F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

S T E V E H A R

R I S ; D E N N I S F

. R A M O S , AKA Dennis Ramos; D O N A L D H A N K S ; J O R

G E T O R R E S ; A L B E R

T C A P P A , On B ehalf of Themselves and All Others Similarly

Situated, Plaintiffs-Appellants

,

v

.

A M G E N , I N C .; A M G E

N M A N U F A C T U R

I N G , L I M I T E D ; F R

A N K J

. B I O N D I , J R

. ; J E R

R Y D

. C H O A T E ; F R A N K C. H E R

R I N G E R ; G I L B E R

T S. O M E N N ; D A V I D B A L T I M O R

E ; J U D I T H C. P E L H A M ; K E V I

N W

. S H A R

E R ; F R E D E R I C K W

. G L

U C K ; L E O N

A R D D. S C H A E F F E R ; C H A R

L E S B E L L ; J A C Q U E L I

N E A L L R

E D ; A M G E

N P L A N F I D U C I A R

Y C O M M I T T E E ; R

A U L C E R M E N O ; J A C K

I E C R O U S E ; F I D U C I A R

Y C O M M I T T E E O F T H E A M G E N M A N U F A C T U R

I N G L I M I T E D P L A N ; L O R I J O H N S T O N ; M I C H A E L K E L L Y , Defendants-Appellees

,

D E N N I S M. F E

N T O N ; R I C H A R

D N A N U L A ; T H E F I D U C I A R

Y C O M M I T T E E ; A M G E

N G L O B A L N o. 10-56014

D.C. No. 2:07-cv-05442- PSG-PL A

OPI NI ONH A R R I S V

. A M G E

N 2

B E N E F I T S C O M M I T T E E ; A M G E N F I D U C I A R

Y C O M M I T T E E , Defendants

.

On Remand F rom The United States Supreme Court

F iled October 30, 2014

B e fore: J erome F arris and W illiam A. F letcher, Circuit J udg es, and Edward R. Korman, Senior District J udg e. *

Opinion by

J udg e W

. F letcher

SUMMARY * *

ERISA

On rem a n d f

r om the United States Supreme Court for reconsideration in li g ht of Fifth Third Bancorp v

. Dudenhoeffer

, 134 S. Ct. 2459 (2014), the panel reversed the district court’s dismissal of a class action broug ht by current

a n d f ormer employ ees of Amg en, I nc., a nd a n A mg e n subsidiary under the Employ ee Retirem e nt I ncome Security

* T h e Ho n o rab le Ed w ard R. Ko rm an , Sen io r Un ited States D i strict J u dg e f o r th e Eastern District o f

New Yo rk , sittin g b y

d esig n atio n

.

** T h is su m m ary co n stitu

t es n o p ar t o f t h e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.H A R R I S V

. A M G E

N 3

Act, alleg ing breach o f fiduc i a r y duties reg arding two employ e r-sponsored pension plans.

The plans we r e employ ee stock ownership plans that qualified a s “elig ible individual a c count plans,” or “EI APs.” All o f the plaintiffs’ EI APs included holding s in the Amg en Common Stock F und, which he l d o n ly Amg en common stock.

The Supreme Court held in Fifth Third t h a t t h ere is no presumption of prudence for employ ee stock ownership p lan fiduciaries bey ond the statutory e x emption from the otherwise applicable d u t y to diversify

. The panel held, the r efore, that the plaintiffs were not required to satisfy the criteria of Quan v. Computer Sci. Corp.
, 623 F

. 3d 870 (9th Cir. 2010), in order to show that no presumption of prudence applied.

The panel held that the plaintiffs stat e d a claim that the defendants acted imprudently

, and thereby violated their duty of care, by continuing to provide Amg en common stock a s an investment alternative when they knew or should have known that the stock was being sold a t an ar t i ficially inflated price.

The panel held that the plaintiffs sufficiently alleg ed that the defendants violated their duty of loy alty a nd care b y failing t o provide material information to plan participants ab o u t investment of the A mg en Common Stock F und. Ag reeing with the Six th Circuit, the panel held that the defendants’ prep a r a t ion and distribution of summary p lan distributions, including their incorporation of Amg en’s SEC filing s by r eference, were acts p erformed in their fiduciary capacity

.H A R R I S V

. A M G E

N 4

The p anel a lso r eversed the dismissal o f derivative claims,

as well as a c l a i m that the defendants caused the plans d i r ectly or indirectly to sell or e x chang e property wit h a party -in-interest. B ecause the Amg en Plan contained no clear deleg ation of ex ecutive a u thority

, the panel reversed the district court’s dismi s s a l o f Amg en from the case as a nonfiduciary

. The p a

nel remanded for further proceeding s consistent with its opinion.

COUNSEL

Stephen J

. F earon, J r

. a

nd G arry T. Steven s , J r., Squitieri & F earon, L L P, Ne w York, N ew York; Stephen M. F ishback and Daniel L

. Keller, K eller

, F ishback & J ackson, L L P, Tarz ana, C a l i fornia; F rancis M. Greg o rek, B etsy C. Manifold, and Rachele R. Rickert, W o lf Haldenstein Adler F reeman & Herz
, L L P, San D ieg o, California, Mark C. Rifki n (arg ued), W o lf Hal d e n s tein Adler F reeman & Herz
, L L P, New York, New Y ork; and Thomas J a m e s McKenna, Gainey & McKenna, New York, New York, for Appellants.

Em i l y S e y m o u r Costin, Sheppard Mullin Richter & H ampton, L L P, W ashing ton, D.C.; Steven Oliver Kramer and J onathan David Moss, Sheppard Mullin Richter & Hampton, L L P, L os Ang eles, California; J onathan R ose, Alston & B ird, L L P, W a shing ton, D.C.; J ohn N adolenco, May er B rown, L L P, L os Ang eles, California; B rian D avid Netter, May er B rown, L L P, W a shing ton, D.C.; and Robert P. Davis (arg ued )

, M ay er B rown, L L P, New York, New York, for Appellees.H A R R I S V

. A M G E

N 5

OP INION

W

. F L ETCHER, Circuit J udg e:

Plaintiffs, current and f

or m e r employ ees of A mg e n, I nc. (“Amg en”) and its subsidi a r y A m g e n Manufacturing

, L imited (“AML ” ), participated in two employ er

- s p onsored pension plans, the Amg en Retirement and Saving s Plan (the “Amg en Plan” ) a nd the Retirement and Saving s Plan f or Amg en Manufacturing

, L imited (the “ A ML Plan”) (collectively

, “the Pl ans”). The Plans w ere employ ee stock-ownership plans that qualified as “elig ible individual account plans” (“EI A P s ”) u nder 29 U .S.C. § 1107(d)(3)(A). All of the plaintiffs’ EI APs i n cluded holding s in the Amg e n Common Stock F und, one of the investments available to p lan participants. The Amg e n Commo n S tock F und held only Amg en common stock.

After the value of A mg en common stock fell, pla i n t i f fs filed a class action under the E mploy e e R etirement I ncome Security Act ( “ER I S A ” ) ag ainst Amg en, AML
, Amg en’s board o f directors, and the F iduciary Committees of the Plans (collectively

, “defen d a nts”), alleg ing that defendants breached their fiduciary duties un d er ERI SA. The district
court dismissed the complaint ag ainst Amg en under F ederal Rule o f Civil Procedure 12(b)(6) o n the g roun d that Amg en

was not a fiduciary

. I t dismissed the complaint ag ainst the other defendants, who were fid u ci aries, after apply ing the “presumption of prudence” articulated in Quan v . Computer Sciences Corp.
, 623 F .3d 870 (9th Cir. 2010). Alternatively

, even assuming the absence o f t he p resumption, the district
court d ismissed the complaint on the g round that defendants had not violated their fiduciary duties.H A R R I S V

. A M G E

N 6

I n an earlier opinion, w e reversed the district court’s dismissal of the complaint. Harris v. Amgen, Inc. , 738 F .3d 1026 (9th Cir. 2 013). Apply ing Quan
, we he l d t h a t the presumption of p rudence d i d not apply

. W e held, further, that, in the absence of the p resumption, plaintiffs h ad sufficiently alleg ed v i olation of the defendants’ fiduciary duties. F inally

, we h e l d that Amg en was a n adequately alleg ed fiduciary

of the Amg en Plan.

Defendants p e tit i o n ed f or a writ of certiorari. The Supreme Court deferred ruling on the petition while it considered Fifth Third Bancorp v. Dudenhoeffer

, 1 34 S. Ct. 2459 (2014), another ERI SA case in w hich the presumption of prudence was at issue. I n Quan
, w e had held that the presumption of prudence was available to ERI SA f iduciaries fo r b oth EI APs and employ ee stock ownership plans (“ESOPs”) “when the plan terms r eq uire or encourag e the fiduciary to invest primarily in emp l oy er stock.” Q uan , 623 F .3d at 881. Overruling Quan and s i m ilar d ecisions b y

our sister circuits, the Supreme Court held in Fifth Third that there was no presumption of prudence f or ESOP f

iduciaries bey ond the statutory ex emption f r om the otherwise applicable duty to diversify

. Fifth Third

, 134 S. Ct. at 2467; 29 U.S.C. § 1104(a)(2). After d e c iding Fifth Third

, the Court g ranted certiorari, a

nd vacated a n d remanded for reconsideration in l i g ht of its d ecision. Amgen, Inc. v. Harris
, 134 S. Ct. 2870 (2014).

On reconsideratio n in lig ht of Fifth Third

, we ag ain reverse the district court’s dismissal.H A R R I S V

. A M G E

N 7

I . B ackg round

The following nar r ative is taken from the complaint a nd documents that provide u n c o n tested facts. On a motion to dismiss, we a ssume the alleg ations of the c omplaint to be
t rue. See Tellabs, Inc. v. Makor Issues & Rights, Ltd.

, 551 U.S. 308, 322 (2007).

Amg en is a g lobal biotechnolog y company that develops and markets p harmaceutical drug s. AML
, a w h olly owned subsidiary o f Amg en, operates a manufacturing f acility in Puerto Rico. To provide retirement benefits to their employ e es, Amg en set up the Amg en Plan on April 1, 1985. AML set u

p the AML Plan in 2002 and it became effective on J anuary 1, 2006.

The Plans are c overed by the Empl o y e e Retirement I ncome Security Act (“ERI SA”). B oth qualify as “individual
account p lans.” See 29 U.S.C. § 1002(34). Plan participants contribute a portion of their pre-tax compensation to individual investment a ccounts. They receive benefits based solely upon their contributions, a d j usted for any g ains a

nd losses in assets held b y the Plans. Participants may contribute
up to thirty percent of their pre-tax compensation. They may select from a num b e r o f investment funds offered b y the Plans. One o f those is the Amg en Co m m o n Stock F und, which h olds only Amg en stock. A mg e n stock constituted the larg e st sing le asset of both Plans in 2004 and 2005.

This litig ation a r i ses out of a controversy concerning Amg en drug s used for the treatment of a nemia. Anemia is a

con d i t i o n in which blood is d eficient in red blood cells o r hemog lobin. Causes of anemia include a n iron-deficient diet,

ex c e ssive bleeding

, cert a in cancers and cancer treatments,H A R R I S V

. A M G E

N 8

and kidney or liver failure. I n the early 1980s, Amg en scientists discovered how to make artificial ery thropoietin, a protein formed in the kidney s that stimulates ery thropoiesis, the formation of r ed blood c ells. After this discovery

, Amg en commercializ ed the manufacture of a class of drug s k nown a s ery thropoiesis-stimulating ag ents (“ESAs”) to treat anemia.

I n 1 9 8 9
, t h e F e d e r a l D r u g A d m i n i s t r a t i o n (“ FD A ” ) approved A m g en’s first commercial E SA, epoetin alfa, for the treatment of anemia associated wit h chronic kidney fa i l u r e. Amg en marketed e poetin alfa for approved u ses under the brand name E POGEN (“Epog en”)

, a nd licensed patents to J ohnson & J ohnson (“J & J ”) to develop additional marketable uses. J & J obtained F DA approval between 1991 and 1 9 96 to market e p o et i n alfa under the b r a nd name P R O C R I T ( “ P r o c ri t ”) f o r a n e m i a a s s o c i a t e d w i t h chemotherapy and HI V therapies, for chronic kidney diseases, and for pre-surg ery support of anemic patients. J & J had ex clusive marketing rig h ts for Procrit under its licensing
ag reement with Amg en.

Sometime before 2001, Amg en developed a new ESA, darbepoetin alfa, whose sales by Amg en were not restricted by J & J ’s e x clusive marketing rig hts for Procrit. Darbepoetin alfa, marketed as Aranesp, lasts long er in the b loodstream than e poetin alfa. T he F DA approved Aranesp for treatment of anemia associat e d with c h ronic k idney failure and cancer chemotherapy

. Aranesp h a s taken sig nificant market share from J & J ’s Procrit. At the time the complaint wa s filed, Aranesp “control[ led] half the market” for non-dialy sis ESA. Sales of EPOGEN and A r a n es p have been “core to [ Amg en’s] survival and success,” making up roug hly h alf o f Amg en’s $14.3 billion in revenue in 2006.H A R R I S V

. A M G E

N 9

I n t he late 1990s and e arly 2000s, several clinical trial s raised safety concerns reg arding t h e u se of E SAs for particular a

nemic p o p ulations. I n 1998, the Normal H ematocrit Study tested the e f ficacy of ESAs on an e m i a p a t ients with pre-ex isting heart disease. The study w a s terminated because the test g roup ex perienced statistically sig nificant h ig her rates of blood clotting

. I n 2 0 0 3 and e arly 2004, two trials

— ENHANCE and B EST — tested ESAs on

cance r p a tients in Europe. The ENHANCE trial showed shorter prog ression-free survival a nd shorter overall survival of head a nd neck cancer patients for the ESA g roup than the placebo g roup. Th e B EST trial was terminated after four months b ecause breast c ancer pat i en t s in the g roup taking epoetin a lfa had a h ig her rate of death than those in the placebo g roup.

ENHANCE and B EST did not test the safety of ESAs for the specific uses and d oses for which they had been approved in the United States. I n March 2004, the FD A p u b lished notice in t h e F ederal Reg ister that the Oncolog y Drug Advisor y C o m m i t t e e ( “ ODAC”), an F DA-sponsored g roup o f oncolog y ex per t s , w o uld c onvene in May 2004 to discuss safety c oncerns about Aranesp. I n April, b e f ore the ODAC meeting

, an Amg en spokesperson stated during a conference call with investors, analy sts, and p lan participants that “the focus [ of the ODAC meeting ] was not on Aranesp” and that “the safety

for Aranesp has been comparable to placebo.”

During its two-day

meeting with ODAC, the F DA urg ed Amg en to conduct further c linical trials to test the safety o f ESAs f or uses that h a d a l ready been approved by the F DA. Amg en made a presentation at the meeting outlining what it called the “Amg e n Pharmacovig ilance Prog ram,” consisting of five ong oing or planned clinical trials testing Aranesp “inH A R R I S V

. A M G E

N 10

different tumor treatment setting s.” Amg en’s Vice President for Onc o log y Clinical Development described the Amg en prog r am a s the “ responsible and credible ap p r oach to definitively

resolv[ e] the questions raise[ d] ” by the F DA.

One of the trials under A mg e n’s prog ram was the Danish Head a nd Neck Cancer Group ( “DAHANCA”) 1 0 Trial. The DAHANCA 1 0 T r i al tested whether hig h doses o f A ranesp could help shrink tumors in patients receiving radiation therapy for head and neck cancer. O n October 18, 20 06, DA H A NCA investig ators temporarily halted the study “due to information about potential unex pected neg ative effects.” Amg en was informed of the temporary halt of the study on o r

near that day

. A mg en did not disclose that the DAHANCA 10 Trial had been temporarily halted.

An analy sis of the ha l t e d DAHANCA 10 Trial was completed on November 28, 2006. The p rincipal investig ator reported that “[ b] ased on these outcome results the DAHANCA g roup concluded that the likelihood of a reverse outcome, i.e. that Aranesp would be sig nificantly better than in control[

, ] was almost non-ex isting .” The DAHANCA 10 Trial was permanently terminated on D e c e mber 1
, 2006. DAHANCA investig ators concluded that “there is a small but sig nifica n t p o or outcome in the patients treated w ith Aranesp” in that tumor g rowth was worse for p a t i ents who took A r anesp compared to patients who did not. Amg e n w a s informed i n December 2006 that the study had been permanently

terminated.

Another c linical trial, CHOI R, raised additiona l safety

concerns about ESAs. The CHOI R t r i al investig ated the safety of epoetin alfa (EPOGEN) when used to treat chronic kidney disease patients. The safety monitoring board forH A R R I S V

. A M G E

N 11

CHOI R terminated the trial when a h ig her incidence of death and car d i o vascular hospitaliz ation w as observed a mong epoetin alfa users. Yet another clinical trial, CREATE, tested the benefit provided by Roche Pharmaceuticals’s ESA in raising hemog lobin level s i n patients with chronic kidney disease. On November 16, 2006, Roche announced that the results of the CREATE trial “clearly show that ther e i s no additional cardiovascular benefit f rom treating to hig her hemog lobin levels in this patient g roup.”

On November 20, A mg en posted a public statement responding to the CHOI R and CREATE trials. Amg en wrote, “A very substantial body o f evidence, developed o v er the past 17 y ears, demonstrates that anemia associate d w i t h chronic kidney disease can be treated safely and e ffectively with EPOGEN and Aranesp w hen adm i n istered according to the F ood an d Drug Administration (F DA)-approved dosing
g uidelines.” Two weeks later, Amg en issued a press release
to correct “what the company b elieves a r e m isleading a nd inaccurate news reports reg arding the use o f i t s drug s.” Amg en reiterated, “EPOGEN a n d Aranesp are effective and safe medicines when administered according to the F ood a nd Drug Administration (F DA) label.”

Am ge n also conducted its own c linical trial, the “103 Study .” The 103 Study tested Ar a nesp in 939 patients with anemia s e c o n d a ry to c ancer. The F DA later described the 10 3 Study as “demonstrat[ ing ] sig nificantly shorter survival rate[ s] in c ancer patients receiving E SAs as compared to th[ o] se receiving transfusio n s u p port.” However, during a J an u a r y 2007 conference call, an Amg en representative described the 103 Study as not d e monstrating a “statistically sig nificant adverse [ e] ffect of Aranesp on overall mortality in this patient population.” He said t h a t “ the risk benefit ratioH A R R I S V

. A M G E

N 12

for Ara n e sp in these ex tremely ill patients with anemia secondary to malig nancy is, at best, neutral and perhaps
neg ative.” During what may have been the same conference call, discussing A mg e n ’s fourth-quarter earning s on J anuary 25, an Amg e n representati v e stated, in response to concerns

ex p ress e d about the 103 Study

, that “we have a w ell established risk benefit profile.”

During a F ebruary 1 6
, 2007, investor c onference call, defendant Kevin Sharer, Amg en’s President, Chief Ex ecutive Officer, and Chairman of the B oard, stated, “W e strong ly believe, as we have consistentl y s t ated, that Aranesp a nd E P O G EN a

re safe and effective medicines when used i n accordanc e w ith label indications.” During a March conference call, defendant Sharer reiterated, “W hen we look
at the totalit y o f data, w e believe our products are safe a nd effective w hen used o n-label.” O n March 9, 2007, Amg en posted a statement on the company w ebsite a vailable to p lan participants under the title “Amg en’s Statement on the Safety of Aranesp (darbepoetin alfa) and EPOGEN (Epoetin alfa)”:

Aranesp (darbepoetin alfa) a nd EPOGEN (Epoetin alfa) h a ve favorable risk/benefit profiles in approx imately four million patients with chemotherapy -induced anemia or CKD when a dministered a ccord i n g to the F DAapproved dosingg uidelines.

Amg en eng a g e d i n e xt e n s i v e m arketing

, encourag ing both

o n - and off-label uses of its E SAs. Amg en trained i t s s al e s representatives to a s k questions that steered doctors to discussions about off-label uses. I n an Amg en sales personnel manual, A mg e n g ave an “ex panded list” o f

“ e x c ellent q

uestions” to ask doctors in order to move t h eH A R R I S V

. A M G E

N 13

discussions toward off-label uses. Ex amples include, “ W hat is keeping y ou from using Aranesp in all y our MDS/HI V /CI A patients? ” MDS i s m y elody splastic sy ndrome, an illness

o f t en resulting in a

n emia. The F DA has never appr o v e d Aranesp to treat MDS or HI V patients.

Amg en created a speakers p rog ram in which Amg en p aid for dinners at w h i ch “ex pert” speakers talked to phy sicians and other provide r s about off-label uses for Aranesp. Speakers prog ram events w ere n o t accredited as continuing medical education seminars conducted by an independent medical association. Amg en paid n o t only the s peakers but also the doctors and other medical providers who attended the
events. The $1,000 pay

ments to phy sician attendees were “paid from [ Amg en’s] marketing budg et.”

Amg en educated medical providers about the profit they could o btain by prescribing its ESAs

. B efore J anuary 1, 2005, Medicare calculated drug reimburseme n t r a t es based on t h e averag e w holesale p rice (“AW P”) of d rug s. Medical providers could purchase Amg e n’s ESAs at a price lower than the AW P, but c ould charg e Medicare the A W P. Amg en created spreadsheets a n d other tools to help providers calculate the profit. Amg en a l s o e ncourag ed doctors to use its ESAs inefficiently

. F or ex ample, it encourag ed doctors to deli ver Epog en intravenously r ather than subcutaneously

, because an intravenous delivery of the drug requi res a substantially

larg er dose to achieve the same effect.

Amg en marketing e fforts w ere successful. F or ex ample, Amge n ’s worldwide sales o f A ranesp increased f ourteen percent during the first quarter of 2007 compared to the same quarter in 2006. Amg en told investors on several occasions that its marketing practices w e r e p roper. I n public SECH A R R I S V

. A M G E

N 14

filing s, Amg en st a t e d t h at it marketed its products o nly for on-label uses. I n De c e m ber 2006, in response to neg ative publici ty about off-label uses, Amg en issued a p ress release “intended to clarify Amg e n’s position on the u se o f EPOGEN and Aranesp and to correct what the company believes a re misleading and inaccur ate news reports reg a rding the use o f its drug s.” The com p a n y c larified that “Amg en only promotes the use of EPOG E N and Aranesp consistent with the F DA label.” On a J anuary 2007 conference call, Amg en stated that “our promotion [ of E POGEN] h as alway s been strictly a ccording to our label, we do not antici p a t e a major shift in clinical practice.”

I n F ebruary 2007, The Cancer Letter published an article entitled “Amg en Didn’t Tell W a l l Street About Results o f [ DAHANCA] Study .” The article reported that the DAHANCA trial had been temporarily halted d u e to the “sig nificantly inferior therapeutic o u t c ome from a dding Aranesp to r adiation treatment o f patients with head and neck cancer.” On F ebruary 23, the Associated P r ess announced that the USP DI
, an influential drug ref erence g uide, h ad delisted Aranesp as a treatment for anemia in cancer patients
not underg oing chemotherapy

. O n F ebr uary 27, the New Y o rk Times published an article stating :

New studies are raising questions ab o ut whether drug s that have been used by millions of c ancer patients mig h t actually be h arming them. The drug s, sold by Amg e n , Roche, a nd J ohnson & J ohnson, are used to treat a n e mia caused by chemotherapy and meant to reduce the need for blood transfusions and g ive patients more energ y

. B ut the n e w results
sug g est that the dru gs m ay make the cancerH A R R I S V

. A M G E

N 15

itself worse.

. . . [ S] ome cancer specialists a nd

s e curities a

n aly sts say the new informati o n may make doctors more cautious in using the drug s, which have comb i ned sales for the three com p an ies ex c eeding $11 billion a nd have been heavily promoted throug h efforts that include television commercials.

On March 9, the F D A mandated a “black b o x ” warning for off-label use of Arane sp and E p og en. A black box warning is the strong est w arning the F DA can require. Cf. 21 C.F .R. § 201.57(c)(1) (2012). The black box warning read:

Recently c ompleted studies describe an i ncreased risk of death, b lood clots, strokes

, and heart attacks in patients with k idney failure where ESAs were g iven at hig her than recommended doses. I n other studies, more rapid tumor g rowth occu r red in patients with head and n eck cancer w ho received th ese hig h e r doses. I n studies w here ESAs were g iven at recommended doses, an increased risk o f death was reported in p atients with

cancer who were not receiving chemotherapy and an increased risk of blood clots wa s observed in patients following orthopedic
surg ery

.

On March 21, 2007, t w o H o u se of Representatives subcommittees opened an investig ation into the safety profile of Aranesp and E POGEN as well as into Amg en’s o ff-label marketing practices. The Chairs of those two subcommittees “ordered” Amg en to halt direct-to-consumer advertising a nd phy sician incentives pending further F DA action. On May 8,H A R R I S V

. A M G E

N 16

the F DA n oted on its w e b site that Aranesp and EPOGEN “were clearly demonstrated to be una c ceptable” in hig h doses. On May 1 0, ODAC reconvened and v oted to r estrict the use of ESAs, to ex pand ex isting warning s, and to require ESA manufacturers to conduct further studies.

Defendant Sharer, Am ge n ’s President and CEO, told a W a ll Street J ournal reporter in an interview that 2007 was the “most d ifficu l t [ y ear] in [ Amg en’s] h istory .” According to Sharer, th e r e was a

n “unex pected $800 million to $1 billion hit to operating income due to safe t y c oncerns” about Aranesp. Sales of Aranesp decreased by fifty percent.

Amg en stock, and thus the Amg en Common Stock F und, lost sig nificant value as a result of these safety concerns. The class period runs from May 4
, 2 0 0 5
, to March 9
, 2007. Am ge n common stock w as at its hig h of $86.17 on September 1 9
, 2 005. O n F ebruary 16, 2007, when The Cancer Letter published its article revealing that Amg en h ad
not been forthcoming about the result of the DAHANCA 10 Trial, Amg en stock sold for $66.73. W h en ODAC voted to restrict the u se of ESA drug s, o n or shortly after May 1 0
, the price of Amg en stock dropped to $57.33, the class p er i o d low. B e tween September 1 9, 2005 and the ODAC vote, the price o f Amg en stock dropped $28.83, or thirty -three percent.

On A ug ust 20, 2007, p laintiffs Steve Harris, a participant in the Amg en Plan, and D ennis Ramos, a particip a n t in the AML Plan, f

iled a complaint alleg ing that defendants breached their fiduciary dut i e s under ERI SA. The district
court dismissed Harris’s claims for lack of sta n d i n g, on the
g round that Harris no long er owned assets in the Amg en Plan

o n the date he filed his complaint. H arris v. Amgen, Inc.
, 573 F .3 d 7 2 8
, 731 (9th Cir. 2009). The court dismissedH A R R I S V

. A M G E

N 17

Ramos’s claims without leave to amend on the g round that he had failed to identify the proper fiduciaries of the A ML Plan. Id. W e reversed, h o l d i n g that Harris had standing as a “participant” of the Amg en Plan during the Class Period, a nd that Ramos should have been allowed to amend t h e complaint. Id.

The comp l a i nt now a t issue is the F irst Amended Class Action Consolidated Complaint (“F AC”), filed on March 23, 2010, by five plaintiffs, including Harris a nd R a m os. The F AC alleg es six counts o f violation of fiduciary duty under ERI SA ag ainst Amg en, A ML
, nine Directors o f t h e Amg en B oard (“the Directors”), and the Plans’ F iduciary Committees and their members. The d istrict court dismissed the F AC
ag ainst A m ge n o n the g r ound that it was not a fiduciary

. I t dismissed the F A C ag ainst the re m a ining defendants under Rule 12(b)(6) for failure to state a claim.

I n a separate class action simultaneous ly pending before the same district judg e, investors in A mg en common stock claimed violations of federal securit ies laws based on the

same a lleg ed facts as in the E RI SA action now b efore us. I n

a careful thirty -five pag e order, the district court concluded that the inves t o r s had sufficiently alleg ed material misrepresentations and omissions, scienter, r eliance, a nd resulting economic loss to state claims under Sections 10(b) and 20( a) of the 1934 Ex chang e Act. See 15 U .S.C. §§ 78j(b), 78t(a). The district court certified a class based on the facts alleg ed in the complaint. W e affir m e d t he district court’s class c ertification in Conn. Ret. P lans & Trust Funds

v. Amgen, Inc.
, 660 F .3d 1170 ( 9th Cir. 2011). T he Supreme Court affirmed in Amgen, Inc. v. Conn. Ret. Plans & T r ust Funds , 133 S. Ct. 1184 (2013).H A R R I S V

. A M G E

N 18

F or the reasons that follow, we reverse the district court’s decision in the ERI SA case before us.

I I . Standard of Review

“W e review de novo the district court’s g r ant of a motion
t o d i smiss under Rule 12(b)(6), accepting all factua l alleg ations in t h e c o m p laint as true and construing them in the lig h t most favorable to the nonmo v i n g p a r ty .” Skilstaf, Inc. v. CVS Caremark Corp.
, 6 69 F

. 3d 1005, 1014 (9th Cir. 2012). “ [ C] ourts must consider the complaint in its entirety

, as well as o ther sources courts ordinarily ex amine when ruling on Rule 12(b)(6) motions to dismiss, i n p articular, documents incorporated into the complaint by reference, a nd
matters o f which a co u r

t may take judicial notice.” Tellabs, Inc.
, 551 U.S. a t 322. We t h en determine whether the alleg ations in the complaint and i nformation from other permissible sources “plausibly sug g est an entitlement to relief.” Ashcroft v. Iqbal

, 556 U.S. 662, 681 (2009); S tarr v

. Baca , 652 F .3d 1202, 1216 (9th Cir. 2011) (quoting Iqbal ).

I I I

. Discussion

Cong r ess enacted ERI SA to provide “minimum standards

. . . assuring th e e quitable character o f [ employ ee benefit] plans and their finan c i al s o undness.” 29 U.S.C. § 1001(a). T h e s e m i n i m u m s t a n d ar d s r e g u l a t e t h e “ c o n d u c t , responsibility

, and oblig ation f o r f iduciaries of employ ee benefit plans

. . . .” Id. § 1001(b). “Cong ress painted with a broad brush, ex pecting the f ederal c ourts to develop a ‘federal

common law of rig h ts and oblig ations’ interpreting E RI SA’s fiduciary standards.” Bins v

. E xxon Co. U.S.A.
, 22 0 F.3d 1042, 1047 (9th Cir. 2000) (en banc) (citation omitted).H A R R I S V

. A M G E

N 19

The Supreme Court h as established certain interpretive rules specific to ERI SA’s f iduciary d

uties. These duties, including those g overn i n g f iduciary status, “draw much o f their content f

rom the c ommon law of trusts, the law that
g ov e rned most b enefit p lans before ERI SA’s enactment.” Varity Cor

p. v. H owe , 516 U.S. 4 89, 4 96 (1996). ERI SA reflects a “cong ressional determination that the common law of trusts d id not offer completely satisfactory protection.” Id.
at 4 97. The law of trusts “often

. . . inform[ s] ” but does “ not necessarily d etermine the outcome of” an interpr etation o f ERI SA’s f

iducia r y duties. Id. The common law o f trusts offers “only a starting point” that must y ield to the “lang uag e of the statute, its structure, or its purposes,” if necessary

. Id.

W e first address the sufficiency of the F AC ag ainst each properly named fiduciary

. W e then address whether the plaintiffs have adequately alleg ed that Amg en is a fiduciary

.

A. Sufficiency

of the F AC

The dis t ri c t court dismissed all six counts of the F AC

un d e r Rule 12(b)(6). Plaintiffs have appealed only the dismissal of Counts I I throug h VI

.

1. Count I I

Plaintiffs alleg e in Count I I that defendants acted imprudently

, and thereby viola t e d t heir duty of care under 29 U.S.C. § 1104(a)(1)(B ), by continuing to provide Amg en common stock as an investment alternative when they knew

or should have k

now n that the stock was being sold at an artificially inflated pr i c e

. Defendants o rig inally contended that they were entitled to a “presumption of prudence” under Quan v. Computer Sci. Corp.
, 623 F .3d 870 (9th Cir. 2010).H A R R I S V

. A M G E

N 20

I n o ur earlier opinion, we held that plaintiffs had satisfied the criteria of Quan
, such that the pr e s u m ption o f prudence did
not apply

. The Supreme Court’s opinion in Fifth Third h a s

now made clear that an E R I S A p laintiff does not need to satisfy the criteria we a

rticu l a t e d in Quan

. The Court wrote in Fifth Third :

[ T] he law does not create a special
presu m ption favoring ESOP fiduciaries. Rather, the same standard of p rudence a pplies
to all ERI SA fiduciaries, ex cept that a n ESOP fiduciary is under no duty to diversify the ESOP’s holding s.

134 S. Ct. a t 2467. D efendants are EAI P fiduciaries r a t h er than ESOP fiduciaries, but they do not dispute that F ifth Third applies e qually to them, and they do not c o n tend that they enjoy a presumption of prudence. However, defendants contend that their acti o n s w e r e prudent even if the presumption of prudence does not apply

.

ERI SA requires t h at a fiduciary perform duties under a plan “with the care, skill

, p r udence, and dilig ence under the circumstances then prevailing that a prudent man acting in a like capacity a

nd familiar with such matters would use in the conduct of an enterprise o f a li ke character and with like aims.” 29 U.S.C. § 1 104(a)(1)(B ). This standard g o verns a fiduciary ’s d ecision to allow i n v estment of plan assets in employ e r stock. Quan
, 623 F

. 3 d a t 8 78–79. “This is true,

even thoug h the duty of prudence may be in tension with Cong r ess’s ex pressed preference for p lan investment in the employ e r’s stock.” Id. at 879 ( internal q uotation marks

o mitted). A “my

riad of circumstances” surround i n g investments in company stock c ould support a violation of theH A R R I S V

. A M G E

N 21

prudence requirement. In re Syncor , 516 F .3d at 1102. “‘A court’s task in evaluating a fiduciary ’s compliance w i t h this standard is to inquire w hether the individual trustees, a t the time they eng ag ed in the challeng ed transactions, empl o y ed
t h e appropriate methods to investig a te the merits o f t h e investment and to structure the investment.’” Quan
, 623 F .3d
at 879 (quoting W

right

, 360 F .3d at 1 097) ( alterati o n s a nd quotation marks omitted).

Count I I alleg es t hat defendants knew or should have known about material o missions a nd misrepresentations, a s well as illeg al off-label sales, that artificially inflated the price of the stock while, at the sa m e t i m e , they continued to offer the A m gen Common Stock F u nd as an investment alternative to plan participants. The district court held that,

even without the assistance o f the presumption of prudence, defendants were entitled to dismissal of Count I I under Rule 12(b)(6). W e disag ree.

W e b eg in by noting that we held in S y n c o r t h a t “[ a] violation [ of the prudent man standard] may occur where a company ’s stock

. . . was artificially inflated d uring that time by an illeg a l scheme in which the f iduciaries knew o r should have known, a

nd then suddenl y declined when the scheme

was ex posed.” In re Syncor
, 516 F

. 3d at 1102. I n Syncor
, the
company was a fiduciary that k nowing ly made cash bribes to doctors in T aiwan in v i o l ation of the F oreig n Corrupt Practices Act. Upon disclosur e o f these illeg al pay ments, Sy ncor’s stock price lost nearly half its value. “Despite these illeg al practices, the [ fiduciaries] allowed the Plan to hold a nd acquire Sy

ncor stock when they knew or had reason to know of Sy ncor’s foreig n b ribery scheme.” Id. at 1098. W e h eld

on appeal from summary ju d g ment that “there is a g enuine issue whether the fiduciaries breached the prudent manH A R R I S V

. A M G E

N 22

standard b y knowi n g o f, and/or participating in, the illeg al scheme w hile continui n g t o hold a nd purchase artificially inflated Sy

ncor stock for the ERI SA Plan.” I d. at 1103.

I n their orig inal briefing

, f iled before the Court de ci d e d Fifth Third

, defendants make five arg uments in favor o f dismissal of Count I I . None is persuasive. F irst, defendants
arg ue that investments i n Amg en stock during the class period w ere not i m prudent “ b ecause Amg en was not even remotely e x periencing severe financial difficul t i es during that time, and remains a strong , viable, and profita b l e c o mpany today .” This arg ument is b eside the point. A m ge n w a s not “ex p e riencin g s evere financial difficulties” d u ring the relevant time period in part because of the very actions about which plaintiffs are now complaini n g. That is, Amg en was earning larg e but unsustainable profits based on improper a nd unsustainable sales of EPOGEN and Aranesp

. F urther, Amg en may h ave been, a n d may now be, a “strong
, viable, and profitable company ,” but that does n o t m e an that the price of Amg en stock was not artificially inflated during the class period.

Second, defendants arg ue that the dec l i n e in p rice in Amg en stock was insufficient to show an i mprudent investment by the fiduciaries. They write, “[ A] s the District Court correctly held, this ‘relatively modest a n d g radual decline in the stock price’ d oe s not render the investment imprudent.” As an initial mat ter, w e note that the proper q u e s tion is not whether the investment results were unfavorable, but whether the f iduciary used “‘app r o p r iate methods’” to investig ate the merits o f the transaction. Q uan , 623 F .3d at 879 (quoting W right

, 360 F

. 3d at 1097); see also K i r schbaum

, 526 F .3d at 254 (ex plaining that the “ te s t o f prudence is one of conduct, n o t results”); Bunch v. W

. R.H A R R I S V

. A M G E

N 23

Grace & C o

. , 5 5 5 F .3d 1, 7 (1st Cir. 2009) (same). B ut defendants’ arg ument fails even o n its own terms. Their
arg ument is f

oreclose d by the d istrict court’s decision in the f ederal securities class action ag ainst Amg en based o n t h e

same alleg ed sequence o f events. See Conn. Ret. P lans & T r ust Funds v. Amgen, Inc.
, 660 F .3d 1170 (9th Cir. 2 0 1 1 ), aff’d Amgen Inc. v

. Conn. Ret. Plans & Trust Funds

,

__ U

. S

.

_ _ , 133 S. Ct. 1184 (2013). I f the alleg ed misrepresentations and omiss i o ns, scienter, and resulting decline in share price in Connecticut R etirement Plans were sufficient to state a c laim that defendants violated their duties under Section 10(b), the alleg ed misrepresentations a nd omissions, scienter, and resulting decline in share price in this

case are sufficient to state a claim that defendants v iolated their more string ent duty

of care under ERI SA.

Third, quoting Kirschbaum

, 526 F

. 3 d a t 2 53, 256, defendants arg

ue that

[ w] hen, like here, retirement plans are a t issue, c ourts must be mindful of “the long

term horiz on of r et i rement investing

, a s well

as the f avored status Cong ress has g ranted to employ ee stock investments i n their own

c o m p anies.”

. . . [ H] olding fiduciaries liabl e for c ontinuing to off

e r t he option to invest in declining stock would p l ace them in an “u n t e nable position of having to predict the future of the company stock’s p er f o rmance. I n such a case, [a fiduciary ] could be sued for
not selling if he a dhered to the p l a n , but also sued for deviating from the plan if the stock rebounded.”H A R R I S V

. A M G E

N 24

Defendants’ reliance o n Kirschbaum is misplaced. The court wrote in that case, “ The Plan documents, con s i d ered as a whole, compel that the Common Stock F und be available a s

a n i n v e s t m e n t o p t i o n f o r e m p l o ye e

- p a r t i c i p a n t s

. ” Kirschbaum

, 526 F .3d a t 249

. The concerns e x pressed in Kirschbaum have little bearing on the case before us

. Here, unlike in Kirschbaum

, the f iduciaries of the Amg en and A ML Plans were u nder no such compulsion. They knew or should have known that the Am ge n C o mmon Stock F und was purchasing stock a t an a rtifi c i a l l y inflated price due to material misrepresentations a n d omissions by company officers, as w ell as b y illeg al off-label m a rketing

, b ut they nevertheless c ontinued to a llow plan participants to invest in the F und.

F ourth, quoting In re Computer S c i e nces Corp., ERISA Litig.
, 635 F

. Supp. 2d 1 128, 1136 (C.D. Cal. 2009), aff’d 623 F .3d 870 (9th Cir. 2010), defendants a rg ue that if the A m ge n Fu n d had been “remove[ d]

. . . as an investment option,” b a sed on nonpublic information about the company , this a ction “may have broug h t a bout ‘precisely the result [ P] laintiffs seek to avoid: a drop i n t h e stock price.’” The Court wrote in Fifth Third :

To state a claim for breach o f the duty o f prudence on the b asis of inside information, a p laintiff must p lausibly alleg e an alternativ e action that the d e f

endant could have taken that would have been consistent with the securities laws a nd that a p rudent fiduciary wo uld not have viewed as more li k e l y t o harm the fund than to help it.

134 S. Ct. at 2472. More specifically

, the Court wrote:H A R R I S V

. A M G E

N 25

[ L ] ower courts faced with such claims should also consider whether the complaint has plausibly alleg ed that a prudent fidu c i a ry in the defendant’s p osition coul d not have concluded t h at stopping purchases — which the market mig ht take as a s i g n that insider fiducia r i e s viewed the employ er’s stock a s a bad investment — or p u b l icly disclosing
neg ative informatio n would do more harm than g ood to the f

u nd by causing a drop in the
st o c k price and a concomitant drop in the value of the stock already held in the fund.

Id. at 2473.

B a sed on the alleg ations in the complaint, it is at least plausible that defendants could h a v e removed the Amg en Stock F und from the list of investment option s available to the plans without causing u ndue harm to plan participants. I t is unclear h o w much the price of Amg en stock would have declined if the Amg en Common Stock F und had been removed a s an investment option during the period when the price was artificially inflated. Removing t h e F u nd a s an investment option would not h ave meant liquidation o f the F und. I t would have meant only t h a t w h i l e the share price

was artificially infl a t e d, plan participants would not have been allowed to invest additional money in the F und, a nd that th e F und would therefore n ot have purchased additional shares at the inflated price. Given the r elativ e l y small number of Amg en shares that would not have been purchased by the F und in comparison to the enormous number o f actively traded shares, it is ex tremely unlikely that this decrease in the number of shares that would otherwise haveH A R R I S V

. A M G E

N 26

been purchased, considered alone, would have had an appreciable neg ative impact on the share price.

I t is true that removing the Amg e n Common Stock F und

as an investment option w ould have sent a neg ative sig n al to investors if the fact of the removal h ad been made public, a nd that such a sig nal may have caused a drop in the share price. B ut several factors would have mitig ated this effe c t

. The efficient market hy

p othesis ordinarily applied in stock fraud

cases sug g ests that the ultimate d e c l i ne in price would have been no more than the am o u nt by which the price was artificially inflated. F urther, o n ce the Fu nd was removed a s

an investment option, p lan participants would have been protected fr o m making additional purchases of the F und while the price of A mg en shares r emained artificially inflated. F inally

, the defendants’ fiduciary obliga tion to

remove the F und a s an investment option was trig g ered a s

soon as they knew or should have known that Amg e n’s share price was a

rtificially inflated. That is, d e f e n dants b eg an violating their fiduciary duties u nder ERI SA by continuing to authoriz e purchases of Amg en shares a t more or less the same time some of the defendants beg a n violating the federal securities laws. I f d efend ants had acted to remove the F und

as an investment option when Amg en’s share price beg an to be artificially inflated — that is, w hen some of the defendants beg an to violate their oblig ations under the securities laws

— that action may well have c aused those defendants to comply with those o b l i ga tions. B ut defendants d id n o t do this. I n s tead, they continued to authoriz e the F und as an investmen t option for a considerable period after they knew

or should have known that t h e s h a r e p rice was artificially inflated.H A R R I S V

. A M G E

N 27

F ifth, defendants a

r g u e that “they could not have removed the A mg en Stock F und based o n undisclosed alleg ed adverse material information — a potentially illegal course o f action.” (emphasis in o rig inal). Defendants misunderstand the nature

o f t h e ir duties under federal law. As we noted in Qu a n , “[ F ] iduciaries are under no oblig ation to violate se c u r i t ies laws in order to satisfy their ERI SA fiduciary duties.” Q uan , 623 F .3d at 882 n.8. The central problem in this case is that Amg en officials, many of whom are defendants he r e , m ade material misrepresentations and omissions in violation of the federal securities laws. Comp l i an c e with ERI SA would not have required defendants to violate those laws; indeed,

c ompliance with ERI SA would likely have r esulte d i n compliance with t h e s ec urities laws. I f defendants h ad revealed material informati o n in a timely fashion to the
g eneral public (including plan participants), thereby allowing informed plan participants to decide whether to invest in the A m g e n C o m m o n S t o c k F u n d

, t h e y w o u l d h a v e simultaneously satisfied their duties under both the securities laws and ERI SA. S

ee Cal. I ronworkers Field P e nsion Trust

v. Loomis Sayles & Co., 259 F .3d 1 036, 1 045 (9th Cir. 2 001) (“ERI SA imposes upon fiduciaries a g eneral duty to d isclose facts material to investment issues.”); Acosta v. Pac. Enter.
, 950 F .2d 611, 619 (9th Cir. 1991) (holding that a fiduciary is

a f f i rm a t i v e l y r e q u i r e d t o “ i n f o r m b e n e f

i c i a r i es o f circumstances that threaten the funding of b en efits”). Alternatively

, if defendants had made no disclosures b ut h ad simply not allowed additional investments in the F und while the price of Amg en stock was artificially inflated, they would
not thereby h ave violated the prohibition ag ainst insider trading

, f o r there is no violat i o n absent purchase or sale o f stock.H A R R I S V

. A M G E

N 28

On remand in the wake of Fifth Third

, defendants ma k e

an additiona l arg u ment to those they have already made. They arg ue on remand that F ifth Third annou n ced “new pleading requirements” a pplicable to ERI SA cases s u c h a s this one. W e disag ree. The Court wrote as follows:

W e consider more fully one importan t mechanism for weeding o ut meritless claims, the motion to dis m i s s for failure to state a claim. That mechanism

. . . req u i res careful j u d i c i a l co n s i d er a t i o n o f w h e t h e r t h e complaint states a claim that the defendant acted imprudently

. See F ed. Rule Civ

. P r oc. 12(b)(6); Ashcroft v. Iqbal

, 5 5 6 U .S. 662, 677–680 (20 0 9 ); Bell Atlantic Corp. v

. Twomb l y , 550 U.S. 5434, 554–563 (2007). B e c ause the content of the duty of prudence
turns on “the circumstances

. . . p revailing ” at the time the fiduciary a c ts, § 1 1 0 4 (a)(1)(B ), the a p propriate inquiry will necessarily be
contex t specific.

134 S. Ct. at 2471.

To t h e ex tent defendants are arg uing that Fifth Third requires a hig her plea d ing standard of p articularity o r plausibility

, this passag e f rom the Court’s op i nion makes clear that they are mistaken. Ashcroft and Twombly h ad already been decided w hen thi s case was first before us on appeal, and the Court’s citation of th o s e t wo cases indicates that it was not articulating a new pleading sta n d ard in this

sense. To the ex tent d efendants a re arg uing that the Court has articulated new standards of liability (as opposed to a new standard of pleading ) that we had not previously applied, theyH A R R I S V

. A M G E

N 29

are also mistaken. I t is true that the Court articulated c ertain standards for ERI SA l i ab i l ity in Fifth Third

. B ut w e h ad already assumed those standards when w e wrote our earlier opinion. F or ex ample, the Court specified in Fifth Third that

a fiduciary is not required to perform an act that will do more harm than g ood to plan participants. W e assumed that to be
so, and we addressed precisely this p oint in our earlier opinion. See Harris v. Amgen , 738 F .3d at 1041.

W e therefore c onclude that plaintiffs have sufficien tly alleg ed that defendants have v iolated the duty of care they owe as fiduciaries under ERI SA.

2 . Count I I I

Plaintiffs alleg e in Count I I I that defendants violated their duty of loy alty and care under 2 9 U. S

. C. §§ 1104(a)(1)(A) and (B ) by failing to p rovide material i n formation to p lan participants about investment in the Amg en Common Stock F und. Defendants contend that they have limited o blig ations under ERI SA to d isclose information to plan participants, a nd that their disclosure o blig ations do n o t e x tend to information that is material under the federal securities laws. Defendants contend, further, t h a t plaintiffs have not alleg ed detrimental reliance by plan participants on d efendants’ omissions a nd misrepresentations. F inally

, defendants contend that their omissions and misrepresentation s , i f a ny , were not made in their fiduciary

capacity . W e disag ree.

To some ex tent, the analy sis for Count I I o v e r l a p s with the analy sis for Count I I I

. W e h a v e a l ready established that there is no contradiction between defendants’ duty under the federal s e c urities laws and ERI SA. I ndeed, properly understood, these laws are complementary and reinforcing

.H A R R I S V

. A M G E

N 30

Defendants’ first arg ument is that they owe no d uty under ERI SA to pro v ide material information about Amg en stock
to plan participants w h o m u s t d ecide whether to invest in such stock. I n o ther words, defendants contend that t h e ir fiduciary d

uties o f loy alty and care to plan participants under ERI SA, with respect to company stock, a re less than the duty they owe to the g eneral pu b lic under the securities laws. Defendants are wrong , as we made clear in Quan :

W e h ave recog niz ed [ that]

. . . “ [ a] fiducia r y has a n oblig ation to convey complete a nd

a c c u r a t e i n f

o r m a t i o n m a t e r i a l t o t h e beneficiary ’s circumstance, even when a beneficiary has not sp e c i fically asked for the information

. ” Barker [ v. Am. M obil Power Corp.
, 64 F .3d 13 9 7, 1403 ( 9th Cir. 1995)]

. “[ T] he same duty applies to ‘alleg ed material misrepresentations made by f i d uciaries to participants reg arding the risks a t tendant to fund investm e n t.’” Edgar [ v. Avaya Inc.
, 503 F .3d 340, 350 (3d Cir. 2007)]

. Quan
, 623 F .3d at 886. W e specific a l l y endorsed the Third Circuit’s definition o f m a teriality in Quan

. W e wrote, “[ A] misrepresentation is ‘material’ if there was a substantial likelihood that it would have misled a reasonable participant in making an adequately informed decision about w hether to place or maintain monies in a particular fund.” Id. ( q u o ting Edgar , 503 F .3d at 350) (internal quotation marks omitted).

Defendants’ second arg ument is that plaintiffs have failed
to show that they relied on defendants’ material omissions

a n d misrepresentations. Defendants contend that plaintiffs
must show that they actually re l i e d on the omissions a ndH A R R I S V

. A M G E

N 31

misrepresentations. I t is w ell established under Section 10(b) that a defrauded investor need not show actual reliance on the particular omissions o r representations of the defendant. I n stead, as the Supreme Court ex plained in Erica P. J o h n F u n d

, Inc. v. Halliburton Co.
, 131 S. Ct. 2179 (2011)

, t h e investor can rely on a r e b u ttable presumption of reliance based on the “fraud-on-the-market” theory :

According to that theory

, “the market price o f shares traded on w e ll-developed markets reflects all publicly avail able information, and, hence, any material misrepresentations.” [ Basic, Inc. v

. Levinson
, 485 U.S. 224, 246 (1988)]

. Be cause the market “transmits inf o r mation to the investor in the processed form o f a market p r i c e , ” we can assume, the Court ex plain e d [ in Basic ]
, that an investor relies on public misstatemen ts whenever he “buy s or sells stock at t h e price set by the market.” Id. [ ] at 244, 247.

Erica P. John Fund

, 131 S. Ct. a t 2 1 8 5; see also Conn. R e t. P l a n s & Trust
, 133 S. Ct. 1184 (2013). W e see n o r e as o n why ERI SA plan participants who invested in a c o m pany stock fund whose assets c o n s isted solely of publicly traded

common stock should n ot be able to rely on the fraud-on-themarket theory in t h e s am e manner as any other investor in a publicly traded stock.

Defendants’ final arg ument is that statements made to the Securities a

nd Ex chang e Commission in documents r equired by t h e f e d e ral securities laws were not made in a fiduciary capacity

, and that these statements therefore cannot be considered in an ERI SA suit for breach of fiduciary d uty

.H A R R I S V

. A M G E

N 32

A l t h o ug h our circuit has not decided the issue, defendant s mig ht be c orrect if these document s h ad only been filed a nd distributed a s required under the securities laws, for such acts would h ave been performed in a c orporate capacity

. See Lanfear v

. Home Depot, Inc.
, 679 F

. 3d 1267, 1285 (11th Cir. 2012) (“W hen the defendants in this case filed the F orm S-8s and created and distributed the stock prospectuses, they were acting in their corporate capacities and not in their capacity a s ERI SA fiduciaries.”); Kirschbaum

, 526 F .3d at 2 5 7 (“REI

was discharg ing its corporate duties under the securities laws, and was not acting as an ERI SA fiduciary .”). H o w e ver, defenda n t s did more than merely file and distribute the documents as required by the securities laws. See Varity Corp.
, 516 U.S. a t 5 04 (fiduciary may be “communicating with [ plan participants] both in its capacity as employ er and in its capacity as plan administrator”) (emphasis in orig inal).

As they were r equired to do under ERI SA, defendants prepared and d istributed summary plan desc r i p t i o n s ( “ SPDs”)
to Plan participants. See 29 U.S.C. § 1022(a) (requiring fiduciaries to provide a summary plan description). I n the SPDs f or b oth the Amg en a

nd t he AML Plans, defendants

ex p licitly incorporated by reference A mg e n ’ s SEC filing s, including “The Company ’s Annual Report on F orm 10-K for the y ear ending December 31, 2 0 06,” and “The Company ’s Current Reports on F o rm 8-K filed on J anua r y 19, 2007, F ebruary 20, 2007, M a rch 2, 2007, and March 12, 2007, respectively .” Plaintiffs alleg e that the defendant s k n ew o r should have known that statements contained in these filing s, incorporated by reference into the SPDs, were materially false and misleading

.

W e hold that defendants’ preparation and distribution of the SPDs, including their incorporation of A m g e n ’ s SECH A R R I S V

. A M G E

N 33

filing s by r efere n ce, were acts performed in their fiduciary capacities. I n s o holding

, we ag ree with the Six th Circuit, which has held that such incorporation b y reference is an act performed in a fiduciary capacity :

Defendants ex ercised discreti o n in choosing
to incorporate the [ SEC] f iling s into the Plan’s SPD as a direct source o f information for Plan participants about the financial health o f [ the
company ] and the v alue of its stock, an investment o ption u nder the p lan. The SPD is

a f i d u c i a r y c o m m u n i c a t i o n t o p l a n participants and s el ecting the information to convey throug h t h e SPD is a fiduciary activity

. Moreover, w hether the fiduciary
state s information in the SPD itself o r incorporates by r eference another document containing that information is of no moment. To hold otherwise would authoriz e fiduciaries
to convey misleading or patently u nt r ue information throug h documents incorporated by reference, all w h i le safely insulated f rom ERI SA’s g overni n g re ach. Such a result is inconsistent with the intent and stated
purposes of ERI SA

. . . and w ould c reate a loophole in ERI SA larg e enoug h to devour all its protections.

Dudenhoefer v. F

ifth Third Bancorp
, 692 F .3 410, 4 2 3 (6th Cir. 2012) (internal citation omitted); see also In re Citigroup ERI S A L itigation
, 662 F .3d 128, 144–45 (2d Cir. 2 011) (noting that SEC filing s had been incorpor a t ed in the Plans’ S PDs, but dismissing ERI SA claim on the g round that plaintiffs had not suffi c i en t ly alleg ed that the defendantH A R R I S V

. A M G E

N 34

fiduciaries knew or should ha v e known that the filing s contai n ed false information); Quan
, 623 F .3d at 886 (assuming

, “without deciding

, that alleg ed m i s r e p r e s e n t a t ions i n S E C d i s c l o s u r e s t h a t w e r e i n c o r p o r a t e d i n t o communicati o n s about an ERI SA plan are ‘fiduciary communi c ations’ on w hich a n ERI SA misrepresentation claim can be based.”) (citations omitted). The statements made in Amg en’s SEC filing s and incorporated in the Plans’ SPDs may therefore b e used under ERI SA to show t h at defendants knew o r should have known t hat the price o f Amg en shares wa s artificially inflated, and to show that plaintiffs presumptive l y detrimentally relied on defendants’ statements under the fraud-on-the-market theory

.

W e therefore c onclude that plaintiffs have sufficiently alleg ed that defendants have violated the duty of loy alty

and

care they owe as fiduciaries unde r ERI SA. W e emphasiz e , however, as to Counts I I and I I I
, that we hav e d e c ided only that the complaint c ontains alleg ations with a sufficient deg ree o f p lausibility to survive a mot i on to dismiss under R u l e 12(b)(6). A determination whether defendants h a v e actually violated their fiduciar y d uties requires fact-based determinations, such as the l i kely effect of the a lternative actions a vailable to defend a n t s, to be made b y the district
court on remand, with the a ssistance of ex pe r t o p i n ion a s appropriate.

3. Counts I V and V

The d istrict court correctly concluded that Counts I V a nd V are derivative of Counts I I and I I I

. B ecause we reverse the district court’s dismissal of Counts I I and I I I
, we also reverse its dismissal of Counts I V and V. See In re Gilead Sciences Sec. Litig. , 536 F .3d 1049, 1055 (9th Cir. 2008).H A R R I S V

. A M G E

N 35

4. Count VI

Count VI alleg es that d efendants caused the Plans directly

or indirectly to sell or ex ch a n ge property w ith a p arty

- ininterest, in violation of 29 U

. S

. C. § 1106(a). Specifically

, Count V I alleg es that Amg en and AML a re parties-in-interest that c oncealed mate ri al information in order to inflate the price of Amg e n stock sold to the Plans. I n releva n t p art, 29 U.S.C. § 1106(a)(1) provides,

A fiduciary with respect to a plan s h a ll not

cause the plan to eng ag e in a transaction, if he k n o ws or should know that such transactio n constitutes a direct or indirect –

(A) sale or ex chang e, or leasi n g, of any property between the p lan a n d a party in interest; . . .

(D) transfer to, o r u se by or for the benefit o f a party in interest, of any assets of the plan[ .]

A party in interest i n cl u des “ any f iduciary ” o f a plan or “an employ e r” of the plan beneficiaries. 29 U.S.C. § 1002(14).

Defendants did not arg ue in the district court t h a t C ount VI f ails to state a prohibited transaction claim under § 1106(a)(1). Nor do they raise this arg ument o n appeal. I nstead, d efendants arg ue th a t 2 9 U.S.C. § 1108(e) ex empts the sale of employ er stock fr om the restrictions o f § 1106(a)(1).H A R R I S V

. A M G E

N 36

Section 1108(e) specifies that § 1106 does not prohibit the purchase o r sale of e mploy er stock if, a s relevant here, (1) the sale price was the “price

. . . p revailing on a n a t i o n al securities ex chang e”; ( 2) no commission is charg ed f o r the transaction, a n d ( 3 ) the plan is an EI AP. 29 U .S.C. §§ 1107(d)(5), (e)(1), 1108(e).

I n Howard v. Shay

, 100 F .3d 1484, 1 488 (9th Cir. 1996),

we held that because § 1108(e) is an affirmative defense, a defendant has the burden to prove its applicability

. W e

ex p lained, “A f

iduciary who eng ag es i n a self-dealing transaction pursuant to 29 U .S.C. § [1106(a)] has the burden of proving that he fulfilled his duties of care and loy alty and that the E SOP r eceived adequate consideration [under § 1108(e)] .” Id. ; see also Marshall v

. Snyder

, 572 F .2d 894, 900 (2d Cir. 1978) ( “The settled law is that in [ pr o h i bited self-dealing transactions] the burden of proof is alway s on the
p arty to the self-dealing transaction to justify its fairness [ under a statutory ex ception] .”). Citing Howard

, the Eig hth Circuit has held that a plaintiff need not plea d i n his complaint that a transaction was not ex empt under § 1108(e). See Braden v. W

al-Mart Stores, Inc.
, 588 F. 3 d 5 85, 600–01 (8th Cir. 2009); see also J ones v. Bock

, 5 4 9 U.S. 1 9 9, 211–12 (2007) (holding that a plaintiff need not plead the a bsence o f

an affirmative defense, even a defense like e x haustion o f remedies, which is “mandatory ”).

B e cause the ex istence o f an ex emption under § 1108(e) is

an affirmative defense, we can dismiss Count VI based on the § 1108(e) ex emption only if the defense is “clearly indicated” and “appear[ s] on the face of the pleading .” 5B Charles Alan W r ig ht & Arthur R. Miller, F ederal Practice & Proced u r e § 1357 (3d ed. 2004); see also Jones
, 5 49 U.S. at 2 15 (citing W r ig ht & Miller for rule that affirmative defense must appearH A R R I S V

. A M G E

N 37

on the face of the complaint). Here, we cannot say that the face of the complaint clearly indicates the availab i l i t y of a § 1108(e) defense.

B

. Amg e n as Properly

Named F iduciary

Amg en arg ues that i t i s n ot a fiduciary under the Plan because it has deleg a ted its discretionary authority

. “To be found liable under ERI SA for b reach o f the duty of prudence and for participation in a breach o f fiduciary duty

, an individual or entity must be a ‘fiduciary .’” W right v. Or. Metallurgical Corp.
, 360 F .3d 1090, 1101 (9th Cir. 2004). I n defining a fiduciary , ERI SA say s,

a person is a fiduciary with respect to a p lan to th e e x tent (i) he ex ercises any discretionary authority or discretionary control respecting
manag ement of such plan o r ex erc i s es any authority or control respecting manag ement o r disposition of its assets . .

. or (iii) he has any discretionary aut h o r i t y o r d i s c r e t i o n a r y responsibility i n t he administration of such plan.

29 U.S.C. § 1002(21)(A). “W e const r u e E RI SA fiduciary
status ‘liberally

, con s istent with ERI SA’s p olicies a nd objectives.’” Johnson v. Couturier
, 572 F .3d 1067, 1076 (9th Cir. 2 0 09) ( q u o ting Ariz. S tate Carpenters Pension Trust Fund v. Citibank

, 125 F .3d 715, 720 (9 t h Cir. 1997)). W h ether a defendant is a fid u ci a ry is a question o f law we review de novo. S

e e Varity Corp. v

. H

owe , 516 U.S. 489, 498 (1996).H A R R I S V

. A M G E

N 38

Under E RI SA, a “named fiduciary ” is “a fiduciary who is named in the p lan instrument.” 2 9 U.S.C. § 1102(a)(2). The Amg en Plan provides that Amg en is “the ‘named fiduciary ,’

‘ administrator[ ,] ’ a

nd ‘plan sponsor’ of the Plan (as s u c h
terms are used in ERI SA).” E RI SA g rants a n amed fiduciary b road authority to “control and manag e the operation a nd administration of the plan.” 2 9 U.S.C. § 1102(a)(1)

. “Generally

, if an ERI SA plan e x pressly provides for a procedure allocating fiduciary responsibilities t o persons other than named fiduciaries u nder the plan, the named fiduciary is not liable for an act or omission of such person in

carr y i ng out such responsibility .” Ariz. State Carpenters
, 125 F .3d at 719–20 (citing 29 U.S.C. § 1105(c)(2)).

Amg en arg ues that it deleg a t ed authority to trustees a nd investment manag ers. Section 15.1 of the Plan provides, “To the ex tent that the Plan requires a n a c tion under the Plan to be taken by the Company [ Amg en]
, the p ar t y s p ecified in this Section 15.1 shall be authoriz ed to a ct on behalf of the Company .” Section 15.1 say s nothing about deleg ation to trustees and investment manag ers. Rather, it ex plains that the F iduciary Committee has the a u thority

, on behalf of the Company
, to “review the performance o f the I n vestment F unds

. . . a n d m a ke recommendations” and to “otherwise control and manag e the P l a n ’s assets.” I n the absence o f a F iduciary Committee, t h e Global B enefits Committee will perform these tasks. Section 1 4

. 2 o f the Plan g overns the relationship between A m gen (“the Company ”) and the trustees and manag ers. I t provides:

The Trustee shall have t h e ex c lusive authority and discretion to c ontrol and manag e assets of the Plan it holds i n trust, ex cept to th e ex tent that

. . . the Company directs howH A R R I S V

. A M G E

N 39

such assets shall be invested [or] t h e Company allocates the authority t o manag e such assets to one or more I nvestment Manag ers. Each I nvestment Manag er shall have the ex clusive authorit y to manag e , including the authority to acquire and dispose of, the assets of the Plan assig ned to it by the C ompany , ex c e pt to the ex tent that the Plan
p r e s c ribes or the Company d irects how such
assets shall b e i n vested. Each Trustee a nd I n v e s t m e n t M a n a g e r s h a l l b e s o l e l y responsible for d iversify ing

, in accordance with Sectio n 404(a)(1)(C) o f ERI SA, the investment of the assets of the Plan a ssigned
to i t b y the Committee, ex c ept to the ex tent tha t the plan p rescribes or the Committee directs how such assets shall be invested.

ERI SA requires that a trustee hold plan assets in trust for plan p articipants. 29 U.S.C. § 1103(a). A tru stee has “ex c lusive authority and discretion to manag e and control the
assets of the plan” subject to two e x ce p t i o n s

. Id

. T h e first

ex c e ption is that a p lan may “ex p re s s ly provide[ ] that the
trustee or trustees are sub j e c t to the direction of a named fiduciary who is not a trustee.” Id. § 1103(a)(1). Under this

ex c e ption, a named fiduciary with the power to direct trustees is a f iduciary with a

uthority to manag e plan a s s e ts. The

se c o n d ex ception is that an “investment manag er,” duly licensed as an investment adviser under federal or state law,
may also be appointed to man a ge p lan assets in lieu o f the
trustee. Id. §§ 1002(38)(B ), 1103(a)(2).

There is n o question that A mg en appointed a trustee. However, n othi n g i n the record indicates that Amg enH A R R I S V

. A M G E

N 40

appoint ed an investment manag er. Neither ERI SA nor the Plan r equires that an investment manag er be appointed. Even if Amg e n had appointed a n investment manag er , the Plan

m akes clear that the trustee and any investment manag e r d o not have complete contro l o ver investment decisions. See 29 U .S.C. § 1002(21)(A)(i) (defi n i n g a person with “ a ny authority o r control” o ver p lan a ssets to be a fiduciary ) (emphasis added); c

f. Gelardi v. Pertec Comp. C o r p

. , 761 F .2d 1 3 23, 1325 (9th Cir. 1 985) (finding de l eg ation where defendant “retained no discretionary control”) (emphasis added), overruled on other grounds i n C y r v

. Reliance Standard Life I ns. Co.
, 642 F

. 3d 1202, 1207 (9th Cir. 2011).

Section 1 5.1 of the Plan, w h i ch authoriz es the F iduciary Committee to take action on b ehalf of Amg e n, does not preclude fiduciary status for A mg e n. I n M adden v. ITT Long Term Disability Plan

for Salaried Empl.

, 914 F .2d 12 7 9, 1284 (9th Cir. 1990), we held that the c ompany h ad deleg ated authority to an administration committee where t h e p lan provided that the Committee had “‘responsibility for carry ing
out all phases o f the a dministration of the Plan’” and had the “‘ex clusive rig ht

. . . to int e r p re t the Plan a

nd to decide any and all matters arising hereunder.’” (emphasis omitted). This lang uag e contains two features ab s en t from the lang u ag e in the Amg en Plan. F irs t , it deleg a tes responsibility for all phases o f a d ministering the plan, rather than responsibility “to the e x tent that the Plan requires an action .

. . to be taken by the Company

. ” Second, a nd more important, it provides the Committee the ex c lusive rig ht to make decisio n s under
t he plan. T he Amg e n Plan merely authoriz es the F i d u c i a r y Committee to act on behalf of A mg en. I t neither p rovides

ex c lusive authority to the Committee, nor precludes A m g en from actingon its own behalf.H A R R I S V

. A M G E

N 41

Other courts have found a com p an y ’ s g rant of ex clusive authority to a deleg a te a

n d an ex press disclaimer of authority
to be critical. I n Maher v. Ma s s achusetts General H ospital Long Term Disability Plan

, 665 F .3d 289 (1st Cir. 2011), the F irst Circuit h eld that a hospital had deleg ated its fiduciary duties when the plan stated, “‘The Hospital shall be f ully protected in acting u

pon the advice of any such ag ent

. . . a nd shall not be liable for any act or omission of any such ag ent, the Hospital’s only duty being to use r e asonable care in the selection of any such ag ent.’” Id. at 292. I n Costanti n o v

. W ashington Post Multi-Option Benefits P lan

, 4 0 4 F

. Supp. 2d 31 (D.D.C. 2 005), t he district court for the District o f Columbia found deleg a t i o n w h en the plan g ranted the p lan administrator “‘sole and a bsolute discretion’” to c arry o ut various Plan duties. Id. at 39 n.8. Given that ERI SA a llows fiduciaries to have overlapping responsibilities under a plan,

a c l e ar g rant of ex clusive authority is n ecessary for pro p e r deleg ation by a f

iduciary

. S

ee 29 U.S.C

. § 1102(a)(1) (“[ O] n e or more n a med fiduciaries

. . . jointly or severally

. . . h a v e authority to control a nd manag e the o peration a nd administration of the plan”); see al so 1 ERI SA Practice a

nd L itig ation § 6 :5 (“Those w ho wish to avoid liability ex posure throug h allocation of plan responsi b i lities to others must therefore take pains to ensure that their d o cu m e nts f ully authoriz e the contemplated deleg ation.”).

B e cause the Plan c ontains no cl e a r d eleg ation of ex clusive authority

, w e reverse the district court’s dismissal of Amg en from the case as a non-fiduciary

.

Conclusion

W e conclude that defendants are not entitled t o a presumption of prudence, that plaintiffs have stated cla i m sH A R R I S V

. A M G E

N 42

under ERI SA in Counts I I throug h VI
, and t h a t A mg en is a properly named f

iduciary under t h e Amg e n Plan. W e therefore reverse the decision o f the district court and remand for further proceeding s consistent with this opinion.

REVERSED and REMANDED

.