Only two reported district court cases out of the Seventh Circuit address the issue of whether the right to vote an ESOP plan's shares is a plan "asset". In both O'Neill v. Davis, 721 F. Supp. 1013 (N.D. Ill. 1989) and Newton v. Van Otterloo, 756 F. Supp. 1121 (N.D. Ind. 1991), the courts, without any clear analysis, summarily treated the right to vote the ESOP shares as a plan asset and, having accepted that premise, determined that exercising the right constituted a fiduciary act implicating the fiduciary duties imposed under ERISA. However, these cases are distinguishable on an important point.

However, the power (through plan amendment) to appoint, retain and remove plan fiduciaries constitutes "discretionary authority" over the management or administration of a plan within the meaning of § 1002 (21)(A). Defries, 943 F.2d at 477; Miniat, 805 F.2d at 736; Leigh v. Engle, 727 F.2d 113, 134-35 (7th Cir. 1984); Atwood v. Burlington Indus. Equity, Inc., 18 E.B.C. 2009, 1994 WL 698314, *6 (M.D.N.C.); Bromenn Healthcare v. Northwestern Nat'l Life Ins. Co., 806 F. Supp. 799, 804 (C.D. Ill. 1992); Newton v. Van Otterloo, 756 F. Supp. 1121, 1132 (N.D. Ind. 1991); Mobile, Ala.-Pensacola, Fla. Bldg. and Constr. Trades Council v. Daugherty, 684 F. Supp. 270, 275 (S.D. Ala. 1988); 29 C.F.R. § 2509.75-8, D-4 (1995). Moreover, this authority carries with it a duty "to monitor appropriately" those subject to removal.

They allege Green and Butts violated these duties when they used their authority as members of the NAC ESOP Administrative Committee to instruct First American to vote the 85% of NAC stock held by First American in favor of Green, Butts, and Andersen as members of the NAC Board of Directors. Moreover, they further allege "Defendants, including but not limited to Defendants Green and Butts, have pursued an overall plan of operating and dominating the ESOP Committee for the benefit of themselves" ( Id. at ¶ 55). To defend their Complaint, Plaintiffs cite apparently the only two cases directly addressing this issue, O'Neill v. Davis, 721 F. Supp. 1013, 1014 (N.D.Ill. 1989) (noting each member of Board of Directors was a trustee of the Plan) and Newton v. Van Otterloo, 756 F. Supp. 1121, 1132 (N.D.Ind. 1991) (noting trustee was a directed trustee). The O'Neill court analyzed "whether the voting of plan-owned shares constitutes the exercise of fiduciary powers" and thus rooted its analysis in what makes one a fiduciary.

Ches v. Archer, 827 F. Supp. 159, 169 (W.D.N.Y. 1993). If "the conflict of interests is so great that it is virtually impossible for the fiduciary to discharge the duties with an eye single [sic] to the beneficiaries' interest," Newton v. Van Otterloo, 756 F. Supp. 1121, 1127 (N.D.Ind. 1991) ( citing Leigh v. Engle, 727 F.2d 113 (7th Cir. 1984) ( citing Bierwirth, 680 F.2d at 271)), then While the situation here is not a "control contest" in the same way that, say, a hostile tender offer is, it comes close enough: a major shareholder has made a proposal which, if adopted, would severely weaken incumbent management's control of the company.

However, the Sixth Circuit's view has been consistently rejected by district courts in the Seventh Circuit and other courts. See, e.g., Neil v. Zell, 677 F.Supp.2d 1010, 1029 (N.D.Ill. 2009); Newton v. Van Otterloo, 756 F.Supp. 1121, 1127-28 (N.D. Ind. 1991); O'Neill v. Davis, 721 F.Supp. 1013, 1014-16 (N.D. 111. 1989); Spires v. Schools, 271 F.Supp.3d 795, 804 (D.S.C. 2017). In Neil, the court relied on the dissenting opinion in Grindstaff:

But, an appointing authority is only personally liable for a loss if something puts that person on notice of a possible misadventure. Coyne & Delany Co. , 98 F.3d at 1466 n.10 (citing Newton v. Van Otterloo , 756 F. Supp. 1121, 1132 (N.D. Ind. 1991) ). To this end, "fiduciaries must give ‘appropriate consideration to those facts and circumstances that ... the fiduciary knows or should know are relevant to the particular investment or investment course of action involved," id. (quoting 29 C.F.R. § 2550.404a-1(b)(1)(i) ), "[b]ecause the content of the duty of prudence turns on ‘the circumstances ... prevailing’ at the time the fiduciary acts", seeFifth Third Bancorp v. Dudenhoeffer , 573 U.S. 409, 134 S. Ct 2459, 2471, 189 L.Ed.2d 457 (2014) (quoting 29 U.S.C. § 1104(a)(1)(B) ).

Several district courts have held that "the voting of Plan-owned shares by the Plan's trustees [is] a fiduciary act under ERISA, and one which the trustees [are] bound to exercise in the sole interests of the Plan participants." O'Neill v. Davis , 721 F.Supp. 1013, 1015–16 (N.D. Ill. 1989) ; see alsoNeil v. Zell , 677 F.Supp.2d 1010, 1028 (N.D. Ill. 2009), as amended (Mar. 11, 2010); Newton v. Van Otterloo , 756 F.Supp. 1121, 1127–28 (N.D. Ind. 1991). Accordingly, these Courts have held that a trustee who acts out of self-interest when voting shares held by a plan to maintain him or herself to corporate office violates ERISA. Seeid .

) The Sixth Circuit so held, over a dissent, in Grindstaff v. Green, 133 F.3d 416 (6th Cir. 1998), although two other courts have ruled to the contrary, Newton v. Van Otterloo, 756 F.Supp. 1121, 1127-28 (N.D. Ind. 1991) (Miller, J.); O'Neill v. Davis, 721 F.Supp. 1013, 1014-16 (N.D. Ill. 1989) (Nordberg, J.). The Grindstaff court relied on the outcome of the vote at issue, reasoning that because Congress anticipated that company managers would also run ESOPs, when those managers, acting as members of the ESOP committee, voted for themselves as managers in an uncontested election, they did not breach their fiduciary duty to the ESOP.

A plaintiff must "allege that the corporate defendants failed to remove any specific appointees for incompetence, breach of fiduciary duty, or any other wrongdoing" or "that the corporate defendants had notice that any specific appointees were incompetent or otherwise subject to replacement for cause." In re Dynegy, Inc. ERISA Litig., 309 F.Supp.2d 861, 904 (S.D.Tex. 2004): see also Newton v. Van Otterloo, 756 F.Supp. 1121, 1132 (N.D.Ind. 1991) (directors have duties to monitor plan fiduciaries whom they appoint but do not breach duties absent "notice of possible misadventure by their appointees"). Because the Court found that Plaintiff cannot allege facts to show that Defendants acted imprudently with regard to the offering of the Stock Fund, Plaintiff cannot maintain a claim of failure to monitor.

Unlike the plaintiff in this case, the Enron plaintiffs alleged that the corporate defendants either participated in the underlying breaches of their appointees, or had notice of possible breaches by their appointees that they failed to investigate. See id. at 555 (citing Newton v. Van Otterloo, 756 F. Supp. 1121, 1132 (N.D. Ind. 1991) (directors have duties to monitor plan fiduciaries whom they appoint but do not breach duties absent "notice of possible misadventure by their appointees"). Unlike the plaintiff in this case, the Enron plaintiffs complained