In re Target Corp. (275 F. Supp. 3d 1063, 2017)

ORDER

JOAN N. ERICKSEN, United States District Judge

Shareholders of Target Corporation stock brought suit against the company and its current and former' agents under the Securities Exchange Act of 1934 (the “Exchange Act”), codified at 15 U.S.C. § 78a et seq., and the Employee Retirement. Income Security Act of 1974 (“ERISA”), codified in relevant part at 29 U.S.C. ch. 18, for conduct related to Target’s expansion into Canada during the years 2013 and 2014. The Court consolidated the shareholder suits into the two above-referenced actions, and Target filed motions to dismiss in each action. For the following reasons, the Court grants Target’s motions to dismiss.

II. BACKGROUND

Target is a large retailer in the United States with over 1,800 store locations. (Securities Amended Complaint (“SAC”) ¶ 43, S. Dkt. No, 57.) By as late as 2010, Target evaluated opportunities for opening stores in international markets, such as Canada. (See id. ¶ 46.) An opportunity to expand into Canada presented itself, and in January 2011, Target announced that it would open stores in the country starting in 2013. (Id. ¶ 49.)

The expansion into Canada became a “key component” of Target’s “growth story” and efforts to compete with other retailing rivals, such as Wal-Mart. (Id. ¶ 53; see id. ¶¶ 43, 45, 48.) In pursuit of these ends, Target embarked on an ambitious plan to open over 100 stores in Canada in two years. (See id. ¶ 49.) Accomplishing this tall order required “Target Canada” to rapidly develop stores, distribution centers, vendor relationships, and supply chain information technology systems. (See id. ¶¶ 47, 49.)

Large-scale retailers like Target rely heavily on supply chain systems to keep track of inventory, shipments, costs, product information, replenishment, sales, and more. (See id. ¶ 61.) In order to operate effectively, systems performing supply chain functions must be integrated and have the ability to share crucial business data. (See id.) Accordingly, part of Target’s success in the US is due to its “well-developed supply chain and IT infrastructure. ... customized and adjusted over the years to meet [Target’s] specific needs.” (Id. ¶ 62.) Although Target already had a refined US supply chain infrastructure in place when it announced expansion into Canada, the company chose to use a different, new set of supply chain systems for the expansion because extending its existing US systems “would have been too complex and taken too much time.” (Id. ¶ 71.) Thus, Target purchased a new, central “Enterprise Resource Planning” (“ERP”) system and other new systems for its Canadian supply chain infrastructure. (Id. ¶ 64.)

From the beginning, the central ERP system contained data integrity issues, which caused problems in other systems. (See id. ¶¶ 64-65, 78-80.) The new warehouse management system had troubles communicating with the central system. (See id. ¶¶ 65, 85.) The inventory replenishment system was “dysfunctional” and required “manual overrides.” (Id. ¶ 66; see id. ¶ 94.) The long-term inventory demand software “did not provide accurate sales forecasts, and Target employees did not know how to use it.” (Id. ¶ 67; see id. ¶ 95.) And the point-of-sale systems “often malfunctioned.” (Id. ¶ 68; see id. ¶ 97.) Pri- or to opening any Canadian stores, the supply chain systems suffered from “systemic problems” related to “most” of the above-mentioned issues. (Id. ¶¶ 60, 69, 100.) When Target Canada finally opened its first stores in March 2013, customers were “confronted with empty store shelves,” but, at the same time, Target Canada’s “three massive distribution centers were overwhelmed with excess products.” (Id. ¶¶ 82-83.) Other “various problems persisted through 2015.” (Id. ¶ 92; see id. ¶ 102.) As more stores opened, the problems “magnified” and became “more disruptive and difficult to correct.” (Id. ¶ 114.)

Target Canada incurred significant net operating losses throughout 2013 and 2014. (See id. ¶¶126, 157.) On May 5, 2014, Target’s Board of Directors issued a statement announcing that Target’s CEO, Gregg Steinhafel, resigned from his roles at the company. (Id. ¶ 127.) The resignation was due in part to Target Canada’s underperformance, as well as Target’s “massive credit card data breach.” (Id. ¶ 128.) On May 20, 2014, Target announced that Target Canada’s President, Tony Fisher, had been terminated. (Id. ¶ 132.) Then, on August 12, 2014, Target announced a variety of initiatives to address inventory issues, including a “physical count of inventory at all stores, resulting in a reset of systems, and more accurate ordering and shipping data.” (Id. ¶ 146 (emphasis omitted).)

Finally, on January 15, 2015, Target announced that it would discontinue operating its Canadian stores and that Target Canada would file for insolvency protection. (Id. ¶ 158.) Target’s new CEO, Brian Cornell, noted that continued operations in Canada would require additional investments in the supply chain “to make further operational improvements and enable Target to sell online in Canada.” (Id. ¶ 159.) He further explained that the company was “unable to map out a scenario which would allow Target Canada to generate profits or cash flow until at least 2021.” (Id. (emphasis omitted).) In the insolvency filings, Target Canada’s general counsel stated that the venture did not succeed due to issues in four principal categories, one of which was the supply chain. (See id. ¶ 161.)

III. THE SECURITIES ACTION

Plaintiffs allege that between March 20, 2018 and August 4, 2014 (the “Securities Class Period”), certain Defendants made a series of false and/or misleading statements regarding Target Canada’s performance and súpply chain. (See id. ¶¶ 1, 170-261.) Generally speaking, Plaintiffs allege that these Defendants represented that Target Canada was progressing well and facing minor or common problems, when- in reality the supply chain issues were much larger and success was much less certain or impossible. (See id. ¶¶ 3, 8-9.) Plaintiffs assert causes of action under (1) § 10(b) of the Exchange Act and Securities and Exchange Commission (“SEC”) Rule 10b-5 and (2) § 20(a) of the Exchange Act. (See id. ¶¶ 336-51.) Defendants move to dismiss both counts. (See. S. Dkt. No. 69.)

A. Exchange Act § 10(b) and Rule 10b-5 Claims

Section 10(b) of the Exchange Act, codified at 15 U.S.C. § 78j(b), 'makes it unlawful for any person “[t]o use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe.” SEC Rule 10b-5 makes it unlawful to, among other things, “make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b-5(b). Together, § 10(b) and Rule 10b-5 create a private cause of action for fraud. See Halliburton Co. v. Erica P. John Fund Inc., — U.S. -, 134 S.Ct. 2398, 2407, 189 L.Ed.2d 339 (2014) (citing Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 730, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975)). Claims brought pursuant to these provisions have six elements:

(1) a material misrepresentation or omission;

(2) scienter;

(3) a connection -with the purchase or sale of a security;

(4) reliance;'

(5) economic loss; and

(6) loss causation.

Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 37-38, 131 S.Ct. 1309, 179 L.Ed.2d 398 (2011); Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 341, 125 S.Ct. 1627, 161 L.Ed.2d 577 (2005).

To survive a motion to ‘dismiss, plaintiffs must plausibly plead a claim to relief under § 10(b) and Rule 10b-5 when accepting all of the alleged facts as true. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007). In addition, plaintiffs must plead facts as to elements (1) and (2) with the level of particularity required by the Private Securities Litigation Reform Act of 1995 (“PSLRA”), codified in relevant part at 15 U.S.C. § 78u-4.

The PSLRA’s pleading standards are “more rigorous than those under Rule 9(b) of the Federal Rules of Civil Procedure.” Lustgraaf v. Behrens, 619 F.3d 867, 874 n.2 (8th Cir. 2010). They “are unique to securities and were adopted in an attempt to curb abuses of securities fraud litigation.” In re Navarre Corp. Sec. Litig., 299 F.3d 735, 741 (8th Cir. 2002). One of those abuses is “the practice of pleading ‘fraud by hindsight.’ ” Id. at 742 (citing In re Vantive Corp. Sec. Litig., 283 F.3d 1079, 1084-85 (9th Cir. 2002)).

Defendants primarily argue that Plaintiffs failed to plead enough facts as to elements (1) and (2) to meet the PSLRA’s requirements. (See Securities Defendants’ Memorandum in Support of Their Motion to Dismiss (“S. Def. Br.”) 2, S. Dkt.' No. 71.) Their overarching theory as to why this is the case is that Plaintiffs’ claims are really just “impermissible fraud-by-hindsight claim[s].” (Id.) They argue, for example, that the SAC “[flails to identify particular facts or sources showing that any of Defendants’ public statements were materially false or misleading in context and when made.” (Id., (emphasis omitted).) Plaintiffs counter that the SAC contains sufficient facts and that their reliance on confidential witnesses and well-sourced news articles as a basis for their allegations helps Plaintiffs clear the PSLRA’s pleading hurdle and is not an attempt to plead fraud by hindsight. (See Securities Plaintiffs’ Response Memorandum in Opposition to the Motion to Dismiss (“S. PI. Br.”) 3, 14-16, 25-27, S. Dkt. No. 87.)

. Focusing solely on element (1), a material misrepresentation or omission, the PSLRA requires plaintiffs to “specify each statement alleged to have been misleading, ‘ the reason or reasons why the statement is misleading, and, if an allegation regarding the. statement or' omission is made on information, and belief, the complaint shall state with particularity all facts on which that belief is formed.” § 78u-4(b)(1). This standard requires plaintiffs to plead the who, what, when, where, why,- and how with regard to the challenged statements such that the alleged facts “necessarily show that the defendants’ statements were misleading.” In re 2007 Novastar Fin. Inc., Sec. Litig., 579 F.3d 878, 882 (8th Cir. 2009) (quoting In re Cerner Corp. Sec. Litig., 425 F.3d 1079, 1083 (8th Cir. 2005)). Plaintiffs must plead a “link between an alleged misleading statement and specific factual allegations demonstrating the reasons why the statement was false or misleading.” Id. at 883. If a complaint fails to comply with the PSLRA’s requirements, the Court must dismiss the complaint. § 78u-4(b)(3)(A).

In general, pleading fraud by hindsight is characterized by failure to meet the ^ PSLRA’s requirement to specify facts explaining “why” a challenged statement was false or misleading when it was made. See In re Navarre, 299 F.3d at 743. For example, a business states mid-year that sales are on track to meet expected year-end projections, but later reports lower year-end sales. If a plaintiff brings a securities fraud action based only on these facts and alleges that the mid-year prediction must have been false when made, then the plaintiff is pleading fraud by hindsight. See Parnes v. Gateway 2000, Inc., 122 F.3d 539, 551 (8th Cir. 1997) (quoting Di-Leo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990)); In re Patterson Cos., Inc. Sec., Derivative & ERISA Litig., 479 F.Supp.2d 1014, 1030 (D. Minn. 2007); see also Elam v. Neidorff, 544 F.3d 921, 927 (8th Cir. 2008). In such a case, the plaintiff is merely pleading that the prediction must have been false mid-year because it conflicts with year-end facts—an unsatisfactory explanation for “why” the mid-year statement was false when made.

Undoubtedly, Plaintiffs have met the PSLRA’s requirement to “specify each statement alleged to be misleading” because they quote numerous statements throughout the SAC. § 78u-4(b)(1). However, Plaintiffs fail to “specify '... the reason- or reasons why [each] statement is misleading.” Id. For almost every challenged. statement, Plaintiffs provide only the expansive, undefined explanation that the supply chain suffered from “systemic problems” and that the existence of such problems rendered the statement false or misleading. (E.g., SAC ¶ 170.) Even accepting that supply chain system problems existed throughout the Securities Class Period, Plaintiffs do not connect any specific problems to any specific statements. Rather, Plaintiffs primarily allege only that there were persistent, overarching systemic problems. For many statements, their explanation as to “why” shows pleading fraud by hindsight. Without, more detailed allegations, Plaintiffs fail to necessarily show that Defendants’ statements were false or misleading when made, as required by the PSLRA. See In re 2007 Novastar, 579 F.3d at 882. A review of representative" challenged statements in the SAC reveals the inadequacies:

1. March 20, 2013 Statements

The earliest challenged statement is from March 20, 2013, shortly after Target Canada opened its first pilot stores. (See SAC ¶ 171.) On that date, Target, filed its annual Form 10-K for the fiscal year ending February 2, 2013. (See id.) The Form 10-K stated, in part:

Our ability to deliver a shopping experience that is preferred by our customers, referred to as “guests,” is supported by our strong supply chain and technology infrastructure, a devotion to innovation that is ingrained in our organization and culture, and our disciplined approach to managing our current business and investing in future growth.

Effective inventory management is key to our ongoing success. We utilize various techniques including demand forecasting and planning and various forms of replenishment' management.' We achieve effective inventory management by being in-stock in core product offerings, maintaining positive vendor relationships, and' carefully planning inventory levels for seasonal and apparel items tp minimize markdbwns;

(Id. ¶ 172 (some emphasis omitted).)

Plaintiffs allege that the statement about a “strong supply chain and technology infrastructure” was “false and misleading when made because it failed to disclose the adverse facts that [Target Canada] had neither a ‘strong' supply chain nor ‘strong' technology infrastructure." (Id. ¶ 173.) Similarly, the averments about “effective inventory management” were “false and misleading when made because Defendants failed to disclose that Target did not have effective inventory management with respect to [Target Canada’s] supply chain IT systems.” (Id.)

The SAC does not connect the Form 10-K statements to “any specific fact that would render the ... statements false [or misleading]” when made. Elam, 544 F.3d at 927. In an entirely different section, the SAC provides some background information about what issues existed around the time Target filed the Form 10-K. For example, plaintiffs allege that the inventory replenishment system “was so dysfunctional that it was turned off immediately after the first stores had opened, and could not be operated without constant manual overrides.” (SAC ¶ 66 (emphasis added); see id. ¶¶ 94, 112.) They allege that in Fall 2012, Target Canada participated in a “data week” to verify product data points, but that when the first stores opened, there were unresolved data issues and excess inventory in warehouses. (Id. ¶¶ 80-83, 118.) “[I]n the weeks leading up to the first store openings ... there was a widely held fear among employees that the stores would not be ready to open...." (Id. ¶ 101 (emphasis added).) But outside these examples, Plaintiffs only paint with a broad brush by alleging that before Target opened any Canadian stores, the systems suffered from “most” of the problems summarized above, there were systemic problems, and the systems “did not function properly” throughout the Securities Class Period. (Id. ¶ 69.) Such sweeping allegations disconnected from particular facts are insufficient to comply with the PSLRA’s mandate that plaintiffs specify why statements were false or misleading at the time the statements were made. See In re 2007 Novastar, 579 F.3d at 882, 883 & n.4 (finding insufficient broad allegations of, for example, undisclosed “systematic deviations”); In re Cerner, 425 F.3d at 1084 (finding that the plaintiffs did not adequately allege why the statement that demand was “strong” was false or misleading when made); In re Navarre, 299 F.3d at 743 (“The amended complaint fails to indicate why these statements would have been false or misleading at the several points in time in which it is alleged they were made.”).

Without additional factual allegations, the Court is left with numerous questions as to why and how the Form 10-K statements were false or misleading. Why was it false or misleading to characterize Target’s supply chain as a whole—or Target Canada’s separate supply chain—as strong or effective? What, specifically, were the supply chain problems at this exact moment in time, and what about these problems were systemic? To what extent did any then-existing problems weaken the supply chain or render it ineffective? Because the SAC fails to allege particular facts that would answer these and other questions and “merely contains ‘[a] litany of alleged false statements, unaccompanied by the pleading of specific facts indicating why those statements were false,’ ” the SAC fails to meet the PSLRA’s pleading standards. In re 2007 Novastar, 579 F.3d at 883 (quoting Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1070 (9th Cir. 2008)); see In re Navarre, 299 F.3d at 743 (asking similar questions).

The SAC also contains allegations that, when taken as true, undermine Plaintiffs’ general theory that statements were materially false or misleading due to the existence of systemic problems. For example, on March 4, 2013—before the Securities Class Period began and just weeks before Target filed the Form 10-K—Fish-er disclosed that Target Canada had “built [its] technology infrastructure from the ground up over the last two .years.” (SAC ¶ 168.) And his comments also drew attention to out-of-stock merchandise, indicating that the supply chain was imperfect. (See id.; see also id. ¶ 119.) Public statements like these undercut general allegations that the challenged statements omitted nonpublic details—unidentified in the SAC—about allegedly overarching problems. See Local 731 I.B. of T. Excavators & Pavers Pension Tr. Fund v. Diodes, Inc., 810 F.3d 951, 958 (5th Cir. 2016) (“Most reasonable investors would rather receive an accurate ‘bottom line’ assessment of a disclosed company problem than all of its assumptions and nuances.”). What additional information should Target have disclosed? Why would further disclosure have significantly altered the total mix of information available to investors at the time? Plaintiffs do not allege answers to these questions.

In summary, Plaintiffs fail to explain, with the level of detail required by the PSLRA, why the Form 10-K statements were false or misleading when made, and what little detail they do allege contradicts their sweeping, nonspecific explanations.

2. March 28, 2013 Statements

On March 28, 2013, Defendant John Mulligan, then-CFO, .attended an annual retail conference in Canada and gave a presentation in which he stated, for example:

How about Canada? Going into the year last year, we talked about four key items we needed to achieve. We needed to build out of the supply chain; build the technology; build the.team; and then begin to remodel stores, primarily the ones that we’re opening right now. We achieved all four of those objectives, and did so with a great deal of financial discipline. And the team did a fantastic job. We’re right where we want to be right now, and did so with $0.48 of dilution versus our goal of $0.50.

(SAC ¶ 179 (some emphasis omitted).) In response to a question recognizing that Target Canada had taken “a few shots to the chin” due to “out-of-stocks,” he also stated:

We needed to get the first three stores •open. You can do all the testing you want of systems and supply chain in the labs. Ultimately, you need. to get the real world working. And so getting those three stores opening; let our teams, which is 99% Canadian team members who haven’t worked in Target stores, letting them get used to things. And that’s gone really well. We’re very, pleased. I think that supply-chain efforts, we work through I think—if we had had a normal amount of opening, we would have worked through those very rapidly. But combined with the overwhelming response, it’s taken us a bit longer than -we might like. But we feel very good about where we’re at.

(Id. ¶ 181 (some emphasis omitted).) Plaintiffs allege that Mulligan’s statements that Target Canada had “achieved” the objectives of building a supply chain and was “right where' [it] wanted to be” were “materially false and misleading when made, because [the statements] failed to disclose the systemic problems experienced in Target Canada’s supply chain IT systems.” (Id. ¶ 180.) Similarly, the statements that testing and training were going well and that Target Canada felt “very good” about where it was were false and misleading due to “systemic problems,” “inadequately trained employees,” and atypical supply chain issues. (Id. ¶¶ 182-83.) Furthermore, “these supply chain problems were both severe and systemic such that a full system rését was' necessary.” (Id. ¶ 182.) The statement about customers’ “overwhelming response” was also misleading'for analogous reasons. (See id. ¶ 183.)

Here, too, the SAC does not adequately alle'ge the who, what, when, where, and how to specifically explain why any of the challenged statements were false or misleading when made. At this time, Target Canada had built a supply chain ánd a technology infrastructure. In what way had they failed to build it at this moment in time?' To what extent were employees untrained or the supply chain issues atypical? What made the supply chain problems severe? The SAC - does not provide “the barest clue,” and, as discussed earlier, the SAC contains too few specifics as to the alleged systemic problems. Parnes, 122 F.3d at 550.

Plaintiffs also do not explain what a “complete reset” would entail, let alone why it was needed less than one month after Target Canada opened its first stores. That more than fifteen months later new leadership determined that a “reset” of systems was the best course of action going forward does not sufficiently explain why a reset was needed prior to that point. (See SAC ¶¶ 146, 263.) Rather, the reference to a complete reset indicates that Plaintiffs are pleading fraud by hindsight. See DiLeo, 901 F.2d at 627 (“You cannot tell from reading [the complaint] why the [plaintiffs] believe that the problems were so apparent that reserves should have been jacked up before the end of 1983—why failure to increase the reserves amounted to ‘fraud.’ ”),

The March 28, 2013 challenged statements further exhibit Plaintiffs’ failure to specify, with particularity, why the challenged statements were false or misleading when made,

3. May 22, 2013 Statements

On May 22, 2013, Target announced its financial results for Q1 2013 and posted a loss for Target Canada. (See SAC ¶¶ 184-85.) During a conference call with investors and analysts related to these results, Steinhafel stated:

After two years of preparation, in March we opened our first 24 Canadian stores in the greater Toronto area and we’re very pleased with the reception we received from our new Canadian guests.... Two weeks ago we opened our second wave of 24 Canadian stores in British Columbia, Alberta and Manitoba and we’re very pleased with the initial guest response in these markets and the ability of our teams and systems to accommodate the increasing volume of traffic and sales.

(Id. ¶ 187 (some emphasis omitted).) Plaintiffs allege that the statements referring to the ability to accommodate traffic and sales were false and misleading because “neither [Target Canada’s] teams nor its supply chain IT systems were in fact equipped to handle the volume of traffic and sales, which created systemic problems that increased as a result of Target continuing with its ill-advised, rampant store opening pace in Canada.” (Id. ¶ 188.)

Plaintiffs allege no facts to explain why or how, at this point in time, the supply chain systems were not equipped to handle traffic and sales. And there are no additional facts regarding systemic problems outside those already discussed. Plaintiffs’ allegation as to “why,’’.then, is essentially a conclusory allegation that the statements were false, without any supporting details. Such an allegation does not meet Rule 8(a)(2)’s plausibility requirement, .let alone the PSLRA’s heightened standards. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (holding that “naked assertion[s]” are insufficient (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557, 127 S.Ct. 1955, 167 L.Ed.2d 929(2007))).

In addition, the reference to Target’s “ill-advised” store' opening pace signals pleading fraud by hindsight. There are no specific allegations demonstrating that company leadership knew that the rapid expansion strategy would fail. And it is facially'implausible that leadership willfully or knowingly engaged in an ill-advised strategy. See Cozzarelli v. Inspire Pharm. Inc., 549 F.3d 618, 627 (4th Cir. 2008). In these circumstances, the basis for the assertion of imprudence can only reasonably be- attributed to leadership’s later supply chain-related regrets and the withdrawal from Canada. (See SAC ¶¶ 149, 151-52.) The “ill-advised” assertion also reveals an attempt to make out a securities fraud claim using allegations that sound in breaches of fiduciary duty. But “plaintiffs] may not ‘bootstrap’ a claim for internal corporate mismanagement or breach of fiduciary duty by alleging that the corporation or its directors failed to disclose that mismanagement or breach.” Andropolis v. Red Robin, Gourmet Burgers, Inc., 505 F.Supp.2d 662, 682 (D. Colo. 2007) (citing Santa Fe Indus., Inc. v. Green, 430 U.S. 462, 473, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977) (“The language of § 10(b) gives no indication that Congress meant tó prohibit any conduct not involving manipulation or deception.”)); see also St. Louis Union Tr. Co. v. Merrill Lynch, Pierce, Fenner & Smith Inc., 562 F.2d 1040, 1048 (8th Cir. 1977) (“Section 10(b) and Rule 10b-5 were not intended to bring within their ambit simple corporate mismanagement or every imaginable breach of fiduciary duty in connection with a Securities transaction.”). This implicit bootstrapping further illustrates pleading fraud by hindsight because it attempts to turn the pursuit of a strategy—later shown to be imprudent—into fraud.

Plaintiffs also allege that, in response to a question- about productivity at the early Canadian stores and expectations in relation to consumables, Steinhafel said,' in part;

Over time our consumables share will grow.... We didn’t want to come out of the blocks by hitting those categories too hard because we-wanted to make sure that we led with our strength. And pie. wanted to make sure that all the supply chains and the operational disciplines mere in place. We feel very confident now that they are. We’re ready to start making those kinds of adjustments in merchandising and supply chain and in store operations to start refining the model.

(SAC ¶ 189 (some emphasis omitted).) Plaintiffs allege that Steinhafel’s confidence in the “supply chain and the operational disciplines” was materially- false and misleading because the statement failed to disclose the systemic supply chain problems; (See id. ¶ 190.) The statements that Target Canada could make “adjustments” and “start refining” were false and misleading because the systemic nature of the supply chain problems “require[d] major, wholesale changes to fix.” (Id.)

Plaintiffs again fail to allege any specific-facts demonstrating that at this point in time the supply chain and operational disciplines were not in place or that Steinhafel was not actually confident in his assessment. There are also no facts showing that improving whatever deficiencies existed was impossible, rendering such a contention implausible. The assertion that major, wholesale changes—which are unde-scribed—were required further indicates that Plaintiffs’ case is built on hindsight and informed by later determinations that supply chain issues would require additional investments and contributed to Target’s withdrawal from Canada. (See SAC ¶¶ 159, 161.) In short, Plaintiffs again fail to give “particulars” as to why these statements were false or misleading when made and therefore fail to meet the PSLRA’s pleading standards. In re Navarre, 299 F.3d at 743.

A May 30, 2013 Statements

Eight days later, on May 30, 2013, Mulligan attended a conference in New York City. (See SAC ¶ 194.) In response to a question about Target Canada’s execution risk, he said:

A lot of the execution risk is behind us. We need the initial execution risk. We’re still refining. Things like replenishment systems, they take a while to tune, and so we’re tuning, and each one of the stores will be different. So we’re working through that. But there is a wave of system enhancements that need to come and operational enhancements that need to come, and that’s just us honing the business that needed to happen naturally through time just as we’ve done in the US over 50 years, but part of us improving and getting to that profitability we need in Canada, we don’t have everything we need on day one. There’s follow-on investment that we need to do. So that needs to continue to happen. But as far as what we planned for the start-up, we feel really good about where we are today.

(Id. ¶ 196 (some emphasis omitted).) While at the conference, he also said:

And, finally, Canada—-when you invest billions of dollars and record losses in your P&L, you obviously generate a very large negative ROIC. We expect that to turn in the fourth quarter of this year as we turn to accretion and then that mil grow. So the ROIC will naturally improve in Canada.

(Id. ¶ 198 (some emphasis omitted).) Plaintiffs allege that Mulligan’s statement as to “execution risk” was false and misleading because “the execution risk was only intensifying as [Target Canada] continued to open stores regardless of the fact that [Target Canada] was plagued by severe systemic issues with its supply chain IT systems.” (Id. ¶ 197.) The “refining” and “tuning” statements were false and misleading because they failed to disclose that the systemic problems would require major, wholesale changes to fix. (Id.) The ROIC statement also failed to disclose the systemic problems and those problems’ negative operational impact. (Id. ¶ 199.) Until the problems were corrected, Mulligan “lacked a reasonable basis in providing this guidance.” (Id.)

Just as the SAC fails to include details about the systemic problems at earlier junctures in time, so too does it fail to include any details about Target Canada’s execution risk at the time Mulligan spoke. In addition, Plaintiffs again fail to allege specific details showing that on or around May 30, 2013, refining and tuning were not viable options for fixing whatever supply chain problems were manifest. And Plaintiffs plead no specific facts showing that the ROIC guidance was false or misleading when issued for similar reasons. Plaintiffs do not plead facts that connect any particular supply chain issues to Target Canada’s negative financial results- and only generally allege such a cause-and-effect relationship. Without specific details as to how and to what extent particular supply chain issues directly affected financial results, Plaintiffs fail to meet the PSLRA’s standards for explaining why Mulligan lacked a reasonable basis in providing guidance on ROIC improvement in Canada. See In re 2007 Novastar, 579 F.3d at 883.

5. August 21, 2013 Statements

On August 21, 2013, Target announced its financial results for Q2 2013 and reported a loss for Target Canada. (See SAC ¶¶ 200-01.) During a conference call, Stein-hafel provided an update on Target Canada and stated, in part:

Our expectations are informed by our experience in launching the. PPresh remodel program and City Target format, as ivell as our historical experience entering new markets in the US. In many of these markets we saw [a] similar pattern in which sales momentum was slower than expected at the launch, but grew rapidly in the first several years after opening, resulting in achievement of our fifth year sales goals. For the stores we’ve opened, the team in Canada is working to adjust inventory and store staffing to match the pace of sales in each individual location. And for the segment in total, we have updated the expected timing of earnings accretion. Having said that, we remain highly confident in our strategy.

(Id. ¶ 204 (some emphasis omitted).) In response to a question about inventory, he also said:

The inventory overhang is a function of the shortfall primarily in some of the seasonal categories.... But it’s the same kind of fine tuning that we go through every time we open a new store here in the United States, and they, have experienced for years and years. There is always a tremendous, amount of fine tuning and getting the right match of sales -volatility, variability, assortment, and aligning that with inventory. What we’re seeing in Canada is there’s such a big critical mass that it stands out, and it’s far more obvious. But it’s no different than what we’ve experienced [in the U.-S.J

(Id. ¶ 208 (some emphasis omitted).) Plaintiffs allege that the comparisons to US operations were false and misleading because “Target had never before encountered such systemic problems to the extent ... [it was] dealing with [problems] in Canada.” (Id. ¶ 205; see id. ¶ 209.)

Despite their assertions to the contrary, Plaintiffs do not allege any particular facts distinguishing specific problems Target Canada faced from those faced by Target in the US. What particular differences existed, and how drastic a disparity in experience did the differences create? How did those differences relate to inventory and sales? It is obvious that Target Canada would experience different supply chain issues because it used entirely different supply chain systems. But how, why, and to what extent were the issues Target Canada experienced not “similar” or not the “same?” The Court does not know because the SAC does not say. Plaintiffs’ general allegations of systemic problems and the threadbare conclusion that Target did not suffer systemic problems in the US are not enough to meet the PSLRA’s pleading standards. See In re 2007 Novastar, 579 F.3d at 883-84; In re Cerner, 425 F.3d at 1084.

6. October 30, 2013 Statements

At a meeting with the financial community in Canada on October 30, 2013, Fisher commented on Target Canada’s supply chain and stated, in part:

We are simplifying processes and improving replenishment practices at our stores, things we take for granted after 50 years in the US, to help us operate more efficieñtly. and strengthen our presentation. For' instance, in July we rolled out an important receiving process improvement which cut the amount of time it takes to check in a trailer at a store from about 25 minutes to less than two minutes. And it is more accurate. And systematic replenishment in store, which we are now unveiling nationwide, has shown promising results in pilot stores, getting merchandise out of the back room quickly and on to the sales floor. Our stores, merchandising team, vendors, and sourcing offices are working together to improve our ordering practices. And we are, doing whatever it takes to clear excess merchandise out of our supply chain so we can more efficiently and effectively and correctly flow product from our distribution centers to our stores.

Noiv our team is getting better every day at interacting with this new technology and we are quickly executing hundreds of fixes to make .this suite of systems even easier for our team members to use.

(SAC ¶ 222 (some emphasis omitted).) In response to a question about “operational initiatives to ... get Canada back on track,” Fisher further stated:, ...

So we had plans, and we started, these back in 2012, ás far as we were going to start lean, start with a very narrow scope. The fact that we went out of the box with these technology solutions allowed us to react and enhance those very, very quickly after opening. So given our performance and the fact that we are sort of our initial sales goal, we are staying with all the initial plans because they are the right ones.

(Id. ¶ 224 (some emphasis omitted).) Plaintiffs allege that Fisher’s statement that Target Canada was “doing whatever it takes to clear excess merchandise” was false and misleading because “a complete reset of the supply chain IT systems was what was actually required to solve its systemic , problems,” but Target Canada was not implementing a reset. (Id. ¶ 223.) The statement that Target Canada’s original plans were the “right ones” was false and misleading in light of the systemic problems. (See id. ¶ 225.)

A$ with Plaintiffs’ previous allegations regarding “why” statements were false and misleading, the Court cannot find any details in the SAC that would sufficiently substantiate Plaintiffs’ theories. The only additional context provided by the SAC is that by Fall 2013, distribution centers were bursting with goods. (See id, ¶¶ 88, 106.) But-Plaintiffs do not tie any such allegations to the explanation that a reset was needed. Plaintiffs also- do not allege whether, as Fisher stated, Target Canada was actually implementing improvements to its supply chain systems and whether those improvements were effective. And Plaintiffs’ explanation as to the “right ones” statement is essentially a conclusory allegation that Target Canada’s plans were the “wrong ones.” Therefore, Plaintiffs fail to meet the PSLRA’s requirement to allege particular details as to why Fisher’s October 30, 2013 statements were false or misleading when made. See In re Navarre, 299 F.3d at 743.

7. November 21, 2013 and February' 26, 20U Statements

On November 21, 2013, Target announced its financial results for Q3 2013 and posted a loss for Target Canada. (See SAC ¶¶ 229-30.) As part of prepared remarks made during a conference call, Ste-inhafel stated, in part:

The Target Canada team is energized and prepared for the holiday season, and preparing to enter 2014 with improved in-stocks and a much better inventory position.

(Id. ¶ 232 (some emphasis omitted).)

One quarter later, on February 26, 2014, Target announced its financial results for Q4 2013 and again posted a loss for Target Canada. (See id. ¶¶ 242-43.) During a conference call, Mulligan stated, in part:

In the Canadian segment, sales came in just below expectations. Importantly as [Steinhafel] mentioned, we took advantage of holiday traffic to clear through a significant amount of excess inventory in the quarter, and while we expect some small lingering issues with long lean receipts this year, the Canadian segment ended 2013 in a much cleaner inventofy position, paving the way for smoother operations in 2014.

(Id. ¶ 243 (some emphasis omitted).) Plaintiffs allege that both statements regarding inventory position were false and misleading because of the existence of systemic supply chain problems. (See id. ¶¶ 233, 244.)

The only additional context as to the state of Target Canada at the time Stein-hafel and Mulligan spoke' is that Target Canada was operating 124 stores. (See id. ¶ 122.) But this additional' context adds little to Plaintiffs’ “systemic problems” theory. Plaintiffs allege that as more stores opened, the problems magnified, but they do not explain why such magnification made the challenged statements false' or misleading when made. (See, e.g., id. ¶¶ 114, 170.) Even as to Steinhafel and Mulligan’s above statements, Plaintiffs fail-to allege details to show why the statements were false or misleading when made. Why was it the case that Steinhafel could not reasonably expect such improvements? Or that improvements were impossible? Or that Mulligan’s statement recapping 2013 was false or misleading? The SAC is silent and therefore fails to meet the PSLRA’s pleading standards. See In re Navarre, 299 F.3d at 743.

8. May 21, 201k Statements

Shortly after Steinhafel’s resignation and Fisher’s termination, Target announced its financial results for Q1 2014 on May 21, 2014 and posted a loss for Target Canada. (See SAC ¶ 256.) In response to a question during a conference call, Mulligan stated:

[W]e continue, to see improvement across the business into April as the guests data improved, and our sales improved. And the early cycle stores continue to be the best. And it’s—again almost in order down the sheet, like one cycle, two-cycle, three-cycle, four-cycle, five. So, the earliest stores, the longer they’ve been open, they performed the better, but the good thing is all cycles • are on an upward path.

(Id. ¶ 257 (some emphasis omitted).) Plaintiffs allege that this statement was false and misleading because “Target Canada stores continued to perform poorly, including those opened -in early cycles, as would later be revealed to investors on August 20, 2014.” (Id. ¶ 258.) About three months later, on - August 20, Target officials announced that “same-store sales, decreased more than 11% in Canada over the prior year as a result of ongoing supply chain problems. Because the only stores that could be included in this metric were stores open for at least a year as of June 2013, this figure directly contrasted with” Mulligan’s May 21 statement. (Id. ¶ 264.)

This is Plaintiffs’ most specific explanation as to falsity and/or materiality, but it is still insufficient. Notably, the explanation says nothing about “systemic problems.” But similar to the systemic problems theory, the explanation is based on hindsight. Indeed, the explanation is the archetype of pleading fraud by hindsight. See In re Patterson, 479 F.Supp.2d at 1030; see also Parnes, 122 F.3d at 551 (-“The story in this complaint is familiar in securities litigation. At one time the firm bathes itself in a favorable light. Later the firm discloses that things are less rosy. The plaintiff contends that the difference must be attributable to fraud.” (quoting DiLeo, 901 F.2d at 627)). Plaintiffs merely compare an earlier statement about sales to a later, inconsistent statement and point to the inconsistency as proof that the statement must have been false when made. “'Must be [false]’ is the critical phrase, for the complaint offers no information other than the differences between the two statements of the firm’s condition.” Parnes, 122 F.3d at 551 (quoting DiLeo, 901 F.2d at 627).

“Plaintiffs may not proffer the different financial statements and rest. [They] must point to some facts suggesting that the difference is attributable to fraud.” Id. Plaintiffs must allege specific facts that show the statement was false or misleading when it was made, not merely proven to be false or misleading in hindsight. In re Navarre, 299 F.3d at 743; see also Parnes, 122 F.3d at 547 (“Predictions on future growth ... will almost always prove to be wrong in hindsight.” (quoting Raab v. Gen. Physics Corp., 4 F.3d 286, 290 (4th Cir. 1993))). Because Plaintiffs do not allege any such additional facts, they fail to meet the PSLRA’s requirements.

.9. Item SOS Non-disclosures

Plaintiffs allege that when Target filed its Form 10-Qs and 10-Ks throughout the Securities Class Period, the Forms contained actionable omissions pursuant to Item 303 of Regulation S-K. (See SAC ¶¶ 193, 220, 238, 253, 259.) Plaintiffs complain that the filings failed to include a discussion of “the extent to which the poor performance of [Target Canada] was attributed to startup-costs and whether Defendants expected [Target Canada] to continue to negatively impact the Company’s operations” as a result of the systemic supply chain problems. (Id. ¶ 253; see id. ¶271.) For example, the Form 10-K for year 2013 reported a $941 million EBIT loss for Target Canada, but provided little to no explanation for the loss. (See id. ¶ 254.) In response to Target’s Form 10-K filed March 14, 2014, the SEC requested the following:

Please tell us what consideration you gave to discussing and quantifying the extent to which the fiscal 2013 performance of the Canadian Segment is attributed, on the one hand, to start-up costs and challenges versus, on the other hand, lower than anticipated sales and earnings of Canadian stores once opened. Additionally, please tell us what consideration you gave to disclosing the extent to which the performance of the Canadian Segment can reasonably be expected to continue to negatively impact your results of operations in future periods.

(Id. ¶255 (emphasis omitted).) In a response letter, Mulligan wrote:

During the year, we experienced significant supply chain issues that contributed to inadequate in-stock levels and excess inventory in our distribution facilities .... These issues, combined with softer-than-expected sales, resulted in performance below our expectations. Because of the interrelated nature of these issues, we were unable to separately identify and quantify the impacts from start-up issues .versus lower-than-expected sales and earnings.

(Id. ¶ 26Ó. (emphasis omitted).)

Even assuming, without deciding, that breach of Item 303’s disclosure duty may form the basis of a § 10(b) and Rule 10b-5 claim, Plaintiffs must still meet the PSLRA’s requirement to allege with particularity a breach of that disclosure duty. See § 78u-4(b)(l). But because Plaintiffs couch their Item 303 theory of liability in their general “systemic problems” explanation, (see SAC ¶¶ 271-74), their Item 303 theory fares no better than their other explanations as to why statements were misleading and fails to meet the PSLRA’s, pleading standards, see In re 2007 Novastar, 579 F.3d at 883-84.

10. Other Statements and Summary

Plaintiffs quote several other challenged statements throughout the SAC’s 129 pages and 351 paragraphs. Those challenged statements, like the ones analyzed above, fail to meet the PSLRA’s pleading standard for analogous reasons, primarily because Plaintiffs’ explanation as to why the' challenged statements were false or misleading when made is tied to general, nonspecific allegations that systemic supply chain problems persisted throughout the Securities Class Period, that the problems contradicted the challenged statements or were not disclosed to the public, and that therefore Defendants’ statements were materially false and misleading. But as discussed at length above, the SAC does not “specify the reasons why each statement was false or misleading.” In re 2007 Novastar, 579 F.3d at 883. “The [SAC] does not provide any link between an alleged misleading statement and specific factual allegations demonstrating the reasons why the statement was false or misleading....” Id. And the SAC does not “necessarily show that, the defendants’ statements were [false or] misleading.” Id. at 884. Therefore, the SAC does not “provide the level of particularity required by the PSLRA.” Id.

The primary reason for Plaintiffs’ pleading inadequacies is that Plaintiffs are pleading fraud by hindsight. Plaintiffs disclaim such a practice, pointing to their reliance on credible news sources and confidential witnesses for their allegations. (See S. PI. Br. 14-28.) Such sources may be used to support allegations showing that statements were false or misleading if the basis for the sources’ knowledge is described with particularity. See § 78u-4(b)(1); California Pub. Employees’ Ret. Sys. v. Chubb Corp., 394 F.3d 126, 147 (3d Cir. 2004). But even if sources are sufficiently described, the allegations supported by those sources must still adequately explain why challenged statements were false or misleading when made. See In re Hutchinson Tech., Inc. Sec. Litig., 536 F.3d 952, 959-60 (8th Cir. 2008); see also New Jersey Carpenters Pension & Annuity Funds v. Biogen IDEC Inc., 537 F.3d 35, 51 (1st Cir. 2008) (“[W]e look at all of the facts alleged to see if they provide an adequate basis for believing that the defendants’ statements were false. This involves an-evaluation, inter alia," of the level of detail-provided by the confidential sources, the corroborative nature of the other facts alleged (including from other sources), the coherence and plausibility of the allegations, the number of sources, the reliability of the sources, and similar indicia.” (internal quotation marks and citations omitted)).

Setting aside whether the basis for the confidential witnesses and news articles’ knowledge is sufficiently' described, (see SAC ¶¶ 32-42), the SAC only attributes general information about Target Canada’s supply chain problems to these sources, (see id. ¶¶ 82-115). Plaintiffs extrapolate their overarching systemic problems explanation from this general information, as well as later company decisions involving a “reset” of systems and a withdrawal from Canada due in part to supply chain issues. They then explain that the challenged statements must have been false and misleading during the entire Securities Class Period because the supply chain contained systemic,-supposedly - unfixable, general problems. This is pleading fraud by hindsight, supplemented only by relevant, but vagué,' background information about supply chain problems that existed during the Securities Class Period. The PSLRA prohibits reliance on such threadbare and hindsight-inspired allegations. See § 78u-4(b)(1); In re Navarre, 299 F.3d at 743.

With the benefit of hindsight, it is possible—and perhaps even • likely—that Target would have plotted a less rapid expansion- into Canada or employed different supply chain systems. (See SAC ¶¶ 149, 151-52.) Regardless, the securities laws “do not provide investors with a recourse against unsuccessful management strategies,” Parnes, 122 F.3d at 551 (quoting Searls v. Glasser, 64 F.3d 1061, 1069 (7th Cir. 1995)), or business reverses, DiLeo, 901 F.2d at 627 (“Awards on account of business failure, even the expenses of litigation on the subject, would discourage firms from taking risk in thé first place. This would make investors as a whole worse off.” (internal citation omitted)).' For all the foregoing reasons, Plaintiffs fail to distinguish their case from one founded on hindsight. They fail to allege sufficient particular facts, explaining why any of the challenged statements were materially false or misleading when-made. See In re 2007 Novastar, 579 F.3d at 883; In re Cerner, 425 F.3d at 1084; In re Navarre, 299 F.3d at 742-43. Therefore, the Court must dismiss the SAC, See § -78u-4(b)(3)(A).

B. Exchange Act § 20(a) Claims

Section 20(a) of the Exchange Act provides that:

Every person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such ■ controlled person is liable....

15 U.S.C. § 78t(a). “Controlling person” claims brought under § 20(a) are, by definition, then, derivative of a controlled person’s violation of the Exchange Act. In re Hutchinson Tech., Inc. Sec. Litig., 536 F.3d 952, 961 (8th Cir. 2008). Because the Court finds that Plaintiffs fail to allege such a violation with the level of particularity required by the PSLRA, their § 20(a) claims likewise fail. See id.

IV. THE ERISA ACTION

The ERISA action contains allegations similar to those in the securities action, but related to the Target Corporation 401(k) Plan (and absorbed Target Corporation Ventures 401(k) Plan) (the “Plan”). (See ERISA Amended Complaint (“EAC”) ¶ 1, E. Dkt. No. 22.) Plaintiffs were Plan participants between February 27, 2013 and May 19, 2014, inclusive (the “ERISA Class Period”). (See id. ¶¶ 19-22, -51.) During that period, Plan participants invested in the Plan’s Company Stock Fund (the “Fund”), which invested in Target common stock as part of Target’s Employee Stock Ownership Plan (“ESOP”). (See id. ¶¶3, 60, 68.)

In general, Plaintiffs allege that Defendants Plan Investment Committee (“PIC”) and its members, Target, and company executives who appointed individuals to the PIC all breached their duties of prudence and loyalty when they failed to take steps to protect Plan participants from drops in Target stock price that resulted from Target Canada’s failure. (See id. ¶ 5.) Plaintiffs allege that Defendants had inside, nonpublic information about Target Canada’s systemic supply chain problems indicating that failure was inevitable, that this information was not fully public and led to artificially-inflated stock prices, and that Defendants were thus duty-bound to take actions to protect Plan participants from future price drops. (See id. ¶¶ 7, 86-167.)

Plaintiffs.assert three causes of action: (1) breach of the duty of prudence in violation of ERISA §§ 404(a)(1)(B) and 405, (2) breach of the duty of loyalty in violation of ERISA §§ 404(a)(1)(A) and 405, and (3) failure to adequately monitor other fiduciaries and provide them with accurate information in violation of ERISA § 404. (EAC ¶¶ 177-221.) Defendants move to dismiss all three counts for failure to state a claim. (See E. Dkt. No. 28.)

A. Count I for Breach of the Duty of Prudence

ERISA § 404(a)(1)(B), codified at 29 U.S.C. § ■ 1104(a)(1)(B), requires Plan fiduciaries to discharge their duties solely in the interests of participants and beneficiaries “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent [person] acting in a like capacity and familiar with such matters would use in the .conduct of an enterprise of a like character and with like aims.” This standard is objective; it focuses on the- fiduciaries’ conduct preceding a challenged decision, rather than the results of that decision. Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 595 (8th Cir. 2009). To prove a breach of this duty of prudence—which has been described as one of “the highest known to the law”— plaintiffs must make a prima facie showing that defendants (1) acted as fiduciaries, (2) breached their fiduciary duties, and (3) caused a loss to the Plan. Id. at 594, 598 (quoting Donovan v. Bierwirth, 680 F.2d 263, 272 n.8 (2d Cir. 1982)). When evaluating whether this showing has been met, courts should engage in a “holistic evaluation” of the factual allegations. Id. at 598.

Defendants challenge element (2), that they breached any fiduciary duties. (See ERISA Defendants’ Memorandum in Support of Their Motion to Dismiss (“E. Def. Br.”) 8-9, E. Dkt. No. 30.) They argue that Plaintiffs’ claims fail under the pleading standards articulated by the Supreme Court in Fifth Third Bancorp v. Dudenhoeffer, — U.S.-, 134 S.Ct. 2459, 189 L.Ed.2d 457 (2014) and reaffirmed in Amgen, Inc. v. Harris, — U.S. -, 136 S.Ct. 758, 193 L.Ed.2d 696 (2016). (See E. Def. Br. 9-11.)

1. Dudenhoejfer and Amgen

In Dudenhoejfer, ESOP plan participants alleged that the fiduciary defendants knew or should have known that a company’s stock was overvalued and excessively risky based on, among other things, nonpublic information known to the fiduciaries in their positions as insiders. 134 S.Ct. at 2464. The participants asserted that instead of continuing to hold and buy company stock, the defendants should have sold stock before the value declined, refrained from purchasing more stock, cancelled the ESOP option, and disclosed the inside information. Id.

The Supreme Court remarked that, “[o]n the one hand, ERISA itself subjects pension plan fiduciaries to a duty of prudence,” but that “[o]n the other hand, Congress recognizes that ESOPs are ‘designed to invest primarily in’ the stock of the participants’ employer.” Id. at 2465. As such,

in many cases an ESOP fiduciary who fears that continuing to invest in company stock may be imprudent finds himself between a rock and a hard place: If he keeps investing and the stock goes down he may be sued for acting imprudently ... but if he stops investing and the stock goes up he may be sued for disobeying the plan documents.

Id. at 2470.

To weed out meritless claims and address the ESOP fiduciary dilemma, the Supreme Court held that in order for plaintiffs to state a claim “for breach of the duty of prudence on the basis of inside information,” they must plausibly allege an alternative action that the defendant fiduciaries could have taken that (1) would have been consistent with the securities laws, and (2) “a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.” Id. at 2472. The Court noted one example of an action that would be inconsistent with securities laws: “divesting the fund’s holdings of the employer’s stock on the basis of inside information.” Id. at 2472. As to the second element, the Supreme Court advised:

[L]ower courts ... should also consider whether the complaint has plausibly alleged that a prudent fiduciary in the defendant’s position could not have concluded that stopping purchases—which the market might take as a sign that insider fiduciaries viewed the employer’s stock as a bad investment—or publicly disclosing negative information would do more harm than good to the fund by causing a drop in the stock price and a concomitant drop in the value of the stock already held by the fund.

Id. at 2473.

The Supreme Court revisited Duden-hoejfer in Amgen just two years later. Reversing the Ninth Circuit Court of Appeals’s decision that a complaint satisfied Dudenhoeffer's standards, the Court stated:

The Ninth Circuit’s proposition that removing the Amgen Common Stock Fund from the list of investment options was an alternative action that could plausibly have satisfied [Dudenhoeffer’s] standards may be true. If so, the facts and allegations supporting that proposition should appear in the stockholders’ complaint. Having examined the complaint, the Court has not found sufficient facts and allegations to state a claim for breach of the duty of prudence.

186 S.Ct. at 760. The Supreme Court then remanded the case for the sole issue of whether the plaintiffs should be granted leave to amend their complaint to add details to meet DudenhoeffePs standards. See id.

2. Plaintiffs’ Alleged Alternative Actions

Plaintiffs allege that Defendants should have taken the following alternative actions to protect Plan participants from artificially-inflated Target stock prices: (1) refrained from purchasing Target stock by “freezing” purchases and/or sales of Target stock in the Fund, (EAC ¶ 152); (2) held Plan contributions in cash or some other short-term investment rather than making future purchases of Target stock, (id. ¶¶ 142, 162); (3) disclosed the nonpublic, material information to the public, (see id. ¶¶ 152,163); (4) sent targeted letters to Plan participants encouraging them to diversify holdings, (id. ¶ 164); (5) sought guidance from the Department of Labor (“DOL”) or SEC or outside experts, (id. ¶ 166); or (6) resigned as fiduciaries, (id.).

a. Refrained from Purchasing Stock by Freezing Purchases and/or Sales

Defendants argue, among other things, that refraining from purchasing the stock by freezing purchases or sales could lower the stock price by sending a -negative signal about the company, so a prudent fiduciary could conclude that a freeze would cause more harm than good. (E. Def. Br. 17-19.) Plaintiffs respond that no prudent fiduciary could conclude that a freeze