N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT R IC HARD A. KONG; e t a l.,

Pla i ntiffs-Appe lla

nts,
v. TR ADER JOE’ S C OM PANY; e t a l., De fe nda n ts-Appe lle e s. No. 20-56415 D.C . No. 2:20-c v-05790-PA-JEM
M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the C e ntra l Distric t of C a lifornia Pe rc y Ande rson, Distric t Judge , Pre siding Argue d a nd Subm itte d April 6, 2022 Pa sa de n a , C a l ifornia B e fore : SC HR OEDER

and GR AB ER , C irc uit Judge s, a

nd M c NAM EE, * * Distric t Judge
. Pla intiffs Ric ha

rd Kong, R obe rt C ruz a le gui, M atthe w He ide n, a nd C a sha y C la y b orn tim e ly

a ppe a l the distric t c ourt’ s dism i ssa l of the i r am e nde d c o m pla int, pursua nt to Fe d. R . C iv. P. 12(b)(6), for fa ilure to sta te a c la i m . R e vie w ing de



# FIL ED APR 15 2022 M OLLY C. DW Y E R, CLERK U. S. CO URT O F APPEALS

* This disposition is not a ppropria te for public at ion a

nd is not pre c e de nt e xc e pt a s provide d

by Ninth C irc uit R

ule 36-3.

* * The Honora

ble Ste phe n M . M c Nam e e , Unite d State s Distric t Judge for the Distric t of Ariz ona , sitting by de s igna tion.novo, Khoja v. Ore xige n The ra

pe utic s , Inc ., 899 F.3d 988, 998 (9th C ir. 2018), we
re ve rse an d re m and. The distric t c ourt e rre d in dismissing Plaintiffs’ c la im for bre a c h of fiduc ia

ry duty . “ In de t e rm ining the c o n tours of a n ER ISA fiduc ia

ry ’ s duty , c ourts ofte n m ust look to the

la w of trusts.”Tibble v. Edison Int’ l , 575 U.S. 523, 528–29 (2015). 1. Unde r trust la

w, “ a truste e c a

nnot ignorethe powe r the trust wie l ds to obta in fa vora ble inve s tm e nt produc ts, pa rtic ula rly whe n those produc ts a

re substa ntia lly ide n tic a l— othe r tha

n the ir lowe r c o st—

to produc ts the truste e ha s a lre a dy se le c te d.” Tibble v. Edison Int’ l, 843 F.3d 1187, 1198 (9th C ir. 2016) (e n ba nc ). In short, though “

the a ppropria te inquiry will ne c e ssa

rily be c o nte xt spe c ific [,] ” Hughe s v. Nw. Univ., 142 S. C t. 737, 742 (2022), quoting Fifth Third B anc orp v. Dude nhoe ffe r, 573 U.S. 409, 425 (2014), “ [w] a s ting be ne fic ia rie s’
m one y is im prude n t.” Tibble , 843 F.3d a t 1198 (inte rna l quota

tion m arks om itte d). He re , the ope ra tive c om

pla int pla u sibly a l le ge s a fa ilure to providec oste ffe c tive inve stm e nts with re a sona ble fe e s. Ta

king the a lle gations a s true , a s we m ust a t this sta ge of the litiga

tion, De fe nda

nts Tra de r Joe ’ s C om

pa ny , its boa

rd of dire c tors, a

nd its e xe c utive c om

m itte e fa ile d to m onitor a nd c ontrol theoffe ring of
a num be r of m utua l funds in the

form of “ re ta i l” sha

re c la sse s tha

t c arrie d highe r 2fe e s tha

n those c ha

rge d by othe rwise ide ntic a l “ institutiona l ” sha re c l a sse s of the
sam e inve stm e nts. Exc e pt for the e xtra fe e s , the sha

re c la sse s we re ide ntic a l. That c hoic e re s ulte d in m ore tha n $30,464,538 in extra

fe e s . De fe nda nts’ e xpla nation for the m ore e xpe nsive c hoic e is una va iling a t the ple a ding sta ge . Though thepa rtie s signe d a re ve nue sha ring a gre e m e nt tha

t m ight provide som e e xpla

nation for this c hoic e , the a gre e m e nt shows only what c o uld
oc c ur in the ory

— not wha t oc c urre d in fa c t. Se e Sta rr v. B a c a , 652 F.3d 1202, 1216 (9th C ir. 2011) (“ If the re are two a l te rnative e xpla nations, onea d

va nc e d by de fe nda n t a nd the othe r a dva

nc e d by pla intiff, both of which a re pla u sible , pla i ntiff’ s c om

p la int survive s a

m otion to dism

iss unde r R

ule 12(b)(6).” ) Thus, draw ing e ve ry

re a sona ble infe re nc e in fa

vor of Pla intiffs, theope ra t ive c om pla int

“ a l le g e [s] ‘ fa c tua l c o nte n t tha t a llows thec o urt to dra

wthe re a sona

ble infe re nc e that the de fe n da

nt is lia ble for the m isc onduc t a lle ge d.’ ” In re C e ntury Alum inum C o. Se c . Litig., 729 F.3d 1104, 1108 (9th C ir. 2013) (quoting Ashc

roft v. Iqba l, 556 U.S. 662, 678 (2009)). 2. In a ddition, fiduc ia

rie s m ust disc ha rge the ir pla

n-re late d dutie s “ for the
e xc lusive purpose of . . . providing be ne fits to pa

rtic ipa nts a nd the ir be ne fic ia

rie s; and . . . de fray ing re a s ona ble e xpe nse s of a dm iniste ring the pla n.” 29 U.S.C
.

3§ 1104(a )(1)(A). Taking a ll the a lle gations a s true , De fe nda nts did not ac t with the purpose of de fray ing re a sona ble a d m inistra tive e xpe nse s. 3. For the forgoing re a sons, thedistric t c ourt a lso e rre d in dismissing the
c la im for bre a c h of the fiduc ia

ry duty to m onitor. RE V E RSE D AND RE M ANDE D.

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