCE PARTICIPANTS’ INTERESTS. Plaintiffs’ other claim sounds in breach of the duty of loyalty. That theory fares no better than their prudence theory. On loyalty, the gravamen of Plaintiffs’ argument is that ERISA requires fiduciaries to have an "eye single" to participants’ interests. Plaintiffs interpret the "eye single" standard as entitling ERISA plaintiffs to bring suit whenever the ERISA fiduciary is motivated, subjectively, by a personal benefit—even if that benefit is achieved, objectively, by advancing the interests of plan participants. Plaintiffs’ theory of what constitutes disloyalty is unsupported by the law, and would imperil fundamental—and fundamentally sound—practices that are customary within the financial services industry. To begin, ERISA’s duty of loyalty does not mean what Plaintiffs say. The statute requires a fiduciary to "discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries." 29 U.S.C. § 1104(a)(1). Like much of ERISA, this 18 Case: 17-1693 Document: 00117220377 Page: 24 Date Filed: 11/10/2017 Entry ID: 6131105 standard is an adaptation of the law of trusts. Cf. Varity Corp. v. Howe, 516 U.S. 489, 497 (1996) ("[T]he law of trusts often will inform, but will not necessarily determine the outcome of, an effort to interpret ERISA’s fiduciary duties."). Under the law of trusts, the loyalty requirement requires fiduciaries to avoid being adverse with their beneficiaries; a fiduciary "is under a duty not to profit at the expense of the beneficiary and not to enter into competition with him." Restatement (Second) of Trusts § 170 cmt. a (1959). Similarly, under ERISA, courts have interpreted the duty of loyalty to prohibit adversity between fiduciaries and their beneficiaries but have rejected an expansion of the duty to prohibit fiduciaries from benefitting from their decisions. See, e.g., DiFelice, 497 F.3d at 421 n.6 (rejecting the claim that a fiduciary breaches its duty of loyalty by being an officer or director of the plan sponsor "simply because an officer or director has an understandable interest in positive performance of company stock"). Indeed, the case on which Plaintiffs primarily rely, Donovan v. Bierwirth, 680 F.2d 263 (2d Cir. 1982), recognizes that fiduciaries do not breach their duties if they undertake an action, in the interests of plan participants, that 19 Case: 17-1693 Document: 00117220377 Page: 25 Date Filed: 11/10/2017 Entry ID: 6131105 "incidentally benefits the corporation or, indeed, themselves." Id. at 271. The duty of loyalty, then, stands for the proposition that fiduciaries—while acting in a fiduciary capacity5—must not act on personal interests adverse to the interests of plan participants. Plaintiffs’ theory is quite different. They suggest that a fiduciary is liable when its objectives are aligned with plan participants’, if the fiduciary was subjectively motivated by its own interests. Courts are not equipped to engage in the psychological hair splitting that would be required by Plaintiffs’ theory. Nor would it benefit plan participants. To the contrary, fiduciaries—including asset managers to retirement plans—should be encouraged to align their interests with the interests of plan participants. That is, after all, the norm in the financial services industry. Fund managers frequently get paid a fee that is proportional to their assets under management—so if their funds perform well, they will get paid more. Individual asset managers likewise may receive Under ERISA, when acting outside a fiduciary capacity, "a 5 fiduciary may have financial interests adverse to beneficiaries." Pegram v. Herdrich, 530 U.S. 211, 225 (2000). 20 Case: 17-1693 Document: 00117220377 Page: 26 Date Filed: 11/10/2017 Entry ID: 6131105 bonuses for exceeding performance targets for the funds that they manage. These practices are desirable, as a rising tide lifts all boats. This Court should be loathe to adopt a rule that would prove impossible to administer, inconsistent with industry norms, and lacking any discernible benefit to plan participants. CONCLUSION The judgment of the district court should be affirmed. Dated: November 10, 2017 s/Brian D. Netter Kevin Carroll Brian D. Netter SECURITIES INDUSTRY AND 1st Cir. Bar #1172960 FINANCIAL MARKETS bnetter@mayerbrown.com ASSOCIATION MAYER BROWN LLP 1101 New York Avenue, NW 1999 K Street, NW Washington, DC 20005 Washington, DC 20006 (202) 263-3000 Nancy G. Ross nross@mayerbrown.com MAYER BROWN LLP 71 South Wacker Drive Chicago, Illinois 60606 (312) 782-0600 21 Case: 17-1693 Document: 00117220377 Page: 27 Date Filed: 11/10/2017 Entry ID: 6131105 CERTIFICATE OF COMPLIANCE 1. This brief complies with the type-volume limitations of Fed. R. App. P. 29(a)(5) and Fed. R. App. P. 32(a)(7)(B)(i) because it contains 3,809 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). 2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using Microsoft Office Word 2007 in Bookman Old Style 14-point font. s/Brian D. Netter 22 Case: 17-1693 Document: 00117220377 Page: 28 Date Filed: 11/10/2017 Entry ID: 6131105 CERTIFICATE OF SERVICE I hereby certify that on November 10, 2017, I electronically filed the foregoing with the Clerk of the Court for the United States Court of Appeals for the First Circuit by using the CM/ECF system, which will electronically serve all registered counsel of record. s/Brian D. Netter 23

NOTICE of appearance on behalf of Movant(s) The Securities Industry and Financial Markets Association filed by Attorney Brian D. Netter. Certificate of service dated 11/10/2017. [17-1693] (BDN) [Entered: 11/10/2017 01:21 PM]

Case: 17-1693 Document: 00117220380 Page: 1 Date Filed: 11/10/2017 Entry ID: 6131106 United States Court of Appeals For the First Circuit NOTICE OF APPEARANCE No. 17-1693 Short Title: Ellis, et al v. Fidelity Management Trust The Clerk will enter my appearance as counsel on behalf of (please list names of all parties represented, using additional sheet(s) if necessary): The Securities Industry and Financial Markets Association as the [] appellant(s) [] appellee(s) [X] amicus curiae [] petitioner(s) [] respondent(s) [] intervenor(s) [] The party I represented below is not a party to the appeal and I wish to be removed from the service list. Please list the names of all parties represented:/s/Brian D. Netter November 10, 2017 Signature Date Brian D. Netter Name Mayer Brown LLP (202) 263-3339 Firm Name (if applicable) Telephone Number 1999 K St NW (202) 263-5236 Address Fax Number Washington, DC 20006 bnetter@mayerbrown.com City, State, Zip Code Email (required) Court of Appeals Bar Number: 1172960 Has this case or any related case previously been on appeal? [X] No [] Yes Court of Appeals No. Attorneys for both appellant and appellee must file a notice of appearance within 14 days of case opening. New or additional counsel may enter an appearance outside the 14 day period; however, a notice of appearance may not be filed after the appellee/respondent brief has been filed without leave of court. 1st Cir. R. 12.0(a). Counsel must complete and file this notice of appearance in order to file pleadings in this court. Counsel not yet admitted to practice before this court must submit an application for admission with this form. 1st Cir. R. 46.0(a)(2). Effective January 1, 2010, use of the Case Management/Electronic Case Files (CM/ECF) system is mandatory for all attorneys filing in this court. Counsel may register at http://pacer.psc.uscourts.gov/. Case: 17-1693 Document: 00117220380 Page: 2 Date Filed: 11/10/2017 Entry ID: 6131106 CERTIFICATE OF SERVICE I hereby certify that on November 10, 2017, the foregoing was electronically filed with the Clerk of Court using the CM/ECF system, which will send notification to all counsel of record in this matter who are registered with the Court’s CM/ECF system./s/Brian D. Netter Brian D. Netter MAYER BROWN LLP 1999 K St NW Washington, DC 20006 (202) 263-3339 (tel.)

MOTION for leave to file amicus curiae brief in support of Appellee filed by Movant(s) Chamber of Commerce of the United States of America and the American Benefits Council. Certificate of service dated 11/13/2017. [17-1693] (EY) [Entered: 11/13/2017 03:45 PM]

Case: 17-1693 Document: 00117220775 Page: 1 Date Filed: 11/13/2017 Entry ID: 6131348 No. 17-1693 _______________________ UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT _______________________ JAMES ELLIS and WILLIAM PERRY, individually and as representatives of a class of similarly situated persons; Plaintiffs-Appellants, v. FIDELITY MANAGEMENT TRUST COMPANY Defendant-Appellee. __________________________ Appeal from the United States District Court for the District of Massachusetts, Case No. 15-14128-WGY, The Honorable William G. Young, District Judge __________________________ The Chamber of Commerce of the United States of America and the American Benefits Council’s Motion for Leave to Participate as Amici Curiae _________________________ Pursuant to Federal Rules of Appellate Procedure 27 and 29, the Chamber of Commerce of the United States of America (the "Chamber") and the American Benefits Council (the "Council") respectfully move for leave to file brief as amici curiae in the above-captioned case in support of Defendant-Appellee and affirmance. Counsel for the Chamber and the Council sought consent to file an amicus brief from counsel for the parties. Defendant-Appellee has consented, but Plaintiffs-Appellants have declined to consent. 1 Case: 17-1693 Document: 00117220775 Page: 2 Date Filed: 11/13/2017 Entry ID: 6131348 As required by Federal Rule of Appellate Procedure 29(b), the Chamber and the Council have an interest in the outcome of this litigation, and believe the proposed amicus brief will help the Court decide the case. See Neonatology Assocs., P.A. v. Comm’r of Internal Revenue, 293 F.3d 128, 133 (3d Cir. 2002) (Alito, J.) ("[O]ur court would be well advised to grant motions for leave to file amicus briefs unless it is obvious that the proposed briefs do not meet Rule 29’s criteria as broadly interpreted."). For the reasons set forth below, the Chamber and the Council meet the requirements of Federal Rule of Appellate Procedure 29(a) to participate as amici curiae in this case: 1. The Chamber is the world’s largest business federation. It represents 300,000 direct members and indirectly represents an underlying membership of three million businesses and professional organizations of every size, in every economic sector, and from every region of the country. Many of the Chamber’s members maintain, administer, or provide services to employee-benefits programs governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. ("ERISA"). 2. The Council is a national non-profit organization dedicated to protecting and fostering privately sponsored employee-benefit plans. Its approximately 430 members are primarily large, multistate employers that provide employee benefits 2 Case: 17-1693 Document: 00117220775 Page: 3 Date Filed: 11/13/2017 Entry ID: 6131348 to active and retired workers and their families. The Council’s membership also includes organizations that provide employee-benefit services to employers of all sizes. Collectively, the Council’s members either directly sponsor or provide services to retirement and health plans covering virtually all Americans who participate in employer-sponsored benefit programs. 3. The Chamber and the Council frequently participate as amici curiae, including in cases with the potential to significantly affect the design and administration of employee-benefit plans. For example, they recently filed a joint amicus brief in this Court in Barchock v. CVS Health Corp., No. 17-1515, a pending appeal that raises similar issues to this case, but in a different procedural posture and against a different type of defendant. 4. Like Barchock and many other cases in which the Chamber and the Council have filed amicus briefs, this case also affects their members and warrants this short brief. This case presents three questions of enormous practical importance to amici and their members: • whether courts asked to resolve challenges to a fiduciary’s adherence to the duty of prudence when making investment decisions with respect to a stable-value fund should focus on an ERISA fiduciary’s process rather than the results of that process; • whether ERISA requires fiduciaries who deem a particular risk allocation to be appropriate to nonetheless adopt riskier investment strategies, such that a "too conservative" risk allocation is a per se breach of fiduciary duty; and 3 Case: 17-1693 Document: 00117220775 Page: 4 Date Filed: 11/13/2017 Entry ID: 6131348 • whether plaintiffs can prove a breach of ERISA’s fiduciary duty of loyalty without demonstrating that a fiduciary put the fiduciary’s interests ahead of the interests of plan beneficiaries. The answers to these three questions directly implicate the interests of the Chamber, the Council, and their members—and indeed the vitality of this country’s system of providing for retirement benefits. 5. Amici’s proposed brief explains why a decision from this Court endorsing Plaintiffs-Appellants’ hindsight-based theory of ERISA fiduciary liability, their proposed presumption of imprudence, or their unduly expansive view of the duty of loyalty would saddle the Chamber and the Council’s members with increased plan-administration and litigation costs, and their employees with decreased options for retirement savings. The brief will further show why these burdens would not benefit employees or plans but would be deadweight losses through transaction costs—and that these burdens are incompatible with ERISA’s text and purposes. A decision for Plaintiffs-Appellants would undermine ERISA’s core purpose of encouraging plan fiduciaries to offer plan participants a variety of investment options of varying risk levels tailored to the needs and circumstances of the particular plan and its participants—a goal that, if fund managers like Defendant-Appellee are penalized as Plaintiffs-Appellants hope, could not be achieved. 4 Case: 17-1693 Document: 00117220775 Page: 5 Date Filed: 11/13/2017 Entry ID: 6131348 6. The Chamber and the Council will present to the Court the broader view of how its decision could affect plan administrators and participants (as well as fiduciaries who manage funds) generally. See Neonatology Assocs., 293 F.3d at 132 ("[A]n amicus may provide important assistance to the court [by] explain[ing] the impact a potential holding might have on an industry or other group.") (quotations omitted). The Court’s resolution of the questions presented here will govern plan-fiduciary decisions with respect to all types of investments—not just stable-value funds—and the Chamber and the Council are particularly well-positioned to discuss the consequences that the Court’s decision will likely have for all ERISA fiduciaries administering plans in the First Circuit and beyond. 7. Granting this motion will neither delay nor disrupt the proceedings. The Chamber and the Council submit the proposed amicus brief seven business days after Defendant-Appellee filed its principal brief.* This motion and the proposed amicus brief are thus timely under Federal Rule of Appellate Procedure 29(a). Furthermore, the Chamber’s and the Council’s proposed amicus brief does not merely duplicate any arguments made by the parties, but provides context on how the Court’s decision will likely affect all plan sponsors, fiduciaries, and participants—not just those currently before the Court. * Defendant-Appellee tendered its brief on November 3, 2017. Because seven days after that, November 10, 2017, was Veterans Day, a federal holiday, amici are filing this motion on the first business day after that legal holiday. See Fed. R. App. P. 26(a)(1). 5 Case: 17-1693 Document: 00117220775 Page: 6 Date Filed: 11/13/2017 Entry ID: 6131348 8. For these reasons, the Chamber and the Council respectfully request that the Court grant them leave to participate as amici curiae and accept the proposed amicus brief, which accompanies this motion. Dated: November 13, 2017 Respectfully submitted,/s/Evan A. Young EVAN A. YOUNG BAKER BOTTS L.L.P. 98 SAN JACINTO BLVD. SUITE 1500 AUSTIN, TX 78701 (512) 322-2506 STEVEN P. LEHOTSKY JANET GALERIA U.S. CHAMBER LITIGATION CENTER 1615 H STREET, NW WASHINGTON, DC 20062-2000 (202) 463-5747 JANET M. JACOBSON AMERICAN BENEFITS COUNCIL 1501 M STREET, N.W., SUITE 600 WASHINGTON, DC 20005 (202) 289-6700 Counsel for the Chamber of Commerce of the United States of America and the American Benefits Council As Amici Curiae Supporting Defendant-Appellant and Affirmance 6 Case: 17-1693 Document: 00117220775 Page: 7 Date Filed: 11/13/2017 Entry ID: 6131348 CERTIFICATE OF COMPLIANCE This motion complies with the type-volume limitations of Federal Rule of Appellate Procedure 27(d)(2)(A) because it contains 1,017 words, not counting the items excluded by Federal Rule of Appellate Procedure 32(f). This motion complies with the typeface and type style requirements of Federal Rules of Appellate Procedure 27(d)(1)(E), 32(a)(5), and 32(a)(6) because this motion has been prepared in a proportionally spaced typeface using Microsoft Word 2010 in Times New Roman 14-point font. Dated: November 13, 2017/s/Evan A. Young Evan A. Young 7 Case: 17-1693 Document: 00117220775 Page: 8 Date Filed: 11/13/2017 Entry ID: 6131348 CERTIFICATE OF SERVICE I hereby certify that on November 13, 2017, I electronically filed the foregoing document with the Clerk of the United States Court of Appeals for the First Circuit by using the appellate CM/ECF system. All interested parties are registered CM/ECF users./s/Evan A. Young Evan A. Young 8 Case: 17-1693 Document: 00117220776 Page: 1 Date Filed: 11/13/2017 Entry ID: 6131348 No. 17-1693 _______________________ UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT _______________________ JAMES ELLIS and WILLIAM PERRY, individually and as representatives of a class of similarly situated persons; Plaintiffs-Appellants, v. FIDELITY MANAGEMENT TRUST COMPANY Defendant-Appellee. __________________________ Appeal from the United States District Court for the District of Massachusetts, Case No. 15-14128-WGY, The Honorable William G. Young, District Judge __________________________ Brief of the Chamber of Commerce of the United States of America and the American Benefits Council As Amici Curiae Supporting Defendant-Appellee and Affirmance _________________________ STEVEN P. LEHOTSKY EVAN A. YOUNG JANET GALERIA BAKER BOTTS L.L.P. U.S. CHAMBER LITIGATION CENTER 98 SAN JACINTO BLVD. 1615 H STREET, NW SUITE 1500 WASHINGTON, DC 20062-2000 AUSTIN, TX 78701 (202) 463-5747 (512) 322-2506 JANET M. JACOBSON AMERICAN BENEFITS COUNCIL 1501 M STREET, N.W., SUITE 600 WASHINGTON, DC 20005 (202) 289-6700 Counsel for Amici Curiae Case: 17-1693 Document: 00117220776 Page: 2 Date Filed: 11/13/2017 Entry ID: 6131348 CORPORATE DISCLOSURE STATEMENT Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, amici cu-riae certify that they have no parent corporations, and no publicly held corporation owns 10% or more of their stock. Dated: November 13, 2017/s/Evan A. Young Evan A. Young ii Case: 17-1693 Document: 00117220776 Page: 3 Date Filed: 11/13/2017 Entry ID: 6131348 TABLE OF CONTENTS CORPORATE DISCLOSURE STATEMENT........................................................ ii TABLE OF CONTENTS......................................................................................... iii TABLE OF AUTHORITIES................................................................................... iv INTEREST OF AMICI CURIAE AND SUMMARY OF ARGUMENT.................1 ARGUMENT.............................................................................................................3 I. The law—backed by sound policy—focuses on the fiduciary’s process, not ultimate results..................................................................3 A. Plaintiffs’ results-oriented theory of fiduciary liability is inconsistent with ERISA’s fiduciary standard and cases interpreting it.............................................................................4 B. A results-oriented approach to ERISA’s fiduciary standard would upset the underlying purposes of ERISA.......................................................................................5 II. Evidence that an ERISA fiduciary followed a more conservative strategy than others in the industry does not demonstrate or even suggest imprudence.............................................8 A. ERISA fiduciaries must have a variety of tools at their disposal to accomplish plan objectives in ever-changing circumstances............................................................................8 B. Liability based on adopting "too conservative" a risk allocation would pose serious practical problems for fiduciaries while driving up plan costs...................................11 III. ERISA fiduciaries do not violate the duty of loyalty unless they place their own interests ahead of plan beneficiaries’........................12 CONCLUSION........................................................................................................15 CERTIFICATE OF COMPLIANCE.......................................................................16 CERTIFICATE OF SERVICE................................................................................17 iii Case: 17-1693 Document: 00117220776 Page: 4 Date Filed: 11/13/2017 Entry ID: 6131348 TABLE OF AUTHORITIES Page(s) CASES Barchock v. CVS Health Corp., No. 1:16-cv-00061 (D.R.I. Jan. 31, 2017), pending on appeal, No. 17-1515 (1st Cir.)....................................................................................2, 6, 7, 10 Bunch v. W.R. Grace & Co., 555 F.3d 1 (1st Cir. 2009).....................................................................................4 Conkright v. Frommert, 559 U.S. 506 (2010)............................................................................................14 Cooper v. IBM Pers. Pension Plan, 457 F.3d 636 (7th Cir. 2006)................................................................................7 DeBruyne v. Equitable Life Assurance Soc’y of the U.S., 920 F.2d 457 (7th Cir. 1990)................................................................................ 5 DiFelice v. U.S. Airways, Inc., 497 F.3d 410 (4th Cir. 2007)................................................................................4 Donovan v. Cunningham, 716 F.2d 1455 (5th Cir. 1983)..............................................................................4 Evans v. Akers, 534 F.3d 65 (1st Cir. 2008)...............................................................................6, 7 Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990)..............................................................................................5 Jenkins v. Yager, 444 F.3d 916 (7th Cir. 2006)..........................................................................6, 11 Morse v. Stanley, 732 F.2d 1139 (2d Cir. 1984).............................................................................14 Pension Benefit Guar. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705 (2d Cir. 2013)................................................................................. 6 iv Case: 17-1693 Document: 00117220776 Page: 5 Date Filed: 11/13/2017 Entry ID: 6131348 Renfro v. Unisys Corp., 671 F.3d 314 (3d Cir. 2011)................................................................................. 8 Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915 (8th Cir. 1994)..................................................................................4 Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002)..............................................................................................5 Vander Luitgaren v. Sun Life Assurance Co. of Can., 765 F.3d 59 (1st Cir. 2014).................................................................................14 Whitley v. J.P. Morgan Chase Bank, 1:12-cv-02548 (S.D.N.Y. Dec. 16, 2014)............................................................. 6 STATUTES Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq...............................................................................passim 29 U.S.C. § 1104(a).........................................................................................4, 6, 13 SECONDARY AUTHORITY Nancy Trejos, Retirement Savings Lose $2 Trillion in 15 Months, Washington Post (Oct. 8, 2008)..........................................................................11 v Case: 17-1693 Document: 00117220776 Page: 6 Date Filed: 11/13/2017 Entry ID: 6131348 INTEREST OF AMICI CURIAE AND SUMMARY OF ARGUMENT Amici curiae are the Chamber of Commerce of the United States of America (the "Chamber") and the American Benefits Council (the "Council"). 1 The Chamber is the world’s largest business federation. It represents 300,000 direct members and indirectly represents an underlying membership of three million businesses and professional organizations of every size, in every eco-nomic sector, and from every region of the country. Many of the Chamber’s members maintain, administer, or provide services to employee-benefits programs governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. ("ERISA"). The Council is a national non-profit organization dedicated to protecting and fostering privately sponsored employee-benefit plans. Its approximately 430 members are primarily large, multistate employers that provide employee benefits to active and retired workers and their families. The Council’s membership also includes organizations that provide employee-benefit services to employers of all 1 Pursuant to Federal Rule of Appellate Procedure 29(a)(4)(E), amici affirm that no party or counsel for a party authored this brief in whole or in part and that no per-son other than amici, their members, or their counsel has made any monetary con-tribution intended to fund the preparation or submission of this brief. Plaintiffs-appellants have declined to consent to the filing of this brief. As set forth in the accompanying motion, pursuant to Federal Rule of Appellate Procedure 29(a)(2)-(3), amici have requested leave to file this brief. 1 Case: 17-1693 Document: 00117220776 Page: 7 Date Filed: 11/13/2017 Entry ID: 6131348 sizes. Collectively, the Council’s members either directly sponsor or provide ser-vices to retirement and health plans covering virtually all Americans who partici-pate in employer-sponsored benefit programs. The Chamber and the Council frequently participate as amici curiae, includ-ing in cases with the potential to significantly affect the design and administration of employee-benefit plans. Like Barchock v. CVS Health Corp., No. 17-1515, an appeal raising similar issues that is currently pending in this Court and in which the Chamber and the Council recently submitted a joint amicus brief, this is such a case. Presented here are three questions of enormous practical importance to amici and their members: (1) whether courts asked to resolve challenges to a fiduciary’s adherence to the duty of prudence when making investment decisions with re-spect to a stable-value fund should focus on an ERISA fiduciary’s process rather than the results of that process; (2) whether ERISA requires fiduciaries who deem a particular risk alloca-tion to be appropriate to nonetheless adopt riskier investment strate-gies, such that a "too conservative" risk allocation is a per se breach of fiduciary duty; and (3) whether plaintiffs can prove a breach of ERISA’s fiduciary duty of loyalty without demonstrating that a fiduciary put the fiduciary’s in-terests ahead of the interests of plan beneficiaries. The answers to these questions directly implicate the interests of amici and their members (and the many employees who benefit from ERISA plans administered by amici’s members). ERISA does not permit (much less require) plaintiffs’ odd theory that courts 2 Case: 17-1693 Document: 00117220776 Page: 8 Date Filed: 11/13/2017 Entry ID: 6131348 should punish fiduciaries who make investment decisions whose risk allocation is regarded as "too conservative" or "too aggressive" compared to that of other funds. Accepting plaintiffs’ theory of liability would undermine ERISA’s core purpose of encouraging fiduciaries to offer plan participants a variety of investment options of varying risk levels. For the reasons stated in this brief, amici respectfully urge the Court to af-firm. ARGUMENT I. The law—backed by sound policy—focuses on the fiduciary’s process, not ultimate results. When reviewing claims of imprudent investment management, courts properly focus on a fiduciary’s conduct in arriving at an investment decision—not on the investment’s results. This principle is familiar in the law. Whether a de-fendant is liable in tort, for instance, turns on the reasonableness of her conduct, not the fact that the plaintiff suffered an alleged injury—otherwise, strict liability would be the norm rather than the very unusual exception. The theory of fiduciary liability underlying plaintiffs’ complaint directly contravenes that principle. Spe-cifically, plaintiffs claim that Fidelity violated its fiduciary duty of prudence by be-ing insufficiently aggressive. They argue that it too conservatively managed a sta-ble-value fund—an investment vehicle offered as a "safe" investment option for 401(k) plans. Their "evidence" is that other stable-value funds that took riskier 3 Case: 17-1693 Document: 00117220776 Page: 9 Date Filed: 11/13/2017 Entry ID: 6131348 approaches earned greater returns. ERISA’s plain text (like common sense) fore-closes such a claim. Allowing it to proceed would undermine the core purposes of the statute, and the district court rightly rejected it. A. Plaintiffs’ results-oriented theory of fiduciary liability is incon-sistent with ERISA’s fiduciary standard and cases interpreting it. This Court has recognized that the "‘test of prudence—the Prudent Man Rule—is one of conduct, and not a test of the result of performance of the invest-ment.’" Bunch v. W.R. Grace & Co., 555 F.3d 1, 7 (1st Cir. 2009) (quoting Do-novan v. Cunningham, 716 F.2d 1455, 1467 (5th Cir. 1983) (quotations omitted)). As such, "‘[w]hether a fiduciary’s actions are prudent cannot be measured in hind-sight....’" Id. (quoting DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 424 (4th Cir. 2007)). Instead, the "test [is] how the fiduciary acted viewed from the per-spective of the time of the challenged decision rather than from the vantage point of hindsight." Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915, 917-18 (8th Cir. 1994) (quotations omitted). This process-focused fiduciary-liability standard not only makes common sense and harmonizes with basic principles of liability in other contexts; it is also the approach demanded by ERISA’s plain text. See 29 U.S.C. § 1104(a)(1)(B) (re-quiring fiduciary conduct to be evaluated according to "then prevailing" circum-stances, not after-the-fact results). And others courts, such as the Seventh Circuit, have applied this process-not-results principle to reject a similar attempt to base an 4 Case: 17-1693 Document: 00117220776 Page: 10 Date Filed: 11/13/2017 Entry ID: 6131348 ERISA fiduciary-liability claim on a plan’s performance relative to that of sup-posed peer funds. See, e.g., DeBruyne v. Equitable Life Assurance Soc’y of the U.S., 920 F.2d 457, 465 (7th Cir. 1990) ("[T]he ultimate outcome of an investment is not proof of imprudence."). As that Court rightly recognized, assertions about the performance of other funds "say little about the wisdom" of a particular plan’s investments—"only that it may not have followed the crowd." Id. Ignoring this settled rule, plaintiffs would have this Court recognize fiduci-ary-imprudence claims anytime hindsight shows that an ERISA fiduciary’s ap-proach—"too conservative" here, but perhaps "too aggressive" in the next case— deviated from some Goldilocks "just right" measure of risk. Beyond being directly contrary to ERISA’s plain text, plaintiffs’ claim of hindsight-based liability would undermine ERISA’s core purposes and ultimately harm the very plan beneficiaries that ERISA intends to protect. B. A results-oriented approach to ERISA’s fiduciary standard would upset the underlying purposes of ERISA. One of Congress’s core purposes in passing ERISA was to create "a uniform body of benefits law," Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990), with "a predictable set of liabilities, under uniform standards of primary conduct and a uniform regime of ultimate remedial orders." Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 379 (2002) (citations omitted). Plaintiffs’ re-sults-oriented approach to assessing ERISA fiduciary liability would make predict-5 Case: 17-1693 Document: 00117220776 Page: 11 Date Filed: 11/13/2017 Entry ID: 6131348 ing liability impossible. Rather, the only certain thing would be that litigation will always be lurking over the horizon no matter how prudent a fiduciary’s investment decision may have been "under the circumstances then prevailing." See 29 U.S.C. § 1104(a)(1)(B). As a review of recent claims brought in this area demonstrates, adopting the hindsight-based approach would make it virtually impossible for ERISA fiduciar-ies to avoid costly litigation. Some plaintiffs, like those that brought this case, claim that fiduciaries have managed funds too conservatively. 2 Others allege that defendants took too much risk. 3 In some instances, ERISA fiduciaries have simul-taneously defended both types of claims, giving new meaning to the concept of be-ing stuck between a rock and a hard place. In Evans v. Akers, which involved claims that fiduciaries breached ERISA duties by maintaining a "heavy investment 2 See Barchock v. CVS Health Corp., No. 1:16-cv-00061 (D.R.I. Jan. 31, 2017) (currently pending on appeal in this Court as No. 17-1515) (plaintiffs allege that plan fiduciary managed stable-value fund too conservatively, as compared to other stable-value funds); Jenkins v. Yager, 444 F.3d 916, 925-26 (7th Cir. 2006) (reject-ing plaintiffs’ claim that notwithstanding "years of lower performance," an "in-vestment strategy" that was based on "find[ing] long-term, conservative reliable investments that would do well during market fluctuations" was "unreasonable [and] imprudent"). 3 Third Am. Compl. at 3, Whitley v. J.P. Morgan Chase Bank, 1:12-cv-02548 (S.D.N.Y. Dec. 16, 2014), ECF No. 182 (alleging fiduciaries managed stable-value fund in "inherently risky" manner); Pension Benefit Guar. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 719 (2d Cir. 2013) (involving claim that fiduciaries were imprudent in making risky investment decisions). 6 Case: 17-1693 Document: 00117220776 Page: 12 Date Filed: 11/13/2017 Entry ID: 6131348 in Grace securities when the stock was no longer a prudent investment," this Court observed that "[a]nother suit challenging the actions of Plan fiduciaries" had "as-serted a diametrically opposed theory of liability"—"that the Plan fiduciaries had imprudently divested the Plan of its holdings in Grace common stock despite the company’s solid potential to emerge from bankruptcy...." 534 F.3d 65, 68 (1st Cir. 2008).4 Placing such pressure on ERISA fiduciaries undermines the purposes of the statute and ultimately harms plan beneficiaries. If later-emerging results could render otherwise-prudent investment decisions retroactively imprudent when viewed in hindsight, no fiduciary could limit its liability, no matter how well it had thought through its decisions. Faced with this type of litigation risk, investment managers inevitably would raise the prices on products sold to ERISA plans pro-vided by employers—ultimately to the ultimate detriment of both participants and sponsors. Cf. Cooper v. IBM Pers. Pension Plan, 457 F.3d 636, 642 (7th Cir. 2006) (result of litigation was that "IBM eliminated the cash-balance option for new workers and confined them to pure defined-contribution plans"). 5 4 Importantly, plaintiffs’ hindsight-based view of fiduciary liability, if accepted, would apply to any type of investment—not just stable-value funds. 5 Amici’s brief in Barchock (at pp. 10-12) describes additional reasons, relevant in that appeal, that hindsight-based liability is antithetical to the core premises and purposes of ERISA. 7 Case: 17-1693 Document: 00117220776 Page: 13 Date Filed: 11/13/2017 Entry ID: 6131348 II. Evidence that an ERISA fiduciary followed a more conservative strate-gy than others in the industry does not demonstrate or even suggest im-prudence. Plaintiffs argue that Fidelity acted imprudently by managing a stable-value fund more conservatively than industry peers. Liability based solely on deviation from what others in the industry do would undermine ERISA’s core purposes just as plaintiffs’ hindsight-based liability theory would. Plaintiffs’ theory would ulti-mately harm the plan participants ERISA was designed to protect. A. ERISA fiduciaries must have a variety of tools at their disposal to accomplish plan objectives in ever-changing circumstances. ERISA’s "flexible" prudence standard reflects the obligation applicable to every ERISA fiduciary to consider the specific "character and aims of the particu-lar type of plan he serves." Renfro v. Unisys Corp., 671 F.3d 314, 322 (3d Cir. 2011) (quotations omitted). Consistent with that mandate, fiduciaries seek to offer plan participants a variety of investment options based on the needs of their work-force. Id. at 327. Without the discretion inherent in ERISA’s flexible prudence standard, fiduciaries would not be able to make individual judgments about the needs of plans and participants. For example, a young workforce (e.g., Google) may have different needs than an older workforce (e.g., a typical industrial plant). Similarly, a particularly investment-savvy workforce might have different needs than the typical workforce. Yet plaintiffs attempt to impose fiduciary liability based on a stable-value 8 Case: 17-1693 Document: 00117220776 Page: 14 Date Filed: 11/13/2017 Entry ID: 6131348 fund’s deviation from some zone of "proper" risk—not too risk-averse but presum-ably not too risk-seeking either. Imposing liability on such a ground, however, would thwart ERISA’s mandate that each fiduciary make investment choices based on its individual plan’s needs, not the theoretical needs of the nation as a whole. If fiduciaries risked liability whenever the amount of risk they take when making in-vestment decisions is outside the risk level undertaken by others, there would natu-rally be a rush toward the mean. After all, the law would punish those who find themselves having been outside of a statistical range, the contours of which the ju-diciary would only later announce. These particular plaintiffs complain about a "too conservative" strategy (be-cause it now turns out that more risk would have generated higher returns), while others could complain about a "too aggressive" strategy (after a market period in which less risk would have generated higher returns). If the courts allow plaintiffs to eliminate both ends of the bell curve, then the next iteration will cover less terri-tory, as fiduciaries rush to avoid the tails. But there will still be a bell curve, and plaintiffs will still challenge the tails of that new curve. This iterative process can only end in the enforcement of some unbending average to which all fiduciaries must adhere. This consequence would destroy (1) the ability of fiduciaries to re-spond to the individual needs of a given plan and (2) the ability of plan sponsors even to have options that they greatly desire but that diverge from the mean. In 9 Case: 17-1693 Document: 00117220776 Page: 15 Date Filed: 11/13/2017 Entry ID: 6131348 this sense, the issue in Barchock—involving alleged liability for deviating from an industry "average"—is just the final manifestation of the theory embraced by plaintiffs here. The willingness to entertain claims based on plaintiffs’ theory would create a legally imposed incentive structure to eliminate any possible char-acterization as an "outlier." Instead, this Court should reaffirm the flexible prudence standard that has long facilitated fiduciaries’ ability to offer plan participants a variety of investment options reflecting varying goals and risk levels. Charting a conservative course through a period of turbulent market volatility, for example, is a legitimate option for plan fiduciaries. Plan administrators frequently employ stable-value funds as the "safe" option in their investment lineups and value the flexibility to pick among options within a given asset class. Depending on their individual plan needs and investment lineups, some may prefer a conservative stable-value strategy, while others may prefer a less-conservative approach. If fund managers are held liable for being "too conservative," plan sponsors that reasonably seek to offer just that sort of conservative choice will find that such options are no longer available to them. Fiduciaries, in other words, need flexibility to respond to the genuine needs of those they serve. After the financial crisis, for example, the availability of a very conservative safe-investment option was particularly important to many plan 10 Case: 17-1693 Document: 00117220776 Page: 16 Date Filed: 11/13/2017 Entry ID: 6131348 administrators and participants. See, e.g., Nancy Trejos, Retirement Savings Lose $2 Trillion in 15 Months, Washington Post (Oct. 8, 2008). Even investments "widely considered more stable" were "hit hard." Id. This dramatic and unex-pected turn of events resulted in a heightened desire for even safer investment op-tions for plan participants. Id. There was nothing imprudent about that approach. ERISA fiduciaries should not be required to take on increased risk simply because other plan fiduciaries do so after considering the "character" and "aims" of their own plans and participants. See, e.g., Jenkins, 444 F.3d at 925-26 (explaining that notwithstanding "years of lower performance," an "investment strategy" that was based on "find[ing] long-term, conservative reliable investments that would do well during market fluctuations" was neither "unreasonable [n]or imprudent"). B. Liability based on adopting "too conservative" a risk allocation would pose serious practical problems for fiduciaries while driv-ing up plan costs. Accepting plaintiffs’ theory of liability would leave some fiduciaries with an untenable choice: (1) follow the herd and risk liability for breach of their fiduciary duty to make individualized judgments regarding the best interest of plan partici-pants, or (2) make those individualized judgments and risk liability solely for not aligning with the herd. Even worse, fiduciaries seeking to abide by such a standard would face one inscrutable question after another: 11 Case: 17-1693 Document: 00117220776 Page: 17 Date Filed: 11/13/2017 Entry ID: 6131348 • Which funds are sufficiently similar to each other to count as "peers" for purposes of determining what amount of risk the industry as a whole adopts? • What constitutes a typical approach to any given investment decision? • Just how much "deviation" from such an approach is acceptable? With no principled way to answer these questions or (more importantly) to guess how a court might answer them, fiduciaries would feel compelled to contin-uously monitor the decisions and approaches of the fiduciaries of all funds even remotely similar to their own without any real sense of what they were looking for. And in the event that they spotted anything a court or a plaintiff might view as a trend in decisions or approaches, fiduciaries would feel no choice but to follow the trend mindlessly, even if the more popular approach was not, in their judgment, in the best interest of the participants they serve. III. ERISA fiduciaries do not violate the duty of loyalty unless they place their own interests ahead of plan beneficiaries’. The district court rejected plaintiffs’ claim that Fidelity’s conservative ap-proach also violated the fiduciary duty of loyalty because plaintiffs failed to pro-duce evidence that Fidelity placed its own interests ahead of plaintiffs’. Plaintiffs phrase their theory as barring fund managers from considering their own interests, but their argument necessarily reduces to holding that a breach of the duty of loyal-ty lurks whenever a fund manager’s self-interest is even aligned with those of plan participants. After all, nothing more than that alignment exists here. Adopting such a startling principle would affirmatively harm plan participants, not help 12 Case: 17-1693 Document: 00117220776 Page: 18 Date Filed: 11/13/2017 Entry ID: 6131348 them. Plan sponsors often want fund managers’ interests to be aligned with those of the participants. Far from seeking judicial protection from any such alignment, sponsors pursue it. They may enter into asset-based fee arrangements (or other contractual provisions that do not wholly divorce the fund managers’ interest from how investment decisions are made) precisely because that ensures a clear and healthy line of incentives. But plaintiffs’ theory means that a manager that consid-ers its own interests even when doing so is entirely consistent with advancing the plan’s interests would be in breach of its duty of loyalty. In turn, the rule would discourage would-be fiduciaries even from offering essential plan-related services and would raise the costs of plan administration—costs ultimately borne by the plan participants supposedly aided by the plaintiffs’ proposed rule. From the per-spective of plan sponsors, like many of amici’s members, therefore, the plaintiffs’ approach to fund managers’ duty of loyalty is decidedly harmful. To be clear, amici do not even regard this question as open. No one disputes that Section 404(a) of ERISA requires fiduciaries to honor the duty of loyalty by "discharg[ing] his duties with respect to a plan solely in the interest of the partici-pants." 29 U.S.C. § 1104(a)(1). But this Court is not writing on a blank slate. It already has held that the mere fact that an ERISA fiduciary receives a benefit from a given investment decision does not inexorably establish disloyalty; rather, 13 Case: 17-1693 Document: 00117220776 Page: 19 Date Filed: 11/13/2017 Entry ID: 6131348 ERISA "require[s]... that the fiduciary not place its own interests ahead of those of the Plan beneficiary." Vander Luitgaren v. Sun Life Assurance Co. of Can., 765 F.3d 59, 65 (1st Cir. 2014) (emphasis added). But "[i]t is no violation of a trus-tee’s fiduciary duties to take a course of action which reasonably best promotes the interest of plan participants simply because it incidentally also benefits the corpo-ration." Morse v. Stanley, 732 F.2d 1139, 1146 (2d Cir. 1984). Any other ap-proach assumes a zero-sum game—any benefit to the fund manager must mean some harm to the employee. Common sense (and the statute) permit no such as-sumption, however. What makes plaintiffs’ theory especially dangerous is that fee arrangements like the one at issue here are commonplace in the workaday world. They do not put the fund manager’s interest ahead of the participants’ interests but merely align all interests. Forbidding all such arrangements would not promote, but would im-pede, ERISA’s core purpose of "ensuring fair and prompt enforcement of rights under a plan and the encouragement of the creation of such plans." Conkright v. Frommert, 559 U.S. 506, 517 (2010) (quotations omitted). Plan sponsors remain free to take different approaches if they so choose. But plaintiffs’ proposed rule would transform the ordinary contractual arrangements that make virtually all ERISA plans possible into badges of disloyalty, which can only mean that fiduciar-ies like Fidelity will either be unable to offer essential services or will do so at far, 14 Case: 17-1693 Document: 00117220776 Page: 20 Date Filed: 11/13/2017 Entry ID: 6131348 far higher costs. Such an outcome would benefit neither plans nor their partici-pants. CONCLUSION The judgment below should be affirmed. Dated: November 13, 2017 Respectfully submitted,/s/Evan A. Young EVAN A. YOUNG BAKER BOTTS L.L.P. 98 SAN JACINTO BLVD. SUITE 1500 AUSTIN, TX 78701 (512) 322-2506 STEVEN P. LEHOTSKY JANET GALERIA U.S. CHAMBER LITIGATION CENTER 1615 H STREET, NW WASHINGTON, DC 20062-2000 (202) 463-5747 JANET M. JACOBSON AMERICAN BENEFITS COUNCIL 1501 M STREET, N.W., SUITE 600 WASHINGTON, DC 20005 (202) 289-6700 Counsel for Amici Curiae The Chamber of Commerce of the United States of America and the American Benefits Council 15 Case: 17-1693 Document: 00117220776 Page: 21 Date Filed: 11/13/2017 Entry ID: 6131348 CERTIFICATE OF COMPLIANCE 1. This brief complies with the type-volume limitations of Fed. R. App. P. 29(a)(5) and Fed. R. App. P. 32(a)(7)(B)(i) because it contains 3,389 words, ex-cluding the parts of the brief exempted by Fed. R. App. P. 32(f). 2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using Microsoft Word 2010 in Times New Roman 14-point font. Dated: November 13, 2017/s/Evan A. Young Evan A. Young 16 Case: 17-1693 Document: 00117220776 Page: 22 Date Filed: 11/13/2017 Entry ID: 6131348 CERTIFICATE OF SERVICE I hereby certify that on November 13, 2017, I electronically filed the forego-ing with the Clerk of the Court for the U.S. Court of Appeals for the First Circuit by using the appellate CM/ECF system. All interested parties are registered CM/ECF users./s/Evan A. Young Evan A. Young 17

CORPORATE disclosure statement filed by Movants American Benefits Council and Chamber of Commerce of the United States of America. Certificate of service dated 11/13/2017. [17-1693] (CP) [Entered: 11/13/2017 04:37 PM]

Case: 17-1693 Document: 00117220860 Page: 1 Date Filed: 11/13/2017 Entry ID: 6131385 CORPORATE DISCLOSURE STATEMENT Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, amici curiae certify that they have no parent corporations, and no publicly held corporation owns 10% or more of their stock. Dated: November 13, 2017/s/Evan A. Young

ORDER granting motion to extend time to file reply brief filed by Appellants James Ellis and William NMI Perry. Reply brief due 12/01/2017 for appellant James Ellis and William NMI Perry. [17-1693] (CP) [Entered: 11/14/2017 09:47 AM]

Case: 17-1693 Document: 00117221000 Page: 1 Date Filed: 11/14/2017 Entry ID: 6131488 United States Court of Appeals For the First Circuit No. 17-1693 JAMES ELLIS; WILLIAM PERRY Plaintiffs-Appellants v. FIDELITY MANAGEMENT TRUST COMPANY Defendant-Appellee ORDER OF COURT Entered: November 14, 2017 Pursuant to 1st Cir. R. 27.0(d) Upon consideration of motion, it is ordered that the time for Appellants James Ellis and William NMI Perry to file a reply brief be enlarged to and including December 1, 2017. By the Court:/s/Margaret Carter, Clerk cc: Brian D. Boyle Kevin M. Carroll Alison V. Douglass Bradley N. Garcia Jonathan Hacker Gregory F. Jacob Janet M. Jacobson Mark T. Johnson Jason H. Kim Steven Paul Lehotsky Michael C. McKay Case: 17-1693 Document: 00117221000 Page: 2 Date Filed: 11/14/2017 Entry ID: 6131488 Christopher T. Micheletti Brian David Netter Nancy G. Ross Todd M. Schneider Meaghan McLaine VerGow Garrett W. Wotkyns Evan Young Rory D. Zamansky

ORDER granting motion for leave to file amicus curiae brief filed by Securities Industry and Financial Markets Association. [17-1693] (CP) [Entered: 11/29/2017 03:05 PM]

Case: 17-1693 Document: 00117226824 Page: 1 Date Filed: 11/29/2017 Entry ID: 6134758 United States Court of Appeals For the First Circuit _____________________ No. 17-1693 JAMES ELLIS; WILLIAM PERRY Plaintiffs-Appellants v. FIDELITY MANAGEMENT TRUST COMPANY Defendant-Appellee ____________________ ORDER OF COURT Entered: November 29, 2017 Pursuant to 1st Cir. R. 27.0(d) No objections having been filed, the Securities Industry and Financial Markets Association's motion for leave to file a brief as amicus curiae in support of the appellee and affirmance is granted. The brief is accepted this day for filing. By the Court:/s/Margaret Carter, Clerk cc: Michael C. McKay Garrett W. Wotkyns Mark T. Johnson Todd M. Schneider Jason H. Kim Christopher T. Micheletti Rory D. Zamansky Alison V. Douglass Gregory F. Jacob Brian D. Boyle Jonathan Hacker Bradley N. Garcia Meaghan McLaine VerGow Nancy G. Ross Case: 17-1693 Document: 00117226824 Page: 2 Date Filed: 11/29/2017 Entry ID: 6134758 Kevin M. Carroll Brian David Netter Steven Paul Lehotsky Evan Young Janet M. Jacobson Janet Galeria

AMICUS CURIAE BRIEF filed by Amicus Curiae Securities Industry and Financial Markets Association in support of Appellee. Certificate of service dated 11/10/2017. Nine paper copies identical to that of the electronically filed brief must be submitted so that they are received by the court on or before 12/06/2017. [17-1693] (CP) [Entered: 11/29/2017 03:09 PM]

Case: 17-1693 Document: 00117226832 Page: 1 Date Filed: 11/29/2017 Entry ID: 6134762 No. 17–1693 __________________________________________________________________ UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT __________________________________________________________________ JAMES ELLIS and WILLIAM PERRY, individually, and as representatives of a class of similarly situated persons, Plaintiffs-Appellants, v. FIDELITY MANAGEMENT TRUST CO., Defendant-Appellee. __________________________________________________________________ On Appeal from The U.S. District Court for the District of Massachusetts No. 1:15-cv-14128-WGY __________________________________________________________________ BRIEF FOR THE SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION AS AMICUS CURIAE IN SUPPORT OF APPELLEE AND AFFIRMANCE __________________________________________________________________ Kevin Carroll Brian D. Netter SECURITIES INDUSTRY AND bnetter@mayerbrown.com FINANCIAL MARKETS MAYER BROWN LLP ASSOCIATION 1999 K Street, NW 1101 New York Avenue, NW Washington, DC 20006 Washington, DC 20005 (202) 263-3000 Nancy G. Ross MAYER BROWN LLP 71 South Wacker Drive Chicago, Illinois 60606 Counsel for The Securities Industry and Financial Markets Association Case: 17-1693 Document: 00117226832 Page: 2 Date Filed: 11/29/2017 Entry ID: 6134762 CORPORATE DISCLOSURE STATEMENT Pursuant to Fed. R. App. P. 26.1, the Securities Industry and Financial Markets Association has no parent corporation, nor does a publicly held corporation own more than 10% of its stock. Case: 17-1693 Document: 00117226832 Page: 3 Date Filed: 11/29/2017 Entry ID: 6134762 TABLE OF CONTENTS Page TABLE OF AUTHORITIES.............................................................. ii STATEMENT OF THE IDENTITY AND INTEREST OF THE AMICUS CURIAE................................................................... 1 ARGUMENT.................................................................................. 3 I. ASSET MANAGEMENT MUST BE JUDGED BY PROCESS, NOT HINDSIGHT................................................. 6 A. Hindsight can play no role in the assessment of asset management........................................................ 6 B. Process is the touchstone for evaluating asset management................................................................. 9 II. TO ENGAGE IN A PRUDENT PROCESS, AN ASSET MANAGER NEED NOT FOLLOW THE HERD....................... 12 A. Asset managers reasonably differentiate their investment offerings from competitors’ funds.............. 13 B. Investing in longer-duration bonds does not provide an opportunity for stable value funds to achieve additional returns without additional risk................... 16 III. ASSET MANAGERS DO NOT BREACH A DUTY OF LOYALTY BY HAVING INCENTIVES TO ADVANCE PARTICIPANTS’ INTERESTS................................................ 18 CONCLUSION............................................................................. 21 CERTIFICATE OF COMPLIANCE................................................. 22 CERTIFICATE OF SERVICE......................................................... 23-i-Case: 17-1693 Document: 00117226832 Page: 4 Date Filed: 11/29/2017 Entry ID: 6134762 TABLE OF AUTHORITIES Page(s) Cases Bunch v. W.R. Grace & Co., 555 F.3d 1 (1st Cir. 2009).......................................................... 9 DeBruyne v. Equitable Life Assurance Soc’y of the U.S., 920 F.2d 457 (7th Cir. 1990).......................................... 8, 13, 14 DiFelice v. U.S. Airways, Inc., 497 F.3d 410 (4th Cir. 2007)................................................ 9, 19 Donovan v. Bierwirth, 680 F.2d 263 (2d Cir. 1982)..................................................... 19 Pegram v. Herdrich, 530 U.S. 211 (2000)................................................................. 20 Rinehart v. Lehman Bros. Holdings Inc., 817 F.3d 56 (2d Cir. 2016)......................................................... 8 Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915 (8th Cir. 1994)........................................................ 9 PBGC ex rel. St. Vincent Catholic Med. Centers Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705 (2d Cir. 2013)..................................................... 10 Sweda v. Univ. of Pa., 2017 WL 4179752 (E.D. Pa. Sept. 21, 2017)............................... 7 In re Unisys Sav. Plan Litig., 74 F.3d 420 (3d Cir. 1996)....................................................... 10 Varity Corp. v. Howe, 516 U.S. 489 (1996)................................................................. 18-ii-Case: 17-1693 Document: 00117226832 Page: 5 Date Filed: 11/29/2017 Entry ID: 6134762 TABLE OF AUTHORITIES (continued) Page(s) Statutes and Regulations 29 U.S.C. § 1104(a)(1).................................................................. 18 29 C.F.R. § 2550.404a-1(b)(1)....................................................... 11 Other Authorities Andrew Apostol, How to Evaluate Stable Value Funds and Their Managers, Dwight Asset Management Company (July 2007)............................................................................... 14 Fed. R. App. P.: Rule 29(a)(4)(D).......................................................................... 1 Rule 29(a)(4)(E)........................................................................... 1 Inv. Co. Inst., Frequently Asked Questions About 401(k) Plan Research, https://www.ici.org/policy/retirement/plan/401k/faqs_401k.............................................. 8 Restatement (Second) of Trusts (1959)......................................... 19-iii-Case: 17-1693 Document: 00117226832 Page: 6 Date Filed: 11/29/2017 Entry ID: 6134762 STATEMENT OF THE IDENTITY AND INTEREST OF THE AMICUS CURIAE1 The Securities Industry and Financial Markets Association (SIFMA) is the voice of the U.S. securities industry. SIFMA represents the broker-dealers, banks, and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the United States, serving clients with over $20 trillion in assets, and managing more than $67 trillion in assets for individual and institutional clients, including mutual funds and retirement plans. SIFMA has offices in New York and Washington, D.C., and is the regional member of the Global Financial Markets Association for the United States. Additional information about SIFMA is available at http://www.sifma.org. 1Pursuant to Fed. R. App. P. 29(a)(4)(E), no party’s counsel authored this brief in whole or in part; no party or party’s counsel contributed money that was intended to fund preparing or submitting this brief; and no person—other than the amicus curiae, its members, or its counsel—contributed money that was intended to fund preparing or submitting the brief. Pursuant to Rule 29(a)(4)(D), this brief is accompanied by a motion for leave to file. Case: 17-1693 Document: 00117226832 Page: 7 Date Filed: 11/29/2017 Entry ID: 6134762 Virtually all companies that offer participant-directed retirement plans permit their participants to elect an income-producing, low risk, liquid fund, such as a money market fund or a stable value fund. SIFMA members manage such funds, and also offer them in the defined-contribution plans that they sponsor and administer for their employees. The rise in the use of defined contribution plans has spawned a rise in lawsuits like this one, in which participants allege that plan fiduciaries breached their duties to plan participants by structuring investment options in a manner that proved, with the benefit of hindsight, to be too risky—or not risky enough. Fund managers must make their decisions, however, before it is known how the investment markets will fare. SIFMA has a strong interest, on behalf of its members, in clarifying the fiduciary obligations of investment managers in selecting and managing investment options in retirement plans governed by ERISA. 2 Case: 17-1693 Document: 00117226832 Page: 8 Date Filed: 11/29/2017 Entry ID: 6134762 ARGUMENT ERISA imposes duties of prudence and loyalty on certain asset managers. The duty of prudence compels covered asset managers to rely on research and judgment to pursue the disclosed objectives of their investment funds; but it does not subject them to judgment by hindsight. The duty of loyalty prevents those asset managers from benefiting at the expense of their investors; but it does not prevent them from benefiting alongside plan participants. In this case, two participants in the Barnes and Noble 401(k) Plan (the "Plan") have challenged the Fidelity Group Employee Benefit Plan Managed Income Portfolio (the "Portfolio"), a stable value fund offered to Plan participants. As the name suggests, a stable value fund is a conservative investment option that is designed primarily to provide stability, as opposed to growth. Plaintiffs do not claim that the Portfolio failed to achieve its desired stability, nor that it lost value. Rather, their theory is that, in the immediate aftermath of the 2008 financial crisis, Fidelity was obligated by ERISA to invest the Portfolio in riskier, longer-term assets in pursuit of greater yield. 3 Case: 17-1693 Document: 00117226832 Page: 9 Date Filed: 11/29/2017 Entry ID: 6134762 Plaintiffs say that Fidelity’s failure to chart a more aggressive course entitles them to proceed to trial on claims that Fidelity breached its duty of prudence (because Fidelity offered a fund that was supposedly less aggressive than the average fund offered by its competitors) and its duty of loyalty (because Fidelity employees were supposedly motivated in their decision making to enhance their bonuses, which were impacted by the Portfolio’s performance). Plaintiffs’ theories—if endorsed by a court—would prove deeply problematic to the financial services industry and to the ERISA plans that it serves. With the benefit of hindsight, it will always be possible to observe that, during any given period, more risk in particular segments was either rewarded or punished. At the point of decision, however, asset managers lack the benefit of hindsight. Instead, asset managers and ERISA fiduciaries must rely on sound processes to offer plan participants the opportunity to elect a specified tradeoff between risk and possible reward. Courts have rightly refused to credit claims, like this one, that rely, inextricably, on hindsight. Rather, courts require ERISA plaintiffs to demonstrate that fiduciary decisions resulted from an imprudent process. Here, the 4 Case: 17-1693 Document: 00117226832 Page: 10 Date Filed: 11/29/2017 Entry ID: 6134762 district court found evidence only of a robust process in which Fidelity employees were constantly evaluating market conditions, subjecting their assumptions to the crucible of analysis and debate—i.e., exactly what fiduciaries are supposed to do. Plaintiffs’ grievance with the decision below is based on the fact that Fidelity’s decisions about how to craft the Portfolio were not unanimous. Again, that is how fiduciaries are supposed to interact. An investment group that reaches all of its decisions without dissent is one that has failed to grapple with the difficult questions that their investors need answered. In the end, then, Plaintiffs’ case amounts to nothing more than the claim that the Portfolio should have looked more like some "average" stable value fund. But ERISA permits—indeed, encourages—fiduciaries to make their own decisions about whether, in any given market segment, they want an average level of risk, or a below-or above-average level of risk, based on their own judgments and on the specific circumstances of their own participants. ERISA permits fund managers to develop a stable value fund—or any other type of fund—with a below-average level of risk. The manager cannot later be subjected to liability because 5 Case: 17-1693 Document: 00117226832 Page: 11 Date Filed: 11/29/2017 Entry ID: 6134762 that below-average level of risk yielded a lower return than a fund that took on more risk. Nor, for that matter, should Plaintiffs be able to advance their claim under a theory of disloyalty. Plaintiffs claim that Fidelity breached its duty of loyalty because it was motivated to increase its capacity to offer stable value products. Plaintiffs’ theory of the duty of loyalty turns on a fiduciary’s subjective motivations. But the law looks to objective measures. It is desirable—not actionable—for fiduciaries to align their interests with the interests of plan participants. So where an investment manager makes decisions that will benefit multiple parties, there is no need to conduct a trial to discern its subjective motivation. I. ASSET MANAGEMENT MUST BE JUDGED BY PROCESS, NOT HINDSIGHT. A. Hindsight can play no role in the assessment of asset management. In hindsight, it is easy to discount low probabilities of catastrophic events that did not occur (or to take for granted low probability events that did occur). But accurately projecting uncertain events beforehand is hard. Indeed, their lack of predictability is what makes the markets function. Investors 6 Case: 17-1693 Document: 00117226832 Page: 12 Date Filed: 11/29/2017 Entry ID: 6134762 demand a premium for taking on risk, so the market prices bonds and stocks based on expectations for their future value combined with the likelihood that the expectations will be realized. In that environment of uncertainty, asset managers employ techniques to manage risks. They assemble portfolios to achieve targets for risk and projected return and monitor the portfolios to ensure continued compliance with those objectives. This approach permits asset managers to offer investors the opportunity to participate in a particular risk-return tradeoff. But, in any given market environment, some strategies will outpace targets, while others will fall short. In aggregate, it is an unavoidable fact of mathematics that one-in-four funds will land in the bottom quartile. ERISA plaintiffs are frequently tempted by that truism to engage in condemnation-by-comparison. As the argument runs, the fact that other investments fared better over some (arbitrary) time period shows that the challenged investments were flawed.2 2 See, e.g., Complaint ¶ 100, Sweda v. Univ. of Pa., 2017 WL 4179752 (E.D. Pa. Sept. 21, 2017) (No. 2:16-cv-04329), ECF No. 1 (alleging that plan fiduciaries breached their duty of prudence by 7 Case: 17-1693 Document: 00117226832 Page: 13 Date Filed: 11/29/2017 Entry ID: 6134762 If this reasoning were enough to take an ERISA claim to trial, it would be a foolproof way to keep the federal courts occupied overseeing the Nation’s 500,000 401(k) plans.3 With the benefit of hindsight, a plaintiff can easily identify the quarter of funds with returns in the bottom quartile, and then identify the investment decisions that most contributed to their lower returns. Plaintiffs’ claim here follows that hindsight selection algorithm. But showing that other stable-value funds generated greater returns—and tying those greater returns to decisions to take on more risk—is not probative of whether the Portfolio’s asset managers made decisions that were reasonable at the time they were made. Accordingly, with good reason, courts have not permitted ERISA claims to be founded on hindsight-based reviews of performance. Rather, they have emphasized that ERISA’s "fiduciary duty of care... requires prudence, not prescience." DeBruyne v. offering a fund that trailed "two other... funds in the same investment style"). Inv. Co. Inst., Frequently Asked Questions About 401(k) Plan 3 Research, https://www.ici.org/policy/retirement/plan/401k/faqs_401k. 8 Case: 17-1693 Document: 00117226832 Page: 14 Date Filed: 11/29/2017 Entry ID: 6134762 Equitable Life Assurance Soc’y of the U.S., 920 F.2d 457, 465 (7th Cir. 1990) (internal quotation marks omitted); accord Rinehart v. Lehman Bros. Holdings Inc., 817 F.3d 56, 64 (2d Cir. 2016). So "whether a fiduciary’s actions are prudent cannot be measured in hindsight." DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 424 (4th Cir. 2007). B. Process is the touchstone for evaluating asset management. Because of the prohibition on judgment by hindsight, courts evaluating ERISA prudence claims do not consider performance— which is inherently a hindsight assessment—but rather focus on whether the manager engaged in a prudent process. As this Court held in Bunch v. W.R. Grace & Co., fiduciary decision-making must be "‘viewed from the perspective of the time of the challenged decision rather than from the vantage point of hindsight.’" 555 F.3d 1, 7 (1st Cir. 2009) (quoting Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915, 917-18 (8th Cir. 1994)). So when an investment decision results from "thorough investigative and decisional process," "it is difficult, indeed impossible, given the standard of review... to legally challenge the[] actions." Id. Other courts 9 Case: 17-1693 Document: 00117226832 Page: 15 Date Filed: 11/29/2017 Entry ID: 6134762 employ similar standards, recognizing that consideration of a fund’s performance sheds no light on whether an investment vehicle was appropriately conceptualized and implemented, and thus must be excluded from the assessment of prudence. See, e.g., PBGC ex rel. St. Vincent Catholic Med. Centers Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 730 (2d Cir. 2013); In re Unisys Sav. Plan Litig., 74 F.3d 420, 434 (3d Cir. 1996) (requiring investment decisions to be reviewed "according to an objective standard, focusing on a fiduciary’s conduct in arriving at an investment decision, not on its results, and asking whether a fiduciary employed the appropriate methods to investigate and determine the merits of a particular investment") (emphasis added). The U.S. Department of Labor has placed the same emphasis on process, interpreting the duty of prudence to be satisfied if the fiduciary’s process is diligent: With regard to an investment or investment course of action taken by a fiduciary of an employee benefit plan pursuant to his investment duties, [ERISA’s prudence] requirements... are satisfied if the fiduciary: (i) Has given appropriate consideration to those facts and circumstances that, given the scope of such fiduciary’s investment duties, 10 Case: 17-1693 Document: 00117226832 Page: 16 Date Filed: 11/29/2017 Entry ID: 6134762 the fiduciary knows or should know are relevant to the particular investment or investment course of action involved, including the role the investment or investment course of action plays in that portion of the plan’s investment portfolio with respect to which the fiduciary has investment duties; and (ii) Has acted accordingly. 29 C.F.R. § 2550.404a-1(b)(1). The Labor Department’s regulations, then, obligate fiduciaries to engage in a deliberative process in which they probe key issues pertaining to their investment duties and make determinations based on their evidence-based assessments. It appears undisputed here that Fidelity did just that—repeatedly assessing, for example, how best to maintain wrap coverage while wrap providers were exiting the market, and challenging, for example, whether another benchmark might prove more effective. Plaintiffs invoke circumstances in which there were heated debates about how best to administer the Portfolio. Plaintiffs’ litigating position is that minority viewpoints should have been adopted—and that a lack of unanimity among Fidelity’s decision makers shows that there is a real issue that merits a full trial. But Plaintiffs are interpreting the internal dissonance completely wrong. Internal debates and 11 Case: 17-1693 Document: 00117226832 Page: 17 Date Filed: 11/29/2017 Entry ID: 6134762 disagreements on tough issues are evidence of sound fiduciary processes—not evidence of fiduciary shortcomings. When fiduciaries encounter difficult decisions—decisions that entail judgments about how best to handle uncertainty—they should challenge each other’s assumptions and they should air out their disagreements. (And after hindsight becomes available, fiduciaries should be expected to look back on their past actions to contemplate what they could have done differently.) A process lacking robust debate is not, ordinarily, a healthy process. Far more often, evidence of disagreement is not indicative of fiduciary breach but rather evidence of sound fiduciary process. II. TO ENGAGE IN A PRUDENT PROCESS, AN ASSET MANAGER NEED NOT FOLLOW THE HERD. Without considering hindsight, there is little left to Plaintiffs’ case. Here, as the district court found, Plaintiffs lack any evidence to dispute that Fidelity "engaged in a comprehensive process of evaluating potential investment strategies and investments for the Portfolio." ADD 30. Rather, Plaintiffs’ theory is that Fidelity was wrong to "increase[] the conservatism" of the Portfolio in the aftermath of the 12 Case: 17-1693 Document: 00117226832 Page: 18 Date Filed: 11/29/2017 Entry ID: 6134762 2008 financial crisis because some other stable value fund managers were willing to keep their money in asset-backed securities, mortgage pass-throughs, and lower-rated corporate bonds. Pls.’ Br. 10. Plaintiffs are wrong to suggest that it is desirable for investment managers to follow the herd and their reasoning is particularly suspect in the stable value fund context. A. Asset managers reasonably differentiate their investment offerings from competitors’ funds. On appeal, Plaintiffs contend that their challenge to the Portfolio is justified because Fidelity’s competitors "worked with less restrictive guidelines and achieved more competitive crediting rates." Pls.’ Br. 13. In so arguing, Plaintiffs suggest that Fidelity was required to adopt laxer guidelines—and to assume greater risk—in order to parallel the strategies of competitor funds. Such was the claim in DeBruyne, where the Seventh Circuit rejected the claim that losses sustained on Black Monday by Equitable’s "Balanced Fund" resulted from imprudence because Equitable’s fund did not reflect the same balance as other "balanced funds." The Seventh Circuit held that "assertions of what a'typical’ 13 Case: 17-1693 Document: 00117226832 Page: 19 Date Filed: 11/29/2017 Entry ID: 6134762 balanced fund portfolio manager might have done in 1987 say little about the wisdom of Equitable’s investments, only that Equitable may not have followed the crowd." 920 F.2d at 465. The DeBruyne approach is the right one. The contrary presumption—that deviations from typicality support an inference of imprudence—would undermine the interests of plan fiduciaries in having choices along the risk/return spectrum. Even if there were such a thing as a typical stable value fund,4 it does not benefit investors to be restricted to investment options that cluster tightly around an "average"; to the contrary, it benefits investors to have investment lineups that reflect conscious decisions about the objectives of the population. That is because 401(k) investors come in all shapes and sizes. Some are old, some are young. Some have considerable wealth, some are dependent on their plan balances to make ends meet. Different plans can be expected to have different populations of plan 4But see, e.g., Andrew Apostol, How to Evaluate Stable Value Funds and Their Managers, Dwight Asset Management Company (July 2007) ("Due to the varying expectations of individual plan sponsors and the range of management techniques used by their stable value managers, there is not a single style or strategy that is common across all stable value funds."). 14 Case: 17-1693 Document: 00117226832 Page: 20 Date Filed: 11/29/2017 Entry ID: 6134762 participants; one would not, for example, expect that the employee population of Barnes and Noble would resemble that of a Silicon Valley startup or a hedge fund. Different investor populations will sometimes indicate different strategies. For example, an older investor may prefer the certainty of a low-risk stable value fund to a more speculative long-term growth fund. Even within a single asset class, the circumstances of the targeted population may counsel in favor of a more aggressive—or a more conservative—posture. It is particularly relevant here that this case involves how an investment option that is typically the most conservative option available to retirement plan participants was invested in the immediate aftermath of the 2008 financial crisis—which highlighted the risks of assets previously thought to be safe. Different investment populations reasonably greeted this "New World Order" with different strategies. Fund managers reasonably crafted funds with different risk profiles to meet the concerns of the marketplace—and many sophisticated plans opted for the risk profile of the Portfolio. See Def.’s Br. 12-13 (identifying some of the participating plans). 15 Case: 17-1693 Document: 00117226832 Page: 21 Date Filed: 11/29/2017 Entry ID: 6134762 As a broader matter, it is a basic tenet of modern investment management that diversification—and a diversity of investment options—expands the horizon of desirable portfolios. Were this Court to accept the theory that Plaintiffs could bring an ERISA claim to trial merely by identifying deviations from industry averages, then the whole financial marketplace would suffer from the reduced choice that would predictably result. If an investment manager that diverges from the average in the level of risk that it assumes or in its general investment strategy has a litigation target on its back, those funds will not long be offered, at least not to retirement plans that are subject to ERISA. B. Investing in longer-duration bonds does not provide an opportunity for stable value funds to achieve additional returns without additional risk. As applied to the stable value context, Plaintiffs’ assertion is that other stable value funds follow the "typical" model because it permits them access to greater returns. But the pursuit of greater returns is not free. Investors who seek greater returns must generally take on additional risks. Sometimes, those risks will be rewarded; sometimes, not. But the key point is that it is inappropriate merely to compare the returns 16 Case: 17-1693 Document: 00117226832 Page: 22 Date Filed: 11/29/2017 Entry ID: 6134762 of different funds without accounting for the disparities in investment risks. Such is the case for stable value funds. Stable value funds have desirable features. By combining bonds and an investment wrap, participants can achieve bond-like returns without the interest-rate volatility present in bond funds. But those features do not eliminate the risk of losses, they just delay them. The stability-enhancing features of a stable value fund mean that, if a stable value fund invests in a bond that defaults, the value of the fund will not take an immediate tumble, but the loss will be amortized over a period of time—unless the wrap provider is insolvent, in which case the losses are experienced immediately. Over the long run, the performance of a stable value fund approaches the performance of the underlying bond portfolio, minus the expenses of maintaining the wrap coverage and administering the fund. Bonds with a longer duration—or a lower credit rating—are likelier to be defaulted, which is why, except in anomalous interest-rate environments, longer and lower-rated bonds have higher yields. So a stable value fund with a longer duration is riskier than a fund with a shorter duration. Were this not so, stable value funds would 17 Case: 17-1693 Document: 00117226832 Page: 23 Date Filed: 11/29/2017 Entry ID: 6134762 be investing primarily in 10-, 15-, and 20-year bonds, rather than in 1-, 2-, and 3-year instruments. III. ASSET MANAGERS DO NOT BREACH A DUTY OF LOYALTY BY HAVING INCENTIVES TO ADVANCE PARTICIPANTS’ INTERESTS. Plaintiffs’ other claim sounds in breach of the duty of loyalty. That theory fares no better than their prudence theory. On loyalty, the gravamen of Plaintiffs’ argument is that ERISA requires fiduciaries to have an "eye single" to participants’ interests. Plaintiffs interpret the "eye single" standard as entitling ERISA plaintiffs to bring suit whenever the ERISA fiduciary is motivated, subjectively, by a personal benefit—even if that benefit is achieved, objectively, by advancing the interests of plan participants. Plaintiffs’ theory of what constitutes disloyalty is unsupported by the law, and would imperil fundamental—and fundamentally sound—practices that are customary within the financial services industry. To begin, ERISA’s duty of loyalty does not mean what Plaintiffs say. The statute requires a fiduciary to "discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries." 29 U.S.C. § 1104(a)(1). Like much of ERISA, this 18 Case: 17-1693 Document: 00117226832 Page: 24 Date Filed: 11/29/2017 Entry ID: 6134762 standard is an adaptation of the law of trusts. Cf. Varity Corp. v. Howe, 516 U.S. 489, 497 (1996) ("[T]he law of trusts often will inform, but will not necessarily determine the outcome of, an effort to interpret ERISA’s fiduciary duties."). Under the law of trusts, the loyalty requirement requires fiduciaries to avoid being adverse with their beneficiaries; a fiduciary "is under a duty not to profit at the expense of the beneficiary and not to enter into competition with him." Restatement (Second) of Trusts § 170 cmt. a (1959). Similarly, under ERISA, courts have interpreted the duty of loyalty to prohibit adversity between fiduciaries and their beneficiaries but have rejected an expansion of the duty to prohibit fiduciaries from benefitting from their decisions. See, e.g., DiFelice, 497 F.3d at 421 n.6 (rejecting the claim that a fiduciary breaches its duty of loyalty by being an officer or director of the plan sponsor "simply because an officer or director has an understandable interest in positive performance of company stock"). Indeed, the case on which Plaintiffs primarily rely, Donovan v. Bierwirth, 680 F.2d 263 (2d Cir. 1982), recognizes that fiduciaries do not breach their duties if they undertake an action, in the interests of plan participants, that 19 Case: 17-1693 Document: 00117226832 Page: 25 Date Filed: 11/29/2017 Entry ID: 6134762 "incidentally benefits the corporation or, indeed, themselves." Id. at 271. The duty of loyalty, then, stands for the proposition that fiduciaries—while acting in a fiduciary capacity5—must not act on personal interests adverse to the interests of plan participants. Plaintiffs’ theory is quite different. They suggest that a fiduciary is liable when its objectives are aligned with plan participants’, if the fiduciary was subjectively motivated by its own interests. Courts are not equipped to engage in the psychological hair splitting that would be required by Plaintiffs’ theory. Nor would it benefit plan participants. To the contrary, fiduciaries—including asset managers to retirement plans—should be encouraged to align their interests with the interests of plan participants. That is, after all, the norm in the financial services industry. Fund managers frequently get paid a fee that is proportional to their assets under management—so if their funds perform well, they will get paid more. Individual asset managers likewise may receive Under ERISA, when acting outside a fiduciary capacity, "a 5 fiduciary may have financial interests adverse to beneficiaries." Pegram v. Herdrich, 530 U.S. 211, 225 (2000). 20 Case: 17-1693 Document: 00117226832 Page: 26 Date Filed: 11/29/2017 Entry ID: 6134762 bonuses for exceeding performance targets for the funds that they manage. These practices are desirable, as a rising tide lifts all boats. This Court should be loathe to adopt a rule that would prove impossible to administer, inconsistent with industry norms, and lacking any discernible benefit to plan participants. CONCLUSION The judgment of the district court should be affirmed. Dated: November 10, 2017 s/Brian D. Netter Kevin Carroll Brian D. Netter SECURITIES INDUSTRY AND 1st Cir. Bar #1172960 FINANCIAL MARKETS bnetter@mayerbrown.com ASSOCIATION MAYER BROWN LLP 1101 New York Avenue, NW 1999 K Street, NW Washington, DC 20005 Washington, DC 20006 (202) 263-3000 Nancy G. Ross nross@mayerbrown.com MAYER BROWN LLP 71 South Wacker Drive Chicago, Illinois 60606 (312) 782-0600 21 Case: 17-1693 Document: 00117226832 Page: 27 Date Filed: 11/29/2017 Entry ID: 6134762 CERTIFICATE OF COMPLIANCE 1. This brief complies with the type-volume limitations of Fed. R. App. P. 29(a)(5) and Fed. R. App. P. 32(a)(7)(B)(i) because it contains 3,809 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). 2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using Microsoft Office Word 2007 in Bookman Old Style 14-point font. s/Brian D. Netter 22 Case: 17-1693 Document: 00117226832 Page: 28 Date Filed: 11/29/2017 Entry ID: 6134762 CERTIFICATE OF SERVICE I hereby certify that on November 10, 2017, I electronically filed the foregoing with the Clerk of the Court for the United States Court of Appeals for the First Circuit by using the CM/ECF system, which will electronically serve all registered counsel of record. s/Brian D. Netter 23

ORDER granting motion for leave to file amicus curiae brief filed by Chamber of Commerce of the United States of America and the American Benefits Council. [17-1693] (CP) [Entered: 11/29/2017 03:44 PM]

Case: 17-1693 Document: 00117226874 Page: 1 Date Filed: 11/29/2017 Entry ID: 6134785 United States Court of Appeals For the First Circuit _____________________ No. 17-1693 JAMES ELLIS; WILLIAM PERRY Plaintiffs-Appellants v. FIDELITY MANAGEMENT TRUST COMPANY Defendant-Appellee ____________________ ORDER OF COURT Entered: November 29, 2017 Pursuant to 1st Cir. R. 27.0(d) No objections having been filed, the Chamber of Commerce of the United States of America and the American Benefits Council's motion for leave to file an amicus brief in support of the appellee and affirmance is granted. The brief is accepted for filing this day. By the Court:/s/Margaret Carter, Clerk cc: Michael C. McKay Garrett W. Wotkyns Mark T. Johnson Todd M. Schneider Jason H. Kim Christopher T. Micheletti Rory D. Zamansky Alison V. Douglass Gregory F. Jacob Brian D. Boyle Jonathan Hacker Bradley N. Garcia Meaghan McLaine VerGow Nancy G. Ross Case: 17-1693 Document: 00117226874 Page: 2 Date Filed: 11/29/2017 Entry ID: 6134785 Kevin M. Carroll Brian David Netter Steven Paul Lehotsky Evan Young Janet M. Jacobson Janet Galeria

AMICUS CURIAE BRIEF filed by Amici Curiae American Benefits Council and Chamber of Commerce of the United States of America in support of Appellee. Certificate of service dated 11/13/2017. Nine paper copies identical to that of the electronically filed brief must be submitted so that they are received by the court on or before 12/06/2017. [17-1693] (CP) [Entered: 11/29/2017 03:49 PM]

Case: 17-1693 Document: 00117226892 Page: 1 Date Filed: 11/29/2017 Entry ID: 6134792 No. 17-1693 _______________________ UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT _______________________ JAMES ELLIS and WILLIAM PERRY, individually and as representatives of a class of similarly situated persons; Plaintiffs-Appellants, v. FIDELITY MANAGEMENT TRUST COMPANY Defendant-Appellee. __________________________ Appeal from the United States District Court for the District of Massachusetts, Case No. 15-14128-WGY, The Honorable William G. Young, District Judge __________________________ Brief of the Chamber of Commerce of the United States of America and the American Benefits Council As Amici Curiae Supporting Defendant-Appellee and Affirmance _________________________ STEVEN P. LEHOTSKY EVAN A. YOUNG JANET GALERIA BAKER BOTTS L.L.P. U.S. CHAMBER LITIGATION CENTER 98 SAN JACINTO BLVD. 1615 H STREET, NW SUITE 1500 WASHINGTON, DC 20062-2000 AUSTIN, TX 78701 (202) 463-5747 (512) 322-2506 JANET M. JACOBSON AMERICAN BENEFITS COUNCIL 1501 M STREET, N.W., SUITE 600 WASHINGTON, DC 20005 (202) 289-6700 Counsel for Amici Curiae Case: 17-1693 Document: 00117226892 Page: 2 Date Filed: 11/29/2017 Entry ID: 6134792 CORPORATE DISCLOSURE STATEMENT Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, amici cu-riae certify that they have no parent corporations, and no publicly held corporation owns 10% or more of their stock. Dated: November 13, 2017/s/Evan A. Young Evan A. Young ii Case: 17-1693 Document: 00117226892 Page: 3 Date Filed: 11/29/2017 Entry ID: 6134792 TABLE OF CONTENTS CORPORATE DISCLOSURE STATEMENT........................................................ ii TABLE OF CONTENTS......................................................................................... iii TABLE OF AUTHORITIES................................................................................... iv INTEREST OF AMICI CURIAE AND SUMMARY OF ARGUMENT.................1 ARGUMENT.............................................................................................................3 I. The law—backed by sound policy—focuses on the fiduciary’s process, not ultimate results..................................................................3 A. Plaintiffs’ results-oriented theory of fiduciary liability is inconsistent with ERISA’s fiduciary standard and cases interpreting it.............................................................................4 B. A results-oriented approach to ERISA’s fiduciary standard would upset the underlying purposes of ERISA.......................................................................................5 II. Evidence that an ERISA fiduciary followed a more conservative strategy than others in the industry does not demonstrate or even suggest imprudence.............................................8 A. ERISA fiduciaries must have a variety of tools at their disposal to accomplish plan objectives in ever-changing circumstances............................................................................8 B. Liability based on adopting "too conservative" a risk allocation would pose serious practical problems for fiduciaries while driving up plan costs...................................11 III. ERISA fiduciaries do not violate the duty of loyalty unless they place their own interests ahead of plan beneficiaries’........................12 CONCLUSION........................................................................................................15 CERTIFICATE OF COMPLIANCE.......................................................................16 CERTIFICATE OF SERVICE................................................................................17 iii Case: 17-1693 Document: 00117226892 Page: 4 Date Filed: 11/29/2017 Entry ID: 6134792 TABLE OF AUTHORITIES Page(s) CASES Barchock v. CVS Health Corp., No. 1:16-cv-00061 (D.R.I. Jan. 31, 2017), pending on appeal, No. 17-1515 (1st Cir.)....................................................................................2, 6, 7, 10 Bunch v. W.R. Grace & Co., 555 F.3d 1 (1st Cir. 2009).....................................................................................4 Conkright v. Frommert, 559 U.S. 506 (2010)............................................................................................14 Cooper v. IBM Pers. Pension Plan, 457 F.3d 636 (7th Cir. 2006)................................................................................7 DeBruyne v. Equitable Life Assurance Soc’y of the U.S., 920 F.2d 457 (7th Cir. 1990)................................................................................ 5 DiFelice v. U.S. Airways, Inc., 497 F.3d 410 (4th Cir. 2007)................................................................................4 Donovan v. Cunningham, 716 F.2d 1455 (5th Cir. 1983)..............................................................................4 Evans v. Akers, 534 F.3d 65 (1st Cir. 2008)...............................................................................6, 7 Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990)..............................................................................................5 Jenkins v. Yager, 444 F.3d 916 (7th Cir. 2006)..........................................................................6, 11 Morse v. Stanley, 732 F.2d 1139 (2d Cir. 1984).............................................................................14 Pension Benefit Guar. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705 (2d Cir. 2013)................................................................................. 6 iv Case: 17-1693 Document: 00117226892 Page: 5 Date Filed: 11/29/2017 Entry ID: 6134792 Renfro v. Unisys Corp., 671 F.3d 314 (3d Cir. 2011)................................................................................. 8 Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915 (8th Cir. 1994)..................................................................................4 Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002)..............................................................................................5 Vander Luitgaren v. Sun Life Assurance Co. of Can., 765 F.3d 59 (1st Cir. 2014).................................................................................14 Whitley v. J.P. Morgan Chase Bank, 1:12-cv-02548 (S.D.N.Y. Dec. 16, 2014)............................................................. 6 STATUTES Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq...............................................................................passim 29 U.S.C. § 1104(a).........................................................................................4, 6, 13 SECONDARY AUTHORITY Nancy Trejos, Retirement Savings Lose $2 Trillion in 15 Months, Washington Post (Oct. 8, 2008)..........................................................................11 v Case: 17-1693 Document: 00117226892 Page: 6 Date Filed: 11/29/2017 Entry ID: 6134792 INTEREST OF AMICI CURIAE AND SUMMARY OF ARGUMENT Amici curiae are the Chamber of Commerce of the United States of America (the "Chamber") and the American Benefits Council (the "Council"). 1 The Chamber is the world’s largest business federation. It represents 300,000 direct members and indirectly represents an underlying membership of three million businesses and professional organizations of every size, in every eco-nomic sector, and from every region of the country. Many of the Chamber’s members maintain, administer, or provide services to employee-benefits programs governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. ("ERISA"). The Council is a national non-profit organization dedicated to protecting and fostering privately sponsored employee-benefit plans. Its approximately 430 members are primarily large, multistate employers that provide employee benefits to active and retired workers and their families. The Council’s membership also includes organizations that provide employee-benefit services to employers of all 1 Pursuant to Federal Rule of Appellate Procedure 29(a)(4)(E), amici affirm that no party or counsel for a party authored this brief in whole or in part and that no per-son other than amici, their members, or their counsel has made any monetary con-tribution intended to fund the preparation or submission of this brief. Plaintiffs-appellants have declined to consent to the filing of this brief. As set forth in the accompanying motion, pursuant to Federal Rule of Appellate Procedure 29(a)(2)-(3), amici have requested leave to file this brief. 1 Case: 17-1693 Document: 00117226892 Page: 7 Date Filed: 11/29/2017 Entry ID: 6134792 sizes. Collectively, the Council’s members either directly sponsor or provide ser-vices to retirement and health plans covering virtually all Americans who partici-pate in employer-sponsored benefit programs. The Chamber and the Council frequently participate as amici curiae, includ-ing in cases with the potential to significantly affect the design and administration of employee-benefit plans. Like Barchock v. CVS Health Corp., No. 17-1515, an appeal raising similar issues that is currently pending in this Court and in which the Chamber and the Council recently submitted a joint amicus brief, this is such a case. Presented here are three questions of enormous practical importance to amici and their members: (1) whether courts asked to resolve challenges to a fiduciary’s adherence to the duty of prudence when making investment decisions with re-spect to a stable-value fund should focus on an ERISA fiduciary’s process rather than the results of that process; (2) whether ERISA requires fiduciaries who deem a particular risk alloca-tion to be appropriate to nonetheless adopt riskier investment strate-gies, such that a "too conservative" risk allocation is a per se breach of fiduciary duty; and (3) whether plaintiffs can prove a breach of ERISA’s fiduciary duty of loyalty without demonstrating that a fiduciary put the fiduciary’s in-terests ahead of the interests of plan beneficiaries. The answers to these questions directly implicate the interests of amici and their members (and the many employees who benefit from ERISA plans administered by amici’s members). ERISA does not permit (much less require) plaintiffs’ odd theory that courts 2 Case: 17-1693 Document: 00117226892 Page: 8 Date Filed: 11/29/2017 Entry ID: 6134792 should punish fiduciaries who make investment decisions whose risk allocation is regarded as "too conservative" or "too aggressive" compared to that of other funds. Accepting plaintiffs’ theory of liability would undermine ERISA’s core purpose of encouraging fiduciaries to offer plan participants a variety of investment options of varying risk levels. For the reasons stated in this brief, amici respectfully urge the Court to af-firm. ARGUMENT I. The law—backed by sound policy—focuses on the fiduciary’s process, not ultimate results. When reviewing claims of imprudent investment management, courts properly focus on a fiduciary’s conduct in arriving at an investment decision—not on the investment’s results. This principle is familiar in the law. Whether a de-fendant is liable in tort, for instance, turns on the reasonableness of her conduct, not the fact that the plaintiff suffered an alleged injury—otherwise, strict liability would be the norm rather than the very unusual exception. The theory of fiduciary liability underlying plaintiffs’ complaint directly contravenes that principle. Spe-cifically, plaintiffs claim that Fidelity violated its fiduciary duty of prudence by be-ing insufficiently aggressive. They argue that it too conservatively managed a sta-ble-value fund—an investment vehicle offered as a "safe" investment option for 401(k) plans. Their "evidence" is that other stable-value funds that took riskier 3 Case: 17-1693 Document: 00117226892 Page: 9 Date Filed: 11/29/2017 Entry ID: 6134792 approaches earned greater returns. ERISA’s plain text (like common sense) fore-closes such a claim. Allowing it to proceed would undermine the core purposes of the statute, and the district court rightly rejected it. A. Plaintiffs’ results-oriented theory of fiduciary liability is incon-sistent with ERISA’s fiduciary standard and cases interpreting it. This Court has recognized that the "‘test of prudence—the Prudent Man Rule—is one of conduct, and not a test of the result of performance of the invest-ment.’" Bunch v. W.R. Grace & Co., 555 F.3d 1, 7 (1st Cir. 2009) (quoting Do-novan v. Cunningham, 716 F.2d 1455, 1467 (5th Cir. 1983) (quotations omitted)). As such, "‘[w]hether a fiduciary’s actions are prudent cannot be measured in hind-sight....’" Id. (quoting DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 424 (4th Cir. 2007)). Instead, the "test [is] how the fiduciary acted viewed from the per-spective of the time of the challenged decision rather than from the vantage point of hindsight." Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915, 917-18 (8th Cir. 1994) (quotations omitted). This process-focused fiduciary-liability standard not only makes common sense and harmonizes with basic principles of liability in other contexts; it is also the approach demanded by ERISA’s plain text. See 29 U.S.C. § 1104(a)(1)(B) (re-quiring fiduciary conduct to be evaluated according to "then prevailing" circum-stances, not after-the-fact results). And others courts, such as the Seventh Circuit, have applied this process-not-results principle to reject a similar attempt to base an 4 Case: 17-1693 Document: 00117226892 Page: 10 Date Filed: 11/29/2017 Entry ID: 6134792 ERISA fiduciary-liability claim on a plan’s performance relative to that of sup-posed peer funds. See, e.g., DeBruyne v. Equitable Life Assurance Soc’y of the U.S., 920 F.2d 457, 465 (7th Cir. 1990) ("[T]he ultimate outcome of an investment is not proof of imprudence."). As that Court rightly recognized, assertions about the performance of other funds "say little about the wisdom" of a particular plan’s investments—"only that it may not have followed the crowd." Id. Ignoring this settled rule, plaintiffs would have this Court recognize fiduci-ary-imprudence claims anytime hindsight shows that an ERISA fiduciary’s ap-proach—"too conservative" here, but perhaps "too aggressive" in the next case— deviated from some Goldilocks "just right" measure of risk. Beyond being directly contrary to ERISA’s plain text, plaintiffs’ claim of hindsight-based liability would undermine ERISA’s core purposes and ultimately harm the very plan beneficiaries that ERISA intends to protect. B. A results-oriented approach to ERISA’s fiduciary standard would upset the underlying purposes of ERISA. One of Congress’s core purposes in passing ERISA was to create "a uniform body of benefits law," Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990), with "a predictable set of liabilities, under uniform standards of primary conduct and a uniform regime of ultimate remedial orders." Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 379 (2002) (citations omitted). Plaintiffs’ re-sults-oriented approach to assessing ERISA fiduciary liability would make predict-5 Case: 17-1693 Document: 00117226892 Page: 11 Date Filed: 11/29/2017 Entry ID: 6134792 ing liability impossible. Rather, the only certain thing would be that litigation will always be lurking over the horizon no matter how prudent a fiduciary’s investment decision may have been "under the circumstances then prevailing." See 29 U.S.C. § 1104(a)(1)(B). As a review of recent claims brought in this area demonstrates, adopting the hindsight-based approach would make it virtually impossible for ERISA fiduciar-ies to avoid costly litigation. Some plaintiffs, like those that brought this case, claim that fiduciaries have managed funds too conservatively. 2 Others allege that defendants took too much risk. 3 In some instances, ERISA fiduciaries have simul-taneously defended both types of claims, giving new meaning to the concept of be-ing stuck between a rock and a hard place. In Evans v. Akers, which involved claims that fiduciaries breached ERISA duties by maintaining a "heavy investment 2 See Barchock v. CVS Health Corp., No. 1:16-cv-00061 (D.R.I. Jan. 31, 2017) (currently pending on appeal in this Court as No. 17-1515) (plaintiffs allege that plan fiduciary managed stable-value fund too conservatively, as compared to other stable-value funds); Jenkins v. Yager, 444 F.3d 916, 925-26 (7th Cir. 2006) (reject-ing plaintiffs’ claim that notwithstanding "years of lower performance," an "in-vestment strategy" that was based on "find[ing] long-term, conservative reliable investments that would do well during market fluctuations" was "unreasonable [and] imprudent"). 3 Third Am. Compl. at 3, Whitley v. J.P. Morgan Chase Bank, 1:12-cv-02548 (S.D.N.Y. Dec. 16, 2014), ECF No. 182 (alleging fiduciaries managed stable-value fund in "inherently risky" manner); Pension Benefit Guar. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 719 (2d Cir. 2013) (involving claim that fiduciaries were imprudent in making risky investment decisions). 6 Case: 17-1693 Document: 00117226892 Page: 12 Date Filed: 11/29/2017 Entry ID: 6134792 in Grace securities when the stock was no longer a prudent investment," this Court observed that "[a]nother suit challenging the actions of Plan fiduciaries" had "as-serted a diametrically opposed theory of liability"—"that the Plan fiduciaries had imprudently divested the Plan of its holdings in Grace common stock despite the company’s solid potential to emerge from bankruptcy...." 534 F.3d 65, 68 (1st Cir. 2008).4 Placing such pressure on ERISA fiduciaries undermines the purposes of the statute and ultimately harms plan beneficiaries. If later-emerging results could render otherwise-prudent investment decisions retroactively imprudent when viewed in hindsight, no fiduciary could limit its liability, no matter how well it had thought through its decisions. Faced with this type of litigation risk, investment managers inevitably would raise the prices on products sold to ERISA plans pro-vided by employers—ultimately to the ultimate detriment of both participants and sponsors. Cf. Cooper v. IBM Pers. Pension Plan, 457 F.3d 636, 642 (7th Cir. 2006) (result of litigation was that "IBM eliminated the cash-balance option for new workers and confined them to pure defined-contribution plans"). 5 4 Importantly, plaintiffs’ hindsight-based view of fiduciary liability, if accepted, would apply to any type of investment—not just stable-value funds. 5 Amici’s brief in Barchock (at pp. 10-12) describes additional reasons, relevant in that appeal, that hindsight-based liability is antithetical to the core premises and purposes of ERISA. 7 Case: 17-1693 Document: 00117226892 Page: 13 Date Filed: 11/29/2017 Entry ID: 6134792 II. Evidence that an ERISA fiduciary followed a more conservative strate-gy than others in the industry does not demonstrate or even suggest im-prudence. Plaintiffs argue that Fidelity acted imprudently by managing a stable-value fund more conservatively than industry peers. Liability based solely on deviation from what others in the industry do would undermine ERISA’s core purposes just as plaintiffs’ hindsight-based liability theory would. Plaintiffs’ theory would ulti-mately harm the plan participants ERISA was designed to protect. A. ERISA fiduciaries must have a variety of tools at their disposal to accomplish plan objectives in ever-changing circumstances. ERISA’s "flexible" prudence standard reflects the obligation applicable to every ERISA fiduciary to consider the specific "character and aims of the particu-lar type of plan he serves." Renfro v. Unisys Corp., 671 F.3d 314, 322 (3d Cir. 2011) (quotations omitted). Consistent with that mandate, fiduciaries seek to offer plan participants a variety of investment options based on the needs of their work-force. Id. at 327. Without the discretion inherent in ERISA’s flexible prudence standard, fiduciaries would not be able to make individual judgments about the needs of plans and participants. For example, a young workforce (e.g., Google) may have different needs than an older workforce (e.g., a typical industrial plant). Similarly, a particularly investment-savvy workforce might have different needs than the typical workforce. Yet plaintiffs attempt to impose fiduciary liability based on a stable-value 8 Case: 17-1693 Document: 00117226892 Page: 14 Date Filed: 11/29/2017 Entry ID: 6134792 fund’s deviation from some zone of "proper" risk—not too risk-averse but presum-ably not too risk-seeking either. Imposing liability on such a ground, however, would thwart ERISA’s mandate that each fiduciary make investment choices based on its individual plan’s needs, not the theoretical needs of the nation as a whole. If fiduciaries risked liability whenever the amount of risk they take when making in-vestment decisions is outside the risk level undertaken by others, there would natu-rally be a rush toward the mean. After all, the law would punish those who find themselves having been outside of a statistical range, the contours of which the ju-diciary would only later announce. These particular plaintiffs complain about a "too conservative" strategy (be-cause it now turns out that more risk would have generated higher returns), while others could complain about a "too aggressive" strategy (after a market period in which less risk would have generated higher returns). If the courts allow plaintiffs to eliminate both ends of the bell curve, then the next iteration will cover less terri-tory, as fiduciaries rush to avoid the tails. But there will still be a bell curve, and plaintiffs will still challenge the tails of that new curve. This iterative process can only end in the enforcement of some unbending average to which all fiduciaries must adhere. This consequence would destroy (1) the ability of fiduciaries to re-spond to the individual needs of a given plan and (2) the ability of plan sponsors even to have options that they greatly desire but that diverge from the mean. In 9 Case: 17-1693 Document: 00117226892 Page: 15 Date Filed: 11/29/2017 Entry ID: 6134792 this sense, the issue in Barchock—involving alleged liability for deviating from an industry "average"—is just the final manifestation of the theory embraced by plaintiffs here. The willingness to entertain claims based on plaintiffs’ theory would create a legally imposed incentive structure to eliminate any possible char-acterization as an "outlier." Instead, this Court should reaffirm the flexible prudence standard that has long facilitated fiduciaries’ ability to offer plan participants a variety of investment options reflecting varying goals and risk levels. Charting a conservative course through a period of turbulent market volatility, for example, is a legitimate option for plan fiduciaries. Plan administrators frequently employ stable-value funds as the "safe" option in their investment lineups and value the flexibility to pick among options within a given asset class. Depending on their individual plan needs and investment lineups, some may prefer a conservative stable-value strategy, while others may prefer a less-conservative approach. If fund managers are held liable for being "too conservative," plan sponsors that reasonably seek to offer just that sort of conservative choice will find that such options are no longer available to them. Fiduciaries, in other words, need flexibility to respond to the genuine needs of those they serve. After the financial crisis, for example, the availability of a very conservative safe-investment option was particularly important to many plan 10 Case: 17-1693 Document: 00117226892 Page: 16 Date Filed: 11/29/2017 Entry ID: 6134792 administrators and participants. See, e.g., Nancy Trejos, Retirement Savings Lose $2 Trillion in 15 Months, Washington Post (Oct. 8, 2008). Even investments "widely considered more stable" were "hit hard." Id. This dramatic and unex-pected turn of events resulted in a heightened desire for even safer investment op-tions for plan participants. Id. There was nothing imprudent about that approach. ERISA fiduciaries should not be required to take on increased risk simply because other plan fiduciaries do so after considering the "character" and "aims" of their own plans and participants. See, e.g., Jenkins, 444 F.3d at 925-26 (explaining that notwithstanding "years of lower performance," an "investment strategy" that was based on "find[ing] long-term, conservative reliable investments that would do well during market fluctuations" was neither "unreasonable [n]or imprudent"). B. Liability based on adopting "too conservative" a risk allocation would pose serious practical problems for fiduciaries while driv-ing up plan costs. Accepting plaintiffs’ theory of liability would leave some fiduciaries with an untenable choice: (1) follow the herd and risk liability for breach of their fiduciary duty to make individualized judgments regarding the best interest of plan partici-pants, or (2) make those individualized judgments and risk liability solely for not aligning with the herd. Even worse, fiduciaries seeking to abide by such a standard would face one inscrutable question after another: 11 Case: 17-1693 Document: 00117226892 Page: 17 Date Filed: 11/29/2017 Entry ID: 6134792 • Which funds are sufficiently similar to each other to count as "peers" for purposes of determining what amount of risk the industry as a whole adopts? • What constitutes a typical approach to any given investment decision? • Just how much "deviation" from such an approach is acceptable? With no principled way to answer these questions or (more importantly) to guess how a court might answer them, fiduciaries would feel compelled to contin-uously monitor the decisions and approaches of the fiduciaries of all funds even remotely similar to their own without any real sense of what they were looking for. And in the event that they spotted anything a court or a plaintiff might view as a trend in decisions or approaches, fiduciaries would feel no choice but to follow the trend mindlessly, even if the more popular approach was not, in their judgment, in the best interest of the participants they serve. III. ERISA fiduciaries do not violate the duty of loyalty unless they place their own interests ahead of plan beneficiaries’. The district court rejected plaintiffs’ claim that Fidelity’s conservative ap-proach also violated the fiduciary duty of loyalty because plaintiffs failed to pro-duce evidence that Fidelity placed its own interests ahead of plaintiffs’. Plaintiffs phrase their theory as barring fund managers from considering their own interests, but their argument necessarily reduces to holding that a breach of the duty of loyal-ty lurks whenever a fund manager’s self-interest is even aligned with those of plan participants. After all, nothing more than that alignment exists here. Adopting such a startling principle would affirmatively harm plan participants, not help 12 Case: 17-1693 Document: 00117226892 Page: 18 Date Filed: 11/29/2017 Entry ID: 6134792 them. Plan sponsors often want fund managers’ interests to be aligned with those of the participants. Far from seeking judicial protection from any such alignment, sponsors pursue it. They may enter into asset-based fee arrangements (or other contractual provisions that do not wholly divorce the fund managers’ interest from how investment decisions are made) precisely because that ensures a clear and healthy line of incentives. But plaintiffs’ theory means that a manager that consid-ers its own interests even when doing so is entirely consistent with advancing the plan’s interests would be in breach of its duty of loyalty. In turn, the rule would discourage would-be fiduciaries even from offering essential plan-related services and would raise the costs of plan administration—costs ultimately borne by the plan participants supposedly aided by the plaintiffs’ proposed rule. From the per-spective of plan sponsors, like many of amici’s members, therefore, the plaintiffs’ approach to fund managers’ duty of loyalty is decidedly harmful. To be clear, amici do not even regard this question as open. No one disputes that Section 404(a) of ERISA requires fiduciaries to honor the duty of loyalty by "discharg[ing] his duties with respect to a plan solely in the interest of the partici-pants." 29 U.S.C. § 1104(a)(1). But this Court is not writing on a blank slate. It already has held that the mere fact that an ERISA fiduciary receives a benefit from a given investment decision does not inexorably establish disloyalty; rather, 13 Case: 17-1693 Document: 00117226892 Page: 19 Date Filed: 11/29/2017 Entry ID: 6134792 ERISA "require[s]... that the fiduciary not place its own interests ahead of those of the Plan beneficiary." Vander Luitgaren v. Sun Life Assurance Co. of Can., 765 F.3d 59, 65 (1st Cir. 2014) (emphasis added). But "[i]t is no violation of a trus-tee’s fiduciary duties to take a course of action which reasonably best promotes the interest of plan participants simply because it incidentally also benefits the corpo-ration." Morse v. Stanley, 732 F.2d 1139, 1146 (2d Cir. 1984). Any other ap-proach assumes a zero-sum game—any benefit to the fund manager must mean some harm to the employee. Common sense (and the statute) permit no such as-sumption, however. What makes plaintiffs’ theory especially dangerous is that fee arrangements like the one at issue here are commonplace in the workaday world. They do not put the fund manager’s interest ahead of the participants’ interests but merely align all interests. Forbidding all such arrangements would not promote, but would im-pede, ERISA’s core purpose of "ensuring fair and prompt enforcement of rights under a plan and the encouragement of the creation of such plans." Conkright v. Frommert, 559 U.S. 506, 517 (2010) (quotations omitted). Plan sponsors remain free to take different approaches if they so choose. But plaintiffs’ proposed rule would transform the ordinary contractual arrangements that make virtually all ERISA plans possible into badges of disloyalty, which can only mean that fiduciar-ies like Fidelity will either be unable to offer essential services or will do so at far, 14 Case: 17-1693 Document: 00117226892 Page: 20 Date Filed: 11/29/2017 Entry ID: 6134792 far higher costs. Such an outcome would benefit neither plans nor their partici-pants. CONCLUSION The judgment below should be affirmed. Dated: November 13, 2017 Respectfully submitted,/s/Evan A. Young EVAN A. YOUNG BAKER BOTTS L.L.P. 98 SAN JACINTO BLVD. SUITE 1500 AUSTIN, TX 78701 (512) 322-2506 STEVEN P. LEHOTSKY JANET GALERIA U.S. CHAMBER LITIGATION CENTER 1615 H STREET, NW WASHINGTON, DC 20062-2000 (202) 463-5747 JANET M. JACOBSON AMERICAN BENEFITS COUNCIL 1501 M STREET, N.W., SUITE 600 WASHINGTON, DC 20005 (202) 289-6700 Counsel for Amici Curiae The Chamber of Commerce of the United States of America and the American Benefits Council 15 Case: 17-1693 Document: 00117226892 Page: 21 Date Filed: 11/29/2017 Entry ID: 6134792 CERTIFICATE OF COMPLIANCE 1. This brief complies with the type-volume limitations of Fed. R. App. P. 29(a)(5) and Fed. R. App. P. 32(a)(7)(B)(i) because it contains 3,389 words, ex-cluding the parts of the brief exempted by Fed. R. App. P. 32(f). 2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using Microsoft Word 2010 in Times New Roman 14-point font. Dated: November 13, 2017/s/Evan A. Young Evan A. Young 16 Case: 17-1693 Document: 00117226892 Page: 22 Date Filed: 11/29/2017 Entry ID: 6134792 CERTIFICATE OF SERVICE I hereby certify that on November 13, 2017, I electronically filed the forego-ing with the Clerk of the Court for the U.S. Court of Appeals for the First Circuit by using the appellate CM/ECF system. All interested parties are registered CM/ECF users./s/Evan A. Young Evan A. Young 17

REPLY BRIEF filed by Appellants James Ellis and William NMI Perry. Certificate of service dated 12/01/2017. Nine paper copies identical to that of the electronically filed brief must be submitted so that they are received by the court on or before 12/07/2017. [17-1693] (AP) [Entered: 12/04/2017 09:04 AM]

Case: 17-1693 Document: 00117228512 Page: 1 Date Filed: 12/04/2017 Entry ID: 6135630 No. 17-1693 ____________________________________ UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT ________________________ JAMES ELLIS and WILLIAM PERRY, individually and as representatives of a class of similarly situated persons, Plaintiffs – Appellants, v. FIDELITY MANAGEMENT TRUST COMPANY, Defendant – Appellee. ____________________________________________ Appeal from a Decision of the United States District Court for the District of Massachusetts, No. 15-14128-WGY – Honorable William G. Young ____________________________________________________________ PLAINTIFFS-APPELLANTS’ REPLY BRIEF ____________________________________________________________ GARRETT W. WOTKYNS SCHNEIDER WALLACE COTTRELL KONECKY WOTKYNS LLP 8501 N. Scottsdale Road, Suite 270 Scottsdale, Arizona 85253 Telephone: (480) 428-0142 JASON H. KIM SCHNEIDER WALLACE COTTRELL KONECKY WOTKYNS LLP Case: 17-1693 Document: 00117228512 Page: 2 Date Filed: 12/04/2017 Entry ID: 6135630 2000 Powell Street, Suite 1400 Emeryville, California 94608 Telephone: (415) 421-7100 PAUL T. SULLIVAN JEFFREY A. GORDON ZELLE LLP 161 Worcester Road, Suite 502 Framingham, Massachusetts 07101 Telephone: (781) 466-0700 CHRISTOPHER T. MICHELETTI HEATHER T. RANKIE ZELLE LLP 44 Montgomery Street, Suite 3400 San Francisco, California 94104 Telephone: (415) 693-0700 MATTHEW RIGHETTI RIGHETTI GLUGOSKI, P.C. 456 Montgomery Street, Suite 1400 San Francisco, California 94104 Telephone: (415) 983-0900 Attorneys for Plaintiffs-Appellants James Ellis and William Perry, Individually and as Representatives of a Certified Class ii Case: 17-1693 Document: 00117228512 Page: 3 Date Filed: 12/04/2017 Entry ID: 6135630 TABLE OF CONTENTS INTRODUCTION.....................................................................................................1 ARGUMENT.............................................................................................................3 I. DISPUTED ISSUES OF MATERIAL FACT PRECLUDE SUMMARY JUDGMENT ON PLAINTIFFS’ CLAIM FOR BREACH OF LOYALTY.. 3 A. Vander Luitgaren Does Not Excuse Fidelity’s Disloyalty..........................3 B. There Are Disputed Issues of Material Fact as to the MIP’s Need for Wrap Coverage......................................................................................................4 C. There Are Disputed Issues of Material Fact as to Whether the Guidelines Fidelity Agreed to in Exchange for Wrap Capacity Were "Overly Stringent".....................................................................................................6 II. DISPUTED ISSUES OF MATERIAL FACT PRECLUDE SUMMARY JUDGMENT ON PLAINTIFFS’ CLAIM FOR BREACH OF PRUDENCE11 A. Fidelity and Amici Impose an Unduly Narrow Definition of ERISA Imprudence................................................................................................11 B. Fidelity by Its Own Admission Failed to Meet a Primary Objective of the MIP--Producing a "Competitive" Return--For Several Years..................14 C. Even if Process Is the Only Relevant Consideration, Fidelity’s Failure to Meet the MIP’s Objectives Was the Result of a Flawed Process.............15 III. ERISA’S STATUTE OF REPOSE DOES NOT BAR PLAINTIFFS’ CLAIMS........................................................................................................ 17 IV. THE AMICI DO NOT ADDRESS THE RECORD EVIDENCE IN ANY MEANINGUL WAY AND RELY ON LARGELY INCOMPLETE GENERALITIES THAT ARE NOT APPLICABLE HERE........................ 18 CONCLUSION........................................................................................................19 i Case: 17-1693 Document: 00117228512 Page: 4 Date Filed: 12/04/2017 Entry ID: 6135630 TABLE OF AUTHORITIES Federal Cases Bunch v. W.R. Grace & Co. 532 F. Supp. 2d 283 (D. Mass. 2008).............................................................. 2, 12 Bunch v. W.R. Grace & Co. 555 F.3d 1 (1st Cir. 2009)................................................................... 2, 11, 12, 21 California Ironworkers Field Pension Trust v. Loomis Sayles & Co. 259 F.3d 1036 (9th Cir. 2001)..............................................................................12 Donovan v. Bierwirth 680 F.2d 263 (2d Cir. 1982)...............................................................................1, 4 Fifth Third Bancorp v. Dudenhoeffer __ U.S. __, 134 S. Ct. 2459, 2469 (2014)...........................................................11 Fish v. GreatBanc Trust Co. 749 F.3d 671 (7th Cir. 2014)................................................................................12 Gomez v. Stop & Shop Supermkt. Co. 670 F.3d 395 (1st Cir. 2012)................................................................................19 Howard v. Shay 100 F.3d 1484 (9th Cir. 1996)..............................................................................12 In re Net-Velazquez 625 F.3d 34 (1st Cir. 2010)..................................................................................17 In re Unisys Savings Plan Litig. 74 F.3d 420 (3d Cir. 1996)...................................................................................13 Kling v. Fid. Mgmt. Trust Co. 270 F. Supp. 2d 121 (D. Mass. 2003).....................................................................2 Vander Luitgaren v. Sun Life Assurance Co. of Can. 765 F.3d 59 (1st Cir. 2014)............................................................................ i, 3, 4 ii Case: 17-1693 Document: 00117228512 Page: 5 Date Filed: 12/04/2017 Entry ID: 6135630 Federal Statutes 29 U.S.C. § 1104(a)(1)...........................................................................................1, 2 29 U.S.C. § 1113(1).......................................................................................... 16, 17 iii Case: 17-1693 Document: 00117228512 Page: 6 Date Filed: 12/04/2017 Entry ID: 6135630 INTRODUCTION Contrary to the assertions of Defendant-Appellee Fidelity Management Trust Company ("Fidelity") and amici, Plaintiffs-Appellants’ ("Plaintiffs") claims for breach of the duty of loyalty and breach of the duty of prudence under the Employee Retirement Income Security Act of 1974 ("ERISA") are based on far more than a hindsight critique of the performance of Fidelity’s Management Income Portfolio ("MIP"). Rather, the record evidence shows, at a minimum, disputed issues of material fact that Fidelity: (1) pursued its own financial interests at the expense of the MIP investors by seeking wrap capacity for non-MIP funds in exchange for less competitive returns; and (2) for years, persisted in managing the MIP in a manner that led to uncompetitive returns, as repeatedly admitted by Fidelity personnel in contemporaneous, internal documents. Both ERISA claims are based squarely on Fidelity’s conduct, not merely the results of that conduct. ERISA requires Fidelity to act "solely in the interest of the participants and beneficiaries" of the MIP. 29 U.S.C. § 1104(a)(1). In other words, Fidelity was required to manage the MIP with an "eye single" fixed on the best interests of MIP’s investors. Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir. 1982). Any benefit Fidelity derived from its investment decisions must be merely "incidental," id. at 271, not the motivating force for these decisions. Whether the benefits Fidelity obtained by favoring the interest of wrap providers over the MIP investors 1 Case: 17-1693 Document: 00117228512 Page: 7 Date Filed: 12/04/2017 Entry ID: 6135630 were merely "incidental" raises inherently factual issues that could not be resolved on a motion for summary judgment based on the record here. ERISA also requires that Fidelity manage the MIP "with the care, skill, prudence, and diligence" of a prudent person "acting in a like capacity and familiar with such matters." 29 U.S.C. § 1104(a)(1)(B). See also Bunch v. W.R. Grace & Co., 555 F.3d 1, 6 (1st Cir. 2009). In making this assessment, the court evaluates the "totality of the circumstances." Id. Fidelity was also required to take "into account all relevant information in performing its fiduciary duty under ERISA." Bunch v. W.R. Grace & Co., 532 F. Supp. 2d 283, 288 (D. Mass. 2008), aff’d, 555 F.3d at 7. Again, whether Fidelity complied with this standard raises inherently factual issues that could not be resolved on a motion for summary judgment based on the record here. ERISA’s fiduciary duties are "the highest known to law." Kling v. Fid. Mgmt. Trust Co., 270 F. Supp. 2d 121, 126 (D. Mass. 2003). Construing these duties as broadly as intended and considering fairly the extensive factual record as a whole, this Court should reverse the District Court’s grant of summary judgment in favor of Fidelity. 2 Case: 17-1693 Document: 00117228512 Page: 8 Date Filed: 12/04/2017 Entry ID: 6135630 ARGUMENT I. DISPUTED ISSUES OF MATERIAL FACT PRECLUDE SUMMARY JUDGMENT ON PLAINTIFFS’ CLAIM FOR BREACH OF LOYALTY A. Vander Luitgaren Does Not Excuse Fidelity’s Disloyalty Fidelity misconstrues this Court’s decision in Vander Luitgaren v. Sun Life Assurance Co. of Can., 765 F.3d 59 (1st Cir. 2014) to shield its self-interested conduct here from any meaningful scrutiny. That case involved the manner in which an ERISA fiduciary made contractually-guaranteed payments to plan beneficiaries. This Court held there was no breach of the duty of loyalty where the method of payment benefited Sun Life but did not in any way harm the beneficiaries: In our view, a better reading of the phrasing is that Sun Life can discharge its obligations to the beneficiary by paying the promised benefit through any one of a range of recognized payment modalities: provided, however, that the chosen modality does not unfairly diminish, impair, restrict, or burden the beneficiary’s rights. The focus, we think, is on how the method of payment affects the beneficiary—not on how it affects the insurer. So viewed, Sun Life’s choice to pay the appellant through the medium of an RAA was a permissible step that comported with the Plan terms. Id. at 64 (emphasis added). Indeed, that case acknowledged that ERISA’s duty of loyalty requires "that the fiduciary not place its own interests ahead of those of the Plan beneficiary." Id. at 65. Here, the gravamen of Plaintiffs’ loyalty claim is not merely that Fidelity obtained a benefit by its pursuit of additional wrap capacity. Rather, Fidelity 3 Case: 17-1693 Document: 00117228512 Page: 9 Date Filed: 12/04/2017 Entry ID: 6135630 disregarded the MIP’s investors’ interest in a competitive return as promised in the MIP’s governing documents (discussed below) to curry favor with the wrap providers for the MIP and other Fidelity stable value funds so Fidelity could increase its stable value business at the expense of its competitors. This worked to "unfairly diminish, impair, restrict, or burden" the rights of the MIP investors. In short, nothing in Vander Luitgaren bars Plaintiffs’ loyalty claim or conflicts with the "eye single" test of Donovan. Fidelity’s argument to the contrary is premised on the alignment of interest between Fidelity’s business interests and the interests of MIP investors. As set forth below, however, numerous disputed issues of material fact preclude any conclusive finding of such alignment. B. There Are Disputed Issues of Material Fact as to the MIP’s Need for Wrap Coverage Fidelity itself admitted its motivation for its single-minded pursuit of additional wrap capacity. According to an early 2010 presentation, Fidelity’s "Core Business Strategy" for stable value was to "[l]everage the strength of the Fidelity platform and early-mover advantage to obtain significantly more wrap capacity than competitors." JA2257. Tellingly, there is no reference to protection of stable value investors like the MIP investors as the reason to seek additional wrap capacity—it is entirely directed at obtaining an advantage against Fidelity’s "competitors." This motive, again by Fidelity’s admission, infected all of its 4 Case: 17-1693 Document: 00117228512 Page: 10 Date Filed: 12/04/2017 Entry ID: 6135630 investment decisions. According to Fidelity, "[w]rap capacity is priority #1; all investment changes essential to maintaining capacity and creating new capacity." JA2893. In its Brief, Fidelity virtually ignores the fact that during the class period it managed 43 stable value funds for Separate Account clients; i.e., stable value funds managed on behalf of and owned by a single 401(k) plan. JA0178, ¶82 and n.6; see also JA1758 ("The Separate Accounts are typically larger plan sponsors who don’t want to be invested in a pool. They would rather have their own account segregated from every other account."). Fidelity also ignores the fact that wrap capacity issues in 2009 were impeding its Separate Account business to such an extent that this business was described as "frozen." See, e.g., JA0589 (March 2009, "capacity for new FMTC Separate Account business is currently frozen"); JA0687 (2011 Trust Committee document identifying over $1.1 billion in Separate Account "AUM" business "at risk"). The MIP, by contrast, was "open to new plans, business as usual" during the entire class period. JA1819; accord JA2982 (Fidelity portfolio manager acknowledging that lack of capacity was never a constraint on Fidelity’s ability to add clients to the MIP). Indeed, Fidelity admitted that wrap capacity needs were motivated not by capacity needs for the MIP, but by "lack of capacity for new Fidelity Separate Account business" (JA2075, ¶33 (emphasis added)), and by 5 Case: 17-1693 Document: 00117228512 Page: 11 Date Filed: 12/04/2017 Entry ID: 6135630 Fidelity’s desire to unfreeze that business ("MIP pools are currently open"). JA2391. Thus, Fidelity used the added wrap capacity to underwrite new Separate Account business in 2013. JA0756. Fidelity successfully grew its Separate Account AUM from $17.6 billion in 2009 to $19.1 billion in 2012. JA0758. While Fidelity argues in its Brief that the number of Separate Accounts remained stable during the first half of the class period (Fidelity Br. at 35, n.12), it fails to note this dramatic growth in its Separate Account AUM. As such, Fidelity’s assertion in its Brief (p. 35 n.12) that there is "no evidence that Fidelity was pursuing wrap capacity to service new funds" is false and contradicted by its own contemporaneous documents. Like the District Court’s order, Fidelity never references these facts. C. There Are Disputed Issues of Material Fact as to Whether the Guidelines Fidelity Agreed to in Exchange for Wrap Capacity Were "Overly Stringent" Fidelity also fails to rebut Plaintiffs’ showing that Fidelity entered "overly stringent" wrap guidelines in 2009. The District Court held, incorrectly, that Plaintiffs failed to show that Fidelity knew, at the time it obtained new wrap capacity from JP Morgan, that the wrap guidelines were "overly stringent." See Plaintiffs’ Br. at 13 and n.6. This finding was flatly contradicted in the record by Fidelity’s documents reflecting communications that occurred near the time 6 Case: 17-1693 Document: 00117228512 Page: 12 Date Filed: 12/04/2017 Entry ID: 6135630 Fidelity agreed to the guidelines.1 Because Fidelity structured the MIP such that the entire portfolio must be managed to the most conservative wrap guidelines, this decision, which was focused on increasing AUM to Separate Accounts, severely impaired MIP competitiveness, leading to "lower crediting rates in the market place relative to peers" and to a "bottom decile crediting rate" for the MIP pools. JA2077-78, ¶¶44, 46-47. While Fidelity now claims it had "literally no other options" (Fidelity Br. at 44), there is no evidence offered for this assertion and it is in fact contrary to the evidence as set forth below.2 Relatedly, Fidelity’s assertion that Plaintiffs never adduced any evidence that Fidelity could have obtained wrap coverage on better terms from another provider during this period is both a straw man and wrong. It is a straw man because the MIP’s wrap coverage was sufficient to accommodate any new business, and was not meaningfully at risk in 2009, in 2012, or ever. As the MIP portfolio manager acknowledged, the MIP was always open to new plans and 1 See JA2937 (Fidelity portfolio manager stating that Fidelity contemporaneously conveyed to third parties that it agreed to "overly stringent" guidelines to secure JP Morgan’s commitment); Plaintiffs’ Br. at 14 (noting same and citing JA3732, ¶44). 2 In support of this argument, Fidelity relies on the testimony of Plaintiffs’ expert, Steve Pomerantz. But evaluating the prudence of the MIP’s investment guidelines was outside the scope of the disclosed opinions he was offering in this matter. See JA2166-230. Indeed, as he testified, his analysis assumes compliance with the guidelines as they existed, JA3151, Pomerantz Dep. 265:2-7, so he had no reason to evaluate their substantive content or the circumstances surrounding Fidelity’s agreement to them. 7 Case: 17-1693 Document: 00117228512 Page: 13 Date Filed: 12/04/2017 Entry ID: 6135630 conducting "business as usual." JA3050; see also JA2075. Fidelity ignores this testimony in its Brief. Further, the two wrap providers that stated an intention to leave the wrap business simultaneously advised Fidelity they would not be leaving for years, one then quickly changed its mind in 2010, and the other did not leave the business until long after the wrap market had stabilized. Plaintiffs’ Br. at 33 n.8. Fidelity indisputably had a window into the future availability of these entities’ wrap business. Given the lack of need for additional wrap capacity for the MIP specifically, Plaintiffs need not show that better terms were available. Even assuming that some such showing was required, on this record, Plaintiffs made it. First, Fidelity’s admission that the wrap terms it entered were "overly stringent," by itself, is sufficient evidence from which a factfinder could infer that the terms were known to be excessively conservative at the time, and should not have been entered. Second, the fact that Fidelity entered excessively restrictive terms is corroborated by Fidelity’s admitted stable value institutional failings including, for example, its unwillingness to consider alternative structures that do not rely on wrap capacity (such as traditional GICs or insurance company separate account GICs)—which inflexibility led to limited options and overly restrictive terms. Steve Kolocotronis, Fidelity’s point person on wrap contract negotiations (JA0082), documented these failings in 2010 as follows: 8 Case: 17-1693 Document: 00117228512 Page: 14 Date Filed: 12/04/2017 Entry ID: 6135630 They probably are more diversified than us. They’re more willing to use every tool available to them – traditional GICs, separate account GICs, Mutual of Omaha. They’re certainly more flexible than we are. You’d think given our size and our resources that we could do anything, but with us everything has to be done our way.... The biggest difference between us and [them] though is that they care about this business in a way that we don’t. Stable value matters to them. JA2901.3 Consistent with Mr. Kolocotronis’s observation, other Fidelity personnel acknowledged that alternatives to wrap capacity were available to Fidelity, but they would risk reduction of Fidelity’s AUM. See JA2938. Finally, Fidelity did negotiate better deals in 2012, and there is no reason to believe this could not have been done earlier given that the MIP was open and conducting "business as usual." Viewing this evidence in a light most favorable to Plaintiffs, as the Court must do, there was no need for Plaintiffs to show that Fidelity—had it ever attempted to do so and which it did not—could have negotiated better wrap capacity deals during 2009 – 2012. 3 Fidelity’s effort to explain away Mr. Kolocotronis’s admissions (Fidelity Br. at 52-53) misses the mark. First, the District Court must view the evidence in the light most favorable to Plaintiffs and draw all reasonable inferences in their favor. Second, Mr. Kolocotronis’s email unambiguously speaks to Fidelity’s failings, and the number of competitors being addressed does not eliminate that fact. 9 Case: 17-1693 Document: 00117228512 Page: 15 Date Filed: 12/04/2017 Entry ID: 6135630 D. There Are Disputed Issues of Material Fact as to the Fidelity Portfolio Managers’ Compensation-Related Conflict Fidelity’s conflicted management of the MIP is also exemplified by the MIP portfolio managers’ bonus program, which incentivized them to use an excessively conservative benchmark, the 1-5 G/C index, that Fidelity knew was "heavily criticized" within the industry. See Plaintiffs’ Br. at 15-16. In its Brief, Fidelity argues that the portfolio managers considered other benchmarks. Fidelity Br. at 15. While Plaintiffs successfully disputed this evidence,4 there was no need to do so because these managers were never going to, and never did, take steps to make it harder for them to attain their bonuses. Rather, they did the opposite, seeking instead to lower their targeted outperformance over the already conservative benchmark. See Plaintiffs’ Br. at 17. If the portfolio managers actually sought to lower their outperformance targets against a weaker benchmark, it is clear they had no intention of moving to a less conservative and more competitive benchmark. Fidelity ignores this evidence in its Brief. 4 As noted in Plaintiffs’ Brief (at p. 38), Fidelity’s cited evidence fails to show, in connection with any discussions regarding changing MIP’s portfolio performance benchmark, any specific analysis or evaluation of whether the MIP is attaining a competitive level of income versus key competitors or peers as required by the DSF, any specific analysis of the propriety of the continued use of the 1-5 G/C index as the benchmark for the MIP in light of that investment objective, or any consideration of the portfolio managers’ inherent, compensation-related bias towards continued use of this benchmark. 10 Case: 17-1693 Document: 00117228512 Page: 16 Date Filed: 12/04/2017 Entry ID: 6135630 Fidelity further asserts that Plaintiffs’ argument "proves far too much" and would impose on managers too much "pressure to maximize returns." Fidelity Br. at 38-39. These arguments are unsupported by any evidence and call for this Court to draw factual inferences in favor of Fidelity, and should therefore be disregarded. Furthermore, they ignore the fact that Fidelity imposed upon itself, and promised MIP plan participants, an investment objective of providing a "competitive level of income." JA0195. A portfolio manager compensation plan that incentivizes the managers to maintain an unduly conservative, "heavily criticized" benchmark that guarantees uncompetitive returns versus peers, indisputably is not a plan that focuses the managers "eye-single" on plan participants’ interests.5 II. DISPUTED ISSUES OF MATERIAL FACT PRECLUDE SUMMARY JUDGMENT ON PLAINTIFFS’ CLAIM FOR BREACH OF PRUDENCE A. Fidelity and Amici Impose an Unduly Narrow Definition of ERISA Imprudence While Fidelity and amici in their briefs focus exclusively on the day-to-day process by which an ERISA fiduciary makes decisions to judge prudence, this Court has applied a more holistic and fact-specific view. In Bunch, 555 F.3d at 6 5 Fidelity’s assertion that the use of the benchmark and other information about the MIP’s holdings and strategy was disclosed to "potential sponsors," and thus implicitly agreed to by these sponsors, is also unavailing. ERISA’s fiduciary duties may not be excused by contract. Fifth Third Bancorp v. Dudenhoeffer, __ U.S. __, 134 S. Ct. 2459, 2469 (2014). Moreover, the certified class here is comprised not of plan "sponsors," but plan participants. 11 Case: 17-1693 Document: 00117228512 Page: 17 Date Filed: 12/04/2017 Entry ID: 6135630 (1st Cir. 2009), this Court held that evaluating the reasonableness of an ERISA fiduciary’s actions requires consideration of the "totality of the circumstances." And while this Court in Bunch relied on the "thorough investigative and decisional process" that led to the decision to divest the company stock at issue there, Bunch, 555 F.3d at 7, that case arose from a "case stated" rather than on a motion for summary judgment. Furthermore, Bunch involved the retention of an independent fiduciary to ensure the process was uncontaminated by the fiduciary’s self-interest. Id. at 8. Here, the existence of such a thorough and unbiased process cannot be inferred given the conflicting evidence on this issue as outlined below. As the district court’s opinion in Bunch makes clear, ERISA requires application of a standard of "substantive reasonableness" that goes beyond process and looks to the "merits" of a decision. That court stated that "the court focuses not only on the merits of a transaction, but also on the thoroughness of the investigation into the merits of that transaction." Bunch v. W.R. Grace & Co., 532 F. Supp. 2d 283, 288 (D. Mass. 2008), quoting Howard v. Shay, 100 F.3d 1484, 1488 (9th Cir. 1996) (alterations omitted and emphasis added). See also Fish v. GreatBanc Trust Co., 749 F.3d 671, 680 (7th Cir. 2014) ("Whether an ERISA fiduciary has acted prudently requires consideration of both the substantive reasonableness of the fiduciary’s actions and the procedures by which the fiduciary made its decision."). 12 Case: 17-1693 Document: 00117228512 Page: 18 Date Filed: 12/04/2017 Entry ID: 6135630 To be sure, the duty of prudence focuses on conduct and not results. Bunch, 555 F.3d at 7. But conduct is not synonymous with process. See California Ironworkers Field Pension Trust v. Loomis Sayles & Co., 259 F.3d 1036, 1044-45 (9th Cir. 2001) (finding breach of prudence even though fiduciary complied with industry standards in investigation of the challenged investment). Plaintiffs here challenge Fidelity’s conduct in, among other things, refusing to take effective action despite years of internal, contemporaneously-expressed concerns that the return of the MIP was uncompetitive. See, e.g., JA2083, ¶¶70-71 (in 2009, Fidelity was made aware that its conservative investment strategies were "having a negative impact on... performance" and that consultants are "very concerned by Fidelity’s underperformance relative to peers"); JA2083-86, ¶¶72-76, 79-85 (noting "clients’ concerns about the low CR [(crediting rate)] in our [MIP] portfolios"; that clients "are very concerned with the crediting rate... [and] commented that we are near the bottom of the 30 providers they track in crediting rate"; that Fidelity’s "[c]onservative positioning [is] increasingly difficult to defend as others were conservative as well and have higher yields"; and that "overly stringent [wrap] guideline[s]" led to a "bottom decile crediting rate"). Thus, Plaintiffs do not merely rely on the fact that Fidelity’s strategy happened ex post to yield such uncompetitive returns. 13 Case: 17-1693 Document: 00117228512 Page: 19 Date Filed: 12/04/2017 Entry ID: 6135630 B. Fidelity by Its Own Admission Failed to Meet a Primary Objective of the MIP--Producing a "Competitive" Return--For Several Years ERISA’s duty of prudence requires consideration of the "character and aims" of the particular type of investment at issue. In re Unisys Savings Plan Litig., 74 F.3d 420, 434 (3d Cir. 1996). One of the primary "aims" of the MIP was producing a "competitive" return. While Fidelity repeatedly asserts that the primary goal of the MIP is capital preservation, this is contradicted by undisputed facts about stable value funds in general and the plain language of the MIP’s Declaration of Separate Fund ("DSF"). First, it is undisputed that all stable value funds have, as a goal, capital preservation. See JA1233-34 (Plaintiffs’ expert: "stable value funds... all seek preservation of capital"). Structural features of stable value funds independent of management largely satisfy that goal. JA2068, ¶¶2-3. The MIP in particular, however, had an additional primary goal. As the "investment objectives" section of the DSF makes clear, the goal of the MIP is both capital preservation "as well as [] provid[ing] a competitive level of income …." JA0195 (emphasis added). Indeed, the fact that Fidelity’s governing document placed special emphasis on providing "a competitive level of income" for a fund type that, by definition, seeks capital preservation, sets the MIP apart from a typical stable value fund. See JA0398-99 (MIP competitor fact sheet with no 14 Case: 17-1693 Document: 00117228512 Page: 20 Date Filed: 12/04/2017 Entry ID: 6135630 reference to goal of competitive returns); JA0403 (MIP competitor acknowledging that it is "unique among stable value managers" due, in part, to efforts to seek "consistent excess returns versus the benchmark"). As set forth above, by Fidelity’s own contemporaneous admissions, the MIP failed to meet this objective persistently, for several years. C. Even if Process Is the Only Relevant Consideration, Fidelity’s Failure to Meet the MIP’s Objectives Was the Result of a Flawed Process Fidelity claims in its Brief (pp. 24-25) that "[t]he court emphasized that plaintiffs did not dispute the evidence that Fidelity'engaged in a comprehensive process of evaluating potential investment strategies and investments’ for MIP." The District Court’s conclusion, however, was wrong and Fidelity’s reliance on it misplaced. First, Fidelity’s evidence and testimony of its purportedly prudent MIP-related processes, including those addressing the benchmark, was very general and not focused on the MIP or its investment objectives. Plaintiffs submitted contrary evidence, which the District Court nowhere discussed or considered. See, e.g., Plaintiffs’ Response to Fidelity’s (Claimed) Undisputed Fact Nos. 57 (JA2107), 78 (JA2113), 86 (JA2116), 101 (JA2121-22), 127 (JA2134), 138 (JA2138-39). Second, Plaintiffs presented evidence that, in 2015, Fidelity needed to revamp its processes and "focus[] on enhancing coordination and implementing 15 Case: 17-1693 Document: 00117228512 Page: 21 Date Filed: 12/04/2017 Entry ID: 6135630 systematic process improvements in asset retention and market share growth efforts"; that Fidelity needed a more "formalized coordinated plan that was cross-organization[al]"; and that Fidelity needed better channels of communication where there was previously a "lack of focus." See JA3760-62, ¶106-111. One element of this new business plan included creation of a new "steering committee" and efforts to involve it in the MIP strategic planning process including Fidelity personnel with client-facing responsibilities and knowledge of the MIP pools’ lack of competitiveness. See id. This 2015 initiative is particularly striking in light of Mr. Koloctronis’s concern about these very same issues expressed as early as 2010. He directly admitted that the MIP’s persistent underperformance was tied to institutional, process-based failings at Fidelity, such as its failure to employ "every tool available," lack of flexibility, insistence on doing everything "our way," and Fidelity’s failure to "care about this business." JA2084, ¶77. Third, while Fidelity claimed that part of its processes involved evaluation of MIP competitors, key witnesses testified to the contrary. MIP portfolio manager Robert Chan, for example, questioned the utility of competitor information because "products are not apples-to-apples comparisons," and "it’s not that reliable." JA1571, Chan Dep. 55:16-20. Similarly, while Mr. Haley’s testimony cited by Fidelity addresses a discussion of "competition," at a Trust and Investment 16 Case: 17-1693 Document: 00117228512 Page: 22 Date Filed: 12/04/2017 Entry ID: 6135630 Committee meeting, Mr. Haley stated that "[c]ompetitors are not the focus of the Trust and Investment Committee" (JA3001-02, Haley Dep. 43:25-44:1), and disputes that the MIP has any "competition" today (id., 44:9-14). It was not until the process changes described above were implemented, that Fidelity commenced effective evaluation of the MIP’s competitive position and focus on plan participant returns, as it should have during the entire class period. III. ERISA’S STATUTE OF REPOSE DOES NOT BAR PLAINTIFFS’ CLAIMS For the first time, Fidelity argues that ERISA’s six-year statute of repose, 29 U.S.C. § 1113(1), bars some part of Plaintiffs’ claims. Fidelity did not raise this argument before the District Court and accordingly, the District Court never considered it. For that reason alone, the Court should disregard this argument. See In re Net-Velazquez, 625 F.3d 34, 40 (1st Cir. 2010) ("A defense or legal theory may not be preserved by bare reference in a pleading if it is thereafter abandoned until, freshly discovered on appeal, it is raised anew."). Furthermore, ERISA’s statute of repose only begins to run after "(A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation." 29 U.S.C. § 1113(1). Plaintiffs offered evidence sufficient to raise disputed issues of material fact of a continuing course of disloyal and imprudent conduct that extended until at least 2015. And this case involves 17 Case: 17-1693 Document: 00117228512 Page: 23 Date Filed: 12/04/2017 Entry ID: 6135630 omissions (for example, failure until 2015 to resolve acknowledged flaws in Fidelity’s process for managing the MIP) as well as actions, and Fidelity could have cured the breaches arising from these omissions well within the six-year period. Specifically, with respect to the investment guidelines in wrap contracts, as Fidelity admits, the negotiation of guidelines is an ongoing, dynamic process rather than being fixed at a particular point in time. JA0082, ¶143 ("During the Class Period, Mr. Koloctronis was successful in negotiating a number of changes to wrap contracts that were requested by the Portfolio Managers to give them greater investment flexibility.") (emphasis added). Thus, ERISA’s six-year statute of repose does not bar any part of Plaintiffs’ claims. IV. THE AMICI DO NOT ADDRESS THE RECORD EVIDENCE IN ANY MEANINGUL WAY AND RELY ON LARGELY INCOMPLETE GENERALITIES THAT ARE NOT APPLICABLE HERE Amici, the Securities Industry and Financial Markets Association ("SIFMA") and the Chamber of Commerce of the United States of America and American Benefits Council ("Chamber and Council"), barely address the record evidence in this case. Since this appeal arises from a motion for summary judgment with a voluminous factual record, their briefs are of limited assistance to the Court. SIFMA’s brief emphasizes that the Court should focus on a fiduciary’s process and not results. As set forth above, however, ERISA’s duty of prudence requires more than compliance with process. Furthermore, as SIFMA ignores, 18 Case: 17-1693 Document: 00117228512 Page: 24 Date Filed: 12/04/2017 Entry ID: 6135630 Plaintiffs’ prudence claim is based in part on self-admitted failures of process by Fidelity and this claim focuses on Fidelity’s conduct, not merely the results that flowed from that conduct. Finally, contrary to SIFMA’s argument, Plaintiffs have offered evidence that Fidelity placed its interests over those of the MIP investors. The Chamber and Council’s brief suffers from the same flaws. In addition, the Chamber and Council characterize the evidence of Fidelity’s recurring internal concerns about the MIP’s failure to produce competitive returns as healthy "dissent." In fact, there is no evidence of dissent here. To the contrary, there was a broad internal consensus that the motivating force for Fidelity’s investment decisions was its desire to increase wrap capacity at the expense of its competitors and that, at least until 2015, the MIP’s returns were uncompetitive as a result of that motivation. In any event, even if this evidence could in a general sense be characterized as showing healthy dissent, it could not be so construed when offered in opposition to summary judgment. The party opposing summary judgment is entitled to having all facts construed "in the light most flattering" to that party and "all reasonable inferences" drawn in that party’s favor. Gomez v. Stop & Shop Supermkt. Co., 670 F.3d 395, 396 (1st Cir. 2012). CONCLUSION Finally, Fidelity and amici’s mischaracterization of Plaintiffs’ claims and evidence is demonstrated by Fidelity’s argument that "[i]f plaintiffs had walked 19 Case: 17-1693 Document: 00117228512 Page: 25 Date Filed: 12/04/2017 Entry ID: 6135630 into court in 2010 seeking an injunction requiring Fidelity to adopt a'more aggressive investment strategy’ for any fund—much less this'safe’ fund intended to provide refuge from market volatility—they would have been laughed out of the courthouse." Fidelity Br. at 5. This assertion is wrong on several levels. Given the evidence in the record from 2009 and 2010, Plaintiffs would have "walked into court" with documents and testimony establishing, among other things, the following: (a) The MIP had an investment objective of providing a "competitive level of income" (JA2069, ¶8), but Fidelity’s management of the MIP by its own admission failed to provide plan participants with that "competitive level of income" (JA2083-85, ¶¶70-82); (b) Fidelity was using the G/C 1-5 Index benchmark for the MIP, which had been disfavored, and "heavily criticized" as "too conservative" by industry participants (JA2080, ¶¶55-56); (c) MIP portfolio managers’ bonuses were based on reaching a targeted "alpha" or outperformance versus the conservative G/C 1-5 index, incentivizing them to use the most conservative benchmark (JA2080-81, ¶¶59-64), and the portfolio managers actually sought to and did lower their targeted outperformance, supporting the inference that for their own personal reasons, they had no intention of changing the MIP benchmark to one that was less conservative, more challenging to surpass, and more competitive with MIP peers (JA2081, ¶65); (d) Fidelity’s Vice President and Associate General Counsel expressly acknowledged the institutional failings associated with Fidelity’s management of the MIP, including a failure to diversify, inflexibility in use of wrap capacity substitutes, crediting rates that "suck," and a failure to "care about this business" like MIP competitors (JA2084, ¶77); (e) With respect to wrap providers that had previously stated a future intention to leave the wrap industry, one reversed course in 2010 and advised Fidelity of its intention to grow the wrap business (JA0350), and the other did not 20 Case: 17-1693 Document: 00117228512 Page: 26 Date Filed: 12/04/2017 Entry ID: 6135630 terminate the contracts at that time, and gave Fidelity a long runway for replacement (JA1747); and (f) In 2010, the MIP was open for "business as usual," while Fidelity’s separate account business was "frozen" (JA2075, ¶¶30-31, 33), and thus any wrap capacity issues affected only Fidelity’s separate accounts, not the MIP (JA2075, ¶33). This and other record evidence from that time period would have provided an ample basis from which a factfinder could infer that Fidelity was acting in its own interest in managing the MIP, to the detriment of the promised "competitive level of income" to plan participants. And, contrary to Fidelity’s characterization, Plaintiffs would not have requested that Fidelity be ordered to adopt a more aggressive investment strategy. Rather, as argued at the hearing before the District Court (JA3788-89), Plaintiffs would likely have sought—similar to what was done by the defendant fiduciary in the Bunch case—appointment of an independent fiduciary to ensure that the MIP management process was uncontaminated by Fidelity’s self-interested desire to grow its separate account and other stable value AUM. See 555 F.3d at 8. Had that appointment been made, the implementation of the new MIP management processes Fidelity commenced in 2015 would likely have occurred years earlier, to the great benefit of MIP plan participants and their retirement plans. Thus, this Court should reverse the District Court’s grant of summary judgment to Fidelity and remand the case for further proceedings. 21 Case: 17-1693 Document: 00117228512 Page: 27 Date Filed: 12/04/2017 Entry ID: 6135630 Date: December 1, 2017 Respectfully Submitted, SCHNEIDER WALLACE COTTRELL KONECKY WOTKYNS LLP/s/Jason H. Kim 22 Case: 17-1693 Document: 00117228512 Page: 28 Date Filed: 12/04/2017 Entry ID: 6135630 CERTIFICATE OF COMPLIANCE WITH RULE 32(a) I certify that Plaintiffs-Appellants’ Reply Brief complies with the type and word limitations in Rule 32(a) of the Federal Rules of Appellate Procedure. The Reply Brief consists of 5,391 words, exclusive of the exempted portions of the brief. The Reply Brief has been prepared in proportionally-spaced typeface using Microsoft Word 2016 in 14 point Times New Roman font. The undersigned has relied on the word count feature of this program in preparing this certificate./s/Jason H. Kim 23 Case: 17-1693 Document: 00117228512 Page: 29 Date Filed: 12/04/2017 Entry ID: 6135630 CERTIFICATE OF SERVICE I certify that on the 1st day of December, 2017, I electronically filed the foregoing document with the United States Court of Appeals for the First Circuit by using the CM/ECF system. I certify that the parties or their counsel of record listed below that are registered as ECF filers will be served by the CM/ECF system. Brian D. Boyle Gregory F. Jacob Meaghan VerGow O’MELVENY & MYERS LLP 1625 Eye Street, NW Washington, DC 20006 Alison V. Douglass John J. Falvey, Jr. GOODWIN PROCTER LLP Exchange Place 53 State Street Boston, MA 02109/s/Jason H. Kim 24

DESIGNATION of attorney presenting oral argument filed by Attorney Jonathan Hacker for Appellee Fidelity Management Trust Co. Certificate of service dated 12/05/2017. [17-1693] (JH) [Entered: 12/05/2017 12:08 PM]

Case: 17-1693 Document: 00117229325 Page: 1 Date Filed: 12/05/2017 Entry ID: 6136026 United States Court of Appeals For the First Circuit ____________________ Designation of Attorney Presenting Oral Argument Counsel who intend to present oral argument to the court must file this form no later than two weeks prior to oral argument. Counsel presenting oral argument must be admitted to practice before this court and must have entered an appearance in the case. Counsel who have not entered an appearance must file an appearance and a motion for leave pursuant to Loc. R. 12.0(a) with this designation. Appeal No.: 17-1693 Case Name: Ellis v. Fidelity Management Trust Company Date of Argument: January 9, 2018 Location of Argument: ✔ Boston Puerto Rico Other: Name and appellate designation of the party(ies) you will be arguing on behalf of: Appellee Fidelity Management Trust Company Attorney Name: Jonathan Hacker First Circuit Bar No.: 1169993 Phone Number: 202-383-5285 Fax Number: 202-383-5414 Email: jhacker@omm.com Check the box that applies: ✔ I have already filed an appearance in this matter. I am filing my appearance form and a motion in accordance with Loc. R. 12.0(a) contemporaneously with this form./s Jonathan Hacker 12/5/2017 (Signature) (Date) PLEASE NOTE: Only arguing counsel will be notified by phone when the opinion is released. Case: 17-1693 Document: 00117229325 Page: 2 Date Filed: 12/05/2017 Entry ID: 6136026 CERTIFICATE OF SERVICE I hereby certify that on December 5, 2017, I electronically filed the foregoing with the Clerk of the Court for the U.S. Court of Appeals for the First Circuit by using the appellate CM/ECF system. All interested parties are registered CM/ECF users. Dated: December 5, 2017/s/Jonathan Hacker Jonathan Hacker

DESIGNATION of attorney presenting oral argument filed by Attorney Garrett W. Wotkyns for Appellants James Ellis and William NMI Perry. Certificate of service dated 12/07/2017. [17-1693] (GWW) [Entered: 12/07/2017 05:11 PM]

Case: 17-1693 Document: 00117230699 Page: 1 Date Filed: 12/07/2017 Entry ID: 6136784 Case: 17-1693 Document: 00117230699 Page: 2 Date Filed: 12/07/2017 Entry ID: 6136784

MOTION requesting leave for Attorney Garrett W. Wotkyns to enter an appearance filed by Appellants James Ellis and William NMI Perry. Certificate of service dated 12/07/2017. [17-1693] (GWW) [Entered: 12/07/2017 05:17 PM]

Case: 17-1693 Document: 00117230705 Page: 1 Date Filed: 12/07/2017 Entry ID: 6136788 No. 17-1693 UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT ________________ JAMES ELLIS and WILLIAM PERRY, individually and as representatives of a class of similarly situated persons; Plaintiffs - Appellants v. FIDELITY MANAGEMENT TRUST COMPANY Defendant - Appellee ____________________________________________ Appeal from a Decision of the United States District Court for the District of Massachusetts, No. 15-14128-WGY – Honorable William G. Young ____________________________________________ MOTION FOR LEAVE TO NOTICE APPEARANCE GARRETT W. WOTKYNS SCHNEIDER WALLACE COTTRELL KONECKY WOTKYNS LLP 8501 N. Scottsdale Rd., Suite 270 Scottsdale, Arizona 85253 Telephone: (480) 428-0142 (Additional counsel listed on the inside cover) Attorney for Plaintiffs-Appellants James Ellis and William Perry, Individually and as Representatives of a Certified Class Case: 17-1693 Document: 00117230705 Page: 2 Date Filed: 12/07/2017 Entry ID: 6136788 JASON A. KIM JAMES A. BLOOM SCHNEIDER WALLACE COTTRELL KONECKY WOTKYNS LLP 2000 Powell Street, Suite 1400 Emeryville, California 94608 Telephone: (415) 421-7100 PAUL T. SULLIVAN JEFFREY A. GORDON ZELLE LLP 161 Worcester Road, Suite 502 Framingham, Massachusetts 07101 Telephone: (781) 466-0700 CHRISTOPHER T. MICHELETTI HEATHER T. RANKIE ZELLE LLP 44 Montgomery Street, Suite 3400 San Francisco, California 94104 Telephone: (415) 633-0700 MATTHEW RIGHETTI RIGHETTI GLUGOSKI, P.C. 456 Montgomery Street, Suite 1400 San Francisco, California 94104 Telephone: (415) 983-0900 Attorneys for Plaintiffs-Appellants James Ellis and William Perry, Individually and as Representatives of a Certified Class ii Case: 17-1693 Document: 00117230705 Page: 3 Date Filed: 12/07/2017 Entry ID: 6136788 MOTION FOR LEAVE TO NOTICE APPEARANCE Pursuant to First Circuit Court of Appeals Local Rule 12.0(a), Garrett W. Wotkyns hereby moves this Court for leave to appear and participate in the above- entitled action on behalf of the Plaintiffs-Appellants James Ellis and William Perry, individually and as class representatives. In support of this Motion, I, Garrett W. Wotkyns, states as follows: 1. I was admitted to the United States Court of Appeals for the First Circuit on September 14, 2017. First Circuit Court of Appeals Bar No. 1141522. 2. I was primarily responsible for preparing the Opening Brief. 3. I has been on leave for the past few weeks and returned from leave on December 4, 2017. I am available and fully prepared to lead the scheduled Oral Argument. 4. In accordance with Loc. R. 12.0(a), I am contemporaneously filing my Designation of Attorney Presenting Oral Argument and Notice of Appearance. For the foregoing reasons stated above, Garrett W. Wotkyns respectfully requests that the Court grant him leave to appear and participate, and accept the contemporaneously filed Designation of Attorney Presenting Oral Argument and Notice of Appearance. Date: December 7th, 2017 Respectfully Submitted, By: /s/ Garrett W. Wotkyns Garrett W. Wotkyns 1 Case: 17-1693 Document: 00117230705 Page: 4 Date Filed: 12/07/2017 Entry ID: 6136788 CERTIFICATE OF SERVICE I, Kelle J. Winter, hereby certify that on the 7th day of December, 2017, I electronically filed the foregoing document with the United States Court of Appeals for the First Circuit by using the CM/ECF system. I certify that the parties or their counsel of record are registered as ECF filers and will be served by the CM/ECF system. /s/ Kelle J. Winter Kelle J. Winter 2 Case: 17-1693 Document: 00117230706 Page: 1 Date Filed: 12/07/2017 Entry ID: 6136788 Case: 17-1693 Document: 00117230706 Page: 2 Date Filed: 12/07/2017 Entry ID: 6136788

NOTICE of appearance filed by Attorney Garrett W. Wotkyns for Appellants James Ellis and William NMI Perry. Certificate of service dated 12/07/2017. [17-1693] (DT) [Entered: 12/11/2017 03:04 PM]

Cascage1693169BocuDoeotnēOL: 1422169BagePage: DateFälkedF1AA07 / 201201EntryEmry6CX68B87378 United States Court of Appeals For the First Circuit NOTICE OF APPEARANCE No. 17 - 1693 Short Title: Ellis v. Fidelity The Clerk will enter my appearance as counsel on behalf of (please list names of all parties represented, using additional sheet (s) if necessary): James Ellis and William Perry, individually and as class representatives as the llant (s) [ ] appellee (s) [ ] amicus curiae [ ] petitioner (s) [ ] respondent (s) [ ] intervenor (s) sessicistisk sivissus Date / s / Garrett W. Wotkyns 12 / 07 / 2017. Signature Garrett W. Wotkyns Name Schneider Wallace Cottrell Konecky Wotkyns LLP (480) 428 - 0142 Firm Name (if applicable) Telephone Number 8501 N Scottsdale Road, Suite 270 (866) 505 - 8036 Address Fax Number Scottsdale, Arizona 85253 gwotkyns @ schneiderwallace. com City, State, Zip Code Email (required) Court of Appeals Bar Number: 1141522 animais sunykusiosecuestixiosaisissanssilatelistelike dekksities Has this case or any related case previously been on appeal ? [ V ] No [ ] Yes Court of Appeals No. FEEEEEEEEEEEFF = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Attorneys for both appellant and appellee must file a notice of appearance within 14 days of case opening. New or additional counsel may enter an appearance outside the 14 day period; however, a notice of appearance may not be filed after the appellee / respondent brief has been filed without leave of court. 1st Cir. R. 12. 0 (a) . kagatikijtosensiesitieteicamszesnastisk agensialgslalansiraganasasakaalustatistiske statsbaalikta gaudia Counsel must complete and file this notice of appearance in order to file pleadings in this court. Counsel not yet admitted to practice before this court must promptly submit a bar application, 1st Cir. R. 46. 0 (a) (2) . SEKSENSAXE: AMERASAIStessesetetes Lesliitritab Asrikernisierusasiseseis CaseLage1693169BocuBoeomeoL: 1427169BagePage: DatevältedF1AA07 / 201201 EntryEmry6C367B87378 CERTIFICATE OF SERVICE I, Kelle J. Winter, hereby certify that on the 7th day of December, 2017, I electronically filed the foregoing document with the United States Court of Appeals for the First Circuit by using the CM / ECF system. I certify that the parties or their counsel of record are registered as ECF filers and will be served by the CM / ECF system. / s / Kelle J. Winter Kelle J. Winter NASA KRAXXAKKI 854కడపడుచు మనమందరం కూడANKSHAువకకకకకకకకకకకకకకకకడికిటికీHAf4 / > kkalడుకకకకకకకకకకకకకకక నరకకపక్కన కవరి ఉండవపడుకుకుlistNuisువకుడdisుపు iniadskవకuses నుకతవకి పంపు Eksts:

LETTER regarding Citation of Supplemental Authority pursuant to Federal Rule of Appellate Procedure 28(j). filed by Attorney Garrett W. Wotkyns for Appellants James Ellis and William NMI Perry. Certificate of service dated 01/12/2018. [17-1693] (GWW) [Entered: 01/12/2018 12:59 PM]

Case: 17-1693 Document: 00117242798 Page: 1 Date Filed: 01/12/2018 Entry ID: 6143518 January 12, 2018 VIA CM/ECF Margaret Carter Clerk of the Court FIRST CIRCUIT COURT OF APPEALS John Joseph Moakley U.S. Courthouse 1 Courthouse Way, Suite 2500 Boston, MA 02210 Re: Ellis et al. v. Fidelity Management Trust Company, Case No. 17-1693 Dear Ms. Carter: We write on behalf of Appellants in the above-referenced matter, and respectfully submit this citation of supplemental authority pursuant to Federal Rule of Appellate Procedure 28(j). See Ruskai v. Pistole, 775 F.3d 61, 66 (1st Cir. 2014) (Kattaya, J.) ("[Federal Rule of Appellate Procedure] 28(j) is not strictly limited to offering authorities that did not exist at the time of briefing or oral argument"); People To End Homelessness, Inc. v. Develco Singles Apartment Assoc., 339 F.3d 1, 6 (1st Cir. 2003) (considering new testimonial evidence offered outside appellate record). This matter was argued on January 9, 2018. During oral argument, the Panel asked whether Appellants' argument concerning the availability of alternative forms of wrap coverage (specifically, a class of insurance product called guaranteed investment contracts, or "GICs") was presented to the District Court in Appellants' Rule 56.1 statement and presented in Appellants' opening brief before this Court. During oral argument, Appellants' counsel noted only that Mr. Kolocotronis's email was cited and quoted in the District Court. See JA2084 (¶77). In fact, Appellants made this argument to both the District Court and to this Court. This argument appears at pages 34-35 of Appellants' opening brief and pages 8-9 of Appellants' reply brief. Additionally, Appellants respectfully refer the Court to the following portions of Appellants' Rule 56.1 statement to the District Court, identified at the following citations in the Joint Appendix:  JA2143-44 (¶157) ("Fidelity acknowledged it had 'alternative sources of wrap capacity' through select high-quality insurance companies[.] . . . Also, alternative sources of insuring the MIP (e.g., through GICs) were available to Fidelity. Further, alternative sources of capacity (e.g., through GICs) were available to stable value providers like Fidelity");  JA2088 (¶95) ("The more conservative portfolio profile and lack of non-synthetic components has resulted in lower crediting rates than key competitors[.]"); and 1 Case: 17-1693 Document: 00117242798 Page: 2 Date Filed: 01/12/2018 Entry ID: 6143518  JA2090 (¶103) (noting that the "lack of synthetic wrap capacity, on the other hand, has precluded our growth via new plans/participants while competitors using an open architecture philosophy remain open and have acquired new business."). Thank you for your time and attention to this matter. Respectfully submitted, SCHNEIDER WALLACE COTTRELL KONECKY WOTKYNS LLP s/ Garrett W. Wotkyns Garrett W. Wotkyns Attorney at Law CC: Counsel of Record (via CM/ECF) 2

JUDGMENT: Upon consideration whereof, it is now here ordered, adjudged and decreed as follows: The district court's grant of summary judgment is affirmed. [17-1693] (TS) [Entered: 02/21/2018 03:54 PM]

Case: 17-1693 Document: 00117258272 Page: 1 Date Filed: 02/21/2018 Entry ID: 6152137 United States Court of Appeals For the First Circuit _____________________ No. 17-1693 JAMES ELLIS; WILLIAM PERRY, Plaintiffs, Appellants, v. FIDELITY MANAGEMENT TRUST COMPANY, Defendant, Appellee. __________________ JUDGMENT Entered: February 21, 2018 This cause came on to be heard on appeal from the United States District Court for the District of Massachusetts and was argued by counsel. Upon consideration whereof, it is now here ordered, adjudged and decreed as follows: The district court's grant of summary judgment is affirmed. By the Court: /s/ Margaret Carter, Clerk cc: Michael C. McKay Garrett W. Wotkyns Mark T. Johnson Todd M. Schneider Jason H. Kim Christopher T. Micheletti Rory D. Zamansky Alison V. Douglass Gregory F. Jacob Brian D. Boyle Jonathan Hacker Bradley N. Garcia Meaghan McLaine VerGow Nancy G. Ross Case: 17-1693 Document: 00117258272 Page: 2 Date Filed: 02/21/2018 Entry ID: 6152137 Kevin M. Carroll Brian David Netter Steven Paul Lehotsky Evan Young Janet M. Jacobson

ERRATA issued by court to opinion (published) [6152135-2]. [17-1693] (SBT) [Entered: 03/02/2018 02:04 PM]

Case: 17-1693 Document: 00117261900 Page: 1 Date Filed: 03/02/2018 Entry ID: 6154296 United States Court of Appeals For the First Circuit No. 17-1693 JAMES ELLIS; WILLIAM PERRY, Plaintiffs, Appellants, v. FIDELITY MANAGEMENT TRUST COMPANY, Defendant, Appellee. ERRATA SHEET The opinion of this Court issued on February 21, 2018, is amended as follows: On page 11, the full text of footnote 3 is replaced with: "For this reason, we reject plaintiffs' claim that the Supreme Court's reference to Donovan in Pegram v. Herdrich, 530 U.S. 211, 235 (2000), blesses the interpretation plaintiffs would have us glean from Donovan."

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doc
07/10/2017
CIVIL CASE docketed. Notice of appeal (doc. #139) filed by Appellants James Ellis and William NMI Perry. Docketing Statement due 07/24/2017. Transcript Report/Order form due 07/24/2017. Appearance form due 07/24/2017. [17-1693] (CP) [Entered: 07/10/2017 01:59 PM]
doc
07/13/2017
NOTICE of appearance on behalf of Appellants James Ellis and William NMI Perry filed by Attorney Jason H. Kim. Certificate of service dated 07/13/2017. [17-1693] (JHK) [Entered: 07/13/2017 08:46 PM]
doc
07/13/2017
TRANSCRIPT report/order form filed by Appellants James Ellis and William NMI Perry indicating transcripts are being ordered. [17-1693] (JHK) [Entered: 07/13/2017 08:47 PM]
doc
07/14/2017
TRANSCRIPT ordered: 04/06/2017, Motion Hearing. Transcript(s) due 09/12/2017 from Court Reporter Richard Henry Romanow [17-1693] (AM) [Entered: 07/14/2017 04:31 PM]
doc
07/14/2017
DOCKETING statement filed by Appellants James Ellis and William NMI Perry. Certificate of service dated 07/14/2017. [17-1693] (JHK) [Entered: 07/14/2017 07:53 PM]
07/19/2017
AMENDED notice of appeal (doc. #142) filed by Appellants James Ellis and William NMI Perry on 07/13/2017. [17-1693] (CP) [Entered: 07/19/2017 10:32 AM] (Text entry; no document attached.)
doc
07/24/2017
NOTICE of appearance on behalf of Appellee Fidelity Management Trust Co. filed by Attorney Jonathan Hacker. Certificate of service dated 07/24/2017. [17-1693] (JH) [Entered: 07/24/2017 04:34 PM]
doc
07/24/2017
NOTICE of appearance on behalf of Appellee Fidelity Management Trust Co. filed by Attorney Brian D. Boyle. Certificate of service dated 07/24/2017. [17-1693] (BDB) [Entered: 07/24/2017 04:36 PM]
doc
07/24/2017
NOTICE of appearance on behalf of Appellee Fidelity Management Trust Co. filed by Attorney Gregory F. Jacob. Certificate of service dated 07/24/2017. [17-1693] (GFJ) [Entered: 07/24/2017 04:39 PM]
doc
07/24/2017
NOTICE of appearance on behalf of Appellee Fidelity Management Trust Co. filed by Attorney Meaghan VerGow. Certificate of service dated 07/24/2017. [17-1693] (MMV) [Entered: 07/24/2017 04:41 PM]
doc
07/24/2017
NOTICE of appearance on behalf of Appellants James Ellis and William NMI Perry filed by Attorney Christopher T. Micheletti. Certificate of service dated 07/24/2017. [17-1693] (CTM) [Entered: 07/24/2017 06:36 PM]
doc
07/26/2017
NOTICE issued. After 08/09/2017, the following attorneys will no longer receive notice of court issued documents in this case unless they register for an appellate ECF account: Kyle G. Bates for James Ellis and William NMI Perry, Jeffrey A. Gordon for James Ellis and William NMI Perry, Heather Rankie for James Ellis and William NMI Perry, Matthew Righetti for James Ellis and William NMI Perry, Michael Righetti for James Ellis and William NMI Perry, Paul Thomas Sullivan for James Ellis and William NMI Perry and John J. Falvey for Fidelity Management Trust Co. [17-1693] (CP) [Entered: 07/26/2017 02:47 PM]
doc
07/27/2017
NOTICE of appearance on behalf of Appellee Fidelity Management Trust Co. filed by Attorney Bradley N. Garcia. Certificate of service dated 07/27/2017. [17-1693] (BNG) [Entered: 07/27/2017 05:44 PM]
08/03/2017
NOTICE of filing the following transcript in district court by Court Reporter Richard Henry Romanow: 04/06/2017, Summary Judgment Hearing. In accordance with Judicial Conference Policy, the transcript will not be available to the public by remote electronic access for ninety days after the filing date. During that ninety day period, the transcript may be purchased through the court reporter or viewed at the public terminal at the district court. [17-1693] (CP) [Entered: 08/03/2017 01:05 PM] (Text entry; no document attached.)
doc
08/03/2017
BRIEFING schedule set. Brief due 09/12/2017 for appellant James Ellis. Appendix due 09/12/2017 for appellant James Ellis. Pursuant to F.R.A.P. 31(a), appellee's brief will be due 30 days following service of appellant's brief and appellant's reply brief will be due 14 days following service of appellee's brief. [17-1693] (CP) [Entered: 08/03/2017 01:08 PM]
doc
08/03/2017
CERTIFICATION of filing transcript filed by Court Reporter Richard H. Romanow. [17-1693] (CP) [Entered: 08/04/2017 08:50 AM]
doc
08/10/2017
NOTICE issued. The following attorneys have failed to register for an appellate ECF account and will no longer receive notice of court issued documents in this case: Kyle G. Bates for James Ellis and William NMI Perry, Jeffrey A. Gordon for James Ellis and William NMI Perry, Matthew Righetti for James Ellis and William NMI Perry, Michael Righetti for James Ellis and William NMI Perry, Paul Thomas Sullivan for James Ellis and William NMI Perry and John J. Falvey for Fidelity Management Trust Co. [17-1693] (CP) [Entered: 08/10/2017 02:24 PM]
doc
09/12/2017
BRIEF tendered by Appellants James Ellis and William NMI Perry. [17-1693] (JHK) [Entered: 09/12/2017 07:50 PM]
09/13/2017
APPENDIX filed by Appellants James Ellis and William NMI Perry. Number of volumes: 7. Number of copies: 5. Certificate of service dated 09/12/2017. [17-1693] (AP) [Entered: 09/13/2017 04:41 PM] (Text entry; no document attached.)
doc
09/15/2017
APPELLANTS' BRIEF filed by Appellants James Ellis and William NMI Perry. Certificate of service dated 09/12/2017. Nine paper copies identical to that of the electronically filed brief must be submitted so that they are received by the court on or before 09/22/2017. Brief due 10/12/2017 for APPELLEE Fidelity Management Trust Co. [17-1693] (AP) [Entered: 09/15/2017 01:17 PM]
doc
09/18/2017
ASSENTED TO MOTION to extend time to file brief filed by Appellee Fidelity Management Trust Co. Certificate of service dated 09/18/2017. [17-1693] (JH) [Entered: 09/18/2017 02:57 PM]
09/18/2017
NINE (9) paper copies of appellant/petitioner brief [6120318-2] submitted by Appellants James Ellis and William NMI Perry. [17-1693] (EP) [Entered: 09/19/2017 10:39 AM] (Text entry; no document attached.)
doc
09/19/2017
ORDER granting motion to extend time to file brief filed by Appellee Fidelity Management Trust Co. Brief due 11/03/2017 for appellee Fidelity Management Trust Co. [17-1693] (CP) [Entered: 09/19/2017 12:08 PM]
doc
11/03/2017
NOTICE of appearance on behalf of Movant(s) The Chamber of Commerce of the United States of America and the American Benefits Council filed by Attorney Evan A. Young. Certificate of service dated 11/03/2017. [17-1693] (EY) [Entered: 11/03/2017 01:47 PM]
doc
11/03/2017
BRIEF tendered by Appellee Fidelity Management Trust Co. [17-1693] (JH) [Entered: 11/03/2017 04:35 PM]
doc
11/06/2017
APPELLEE'S BRIEF filed by Appellee Fidelity Management Trust Co. Certificate of service dated 11/03/2017. Nine paper copies identical to that of the electronically filed brief must be submitted so that they are received by the court on or before 11/13/2017. Reply brief due 11/17/2017 for APPELLANT James Ellis and William NMI Perry. [17-1693] (AP) [Entered: 11/06/2017 10:38 AM]
doc
11/06/2017
CORPORATE disclosure statement filed by Appellee Fidelity Management Trust Co. [17-1693] (AP) [Entered: 11/06/2017 10:39 AM]
11/09/2017
NINE (9) paper copies of appellee/respondent brief [6129995-2] submitted by Appellee Fidelity Management Trust Co. [17-1693] (LM) [Entered: 11/09/2017 01:08 PM] (Text entry; no document attached.)
doc
11/10/2017
MOTION for leave to file amicus curiae brief in support of Appellee filed by Movant(s) The Securities Industry and Financial Markets Association. Certificate of service dated 11/10/2017. [17-1693] (BDN) [Entered: 11/10/2017 01:19 PM]
doc
11/10/2017
NOTICE of appearance on behalf of Movant(s) The Securities Industry and Financial Markets Association filed by Attorney Brian D. Netter. Certificate of service dated 11/10/2017. [17-1693] (BDN) [Entered: 11/10/2017 01:21 PM]
doc
11/13/2017
CORPORATE disclosure statement filed by Movant Securities Industry and Financial Markets Association. [17-1693] (CP) [Entered: 11/13/2017 09:01 AM]
doc
11/13/2017
MOTION for leave to file amicus curiae brief in support of Appellee filed by Movant(s) Chamber of Commerce of the United States of America and the American Benefits Council. Certificate of service dated 11/13/2017. [17-1693] (EY) [Entered: 11/13/2017 03:45 PM]
doc
11/13/2017
CORPORATE disclosure statement filed by Movants American Benefits Council and Chamber of Commerce of the United States of America. Certificate of service dated 11/13/2017. [17-1693] (CP) [Entered: 11/13/2017 04:37 PM]
doc
11/13/2017
MOTION to extend time to file reply brief filed by Appellants James Ellis and William NMI Perry. Certificate of service dated 11/13/2017. [17-1693] (JHK) [Entered: 11/13/2017 11:00 PM]
doc
11/14/2017
ORDER granting motion to extend time to file reply brief filed by Appellants James Ellis and William NMI Perry. Reply brief due 12/01/2017 for appellant James Ellis and William NMI Perry. [17-1693] (CP) [Entered: 11/14/2017 09:47 AM]
doc
11/29/2017
ORDER granting motion for leave to file amicus curiae brief filed by Securities Industry and Financial Markets Association. [17-1693] (CP) [Entered: 11/29/2017 03:05 PM]
doc
11/29/2017
AMICUS CURIAE BRIEF filed by Amicus Curiae Securities Industry and Financial Markets Association in support of Appellee. Certificate of service dated 11/10/2017. Nine paper copies identical to that of the electronically filed brief must be submitted so that they are received by the court on or before 12/06/2017. [17-1693] (CP) [Entered: 11/29/2017 03:09 PM]
doc
11/29/2017
ORDER granting motion for leave to file amicus curiae brief filed by Chamber of Commerce of the United States of America and the American Benefits Council. [17-1693] (CP) [Entered: 11/29/2017 03:44 PM]
doc
11/29/2017
AMICUS CURIAE BRIEF filed by Amici Curiae American Benefits Council and Chamber of Commerce of the United States of America in support of Appellee. Certificate of service dated 11/13/2017. Nine paper copies identical to that of the electronically filed brief must be submitted so that they are received by the court on or before 12/06/2017. [17-1693] (CP) [Entered: 11/29/2017 03:49 PM]
doc
11/30/2017
CASE calendared: Tuesday, 01/09/2018 AM Boston, MA Panel Courtroom. Designation form due 12/14/2017. [17-1693] (DT) [Entered: 11/30/2017 04:11 PM]
11/30/2017
NINE (9) paper copies of amicus brief [6134762-2] submitted by Amicus Curiae Securities Industry and Financial Markets Association. [17-1693] (LM) [Entered: 12/01/2017 10:22 AM] (Text entry; no document attached.)
11/30/2017
NINE (9) paper copies of amicus brief [6134792-2] submitted by Amici Curiae American Benefits Council and Chamber of Commerce of the United States of America. [17-1693] (LM) [Entered: 12/04/2017 08:19 AM] (Text entry; no document attached.)
doc
12/01/2017
BRIEF tendered by Appellants James Ellis and William NMI Perry. [17-1693] (JHK) [Entered: 12/01/2017 06:30 PM]
doc
12/04/2017
REPLY BRIEF filed by Appellants James Ellis and William NMI Perry. Certificate of service dated 12/01/2017. Nine paper copies identical to that of the electronically filed brief must be submitted so that they are received by the court on or before 12/07/2017. [17-1693] (AP) [Entered: 12/04/2017 09:04 AM]
doc
12/05/2017
DESIGNATION of attorney presenting oral argument filed by Attorney Jonathan Hacker for Appellee Fidelity Management Trust Co. Certificate of service dated 12/05/2017. [17-1693] (JH) [Entered: 12/05/2017 12:08 PM]
12/06/2017
NINE (9) paper copies of reply brief [6135630-2] submitted by Appellants James Ellis and William NMI Perry. [17-1693] (Text entry; no document attached.)
doc
12/07/2017
DESIGNATION of attorney presenting oral argument filed by Attorney Garrett W. Wotkyns for Appellants James Ellis and William NMI Perry. Certificate of service dated 12/07/2017. [17-1693] (GWW) [Entered: 12/07/2017 05:11 PM]
doc
12/07/2017
MOTION requesting leave for Attorney Garrett W. Wotkyns to enter an appearance filed by Appellants James Ellis and William NMI Perry. Certificate of service dated 12/07/2017. [17-1693] (GWW) [Entered: 12/07/2017 05:17 PM]
doc
12/11/2017
ORDER Entered: Attorney Garrett W. Wotkyns' motion for late appearance is allowed. [17-1693] (DT) [Entered: 12/11/2017 02:59 PM]
doc
12/11/2017
NOTICE of appearance filed by Attorney Garrett W. Wotkyns for Appellants James Ellis and William NMI Perry. Certificate of service dated 12/07/2017. [17-1693] (DT) [Entered: 12/11/2017 03:04 PM]
01/09/2018
CASE argued. Panel: William J. Kayatta, Jr., Appellate Judge; David H. Souter, Associate Supreme Court Justice and Bruce M. Selya, Appellate Judge. Arguing attorneys: Garrett W. Wotkyns for James Ellis and William NMI Perry and Jonathan Hacker for Fidelity Management Trust Co. [17-1693] (DT) [Entered: 01/09/2018 12:30 PM] (Text entry; no document attached.)
doc
01/12/2018
LETTER regarding Citation of Supplemental Authority pursuant to Federal Rule of Appellate Procedure 28(j). filed by Attorney Garrett W. Wotkyns for Appellants James Ellis and William NMI Perry. Certificate of service dated 01/12/2018. [17-1693] (GWW) [Entered: 01/12/2018 12:59 PM]
doc
01/18/2018
RESPONSE to citation of supplemental authorities pursuant to Fed. R. App. P. 28(j) [6143518-2] filed by Appellee Fidelity Management Trust Co. Certificate of service dated 01/18/2018. [17-1693] (JH) [Entered: 01/18/2018 01:59 PM]
doc
02/21/2018
OPINION issued by William J. Kayatta, Jr., Appellate Judge; David H. Souter, Associate Supreme Court Justice* and Bruce M. Selya, Appellate Judge. Published. *Hon. David H. Souter, Associate Justice (Ret.) of the Supreme Court of the United States sitting by designation. [17-1693] (TS) [Entered: 02/21/2018 03:52 PM]
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02/21/2018
JUDGMENT: Upon consideration whereof, it is now here ordered, adjudged and decreed as follows: The district court's grant of summary judgment is affirmed. [17-1693] (TS) [Entered: 02/21/2018 03:54 PM]
doc
03/02/2018
ERRATA issued by court to opinion (published) [6152135-2]. [17-1693] (SBT) [Entered: 03/02/2018 02:04 PM]
doc
03/15/2018
MANDATE issued. [17-1693] (CP) [Entered: 03/15/2018 08:34 AM]
04/09/2018
Sealed record returned to originating court: Presentence Investigation Report [17-1693] CLERK'S NOTE: Docket entry was docketed in the wrong case. Please disregard. (LIM) [Entered: 04/09/2018 11:29 AM] (Text entry; no document attached.)
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