No. 11-3012

IN THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

DUDENHOEFFER, et al., APPELLANTS,

V.

FIFTH THIRD BANCORP, et al., RESPONDENTS.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO

(WESTERN DIVISION) CASE NO.: 08-CV-538-SSB (MRA)

BRIEF OF AMICUS CURIAE AARP IN SUPPORT OF APPELLANTS

Jay E. Sushelsky AARP Foundation

Melvin Radowitz AARP

601 E Street, NW Washington, DC 20049 Tel: (202) 434-2060

Fax: (202) 434-6424

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Disclosure of Corporate Affiliations

And Financial Interest

Sixth Circuit Case No: 11-3012 Case Name: Dudenhoeffer, et al. v. Fifth Third Bancorp, et al. Pursuant to 6th Cir. R. 26.1, AARP makes the following disclosure: 1. Is said party a subsidiary or affiliate of a publicly owned corporation? If

Yes, list below the identity of the parent corporation or affiliate and the relationship between it and the named party:

No.

2. Is there a publicly owned corporation, not a party to the appeal, that has a financial interest in the outcome? If yes, list the identity of such corporation and the nature of the financial interest: No.

CERTIFICATE OF SERVICE I certify that on July 14, 2011 the foregoing document was served on all parties or their counsel of record through the CM/ECF system if they are registered users or, if they are not, by placing a true and correct copy in the United States mail, postage prepaid, to their address of record. /s/ Jay E. Sushelsky Counsel for Amicus Curiae AARP

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TABLE OF CONTENTS

TABLE OF AUTHORITIES ................................................................................. iii

INTEREST OF AMICUS CURIAE .......................................................................... 1

SUMMARY OF ARGUMENT ............................................................................... 2

ARGUMENT ........................................................................................................... 3

I. BECAUSE THE DEFINED CONTRIBUTION RETIREMENT PLAN PARTICIPANT COMMUNITY DEPENDS UPON PLAN INVESTMENTS TO FUND THEIR RETIREMENT, PLAN FIDUCIARIES’ ROLE IN THE INVESTMENT SELECTION PROCESS IS CENTRAL TO PLAN EFFECTIVENESS ........................................................................................ 3 A. Retirement Plan Participants Are Adapting To A New Retirement

Savings Regime ................................................................................... 3

B. Plan Fiduciaries’ Investment Selections Must Be Considerate Of Participants’ Limited Opportunity To Make Suitable Investment Decisions In Their Plans ..................................................................... 5

II. BECAUSE EMPLOYEES BEAR ALL OF THE RISKS IN CONNECTION

WITH FUNDING THEIR RETIREMENT, PLAN FIDUCIARIES MUST ABIDE BY THE STATUTORY REQUIREMENTS OF PRUDENCE AND LOYALTY TO SELECT AND MONITOR RETIREMENT PLAN INVESTMENT OPTIONS ............................................................................ 7

A. Because Defined Contribution Retirement Plans Are A Central

Component Of Employees’ Compensation, Fiduciaries’ Failure To Act In The Best Interests Of Plan Participants Deprives Employees Of Critical Elements of Their Earned Compensation .............................. 7

B. Because Participants Generally Lack Financial Literacy,

They Rely On Fiduciaries To Select And Monitor Plan Investment Choices ............................................................................. 9

ii

1. Even though most Americans graduate high school, a large number have poor literacy skills ................................... 9

2. Americans’ financial literacy skills are even

lower than their general literacy skills .................................... 10

3. Many employees erroneously believe employer stock is safer than other investments ............................................................ 12

4. Because participants are not confident of their investment abilities they rely on plan fiduciaries to chose and manage investment options prudently, loyally, and in their best interests .......................... 14

III. CONGRESS ENACTED ERISA’S FIDUCIARY STANDARDS TO PROTECT PENSION PLAN ASSETS AND THEREBY PROTECT PARTICIPANTS’ RETIREMENT SECURITY ....................................................................... 15

A. ERISA Was Enacted To Prevent Mismanagement Of Pension Assets,

Not To Promote Employee Ownership Of Employer Stock ............. 15

B. Legislative History Confirms That ERISA Contains No Exception To The Duties Of Loyalty And Prudence ............................................... 17

C. Employers Receive Significant Advantages, Including Tax And Cost Savings, From Using Employer Stock For Matching

Contributions ..................................................................................... 21 IV. IN ORDER TO PROTECT PLAN ASSETS AND PARTICIPANTS’

RETIREMENT SECURITY, ERISA REQUIRES THAT THERE BE A PLAN FIDUCIARY WITH RESPONSIBILITY FOR PLAN ASSETS

AND INVESTMENTS ................................................................................ 22 CONCLUSION ...................................................................................................... 25

iii

TABLE OF AUTHORITIES

Federal Cases Bannistor v. Ullman, 287 F.3d 394 (5th Cir. 2002) ............................................... 25 Conn. Nat’l Bank v. Germain, 503 U.S. 249, 112 S.Ct. 1146, 117 L.Ed.2d 391

(1992) .................................................................................................................. 20 Donovan v. Cunningham, 716 F.2d 1455 (5th Cir. 1983) ..................................... 21 Eaves v. Penn, 587 F.2d 453 (10th Cir. 1978) ....................................................... 19 LaRue v. DeWolff, Boberg & Assocs., Inc. 552 U.S. 248 (2008) ........................ 3, 5 Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985)................................ 15, 16 Mertens v. Hewitt Assocs., 508 U.S. 248 (1993) ................................................... 25 Schroyer v. Frankel, 197 F.3d 1170 (6th Cir.1999) ........................................ 20, 21 Telespectrum, Inc. v. Pub. Serv. Com'n of Ky., 227 F.3d 414, 421 (6th Cir.

2000)United States v. Steele, 147 F.3d 1316 (11th Cir.1998) ............................ 20 Varity Corp. v. Howe, 516 U.S. 489 (1996) .......................................................... 25

Federal Statutes, Rules and Regulations

Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. (2006) .............................................................. 3, 17, 21

§ 2(b), 29 U.S.C. § 1001(b) ............................................................... 8, 15, 16 § 3(21)(A), 29 U.S.C. § 1002(21)(A) .......................................................... 25 § 402(a)(1), 29 U.S.C. § 1102(a)(1) ............................................................ 15 § 403(a), 29 U.S.C. § 1103(a) ...................................................................... 24 § 403(a)(1), 29 U.S.C. § 1103(a)(1) ............................................................ 24 § 403(a)(2), 29 U.S.C. § 1103(a)(2) ............................................................ 24 § 404, 29 U.S.C. § 1104 .............................................................................. 19 § 404(a), 29 U.S.C. § 1104(a) ...................................................................... 21 § 404(a)(1), 29 U.S.C. § 1104(a)(1) ............................................................ 21

iv

§ 404(a)(1)(A), 29 U.S.C. § 1104(a)(1)(A) ................................................. 23 § 404(c), 29 U.S.C. § 1104(c) ...................................................................... 20

§ 502(a), 29 U.S.C. § 1132(a) ...................................................................... 15 Internal Revenue Code § 162 ............................................................................................................ 22 § 212 ............................................................................................................ 22 §404(a)(9) .................................................................................................... 22 § 404(k) ........................................................................................................ 22 § 409(e) ........................................................................................................ 22

29 C.F.R. § 2509.75-5 ............................................................................................ 23 29 C.F.R. § 2509.75-8 ............................................................................................ 24 29 C.F.R. § 2550.404c-1(2007) ............................................................................. 20

Legislative History

Employee Retirement Income Security Act, Pub. L. No. 93-406, reprinted in SUBCOMM. ON LABOR OF THE COMM. ON LABOR AND PUBLIC WELFARE, 93rd CONG., Legislative History of the Employee Retirement Income Security Act of 1974, Vol. III (1976) .................................................................... 8, 17

H.R. REP. NO. 90-1867 (1968) ......................................................................... 18, 19 H.R. CONF. REP. NO. 93-1280 (1974), reprinted in 1974 U.S.C.C.A.N. 5038 .............................................19, 20, 23 Senate Report 93-127, 93 Cong., 1st Sess., reprinted in 1974 U.S.C.C.A.N 4838 .......................................................... 19 Strengthening Worker Retirement Security Before the H. Comm. on Education and Labor, 111th Cong. (2009), available at

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_ house_hearings&docid=f:47491.wais ........................................................... 5

v

Miscellaneous

AARP, 401(k) Participants’ Awareness and Understanding of Fees (July 2007), available at http://assets.aarp.org/rgcenter/econ/401k_fees.pdf ................... 6

AARP, Investor Perceptions and Preferences Toward Selected Stock Market

Conditions and Practices: An AARP Survey of Stock Owners Ages 50 and Older (Mar. 2004), available at http://assets.aarp.org/rgcenter/econ/

investor.pdf .............................................................................................. 7, 15 D. Baker, R. Parker, M. Williams, S. Clark, and J. Nurss, The Relationship of

Patient Reading Ability to Self-Reported Health and Use of Health Services, 87(6) AM. J. PUB. HEALTH 1027-30 (1997) ................................................. 10

J.R. Brown, 401(K) Matching Contributions in Company Stock: Costs and Benefits

for Firms and Workers, 90 J. PUB. ECON. 1315 (2006) ............................... 22 Andrea Coombes, U.S. Retirement Income Deficit: $6.6 Trillion, MARKETWATCH,

Sept. 15, 2010, http://www.marketwatch.com/story/us-retirement-income-deficit-66-trillion-2010-09-15 ..................................................................... 13

Fin. Ind. Regulatory Auth. Investor Educ. Found., Financial Capability in the

United States: Initial Report of Research Findings from the 2009 National Survey (Dec. 2009), http://www.finrafoundation.org/resources/research /p120478 ...................................................................................................... 10

Fin. Ind. Regulatory Auth. Investor Educ. Found.: Financial Capability in the

United States: National Survey-Executive Summary Report (Dec. 2009), http://www.finrafoundation.org/resources/research/p120478 ............... 11, 12 Investment Company Inst., The Economics of Providing 401(k) Plans: Services,

Fees, and Expenses, 19(5) RES. FUNDAMENTALS (Sept. 2010) ................... 11 Eleanor Laise, Despite Risks, Workers Guzzle Company Stock, WALL ST. J., Mar. 5, 2009, http://online.wsj.com/article/SB1236213727 1003518 3.html ............................................................................................ 13 Anne Marie Lofaso, Toward a Foundational Theory of Workers’ Rights: The

Autonomous Dignified Worker, 76 UMKC L. Rev. 1 (2007) ....................... 7

vi

Annamaria Lusardi, et al., Financial Literacy and Financial Sophistication in the

Older Population: Evidence from the 2008 HRS (Univ. Mich. Ret. Res. Ctr. Working Paper 2009-216, 2009), http://www.mrrc.isr.umich.edu /publications/papers/pdf/wp216.pdf ............................................................ 13

Annamaria Lusardi, NBER Working Paper No. 13824, Household Saving

Behavior: The Role of Financial Literacy, Information and Financial Education Programs (Feb. 2008), http://www.nber.org/papers/w13824 ... 10

Matthew Martin, Literature Review on the Effectiveness of Financial Education

(June 2007), Fed. Reserve Bank of Richmond Working Paper No. 07-3, http://www.richmondfed.org/publications/research/working_papers/2007/ wp_07-3.cfm .......................................................................................... 10, 11 MetLife, Eighth Annual Study of Employee Benefits Trends: Findings from the

National Survey of Employers and Employees (2010) .................................. 8 Dr. Allen Michel & Dr. Israel Shaked, Fiduciary Responsibility in the Case of

Defined Contribution Plans, 23-JAN Am. Bankr. Inst. J. 46 (2005) ............ 4 Joe Mont, The Dangers of Investing in Your Company Stock, NEWSWEEK, JULY 9,

2010, http://www.newsweek.com/blogs/jobbed/2010/07/09/the-dangers-of-investing-in-your-company-stock.html ....................................................... 14

Steven J. Sacher, et al., Regulation of Qualified Income Plans, EMPLOYEE

BENEFITS LAW (2d ed. 2000) ....................................................................... 22 Ben Steverman, Sell Your Employer’s Stock. Now. March 19, 2008,

http://www.businessweek.com/investing/insights/blog/archives/2008/03/sell_your_employers_stock_now.html.............................................................. 14

U.S. Dep’t of Educ., Nat’l Ctr. for Educ. Statistics, Digest of Education Statistics,

2009 (Apr. 2010), http://nces.ed.gov/ programs/digest/d09/tables/dt09_008 .asp?referrer=list ............................................................................................ 9

vii

U.S. Dep’t of Educ., Nat’l Ctr. for Educ. Statistics, Inst. of Educ. Sci., Literacy in Everyday Life: Results From the 2003 National Assessment of Adult

Literacy (Apr. 2007), available at http://nces.ed.gov/naal /kf_demographics.asp .................................................................................... 9

U.S. Dep’t of Educ., Nat’l Ctr. for Educ. Statistics, National Adult Literacy Survey (1992), available at http://www.nces.ed.gov/pubs93/93275.pdf ..... 9 U.S. DEP’T OF LABOR, EMPLOYEE BENEFITS SECURITY ADMIN., What You Should

Know About Your Retirement (Nov. 2006), available at http://www.dol.gov/ebsa/publications/wyskapr.html .................................... 8

U.S. DEP’T OF LABOR, PENSION & WELFARE BENEFITS ADMIN., STUDY OF 401(K)

PLAN FEES AND EXPENSES §1.1 (1998), available at http://www.dol.gov/ ebsa/pdf/401krept.pdf .................................................................................... 4

U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-07-530T, PRIVATE PENSIONS:

INCREASED RELIANCE ON 401(K) PLANS CALLS FOR BETTER INFORMATION ON FEES (March 2007), available at http://www.gao.gov/new.items/ d07530t.pdf ............................................................................................ 4, 5, 6

U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-08-774, PRIVATE PENSIONS:

FULFILLING FIDUCIARY OBLIGATIONS CAN PRESENT CHALLENGES FOR 401(K) PLAN SPONSORS (July 2008), available at http://www.gao.gov /new.items/d08774.pdf .................................................................................. 4

Wall Street Employee Owners Shudder As Bear Stearns Implodes,

MARKETWATCH, Mar. 17, 2008, http://www.marketwatch.com/story/wall-street-employee-owners-shudder-as-bear-stearns-implodes?

pagenumber=2 ............................................................................................. 13 Kimberly Lynn Weiss, Directors’ Liability for Corporate Mismanagement of

401(k) Plans: Achieving the Goals of ERISA in Effectuating Retirement Security, 38 IND. L. REV. 817 (2005) ........................................................... 23

James A. Wooten, THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974: A

POLITICAL HISTORY (2004) .................................................................... 17, 18

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INTEREST OF AMICUS CURIAE AARP is a nonpartisan, nonprofit organization dedicated to representing the

needs and interests of persons aged 50 and older. Nearly half of AARP’s members

are employed full or part-time, with many working for employers which provide

pension and health plans covered by ERISA. One of AARP’s primary objectives

is to foster the economic security of individuals as they age by attempting to ensure

the availability, security, equity, and adequacy of public and private pension,

health, disability, and other employee benefits through educational and advocacy

efforts

Participants in private, employer-sponsored employee benefit plans rely on

ERISA to protect their rights under those plans. In particular, ERISA’s protections,

and plan participants’ opportunities to enforce the statute’s protections, are of vital

concern to workers of all ages and to retirees, since the quality of workers’ lives in

retirement depends heavily on their retirement plan benefits.

Given the primacy of Defined Contribution plans in the American workplace

landscape, it is imperative that fiduciaries of ERISA-governed plans be held to a

high standard of duty to manage plans prudently. The resolution of the issues in

this case will have a direct and vital bearing on individuals’ ability to obtain those

benefits which will foster their economic security. AARP, therefore, submits its

brief amicus curiae to facilitate a full consideration by this Court of these issues.

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SUMMARY OF ARGUMENT

Because the employer-sponsored retirement plan landscape has shifted

radically from the standard defined benefit plan regime to the defined contribution

plan regime, employees bear an entirely new set of responsibilities for attending to

their retirement security. In the main employees are ill-equipped to make the wide

array of financial decisions that retirement financial planning entails. They are

heavily dependent upon the fiduciaries of their respective defined contribution

retirement plans to steward the plan investment options in a manner that limits the

risk of investment decisions based upon too little information and knowledge.

Employees’ attitudes about holding employer stock in their defined

contribution plans are often founded on misapprehensions about the risk-reward

calculus of doing so, and as a consequence employees frequently make bad

decisions pertaining to holding employer stock in their retirement savings plan

accounts.

ERISA’s duties of prudence and loyalty by which ERISA employee benefit

plan fiduciaries are bound entertain no exception for fiduciaries of employer stock

plans. Rather, the duties of prudence and loyalty take precedence and override the

ERISA provisions permitting plan holdings of employer stock.

Vigilance by defined benefit plan fiduciaries in connection with the selection

and monitoring of investments in defined contribution retirement savings plans is

3

critical to the fulfillment of ERISA’s retirement security provisions for the

generation of employer-sponsored defined contribution plan savers under the new

retirement plan regime. Employer stock plans pose no exception to the vigilance

requirement.

ARGUMENT

I. BECAUSE THE DEFINED CONTRIBUTION RETIREMENT PLAN PARTICIPANT COMMUNITY DEPENDS UPON PLAN INVESTMENTS TO FUND THEIR RETIREMENT, PLAN FIDUCIARIES’ ROLE IN THE INVESTMENT SELECTION PROCESS IS CENTRAL TO PLAN EFFECTIVENESS.

A. Retirement Plan Participants Are Adapting To A New Retirement

Savings Regime.

Private retirement pension benefit programs were established to provide a

stable source of income to employees and their families upon retirement. In the

period since the passage of the Employee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. § 1001 et seq. (2006), and particularly in the past two

decades, there has been a marked shift from defined benefit plans to defined

contribution plans. LaRue v. DeWolff, Boberg & Assocs., 552 U.S. 248 (2008).

Defined contribution plans have so eclipsed defined benefit plans that “[b]y 2005 .

. . roughly 21 million active participants [were] covered by defined benefit plans

and approximately 55 million active participants [were covered by] defined

contribution plans.” U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-07-530T,

4

PRIVATE PENSIONS: INCREASED RELIANCE ON 401(K) PLANS CALLS FOR BETTER

INFORMATION ON FEES 5 (March 2007), available at

http://www.gao.gov/new.items/d07530t.pdf [hereinafter GAO REPORT: PRIVATE

PENSIONS: INCREASED RELIANCE ON 401(K) PLANS]. Of the various types of

defined contribution plans available, 401(k) plans have become the most popular.

See Dr. Allen Michel & Dr. Israel Shaked, Fiduciary Responsibility in the Case of

Defined Contribution Plans, 23-JAN Am. Bankr. Inst. J. 46, 46 (2005). As of

2005, there were approximately “436,000 401(k) plans that held about $2.4 trillion

in assets for the retirement savings of more than 54 million plan participants—

more than any other type of employer-sponsored pension plan in the United

States.” U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-08-774, PRIVATE PENSIONS:

FULFILLING FIDUCIARY OBLIGATIONS CAN PRESENT CHALLENGES FOR 401(K) PLAN

SPONSORS 1 (July 2008), available at http://www.gao.gov/new.items/d08774.pdf.

In contrast to the predictable retirement income stream that flows from a

defined benefit plan, in a defined contribution plan employer and/or employee

contributions invested in a tax-deferred qualified plan determine the dollar amount

a participant will receive in retirement, completely subject to the investment

performance-driven accumulation that results over the life of the account. U.S.

DEP’T OF LABOR, PENSION & WELFARE BENEFITS ADMIN., STUDY OF 401(K) PLAN

FEES AND EXPENSES §1.1 (1998), available at http://www.dol.gov/ebsa/pdf/

5

401krept.pdf; see also LaRue, 552 U.S. 248, 250 n.1. (2008) (contrasting defined

benefit and defined contribution plans). Accordingly, employees bear a far greater

responsibility for the ultimate funding of their retirement income than previously.

GAO REPORT: PRIVATE PENSIONS: INCREASED RELIANCE ON 401(K) PLANS CALLS

FOR BETTER INFORMATION ON FEES, supra, at 9; Strengthening Worker Retirement

Security Before the H. Comm. on Education and Labor, 111th Cong. 3 (2009)

(statement of John C. Bogle, Founder and Former Chief Executive of the Vanguard

Group), available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname

=111_house _hearings &docid=f:47491.wais (describing this transition to defined

contribution plans as “a massive transfer from business enterprises to their

employees of both investment risk (and return) and the longevity risk of retirement

funding”).

B. Plan Fiduciaries’ Investment Selections Must Be Considerate Of Participants’ Limited Opportunity To Make Suitable Investment Decisions In Their Plans.

For the majority of individuals now saving for retirement through 401(k)

plans, the amount contributed and accumulated is critically important, as it is often

their only source of private retirement income. “[M]ore than 60 percent of workers

with pension coverage in 2003 had only a 401(k) plan or other defined contribution

plan, which suggests that worker reliance on defined contribution plans has

increased considerably since 1981.” AARP, 401(k) Participants’ Awareness and

6

Understanding of Fees 2 (July 2007), available at http://assets.aarp.org/

rgcenter/econ/401k_fees.pdf.

Moreover, most 401(k) account balances are not high to start with: “While

some participants have account balances of greater than $100,000, most have

smaller balances. Based on industry estimates for 2005, 37 percent of participants

had balances of less than $10,000, while 16 percent had balances greater than

$100,000.” GAO REPORT: PRIVATE PENSIONS: INCREASED RELIANCE ON 401(K)

PLANS, supra, at 9-10. In this environment, a fiduciary’s duty of selecting prudent

investments rises to critical significance because participants’ investment

selections are limited by the plan fiduciary’s selection of available fund options.

Research indicates that participants are not confident of their abilities to

select prudently from among the investment options available to them, which

emphasizes the significance of a plan fiduciary’s role to prudently select funds.

For example, a survey of stock owners age 50 to 70 indicates that:

close to three in four respondents (72-76%) have more confidence in the abilities of mutual fund managers or stock brokers to conduct transactions for them than they have in their own abilities to conduct transactions. In contrast, only one in three (33%) are confident in their ability to buy and sell individual stocks without the assistance of stock brokers.

AARP, Investor Perceptions and Preferences Toward Selected Stock Market

Conditions and Practices: An AARP Survey of Stock Owners Ages 50 and Older

7

(Mar. 2004), available at http://assets.aarp.org/rgcenter/econ/investor.pdf.

[hereinafter Investor Perceptions]. The rapid growth and primacy of such plans to

fund retirement makes it vital that defined contribution retirement plan participants

be protected.

II. BECAUSE EMPLOYEES BEAR ALL OF THE RISKS IN CONNECTION WITH FUNDING THEIR RETIREMENT, PLAN FIDUCIARIES MUST ABIDE BY THE STATUTORY REQUIREMENTS OF PRUDENCE AND LOYALTY TO SELECT AND MONITOR RETIREMENT PLAN INVESTMENT OPTIONS.

A. Because Defined Contribution Retirement Plans Are A Central

Component Of Employees’ Compensation, Fiduciaries’ Failure To Act In The Best Interests Of Plan Participants Deprives Employees Of Critical Elements of Their Earned Compensation.

A simple equation exists in the workplace: an employer is able to operate its

business with the benefit of an employee’s labor in exchange for paying that

employee a salary and other benefits. See generally Anne Marie Lofaso, Toward a

Foundational Theory of Workers’ Rights: The Autonomous Dignified Worker, 76

UMKC L. Rev. 1 (2007). The benefits exchanged for the employee’s labor often

includes pension and other employee benefits.1 See ERISA § 2(b), 29 U.S.C.

1 One of the primary factors motivating employers to offer retirement savings plans is the need to attract, and retain desirable workers and maintain productivity in a high quality workforce with competitive compensation packages. Investment Company Inst., The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 19(5) RES. FUNDAMENTALS at 2 (Sept. 2010), available at http://www.ici.org/pdf/fm-v15n7.pdf. Accord, MetLife, Eighth Annual Study of

8

§ 1001(b) ([benefit plans] “have become an important factor affecting the stability

of employment ….”); Employee Retirement Income Security Act, Pub. L. No. 93-

406, reprinted in SUBCOMM. ON LABOR OF THE COMM. ON LABOR AND PUBLIC

WELFARE, 93rd CONG., Legislative History of the Employee Retirement Income

Security Act of 1974, Vol. III, at 4751 (1976).

Employees who participate in defined contribution plans contribute a portion

of their salaries to those plans and may receive matching contributions from their

employers as part of their compensation package. U.S. DEP’T OF LABOR,

EMPLOYEE BENEFITS SECURITY ADMIN., What You Should Know About Your

Retirement at 3 (Nov. 2006), available at http://www.dol.gov/ebsa

/publications/wyskapr.html. They participate based on the assumption that

“someone is minding the store,” that is, fiduciaries are administering the plans

prudently and solely in the best interests of plan participants. ERISA § 404(a)(1),

29 U.S.C. § 1104(a)(1). A holding that plan fiduciaries are not liable for fiduciary

breaches that cause losses to participants’ accounts and the plan as a whole

threatens to seriously undermine the confidence employees have in these plans to

provide for their retirement security. Such a holding undermines the assumptions

Employee Benefits Trends: Findings from the National Survey of Employers and Employees at 8, 18 (2010).

9

and understandings underlying the employer-employee relationship, not to mention

the language and purpose of ERISA.

B. Because Participants Often Lack Financial Literacy, They Rely On Fiduciaries To Select And Monitor Plan Investment Choices.

1. Even though most Americans graduate high school,

a large number have poor literacy skills.

Although 84.6 % of adults over age 25 had a high school or higher degree in

2003, U.S. Dep’t of Educ., Nat’l Ctr. for Educ. Statistics, Digest of Education

Statistics, 2009 at Table 8 (Apr. 2010), available at http://nces.ed.gov/programs

/digest/d09/tables/dt09_008.asp?referrer=list, 43% of adults fell into the Basic or

Below Basic literacy level, signifying difficulty in reading, comprehension,

computation, communication, writing, and problem solving.2 See U.S. Dep’t of

Educ., Nat’l Ctr. for Educ. Statistics, Inst. of Educ. Sci., Literacy in Everyday Life:

Results From the 2003 National Assessment of Adult Literacy at 13 (Apr. 2007),

available at http://nces.ed.gov/naal/kf_demographics.asp. Some experts estimate

that literacy levels can lag behind educational attainment by at least four years so

that high school graduates effectively have the literacy skills of ninth-graders. See

2 A person who has proficient literacy would be able to explain the difference between two types of employee benefit plans, use a table to determine a pattern in oil exports across years, and using information in a news article, calculate the amount of money that should go to raising a child. U.S. Dep’t of Educ., Nat’l Ctr. for Educ. Statistics, National Adult Literacy Survey at 10-11 (1992), http://www.nces.ed.gov/pubs93/93275.pdf.

10

D. Baker, R. Parker, M. Williams, S. Clark, and J. Nurss, The Relationship of

Patient Reading Ability to Self-Reported Health and Use of Health Services, 87(6)

AM. J. PUB. HEALTH 1027-30 (1997).

2. Americans’ financial literacy skills are even lower than their general literacy skills.

As 401(k) plans became more predominant in the workplace, scholars began

looking at the impact of financial literacy on participants’ saving and investing

behavior. What they found was sobering. Early research warned of the lack of

financial literacy among savers and investors and the implications for individuals’

economic security. See Annamaria Lusardi, NBER Working Paper No. 13824,

Household Saving Behavior: The Role of Financial Literacy, Information and

Financial Education Programs at 7 (Feb. 2008), http://www

.nber.org/papers/w13824. In response to these findings, financial education

programs were developed and promoted. Matthew Martin, Literature Review on

the Effectiveness of Financial Education 3 (June 2007), Fed. Reserve Bank of

Richmond Working Paper No. 07-3, available at

http://www.richmondfed.org/publications/research/working_papers/2007/pdf/wp07

-3.pdf; Financial Literacy, supra at 10. Even after significant attempts to promote

financial education, financial literacy is still frighteningly low. Id. at 21; see Fin.

Ind. Regulatory Auth. Investor Educ. Found., Financial Capability in the United

11

States: Initial Report of Research Findings from the 2009 National Survey (Dec.

2009), http://www.finrafoundation.org/resources/research/p120478.

In a recently completed study to evaluate financial knowledge, respondents

were exposed to a battery of questions covering fundamental concepts of

economics and finance impacting everyday life, such as calculations involving

interest rates and inflation, principles relating to risk and diversification, the

relationship between bond prices and interest rates, and the impact that a shorter

term can have on total interest payments over the life of a mortgage. While the

correct response to any single question sometimes exceeded 60%, fewer than half

of respondents (46%) correctly answered both a question about interest rates and a

question about inflation. Less than one-third (30%) correctly answered those

questions plus a question about risk and diversification. And, fewer than 10% of

respondents were able to answer all questions correctly. Fin. Ind. Regulatory

Auth. Investor Educ. Found.: Financial Capability in the United States: National

Survey-Executive Summary Report at 17, 18 (Dec. 2009), available at http://www

.finrafoundation.org/resources/research/p120478.

For example, only two-thirds of respondents (64%) were able to correctly

identify that the money in an account earning 1% interest during a year with 2%

inflation would be able to buy less than it would today. Only one in five

respondents (21%) knew that if interest rates rise, bond prices will typically fall.

12

See Fin. Ind. Regulatory Auth. Investor Educ. Found., Financial Capability in the

United States; Initial Report.

A more disturbing finding is that a many defined contribution plan

participants could not describe how their retirement assets were invested. For

example, 17% did not know whether the assets in their retirement plan were

invested in stocks or stock mutual funds, and 37% did not know whether their

assets were invested primarily in a life-cycle or target-date fund. Id. at 28.

3. Many employees erroneously believe employer stock is safer than other investments.

Of particular significance to this case is that 47% of respondents answered

that the statement “[b]uying a single company’s stock usually provides a safer

return than a stock mutual fund” was either true or they didn’t know. Id. at 40.

In contrast, most, if not all, economists would agree that an excess of

employer stock or any other single stock is too risky and potentially devastating to

a participant’s retirement security due to the lack of diversification. Even after

Enron and Worldcom and the enactment of the Pension Protection Act, employees

still tend to own too much employer stock. E.g., Wall Street Employee Owners

Shudder As Bear Stearns Implodes, MARKETWATCH, Mar. 17, 2008,

http://www.marketwatch.com/story/wall-street-employee-owners-shudder-as-bear-

stearns-implodes?pagenumber=2; Eleanor Laise, Despite Risks, Workers Guzzle

13

Company Stock, WALL ST. J., Mar. 5, 2009, at D-1, http://

online.wsj.com/article/SB123621372710035183.html. Indeed, a recent research

paper showed that persons over age 55 expressed a preference for having company

stock. And, depending on the manner of the question, most rejected the idea of

holding little or no money in company stock. See Annamaria Lusardi, et al.,

Financial Literacy and Financial Sophistication in the Older Population: Evidence

from the 2008 HRS 6-7 (Univ. Mich. Ret. Res. Ctr. Working Paper 2009-216,

2009), http://www.mrrc.isr.umich.edu/publications/papers/pdf/wp216.pdf. A

partial explanation as to why participants are willing to stuff their plans with their

company stock may be due to a misplaced sense of employee loyalty or a desire to

emulate the success of their corporate leaders. Andrea Coombes, U.S. Retirement

Income Deficit: $6.6 Trillion, MARKETWATCH, Sept. 15, 2010, http://www

.marketwatch.com/story/us-retirement-income-deficit-66-trillion-2010-09-15.

Whatever the explanation, where the employer stock crashes and participants have

not properly diversified their accounts, participants may lose not only their jobs,

but their retirement security as well.

It is beyond argument that employees having a sizable percentage of their

retirement savings in employer stock are at excessive risk. Joe Mont, The Dangers

of Investing in Your Company Stock, NEWSWEEK, JULY 9, 2010,

http://www.newsweek.com/blogs/jobbed/2010/07/09/the-dangers-of-investing-in-

14

your-company-stock.html. And one investment savvy market commentator urges

that it is never a good idea to own employer stock because it involves what the

investment world calls unrewarded risk – risk that doesn’t pay off with higher

returns over the long-term. Ben Steverman, Sell Your Employer’s Stock. Now.

March 19, 2008, http://www.businessweek.com/investing/insights/blog

/archives/2008/03/sell_your_employers_stock_now.html.

4. Because participants are not confident of their investment abilities they rely on plan fiduciaries to chose and manage Investment options prudently, loyally, and in their best interests.

It is not surprising, then, that research indicates participants lack confidence

in their abilities to select from among the investment options available to them.

For example, a survey of stock owners age 50 to 70 indicates that -

close to three in four respondents (72-76%) have more confidence in the abilities of mutual fund managers or stock brokers to conduct transactions for them than they have in their own abilities to conduct transactions. In contrast, only one in three (33%) are confident in their ability to buy and sell individual stocks without the assistance of stock brokers.

Investor Perceptions, supra.. In the same manner as stockholders outside of plans

feel that they must rely on investment professionals to assist them in their

investment selection, to an even greater extent are retirement plan participants

captive to the investment selection process that rests in the hands of defined

contribution plan administrators because of the far-reaching control the plan

15

administrator has in defining the universe of investment options available to plan

participants. Therefore, it is important that fiduciaries are held accountable for their

selection and retention of options from which participants may choose to invest.

ERISA §§ 2(b), 404(a)(1)(A), 502(a), 29 U.S.C. §§ 1001(b), 1104(a)(1)(A),

1132(a); cf. Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140-43 & n.8 (1985)

(ERISA was passed to prevent the misuse and mismanagement of plan assets).

Given these studies, Congress appeared prescient when it enacted ERISA

and refused to provide exemptions to ERISA’s overarching fiduciary demands of

prudence and loyalty.

III. CONGRESS ENACTED ERISA’S FIDUCIARY STANDARDS TO PROTECT EMPLOYEE BENEFIT PLAN ASSETS AND THEREBY PROTECT PARTICIPANTS’ RETIREMENT SECURITY.

A. ERISA Was Enacted To Prevent Mismanagement Of Plan Assets, Not To Promote Employee Ownership Of Employer Stock.

After assembling a record that showed a history and pattern of employees

failing to receive their promised employee benefits, a lack of disclosure and

transparency, and varied and numerous financial abuses, Congress enacted ERISA.

By “establishing standards of conduct, responsibility, and obligation for

fiduciaries” and “by providing for appropriate remedies [and] sanctions” for

violations of those fiduciary standards, ERISA § 2(b), 29 U.S.C. § 1001(b),

16

Congress sought to protect “the interests of employees and their beneficiaries in

employee benefit plans.” Id.

Citing the extensive legislative history from the Congressional Record, the

Supreme Court recognized in Massachusetts Mutual Life Insurance Co. v. Russell,

that “[t]he floor debate also reveals that the crucible of congressional concern was

misuse and mismanagement of plan assets by plan administrators and that ERISA

was designed to prevent these abuses in the future.” 473 U.S. 134, 140 (1985).

The Court’s recognition of congressional concern was not surprising given

the history leading up to ERISA’s enactment. Among the events that precipitated

Congress to regulate retirement plans were the failure of Studebaker and the

termination of its pension plan, the trial of Jimmy Hoffa alleging (and later finding

him guilty of) fraud of the Central States Pension Fund, and instances of other

trustees embezzling or using pension funds for their own benefit. See, e.g., James

A. Wooten, THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974: A

POLITICAL HISTORY at 8-10, 51-80, 112-113, 118 (2004).

Because employer stock was not at the forefront of congressional concern, it

is not surprising that ERISA’s legislative findings do not mention the goal of

promotion of “employee ownership of employer stock.”3 Accordingly, promoting

3 A review of ERISA’s legislative history shows little discussion concerning the importance of employee ownership of employer stock. Instead, the legislative

17

employee ownership of company stock is merely ancillary to the Act’s stated

policies – the principal of which is the “Protection of Employee Benefit Rights” as

stated at the beginning of Title I of ERISA. See ERISA § 2, 29 U.S.C. § 1001

(reviewing the need to protect participants and beneficiaries).

B. Legislative History Confirms That ERISA Contains No Exception To The Duties Of Loyalty And Prudence.

Significantly, both the 1974 House and Senate bills created similar general

standards for fiduciaries – the duties of prudence and loyalty. However, a major

difference between the two bills was the provision concerning self-dealing

transactions. The provision in the two bills was a mirror image. The House

version generally permitted party-in-interest transactions prohibiting only

extraordinary transactions. In contrast, the Senate bill banned all self-dealing, but

exempted certain common transactions. Because the Senate bill hampered

employee stock ownership plans, Senator Russell Long -- a big supporter of

ESOPs -- favored the House bill. However, after Senator Jacob Javits circulated a

list of various abuses that the House bill would not regulate, the Senate version was

history shows discussions concerning the percentage of employer stock that defined benefit plans should be permitted to hold. See Employee Retirement Income Security Act, Pub. L. No. 93-406, reprinted in SUBCOMM. ON LABOR OF THE COMM. ON LABOR AND PUBLIC WELFARE, 93rd CONG., Legislative History of the Employee Retirement Income Security Act of 1974, Vol. II at 1665, Vol. III at 3774, 4743 (1976).

18

endorsed. This resulted in stronger fiduciary requirements concerning ESOPs, by

categorically banning self-dealing and not providing ESOPs with any exception to

the general fiduciary requirements. See Wooten, supra, at 257-58.

Additional legislative history confirms that this understanding of the statute

is correct. The pertinent statutory provisions all have their origins in ERISA’s first

progenitor, H.R. REP. NO. 90-1867, at 7-8 (1968). The Committee Report

accompanying the original House legislation explained the interaction of these

provisions, categorically rejecting the reading adopted by the district court:

…. this proviso [exempting the diversification requirement for employer stock] is not intended to insulate such plans from other applications of the prudent man rule. Thus, if investment by a profit sharing plan in the employer is completely unsound the prudent man rule should operate to preclude such investment. All that the proviso says is that if investment in the employer is sound, no profit sharing or similar plan shall be precluded by virtue of a diversification requirement from investing part or all of the plan funds in the stock or securities of the employer to the extent the plan so requires. (emphasis added).

Id. at 7-8 (emphasis added).

The legislative history closer in time to ERISA’s enactment is equally

definitive. Eaves v. Penn, 587 F.2d 453, 460 (10th Cir. 1978) (“It is emphasized,

however, that even with respect to the transactions [involving employer stock]

expressly allowed, the fiduciaries’ conduct must be consistent with the prudent

man standard.”) (quoting Senate Report 93-127, at 93 Cong., 1st Sess., reprinted in

19

1974 U.S.C.C.A.N 4838, 4867). Nowhere in the statutory language or legislative

history did Congress indicate an exception to the prudence rules. E.g., H.R. CONF.

REP. NO. 93-1280, at 305 (1974), reprinted in 1974 U.S.C.C.A.N. 5038, 5086

(“[A]ll plan fiduciaries must act, with respect to the plan, in accordance with a

‘prudent man’ rule.”); Eaves, 587 F.2d at 460 (“the legislative history combined

with a natural and clear reading of § 404, lead to the inexorable conclusion that

ESOP fiduciaries are subject to the same fiduciary standards as any other fiduciary

except to the extent that the standards require diversification of investments.”).

There is simply nothing in ERISA or its legislative history to show that Congress

intended to exclude investments in employer stock, even those required by the

plan, from the duty of prudence. The holding that congressional intent to

encourage employee stock ownership requires courts to permit the imprudent

acquisition or retention of employer stock cannot be squared with the statutory

language and legislative history of ERISA. Nor does it follow that Congress’s

specific and cabined willingness to tolerate a lack of diversification in employer

stock investments suggests a willingness to tolerate imprudent investments

mandated by the plan document. If anything, Congress showed particular concern

for plans which used employer securities by indicating that it barred the use of

20

section 404(c) as a defense to fiduciary breaches.4 H.R. CONF. REP. NO. 93-1280, at

305 (1974), reprinted in 1974 U.S.C.C.A.N. 5038, 5086.

This Court “must presume that a legislature says in a statute what it means

and means in a statute what it says.” Telespectrum, Inc. v. Pub. Serv. Com'n of Ky.,

227 F.3d 414, 421 (6th Cir. 2000), quoting Conn. Nat’l Bank v. Germain, 503 U.S.

249, 253–54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992); accord Schroyer v. Frankel,

197 F.3d 1170, 1174 (6th Cir. 1999). Consequently, a court should not disregard

the plain language of a statute unless a literal application of the statutory language

“would lead to absurd results . . . or would thwart the obvious purpose of the

statute.” Id. Here, literal application of ERISA’s language clearly furthers

ERISA’s purpose of protecting participants and beneficiaries and the financial

integrity and stability of retirement plans. See ERISA § 2, 29 U.S.C. § 1001.

Indeed, to hold otherwise would create a perverse incentive for plan sponsors to

disregard ERISA fiduciary responsibilities so as to avoid ERISA’s pervasive reach

and thwart its requirements. These principles and ERISA’s plain language, applied

to the facts as alleged in the Complaint, make unmistakably clear that nothing in

the statute exempts fiduciaries of plans investing in company stock, or any other 4 Moreover, section 404(c), exempting fiduciaries from liability for losses caused by participants' exercise of control over assets in their individual accounts, would be superfluous if a plan sponsor could simply relieve fiduciaries from any liability for losses in an individual account. 29 U.S.C. § 1104(c); see also 29 C.F.R. § 2550.404c-1 (2007).

21

investment for that matter, from ERISA § 404(a)’s requirements of loyalty and

prudence. See Donovan v. Cunningham, 716 F.2d 1455, 1467 (5th Cir. 1983)

(“ESOP fiduciaries remain subject to the general requirements of Section 404”).

C. Employers Receive Significant Advantages, Including Tax And Cost Savings, From Using Employer Stock For Matching Contributions.

To be sure, ERISA allows employers to offer employer stock as a plan

investment option. But the reasons companies choose to do so is hardly altruistic

and has little to do with enhancing the security of participants’ retirement savings.

On the contrary, employers receive significant advantages from providing the

employer matching contribution in employer stock, not the least of which is that

matching in company stock is far less expensive that matching in cash, IRC

§§ 162, 212, 404(a)(9), provides tax benefits for companies that pay dividends,

IRC § 404(k), and puts a block of the stock in employer friendly hands, IRC

§ 409(e), which can help thwart takeovers. See generally Steven J. Sacher, et al.,

Regulation of Qualified Income Plans at 245-50, EMPLOYEE BENEFITS LAW (2d ed.

2000); J.R. Brown, 401(K) Contributions in Company Stock: Costs and Benefits

for Firms and Workers, 90 J. PUB. ECON. 1315, 1319-21 (2006).

Because the reasons for allowing plan investment in employer securities has

little if anything to do with the promotion of ERISA’s primary purpose –

protecting retirement savings, and, indeed, often undermines this purpose, it is

22

incumbent on this and other courts to ensure that the employers’ interests in

promoting company stock is properly constrained. The district court erred by

elevating this ancillary purpose above the primary objective of Congress when

enacting ERISA. ERISA’s permissiveness with respect to investments in employer

stock is a subset of the fiduciary principles applicable to ERISA fiduciary status,

and strictly subject to those principles. The trial court erred in interpreting

ERISA’s employer stock provisions as trumping the statute’s entire fiduciary

scheme.

IV. IN ORDER TO PROTECT PLAN ASSETS AND PARTICIPANTS’ RETIREMENT SECURITY, ERISA REQUIRES THAT THERE BE A PLAN FIDUCIARY WITH RESPONSIBILITY FOR PLAN ASSETS AND INVESTMENTS. Under ERISA, fiduciary status may be conferred in one of two ways. The

first is that an individual or entity may be named a fiduciary directly in the

governing plan documents or pursuant to a procedure specified in those

documents. The second is by meeting the statute’s functional definition of a

fiduciary. See generally Kimberly Lynn Weiss, Directors’ Liability for Corporate

Mismanagement of 401(k) Plans: Achieving the Goals of ERISA in Effectuating

Retirement Security, 38 IND. L. REV. 817, 826 (2005).

Congress required a plan to identify a named fiduciary in the plan instrument

so that responsibility to control and manage the operation and administration of the

23

plan and liability for its mismanagement would be established with a degree of

certainty. ERISA § 402(a)(1), 29 U.S.C. § 1102(a)(1); see H.R. CONF. REP. NO.

1280, 93rd Cong., 2d Sess., reprinted in 1974 U.S.C.C.A.N. 5038, 5076 (“[A]

written plan is required so the employee may know who is responsible for

operating the plan. Therefore, the plan document is to provide for the “named

fiduciaries” who have authority to control and manage the plan operations and

administration.”); see also 29 C.F.R. § 2509.75-5, FR-1.

Along with ensuring that there is at least one fiduciary which is always

responsible for administration of the plan, Congress also established statutory

requirements to guarantee that some entity is responsible for the management of

plan assets. Under ERISA § 403(a), 29 U.S.C. § 1103(a), plan assets must be held

in trust by one or more trustees. Those trustees must either be named in a plan

document or trust instrument, or appointed by a named fiduciary of the plan. Id.

These trustees will always be fiduciaries, see 29 C.F.R. § 2509.75-8, D-3, and

unless one of two exceptions is met, they will have exclusive authority and

discretion to manage and control all plan assets. The first exception is where the

written plan document instructs that the trustee is subject to the direction of a

named fiduciary who is not a trustee. ERISA § 403(a)(1), 29 U.S.C. § 1103(a)(1).

The second exception is where there has been a proper delegation to an investment

manager. ERISA § 403(a)(2), 29 U.S.C. § 1103(a)(2). If the employer is

24

identified in the plan document as a named fiduciary with the responsibility for

directing the trustee, then the employer clearly is a fiduciary with regard to plan

assets, including plan assets invested in the employer’s stock. If so, then the

employer may have the duty to direct the plan trustee to cease investment in the

employer’s stock, regardless of the plan provisions. The employer has a duty to

override the plan documents, if it is prudent to do so. The court’s opinion

overlooks this principle.

Alternatively, even though ERISA specifies that there must be a trustee and

a named fiduciary to ensure that some entity has responsibility for the plan and its

assets, the statute provides another method for determining fiduciary status.

ERISA provides a functional definition of fiduciary, which depends on the facts of

a particular situation. Varity Corp. v. Howe, 516 U.S. 489, 527 (1996) (Congress

“define[d] ‘fiduciary’ not in terms of formal trusteeship, but in functional terms of

control and authority over the plan.”) (quoting Mertens v. Hewitt Assocs., 508 U.S.

248, 262 (1993)). ERISA provides that “a person is a fiduciary with respect to a

plan to the extent (i) he exercises any discretionary authority or discretionary

control respecting management of such plan or exercises any authority or control

respecting management or disposition of its assets, . . . . or (iii) he has any

discretionary authority or discretionary responsibility in the administration of such

plan.” ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A); see also 29 C.F.R. § 2509.75-

25

8, at D-3. The term fiduciary must be broadly construed in order to fulfill the

remedial purposes of ERISA. See Bannistor v. Ullman, 287 F.3d 394, 401 (5th

Cir. 2002). Appellees here fall within the definition of ERISA plan fiduciary. Any

other analysis would necessarily cut a gaping gulf between ERISA’s laws and

ERISA fiduciary practices.

Under the plain language of the statute, the district court erred in its

imposition upon plaintiffs of a pleading standard that attaches a presumption of

reasonableness that flies in the face of ERISA’s fiduciary mandates. The court’s

holding is the functional equivalent of a license for fiduciaries of employer stock

plans to look the other way in circumstances in which common investing sense

dictates that it is utterly irresponsible for the plan to invest in employer stock.

26

CONCLUSION

For the reasons stated above, AARP respectfully submits that the district

court’s judgment should be reversed and the case should be remanded for further

proceedings.

Respectfully submitted,

Dated: July 14, 2011 /s/Jay E. Sushelsky Jay E. Sushelsky

AARP Foundation Litigation

Melvin Radowitz

AARP 601 E Street, NW Washington, DC 20049 Counsel for Amicus Curiae AARP

CERTIFICATE OF COMPLIANCE

Pursuant to Fed. R. App. P. 32(a)(7)(B)(C) and Sixth Circuit Rule 32(a), the

undersigned certifies that this brief complies with the type limitations of these

Rules.

1. Exclusive of the exempted portions in FRAP 32(a)(7)(B)(i) and (iii), the

brief contains no more than 5,562 words in its entirety.

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 of 14-point

Times New Roman using Microsoft Word.

3. If the Court so requests, the undersigned will provide an electronic version

of the brief and/or a copy of the word or line printout.

4. The undersigned understands a material misrepresentation in completing this

certificate of the Fed. R. App. P. 32(a)(7)(B)(C) and Sixth Circuit Rule 32(a)

may result in the Court’s striking the brief and imposing sanctions against

the person signing the brief.

/s/ Jay E. Sushelsky

CERTIFICATE OF SERVICE

I certify that on this 14th day of July, 2011, pursuant to Sixth Circuit Rule

25, I caused the foregoing to be served electronically through the ECF System to

all counsel of record.

/s/Jay E. Sushelsky