Harzewski, Erica v. Guidant Corporation ( 2007 )


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  •                               In the
    United States Court of Appeals
    For the Seventh Circuit
    ____________
    No. 06-3752
    ERICA HARZEWSKI, et al., on their own behalf and on behalf
    of all other persons similarly situated,
    Plaintiffs-Appellants,
    v.
    GUIDANT CORPORATION, et al.,
    Defendants-Appellees.
    ____________
    Appeal from the United States District Court
    for the Southern District of Indiana, Indianapolis Division.
    No. 05–CV–1009—Larry J. McKinney, Chief Judge.
    ____________
    ARGUED APRIL 10, 2007—DECIDED JUNE 5, 2007
    ____________
    Before BAUER, POSNER, and RIPPLE, Circuit Judges.
    POSNER, Circuit Judge. This is a class action on behalf of
    participants and beneficiaries in a pension plan for employ-
    ees of Guidant Corporation. A manufacturer of cardiovas-
    cular devices, Guidant was bought last year by Boston
    Scientific, which paid for each share of Guidant stock
    $42.28 in cash plus 1.6799 shares (worth $37.78 at the time,
    as each share was worth $22.49) of stock in Boston Scien-
    tific, for a total value of $80.06. The plan’s portfolio in-
    cluded stock in Guidant held by an ESOP (employee stock
    2                                               No. 06-3752
    ownership plan), and the suit claims that the pension
    plan’s fiduciaries acted imprudently in failing to dispose of
    that stock between October 1, 2004, and November 3, 2005.
    The fiduciaries are various employees and board members
    of Guidant, all of whom were under the company’s control
    (as ERISA permits, see 
    29 U.S.C. §§ 1102
    (c)(1), 1103(a)(1);
    Geddes v. United Staffing Alliance Employee Medical Plan, 
    469 F.3d 919
    , 923–24 (10th Cir. 2006); U.S. Department of
    Labor, “Meeting Your Fiduciary Responsibilities,”
    www.dol.gov/ebsa/publications/fiduciaryresponsibility
    .html (visited May 17, 2007)), as was the ESOP. So for the
    sake of simplicity we shall pretend that Guidant is the only
    defendant and the only fiduciary.
    October 2004 to November 2005 was a period, prior to
    Boston Scientific’s acquisition of Guidant (which took place
    in April 2006), when according to the complaint the price
    of Guidant stock was inflated by a fraud committed by the
    company’s management. The alleged fraud consisted of the
    concealment of information concerning defects in the
    company’s implantable defibrillators, which accounted for
    nearly half its revenues. Very shortly after Boston Scien-
    tific’s acquisition of Guidant, the full gravity of Guidant’s
    problems came to light and the revelation contributed to
    the drop in the price of Boston Scientific stock from $22.49
    when Boston Scientific bought Guidant to $16.33 on May 3
    of this year.
    The district court dismissed the complaint on the ground
    that the named plaintiffs have no “standing” to bring this
    suit because they retired from Guidant and cashed out
    their pension benefits before the filing of the amended
    complaint, and so ceased to be participants in the pension
    plan. The lawyers for the class could, to keep the class
    action alive, have substituted as named plaintiffs members
    of the class who remained participants in the plan—current
    No. 06-3752                                                3
    employees. But being unwilling to abandon the claims of
    class members in the situation of the named plaintiffs, they
    decided instead to appeal the district court’s ruling.
    To make the issue of “standing,” as the parties call it,
    intelligible, we must say a bit more about the plan and the
    allegations. The plan is a defined-contribution plan,
    meaning that it does not specify the pension benefits to
    which participants are entitled. Rather, it establishes
    retirement accounts for each participant and a scheme for
    determining the character, amount, timing, etc., of contri-
    butions to those accounts by employer and employee.
    When a participant retires, his pension benefit is simply the
    balance in his account. Contributions to the Guidant
    pension plan and hence to the retirement accounts were to
    come from both a 401(k) plan and the ESOP, the former
    funded by employee contributions and matching employer
    contributions and the latter funded by Guidant’s issuing
    common stock to the ESOP usually amounting to five
    percent of the employee’s monthly salary. Apparently the
    ESOP component of the pension plan accounted for most
    of the value in most of the retirement accounts.
    In December 2004, Guidant agreed to be sold to Johnson
    & Johnson for $76 a share. But before the deal could be
    consummated, problems with Guidant’s products came to
    light. It was forced to recall hundreds of thousands of
    defibrillators and pacemakers; Johnson & Johnson began to
    get cold feet; and the Attorney General of New York filed
    a fraud complaint (still pending) against Guidant. (On
    Guidant’s woes, see Barry Meier & Andrew Ross Sorkin,
    “Price Tag of Guidant Is Lowered,” N.Y. Times, Nov. 16,
    2005, at C1.) But although Guidant was thus in trouble
    toward the end of the period (which, remember, ran from
    October 2004 to November 2005) in which the plaintiffs
    4                                              No. 06-3752
    contend that the pension plan’s fiduciaries should have
    disposed of the plan’s Guidant stock, it bounced back
    shortly afterwards, rising steadily until the company’s sale
    to Boston Scientific in April 2006 (after Johnson & Johnson,
    having earlier lost interest, made a new offer, of $71 per
    share) for, as we said, a total consideration of $80.06 a
    share. (See accompanying charts graphing Guidant’s
    share price from the beginning of 2004 to the acquisition
    by Boston Scientific, and Boston Scientific’s share price
    thereafter.).
    No. 06-3752                                                 5
    Had the pension plan been divested of its Guidant stock
    no later than November 2005, as the plaintiffs claim it
    should have been, the members of the class would have
    missed out on the sale of Guidant to Boston Scientific. It is
    unlikely that they would have done better from whatever
    substitute investment Guidant would have put them in.
    Even after Boston Scientific’s stock tanked following the
    acquisition of Guidant, anyone who owned Guidant stock
    at the time of the acquisition received $42.28 per share in
    cash plus 1.6799 shares of Boston Scientific worth $27.43 as
    of May 3 of this year. The total of $69.71 exceeds the price
    of Boston Scientific on the last day of the class period
    ($57.57) and also the revised offer of $63 per share that
    Johnson & Johnson submitted twelve days after the class
    period ended. And it falls only slightly short of the $71 that
    Johnson & Johnson ultimately offered—an offer that the
    plaintiffs claim was inflated by that company’s ignorance
    of the fraudulent overvaluation of Guidant. So, had there
    6                                               No. 06-3752
    been no fraud, the price that Johnson & Johnson and
    Boston Scientific would have offered for a share of Guidant
    stock would have been less than either the $80.06 that
    Boston Scientific eventually paid or the $69.71 in cash and
    stock that shareholders in Guidant when it was acquired by
    Boston Scientific still have. But whether the class was
    injured by Guidant’s alleged imprudence in its capacity as
    the plan fiduciary (or whether, for that matter, Guidant was
    imprudent) has not been considered by the district court or
    raised as an issue in this appeal, and so we shall not try to
    resolve it.
    The issue that has been raised and pressed is whether the
    plaintiffs are within the group of persons who are autho-
    rized to seek relief under ERISA. Section 502(a)(2) of the
    statute authorizes a participant in an ERISA-governed plan
    to sue “for appropriate relief under section 1109 [of Title
    29].” 
    29 U.S.C. § 1132
    (a)(2). Section 1109 makes ERISA
    fiduciaries personally liable for breaches of their fiduciary
    duties. The named plaintiffs, however, cashed out of the
    plan during the course of the suit. That they cashed out
    after the complaint was filed, and before the amended
    complaint was filed, is immaterial. The parties’ preoccupa-
    tion with those filing dates is a product of the confusing
    use of the word “standing” to denote both a right to invoke
    the aid of the courts and a right to obtain a particular form
    of judicial relief.
    Obviously the named plaintiffs have standing to sue in
    the sense of being entitled to ask for an exercise of the
    judicial power of the United States as that term in Article
    III of the Constitution has been interpreted, because if they
    win they will obtain a tangible benefit. But there is also a
    nonconstitutional doctrine of standing to sue, one aspect of
    which is the requirement that the plaintiff be within the
    No. 06-3752                                                  7
    “zone of interests” of the statute or other source of rights
    under which he is suing. See, e.g., Air Courier Conference of
    America v. American Postal Workers Union, 
    498 U.S. 517
    , 523-
    26 (1991); Clarke v. Securities Industry Ass’n, 
    479 U.S. 388
    ,
    395-400 (1987). The requirement has been used to bar some
    ERISA suits. E.g., Miller v. Rite Aid Corp., 
    334 F.3d 335
    , 340-
    41 (3d Cir. 2003). If someone brought a suit for ERISA
    benefits who had no possible legally protected interest in
    the pension plan (suppose he was merely a creditor of a
    plan participant), he would be outside the statute’s do-
    main, and the court would dismiss the case for want of
    jurisdiction even if the defendant had made no issue of the
    remoteness of the plaintiff’s interest from the interests that
    ERISA protects, namely the interests of plan participants
    and beneficiaries. See, e.g., Western Shoshone Business
    Council v. Babbitt, 
    1 F.3d 1052
    , 1055-56 (10th Cir. 1993);
    Waits v. Frito-Lay, Inc., 
    978 F.2d 1093
    , 1109 (9th Cir. 1992);
    National Union of Hospital & Health Care Employees v. Carey,
    
    557 F.2d 278
    , 280-81 (2d Cir. 1977).
    But if “zone of interests” were interpreted too broadly,
    standing and merits would merge, since any time a plain-
    tiff failed to prove that the statute under which he was
    suing entitled him to relief, thus revealing that he was not
    someone whose interests the statute had been intended to
    protect, his suit would be dismissed for want of standing.
    Both Coan v. Kaufman, 
    457 F.3d 250
    , 256 and n. 3 (2d Cir.
    2006); and Miller v. Rite Aid Corp., 
    supra,
     express misgivings
    about the merger of standing and merits that “zone of
    interest” analysis, unguardedly applied to the question
    whether an ERISA plaintiff is a “participant,” might
    produce. Except in extreme cases illustrated by our exam-
    ple of the attempt of the plan participant’s creditor to
    enforce a claim to ERISA benefits, the question whether an
    8                                                 No. 06-3752
    ERISA plaintiff is a “participant” entitled to recover
    benefits under the Act should be treated as a question of
    statutory interpretation fundamental to the merits of the
    suit rather than as a question of the plaintiff’s right to bring
    the suit. Vartanian v. Monsanto Co., 
    14 F.3d 697
    , 701-02 (1st
    Cir. 1994); cf. National Credit Union Administration v. First
    National Bank & Trust Co., 
    522 U.S. 479
    , 492-94 (1998);
    American Federation of Government Employees, Local 2119 v.
    Cohen, 
    171 F.3d 460
    , 469 (7th Cir. 1999).
    So, having cleared a lot of brushwood, let us turn at last
    to the merits. ERISA defines “participant” to include
    former employees who have cashed out their plan benefits,
    as the named plaintiffs in this case did, if they “may
    become eligible to receive a benefit of any type [from the
    plan].” 
    29 U.S.C. § 1002
    (7). So the question comes down to
    whether, if the plaintiffs win their case by obtaining a
    money judgment against Guidant, the receipt of that
    money will constitute the receipt of a plan benefit. It will.
    In the case of a defined-contribution plan, “an employee’s
    retirement benefit is the eventual value of his or her
    account to which contributions have been made by the
    employer and/or the employee.” West v. AK Steel Corp., No.
    06-3442, 
    2007 WL 1159951
    , at *1 (6th Cir. Apr. 20, 2007); see
    also United States v. Novak, 
    476 F.3d 1041
    , 1061 (9th Cir.
    2007) (en banc). Suppose the amount is miscalculated to the
    participant’s disadvantage and he discovers this later and
    sues. Because he is a former employee eligible to receive a
    benefit, he can maintain the suit under section 502(a) of
    ERISA. West v. AK Steel Corp., 
    supra, at *8-9, *13
    ; Coan v.
    Kaufman, supra, 457 F.3d at 255-56; Dobson v. Hartford
    Financial Services Group, Inc., 
    389 F.3d 386
    , 398 (2d Cir.
    2004).
    No. 06-3752                                                  9
    Some courts have had trouble seeing this because they
    strain to distinguish between “benefits” and “damages.”
    ERISA does not say that a plan participant has the right to
    sue a plan fiduciary for damages, and the Supreme Court,
    noting the high level of detail in the Act’s provisions for
    civil enforcement, 
    29 U.S.C. § 1132
    (a), has refused to allow
    courts to read such a right into the statute. Mertens v. Hewitt
    Associates, 
    508 U.S. 248
    , 255-56 (1993); Massachusetts Mutual
    Life Ins. Co. v. Russell, 
    473 U.S. 134
    , 146-47 (1985). Not that
    monetary relief is excluded, but it must be relief to which
    the plan documents themselves entitle the participant. The
    statute authorizes suits for benefits, just not for damages
    separate from those benefits; so only “extracontractual
    damages are prohibited.” Glencoe v. Teachers Ins. & Annuity
    Ass’n, No. 99-2417, 
    2000 WL 1578478
    , at *1 (4th Cir. Oct. 19,
    2000) (per curiam); see also Powell v. Chesapeake & Potomac
    Tel. Co., 
    780 F.2d 419
    , 424 (4th Cir. 1985). The plaintiffs
    must therefore show that they are claiming an amount of
    money to which they are entitled by the plan documents
    over what they received when they retired and received the
    money in their retirement accounts.
    Suppose Guidant had stolen half the money in a plan
    participant’s retirement account and a suit by the partici-
    pant resulted in a judgment for that amount; the suit would
    have established the retiree’s eligibility for the larger
    benefit. There is no difference if instead of stealing the
    money from the account, Guidant by imprudent manage-
    ment caused the account to be half as valuable as it would
    have been under prudent management. The benefit in a
    defined-contribution pension plan is, to repeat, just what-
    ever is in the retirement account when the employee retires
    or whatever would have been there had the plan honored the
    10                                                No. 06-3752
    employee’s entitlement, which includes an entitlement to
    prudent management.
    The idea that pension “benefits” refer to an amount
    specified in the plan confuses defined-contribution plans
    with defined-benefit plans. The latter specify a formula for
    computing benefits. The former specify a formula for
    making contributions to the retirement account, but the
    benefits themselves are not specified; they are just what-
    ever is in the account when it is cashed out, provided the
    formula is properly applied. If the formula is misapplied to
    the participant’s detriment, he can sue for an adjustment in
    the benefits designed to give him what he would have
    received had the formula been honored. What he cannot
    do is sue for damages, in the hope of obtaining punitive as
    well as compensatory damages. Punitive damages are not
    a plan benefit, because the plan documents do not create an
    entitlement to them. Massachusetts Mutual Life Ins. Co. v.
    Russell, 
    supra,
     
    473 U.S. at 144
    ; Harsch v. Eisenberg, 
    956 F.2d 651
    , 656, 660-61 (7th Cir. 1992); Dobson v. Hartford Financial
    Services Group, Inc., supra, 
    389 F.3d at 397-98
    ; Fraser v.
    Lintas: Campbell-Ewald, 
    56 F.3d 722
    , 724-26 (6th Cir. 1995).
    Nor can he sue to obtain the statutory penalty for failing to
    provide plan documents to a participant, since that penalty
    is not a benefit either. Winchester v. Pension Committee of
    Michael Reese Health Plan, Inc., 
    942 F.2d 1190
    , 1193 (7th Cir.
    1991). Nor seek damages for a plan’s failure to advise a
    participant of an option that would enable him to avoid
    taxes, unless such advice was promised in the plan docu-
    ments. Fraser v. Lintas: Campbell-Ewald, 
    supra,
     
    56 F.3d at
    725-
    26. Nor sue for emotional distress resulting from a plan’s
    failure to honor its obligations to a participant, Reinking v.
    Philadelphia American Life Ins. Co., 
    910 F.2d 1210
    , 1219-20
    (4th Cir. 1990), overruled in part on other grounds in
    No. 06-3752                                                  11
    Quesinberry v. Life Ins. Co. of North America, 
    987 F.2d 1017
    (4th Cir. 1993); that too could not be thought a suit for
    benefits.
    The defendants argue that the plaintiffs don’t need a
    remedy under ERISA because they can sue the defendants
    for securities fraud. But can they? The burden of proving
    fraud is heavier than that of proving a breach of fiduciary
    duty (provided, of course, that a fiduciary relation is
    established). Such a breach might consist in imprudent
    management (for example, failure to diversify), mistake,
    self-dealing and other conflicts of interest, or failure to
    remedy breaches of fiduciary duty by a co-fiduciary—all
    examples of misfeasance rather than malfeasance, involv-
    ing no misrepresentations, and in short falling short of
    fraud. Compare 15 U.S.C. § 78u-4(b); Dura Pharmaceuticals,
    Inc. v. Broudo, 
    544 U.S. 336
    , 342-42 (2005), with 
    29 U.S.C. § 1104
    (a); Massachusetts Mutual Life Ins. Co. v. Russell, 
    supra,
    473 U.S. at 
    140 n. 8; LaScala v. Scrufari, 
    479 F.3d 213
    , 220-22
    (2d Cir. 2007); Smith v. Sydnor, 
    184 F.3d 356
    , 357, 359-60,
    362-63 (4th Cir. 1999); Felber v. Estate of Regan, 
    117 F.3d 1084
    , 1086-87 (8th Cir. 1997); Concha v. London, 
    62 F.3d 1493
    ,
    1502 (9th Cir. 1995); Morgan v. Independent Drivers Associa-
    tion Pension Plan, 
    975 F.2d 1467
    , 1470-71 (10th Cir. 1992).
    The duty of care, diligence, and loyalty imposed by the
    fiduciary principle is far more exacting than the duty
    imposed by tort law not to mislead a stranger. See, e.g.,
    Burdett v. Miller, 
    957 F.2d 1375
    , 1381 (7th Cir. 1992) (“a
    fiduciary duty is the duty of an agent to treat his principal
    with the utmost candor, rectitude, care, loyalty, and good
    faith—in fact to treat the principal as well as the agent
    would treat himself”); Meinhard v. Salmon, 
    164 N.E. 545
    , 546
    (N.Y. 1928) (Cardozo, C.J.); cf. Market Street Associates Ltd.
    v. Frey, 
    941 F.2d 588
    , 594-95 (7th Cir. 1991); Langbecker v.
    12                                               No. 06-3752
    Electronic Data Systems Corp., 
    476 F.3d 299
    , 314 (5th Cir.
    2007).
    We have approached the issue of a former employee’s
    right to obtain monetary relief under ERISA for a breach of
    fiduciary duty by the fiduciary of a defined-contribution
    plan as one of first impression, as it largely is despite both
    parties’ insistence that the case law compels the result for
    which each contends. (This is like the depressingly com-
    mon case in which each party to a contract dispute insists
    that the “plain language” of the contract compels a judg-
    ment for him.) Forty-five of the cases that the parties cite
    are district court cases, which, as we tirelessly but futilely
    remind the bar, are not precedents. Most of the appellate
    cases the parties cite deal with unrelated issues, though
    some contain language that, taken out of context, as both
    sides do relentlessly, might appear to support one side of
    this case or the other. The sheer number of cases cited in
    the briefs—123 different cases—illustrates the regrettable
    tendency of some lawyers to substitute citations for
    analysis.
    The defendants’ best case, though falling far short, is
    Kuntz v. Reese, 
    785 F.2d 1410
     (9th Cir. 1986) (per curiam).
    The court disallowed a suit in which the plaintiffs claimed
    that they had been induced to work for the defendant, and
    thus become participants in its pension plan, by the
    defendant’s misrepresentations concerning the rights and
    benefits that the plan would confer. They were not suing to
    enforce any entitlement created by the plan. They might
    have argued that the defendant should be estopped to deny
    that its representations were the plan. See Coker v. Trans
    World Airlines, Inc., 
    165 F.3d 579
    , 585-86 (7th Cir. 1999);
    Mello v. Sara Lee Corp., 
    431 F.3d 440
    , 444-45 (5th Cir. 2005).
    But they did not argue that.
    No. 06-3752                                                   13
    The plaintiffs’ best case is Panaras v. Liquid Carbonics
    Industries Corp., 
    74 F.3d 786
    , 791 (7th Cir. 1996). It holds that
    the benefits that a former employee may seek are not
    limited to defined benefits; in that case they involved
    severance benefits under a welfare plan. One might have
    thought the point obvious, but the Supreme Court in
    Firestone Tire & Rubber Co. v. Bruch, 
    489 U.S. 101
    , 117 (1989),
    had glossed “benefit” in section 1002(7) as “vested bene-
    fit,” which has caused the lower courts a good deal of
    angst. But in context it is apparent that all the Court meant
    was that the former employee had to have an entitle-
    ment—had to show that had it not been for the trustees’
    breach of their fiduciary duty he would have been entitled
    to greater benefits than he received.
    Panaras differs from this case, however, because it was
    plain what the plaintiff was entitled to. Here the entitle-
    ment is less definite, because it is an entitlement only to
    whatever the retirement account would have been worth
    had Guidant sold the Guidant stock held by the pension
    plan and invested the proceeds elsewhere. This also
    distinguishes the other case on which the plaintiffs particu-
    larly rely, Sommers Drug Stores Company Employee Profit
    Sharing Trust v. Corrigan, 
    883 F.2d 345
     (5th Cir. 1989).
    Former employees were permitted to sue the trustees of a
    defined-contribution plan for the fair market value of stock
    held by the plan that (the employees charged) the trustees
    had improperly disposed of for less than its fair market
    value. But the court thought the claim “quite close to a
    simple claim that benefits were miscalculated,” 
    id. at 350
    ,
    and the claim in this case is farther away from that.
    Not that we approve of the distinction made in Sommers.
    Benefits are benefits; in a defined-contribution plan they
    are the value of the retirement account when the employee
    14                                               No. 06-3752
    retires, and a breach of fiduciary duty that diminishes that
    value gives rise to a claim for benefits measured by the
    difference between what the retirement account was worth
    when the employee retired and cashed it out and what it
    would have been worth then had it not been for the breach
    of fiduciary duty. What seems to have troubled the court in
    Sommers is that a contractual or plan entitlement sounds
    like something quite definite, whereas in Sommers as in this
    case the amount of the entitlement is uncertain because it
    is whatever the plaintiff’s retirement account would have
    contained when he retired had the account been managed
    without the manager’s breaching the duties of a fiduciary.
    But there is nothing in ERISA to suggest that a benefit must
    be a liquidated amount in order to be recoverable.
    The defendants argue in the alternative that our decision
    in Summers v. State Street Bank & Trust Co., 
    453 F.3d 404
     (7th
    Cir. 2006), compels affirmance by exempting the trustee of
    an ESOP from liability for failing to dispose of stock of the
    employer. But that is not what Summers holds. The question
    was whether the participants in the ESOP had a remedy
    against the ESOP trustee for the trustee’s failure to dispose
    of the employer’s stock as the market price of the stock fell
    (ending at zero). We said that the trustee could not be
    faulted for failing to second-guess the stock market, and
    while it could be faulted for failing to recognize (and, by
    diversifying, reduce) the risk that the drop in price was
    imposing on the ESOP’s participants because of the
    increase in the employer’s debt-equity ratio brought about
    by the fall in its market value, the plaintiffs had never
    sought to “determine the point at which the ESOP trustee
    should [have sold] in order to protect the employee-
    shareholder against excessive risk.” 
    Id. at 411
    . The claim in
    this case is that Guidant knew that the price of its stock was
    No. 06-3752                                                 15
    overvalued but took no measures to protect the partici-
    pants in the pension plan, as it could have done by selling
    the Guidant stock held by the plan before the overvaluation
    was discovered by the market and its price plummeted.
    The plaintiffs have not yet had an opportunity to try to
    prove that there was such a window of opportunity.
    Remember that the suit was dismissed for failure to state a
    claim; there has been no discovery.
    So the case must go back to the district court. But as its
    first order of business, that court will have to take a very
    careful look at the plaintiffs’ theory of how they were
    injured. As explained earlier in this opinion, had the
    Guidant stock held by the pension plan been sold by
    November 2005, as the plaintiffs claim should have been
    done, they and the rest of the class would not have bene-
    fited from the sale of Guidant to Boston Scientific for a total
    consideration of $80.06 a share in April 2006. It seems
    exceedingly speculative to suppose that Guidant in its
    capacity as plan fiduciary should and would have found a
    substitute investment that would have turned out as well
    as the sale of Guidant to Boston Scientific turned out. Later,
    it is true, Boston Scientific’s stock, which replaced the
    Guidant stock in the ESOP, lost value. But aside from the
    difficulty of parceling out that loss between continued
    problems with Guidant’s products and Boston Scientific’s
    own problems unrelated to the acquisition, we noted
    earlier that even after the drop in Boston Scientific’s stock
    price the ESOP’s stock holdings combined with the cash
    received in the deal were worth more than the Guidant
    stock had been worth at the end of the class period.
    It probably would have been unlawful, moreover, for
    Guidant to sell the Guidant stock held by the pension plan
    on the basis of inside knowledge of the company’s prob-
    16                                                No. 06-3752
    lems. If so, there are no damages, and indeed no breach of
    fiduciary duty; for the fiduciary’s duty of loyalty does not
    extend to violating the law. Wright v. Oregon Metallurgical
    Corp., 
    360 F.3d 1090
    , 1098 n. 4 (9th Cir. 2004), intimates that
    an ESOP trustee cannot trade on inside information, and
    this is also the SEC’s view. Securities and Exchange
    Commission, “Employee Benefit Plans,” 
    1980 WL 29482
    , at
    *28 and n. 168 (S.E.C. Securities Act of 1933 Release No. 33-
    6188, Feb. 1, 1980); cf. Schlansky v. United Merchants & Mfrs.,
    Inc., 
    443 F. Supp. 1054
    , 1062 (S.D.N.Y. 1977); Craig C.
    Martin et al., “What’s Up on Stock-Drops? Moench Revis-
    ited,” 39 John Marshall L. Rev. 605, 629 (2006). But this is
    another issue to be considered in the first instance on
    remand, should its resolution become critical to the out-
    come.
    VACATED AND REMANDED, WITH DIRECTIONS.
    RIPPLE, Circuit Judge. I am pleased to join that part of the
    panel’s fine opinion that holds that the district court erred
    in dismissing this case for lack of standing. In my view, it
    would be far better, as a prudential matter, to refrain from
    commentary on the merits at this time. Therefore, I respect-
    fully decline to join that part of the panel’s opinion that
    addresses the merits of the case.
    No. 06-3752                                            17
    A true Copy:
    Teste:
    _____________________________
    Clerk of the United States Court of
    Appeals for the Seventh Circuit
    USCA-02-C-0072—6-5-07