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Schweitzer v. Inv. Comm. of the Phillips 66 Sav. Plan

United States Court of Appeals for the Fifth Circuit

May 22, 2020, Filed

No. 18-20379

Opinion

 [*192]  PATRICK E. HIGGINBOTHAM, Circuit Judge:

Four participants in Phillips 66's retirement plan bring this putative class action against the plan's Investment Committee for breach of fiduciary duties under the Employee Retirement Income Security Act. They allege that the Defendants failed to monitor properly and divest ConocoPhillips stock from the retirement plan. The district court granted Defendants' motion to dismiss for failure to state a claim, and Plaintiffs timely appealed. We affirm.

In 2012, ConocoPhillips Corporation, a large [**2]  oil and gas company, spun off Phillips 66 as a separate, independent company. ConocoPhillips retained its upstream business, namely exploration and production, while Phillips 66 took on the downstream  [*193]  business, including refining, marketing, and transportation operations.

With the separation, 12,000 ConocoPhillips employees became employees of Phillips 66. Many of them had held assets in individual retirement accounts in the ConocoPhillips Savings Plan at the time of the separation. These accounts included large investments in two single-stock funds comprised of ConocoPhillips stock. As a result of the separation, each employee received one share of Phillips 66 stock for every two shares of ConocoPhillips stock held in their account. Afterward, Phillips 66 employees had $2.9 billion in ConocoPhillips Plan assets, including $1.1 billion invested in the ConocoPhillips Funds. The ConocoPhillips Plan transferred these assets to the Phillips 66 Savings Plan, the newly established retirement plan for Phillips 66 employees. After the transfer, Phillips 66 Plan participants could retain or sell their investments in the ConocoPhillips Funds, but could not make new investments in the Funds.

As [**3]  the Phillips 66 Plan is a defined contribution plan, each participant has an individual account and benefits are based on the amounts contributed to that participant's account.1 Plan participants decide how much to contribute to their accounts and how to allocate their assets among an array of investment options selected by the Plan's Investment Committee. The Phillips 66 Plan allows participants to invest in two single-stock funds comprised of Phillips 66 stock.2 Just a few months after the spin-off, the Plan had $1.1 billion invested in the ConocoPhillips Funds and $0.9 billion in the Phillips 66 Funds. Together, these funds accounted for 58% of the Plan's assets.

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960 F.3d 190 *; 2020 U.S. App. LEXIS 16462 **

JEFFERY SCHWEITZER; JONATHAN SAPP; RAUL RAMOS; DONALD FOWLER, Plaintiffs - Appellants v. THE INVESTMENT COMMITTEE OF THE PHILLIPS 66 SAVINGS PLAN; SAM FARACE; JOHN DOES 1-10, INCLUSIVE, Defendants - Appellees

Prior History:  [**1] Appeal from the United States District Court for the Southern District of Texas.

Schweitzer v. Inv. Comm. of the Phillips 66 Sav. Plan, 312 F. Supp. 3d 608, 2018 U.S. Dist. LEXIS 77788 (S.D. Tex., May 9, 2018)

CORE TERMS

Fiduciaries, stock, diversify, single-stock, imprudent, portfolio, diversification, retirement, publicly, prudent

Civil Procedure, Appeals, Standards of Review, De Novo Review, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Pleadings, Complaints, Requirements for Complaint, Business & Corporate Compliance, ERISA, Fiduciaries, Fiduciary Responsibilities, Fiduciary Responsibilities, Duty of Loyalty, Duty of Prudence, Pensions & Benefits Law, Employee Benefit Plans, Pension Benefit Plans, Defined Benefit Plans, Defined Contribution Plans, Plan Administration