Hecker v. Deere & Co.

• Decision Date: 24 June 2009
• Docket Number: No. 07-3605.,No. 08-1224.,07-3605.,08-1224.
• Citation: 569 F.3d 708
• Parties: Dennis HECKER, et al., Plaintiffs-Appellants, v. DEERE & COMPANY, Fidelity Management Trust Co., and Fidelity Management & Research Co., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

569 F.3d 708

Dennis HECKER, et al., Plaintiffs-Appellants, v. DEERE & COMPANY, Fidelity Management Trust Co., and Fidelity Management & Research Co., Defendants-Appellees.

No. 07-3605.

No. 08-1224.

United States Court of Appeals, Seventh Circuit.

June 24, 2009.

Elizabeth J. Hubertz, Attorney, Washington University School of Law, Jerome J. Schlichter, Attorney (argued), Schlichter, Bogard & Denton, St. Louis, MO, Jennifer L. Amundsen, Attorney, Solheim, Billing & Grimmer, Madison, WI, for Plaintiffs-Appellants.

Charles C. Jackson, Attorney (argued), Sari M. Alamuddin, James E. Bayles, Jr., Morgan, Lewis & Bockius, Chicago, IL, Robert N. Eccles, Attorney, Walter E. Dellinger, Attorney (argued), O'Melveny & Meyers, Washington, DC, James Fleckner, Attorney Goodwin Proctor, Boston, MA, for Defendants-Appellees.

Before DANIEL A. MANION, Circuit Judge, DIANE P. WOOD, Circuit Judge and JOHN DANIEL TINDER, Circuit Judge.

ORDER

Appellants filed their Petition for Panel Rehearing and Petition for Rehearing En Banc on March 9, 2009. Appellee Deere & Company and Appellees Fidelity Management Trust Company and Fidelity Management & Research Company filed their Answers to the Petition on April 6, 2009. In addition, three amicus curiae briefs in support of rehearing or rehearing en banc were filed in conjunction with the Petition: one from the Secretary of Labor (filed March 20, 2009), one from the AARP and other groups (filed March 18, 2009), and one from a group of law professors (filed March 20, 2009). No judge¹ asked for a vote on the petition for rehearing en banc, and all members of the panel have voted to deny the petition for rehearing, with the following addition to the original opinion, Hecker v. Deere & Co., 556 F.3d 575 (7th Cir.2009):

The Secretary of Labor has made a number of points in her amicus brief that deserve a brief response. First, she argues that the panel has erred by failing to give appropriate deference to her interpretation of the regulation implementing 29 U.S.C. § 1104(d), 29 C.F.R. § 2550.404c-1. But, as the Secretary herself acknowledges, the panel did not ignore any language in the regulation proper. Instead, it did not give the weight that the Secretary believes is due to some language in a footnote to the preamble to the regulation. (We are speaking here of the version of the regulation that was in force at the time relevant to this suit; it should go without saying that the Secretary is free to propose and enact new regulations addressed more specifically to the way in which choice of investment options in a plan relates to the safe harbor provision, if she believes that this would be appropriate.) In her brief, the Secretary explains that she presently "interprets her regulation to mean that, even if the plan otherwise qualifies as a section 404(c) plan, the fiduciary is not relieved by 404(c) from liability for plan losses resulting from the imprudent selection and monitoring of an investment option offered by the plan...." As support for that statement, she cites 56 Fed.Reg. 10724,10732 n. 21 (Mar. 13,1991); DOL Opinion Letter No. 98-04A,1998 WL 326300 at *3 n. 1 (May 28,1998); DOL Information Letter to Douglas O. Kant, 1997 WL 1824017 at *2 (Nov. 26,1997) (Kant Letter). This is enough, she asserts, to make that proposition a rule, entitled to deference under Chevron USA Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), rather than a more informal statement of administrative practice, entitled only to respect under the standards of United States v. Mead Corp., 533 U.S. 218, 229-30, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001), which in turn relies on Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944).

With respect, we cannot agree with the Secretary that the footnote in the preamble is entitled to full Chevron deference. The panel did defer to the Secretary's concerns, to the extent that it refrained from making any definitive pronouncement on "whether the safe harbor applies to the selection of investment options for a plan." Hecker, 556 F.3d at 589. Instead, as we explain further in this order, we left this area open for future development, whether on the basis of a different set of pleadings, or on the basis of a regulation directed to this issue. The Secretary admits that the panel's primary holding—that there was no duty to scour the market to find the fund with the lowest imaginable fees, and that the fees themselves in the Funds identified in the complaint could not be deemed imprudent because they were offered at the same prices to the general public—does not call into question the validity of even the preamble to the Secretary's regulation, much less the regulation taken as a whole. Thus, her real quibble is with the panel's alternate holding that the complaint the court was evaluating contained enough information to warrant the conclusion that Deere was entitled to the safe harbor defense. In our view, the Secretary's concern is more hypothetical than real. She fears that some case in the future may arise in which a Plan fiduciary acts imprudently by selecting an overpriced portfolio of funds, and that this opinion will somehow immunize the fiduciary from accountability for that decision.

The...