Opinion ID: 2803327
Heading Depth: 3
Heading Rank: 1

Heading: Sufficiency of the FAC

Text: The district court dismissed all six counts of the FAC under Rule 12(b)(6). Plaintiffs have appealed only the dismissal of Counts II through VI.
Plaintiffs allege in Count II that defendants acted imprudently, and thereby violated their duty of care under 29 U.S.C. § 1104(a)(1)(B), by continuing to provide Amgen common stock as an investment alternative when they knew or should have known that the stock was being sold at an artificially inflated price. Defendants originally contended that they were entitled to a “presumption of prudence” under Quan v. Computer Sci. Corp., 623 F.3d 870 (9th Cir. 2010). 40 HARRIS V. AMGEN In our earlier opinion, we held that plaintiffs had satisfied the criteria of Quan, such that the presumption of prudence did not apply. The Supreme Court’s opinion in Fifth Third has now made clear that an ERISA plaintiff does not need to satisfy the criteria we articulated in Quan. The Court wrote in Fifth Third: [T]he law does not create a special presumption favoring ESOP fiduciaries. Rather, the same standard of prudence applies to all ERISA fiduciaries, except that an ESOP fiduciary is under no duty to diversify the ESOP’s holdings. 134 S. Ct. at 2467. Defendants are EAIP fiduciaries rather than ESOP fiduciaries, but they do not dispute that Fifth Third applies equally to them, and they do not contend that they enjoy a presumption of prudence. However, defendants contend that their actions were prudent even if the presumption of prudence does not apply. ERISA requires that a fiduciary perform duties under a plan “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man 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.” 29 U.S.C. § 1104(a)(1)(B). This standard governs a fiduciary’s decision to allow investment of plan assets in employer stock. Quan, 623 F.3d at 878–79. “This is true, even though the duty of prudence may be in tension with Congress’s expressed preference for plan investment in the employer’s stock.” Id. at 879 (internal quotation marks omitted). A “myriad of circumstances” surrounding investments in company stock could support a violation of the HARRIS V. AMGEN 41 prudence requirement. In re Syncor, 516 F.3d at 1102. “‘A court’s task in evaluating a fiduciary’s compliance with this standard is to inquire whether the individual trustees, at the time they engaged in the challenged transactions, employed the appropriate methods to investigate the merits of the investment and to structure the investment.’” Quan, 623 F.3d at 879 (quoting Wright, 360 F.3d at 1097) (alterations and quotation marks omitted). Count II alleges that defendants knew or should have known about material omissions and misrepresentations, as well as illegal off-label sales, that artificially inflated the price of the stock while, at the same time, they continued to offer the Amgen Common Stock Fund as an investment alternative to plan participants. The district court held that, even without the assistance of the presumption of prudence, defendants were entitled to dismissal of Count II under Rule 12(b)(6). We disagree. We begin by noting that we held in Syncor that “[a] violation [of the prudent man standard] may occur where a company’s stock . . . was artificially inflated during that time by an illegal scheme about which the fiduciaries knew or should have known, and then suddenly declined when the scheme was exposed.” In re Syncor, 516 F.3d at 1102. In Syncor, the company was a fiduciary that knowingly made cash bribes to doctors in Taiwan in violation of the Foreign Corrupt Practices Act. Upon disclosure of these illegal payments, Syncor’s stock price lost nearly half its value. “Despite these illegal practices, the [fiduciaries] allowed the Plan to hold and acquire Syncor stock when they knew or had reason to know of Syncor’s foreign bribery scheme.” Id. at 1098. We held on appeal from summary judgment that “there is a genuine issue whether the fiduciaries breached the 42 HARRIS V. AMGEN prudent man standard by knowing of, and/or participating in, the illegal scheme while continuing to hold and purchase artificially inflated Syncor stock for the ERISA Plan.” Id. at 1103. In their original briefing, filed before the Court decided Fifth Third, defendants made five arguments in favor of dismissal of Count II. None is persuasive. First, defendants argue that investments in Amgen stock during the class period were not imprudent “because Amgen was not even remotely experiencing severe financial difficulties during that time, and remains a strong, viable, and profitable company today.” This argument is beside the point. Amgen was not “experiencing severe financial difficulties” during the relevant time period in part because of the very actions about which plaintiffs are now complaining. That is, Amgen was earning large but unsustainable profits based on improper and unsustainable sales of EPOGEN and Aranesp. Further, Amgen may have been, and may now be, a “strong, viable, and profitable company,” but that does not mean that the price of Amgen stock was not artificially inflated during the class period. Second, defendants argue that the decline in price in Amgen stock was insufficient to show an imprudent investment by the fiduciaries. They write, “[A]s the District Court correctly held, this ‘relatively modest and gradual decline in the stock price’ does not render the investment imprudent.” As an initial matter, we note that the proper question is not whether the investment results were unfavorable, but whether the fiduciary used “‘appropriate methods’” to investigate the merits of the transaction. Quan, 623 F.3d at 879 (quoting Wright, 360 F.3d at 1097); see also Kirschbaum, 526 F.3d at 254 (explaining that the “test of HARRIS V. AMGEN 43 prudence is one of conduct, not results”); Bunch v. W.R. Grace & Co., 555 F.3d 1, 7 (1st Cir. 2009) (same). But defendants’ argument fails even on its own terms. Their argument is foreclosed by the district court’s decision in the federal securities class action against Amgen based on the same alleged sequence of events. See Conn. Ret. Plans & Trust Funds v. Amgen, Inc., 660 F.3d 1170 (9th Cir. 2011), aff’d Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184 (2013). If the alleged misrepresentations and omissions, scienter, and resulting decline in share price in Connecticut Retirement Plans were sufficient to state a claim that defendants violated their duties under Section 10(b), the alleged misrepresentations and omissions, scienter, and resulting decline in share price in this case are sufficient to state a claim that defendants violated their duty of care under ERISA. Third, quoting Kirschbaum, 526 F.3d at 253, 256, defendants argue that [w]hen, like here, retirement plans are at issue, courts must be mindful of “the long- term horizon of retirement investing, as well as the favored status Congress has granted to employee stock investments in their own companies.” . . . [H]olding fiduciaries liable for continuing to offer the option to invest in declining stock would place them in an “untenable position of having to predict the future of the company stock’s performance. In such a case, [a fiduciary] could be sued for not selling if he adhered to the plan, but also sued for deviating from the plan if the stock rebounded.” 44 HARRIS V. AMGEN Defendants’ reliance on Kirschbaum is misplaced. The court wrote in that case, “The Plan documents, considered as a whole, compel that the Common Stock Fund be available as an investment option for employee-participants.” Kirschbaum, 526 F.3d at 249. The concerns expressed in Kirschbaum have little bearing on the case before us. Here, unlike in Kirschbaum, the fiduciaries of the Amgen and AML Plans were under no such compulsion. They knew or should have known that the Amgen Common Stock Fund was purchasing stock at an artificially inflated price due to material misrepresentations and omissions by company officers, as well as by illegal off-label marketing, but they nevertheless continued to allow plan participants to invest in the Fund. Fourth, quoting In re Computer Sciences Corp., ERISA Litig., 635 F. Supp. 2d 1128, 1136 (C.D. Cal. 2009), aff’d 623 F.3d 870 (9th Cir. 2010), defendants argue that if the Amgen Fund had been “remove[d] . . . as an investment option,” based on nonpublic information about the company, this action “may have brought about ‘precisely the result [P]laintiffs seek to avoid: a drop in the stock price.’” The Court wrote in Fifth Third: To state a claim for breach of the duty of prudence on the basis of inside information, a plaintiff must plausibly allege an alternative action that the defendant could have taken that would have been consistent with the securities laws and that a prudent fiduciary would not have viewed as more likely to harm the fund than to help it. 134 S. Ct. at 2472. More specifically, the Court wrote: HARRIS V. AMGEN 45 [L]ower courts faced with such claims 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 in the fund. Id. at 2473. Defendants’ argument does not take into account the fact that, quite independently of any obligation under ERISA, the federal securities laws require disclosure of material information. Consider, first, a situation in which the Fund is not removed as an investment option until after the material information has been concealed from the public for a substantial period of time, and the stock price has been substantially inflated as a result. In this situation, the adverse consequences of the removal of the Fund would be no greater than, and probably substantially less than, the consequences of the disclosure required by the securities laws. This is so for several reasons. First, removing the Fund as an investment option would not mean liquidation of the Fund. It would mean only that while the share price is artificially inflated, plan participants would not be allowed to invest additional money in the Fund, and that the Fund would therefore not purchase additional shares at the inflated price. Second, given the relatively small number of Amgen shares that would not be purchased by the Fund in comparison to the 46 HARRIS V. AMGEN enormous number of actively traded shares, it is unlikely that the decrease in the number of shares that would otherwise have been purchased, considered alone, would have an appreciable negative impact on the share price. Finally, if the investing public were to take the removal of the Fund as a negative signal about the value of Amgen stock, any reduction in the stock price would anticipate (and only partially) the inevitable result of Amgen’s eventual compliance with the federal securities laws. That is, when the previously concealed material information about the company is eventually revealed as required by the securities laws, the stock price will inevitably decline, almost certainly by more than the amount it would have declined as a result of merely withdrawing the Fund as an investment option. It is thus quite plausible, in this situation, that defendants could remove the Fund from the list of investment options without causing undue harm to plan participants. Next, consider a situation in which the Fund is removed as an investment option as soon as the fiduciaries — including fiduciaries without disclosure obligations under the federal securities laws — knew or should have known that material information was being withheld from the public. If the fiduciaries with inside knowledge but without disclosure obligations act to remove the Fund as an investment option as soon as Amgen’s share price begins to be artificially inflated — that is, as soon as those fiduciaries with disclosure obligations begin to violate the securities laws — that action may cause those fiduciaries to comply with their obligations under the securities laws. In that event, there will be no artificial increase in the share price, and no corresponding decline at a later time. Even if removal of the Fund as an investment opinion does not cause those defendants with disclosure obligations to comply with the securities laws, its HARRIS V. AMGEN 47 removal will at least protect plan participants from investing in Amgen stock as artificially inflated prices. Removal of the Fund as an investment option might cause a drop in the share price, perhaps slightly more than the amount of any initial artificial inflation. This very drop in stock price might cause the insider fiduciaries with disclosure obligations to comply with the securities laws. But even if the drop in stock price does not cause these fiduciaries to comply, removal of the Fund as an investment option will prevent the greater harm to plan participants that would result if no disclosure is made, if the stock price continues to inflate artificially, and if plan participants are allowed to make continued investments in the Fund at increasingly inflated prices. In other words, it is quite plausible that in this situation, too, defendants could remove the Fund as an investment option without causing undue harm to plan participants. We emphasize that any problem created by allowing plan participants to invest in the Fund as it purchased Amgen stock at artificially inflated prices is a problem of the defendants’ own making. Both the insider fiduciaries without disclosure obligations under the federal securities laws and those with such obligations have it within their power to prevent harmful investments by plan participants. Insider fiduciaries without disclosure obligations should act to protect plan participants as soon as they know or should know that information of the kind for which disclosure is required under the securities laws is not being released to the public. Insider fiduciaries with disclosure obligations should act to protect plan participants under ERISA as soon as the federal securities laws require disclosure. The fact that the fiduciaries decide not to act at this early stage does not mean that their ERISA fiduciary duties do not apply thereafter. Quite the opposite. It means 48 HARRIS V. AMGEN that they are continuing to violate their fiduciary duties by not acting. Fifth, defendants argue that “they could not have removed the Amgen Stock Fund based on undisclosed alleged adverse material information — a potentially illegal course of action” (emphasis in original). Defendants misunderstand the nature of their duties under federal law. As we noted in Quan, “[F]iduciaries are under no obligation to violate securities laws in order to satisfy their ERISA fiduciary duties.” Quan, 623 F.3d at 882 n.8. The central problem in this case is that Amgen officials, many of whom are defendants here, made material misrepresentations and omissions in violation of the federal securities laws. Compliance with ERISA would not have required defendants to violate those laws; indeed, we interpret ERISA to require first and foremost that defendants not violate those laws. That is, if defendants had revealed material information in a timely fashion to the general public (including plan participants), thereby allowing informed plan participants to decide whether to invest in the Amgen Common Stock Fund, they would have simultaneously satisfied their duties under both the securities laws and ERISA. See Cal. Ironworkers Field Pension Trust v. Loomis Sayles & Co., 259 F.3d 1036, 1045 (9th Cir. 2001) (“ERISA imposes upon fiduciaries a general duty to disclose facts material to investment issues.”); Acosta v. Pac. Enter., 950 F.2d 611, 619 (9th Cir. 1991) (holding that a fiduciary is affirmatively required to “inform beneficiaries of circumstances that threaten the funding of benefits”). Alternatively, if defendants had made no disclosures but had simply not allowed additional investments in the Fund while the price of Amgen stock was artificially inflated, they would not thereby have violated the prohibition against insider HARRIS V. AMGEN 49 trading, for there is no violation absent purchase or sale of stock. We note that the foregoing analysis presumes that at least some defendants were subject both to ERISA’s duty of prudence and to the requirements of the securities laws. On remand from the Supreme Court, defendants assert for the first time that this is not so for all of the defendants. But no defendant made an argument in the district court based on this ground, and nothing in our opinion forecloses a defendant from making such an argument on remand from this court. That is, nothing in our opinion prevents defendants from arguing on remand from this court that their liability, or the extent of their liability, should depend upon the extent to which they knew, or should have known, that material information was being withheld from the public in violation of the federal securities laws, and the extent that they had, or did not have, an obligation under the those laws to reveal such information to the public. Finally, defendants argue that Fifth Third announced “new pleading requirements” applicable to ERISA cases such as this one. We disagree. The Court wrote as follows: We consider more fully one important mechanism for weeding out meritless claims, the motion to dismiss for failure to state a claim. That mechanism . . . requires careful judicial consideration of whether the complaint states a claim that the defendant acted imprudently. See Fed. Rule Civ. Proc. 12(b)(6); Ashcroft v. Iqbal, 556 U.S. 662, 677–680 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 5434, 554–563 (2007). 50 HARRIS V. AMGEN Because the content of the duty of prudence turns on “the circumstances . . . prevailing” at the time the fiduciary acts, § 1104(a)(1)(B), the appropriate inquiry will necessarily be context specific. 134 S. Ct. at 2471. To the extent defendants are arguing that Fifth Third requires a higher pleading standard of particularity or plausibility, this passage from the Court’s opinion makes clear that they are mistaken. Ashcroft and Twombly had already been decided when this case was first before us on appeal, and the Court’s citation of those two cases indicates that it was not articulating a new pleading standard in this sense. To the extent defendants are arguing that the Court has articulated new standards of liability (as opposed to a new standard of pleading) that we had not previously applied, they are also mistaken. It is true that the Court articulated certain standards for ERISA liability in Fifth Third. But we had already assumed those standards when we wrote our earlier opinion. For example, the Court specified in Fifth Third that a fiduciary is not required to perform an act that will do more harm than good to plan participants. We had assumed that to be so, and had addressed precisely this point in our earlier opinion. See Harris v. Amgen, 738 F.3d at 1041. We therefore conclude that plaintiffs have sufficiently alleged that defendants have violated the duty of care they owe as fiduciaries under ERISA. HARRIS V. AMGEN 51
Plaintiffs allege in Count III that defendants violated their duty of loyalty and care under 29 U.S.C. §§ 1104(a)(1)(A) and (B) by failing to provide material information to plan participants about investment in the Amgen Common Stock Fund. Defendants contend that they have limited obligations under ERISA to disclose information to plan participants, and that their disclosure obligations do not extend to information that is material under the federal securities laws. Defendants contend, further, that plaintiffs have not alleged detrimental reliance by plan participants on defendants’ omissions and misrepresentations. Finally, defendants contend that their omissions and misrepresentations, if any, were not made in their fiduciary capacity. We disagree. To some extent, the analysis for Count II overlaps with the analysis for Count III. We have already established that there is no contradiction between defendants’ duty under the federal securities laws and ERISA. Indeed, properly understood, these laws are complementary and reinforcing. Defendants’ first argument is that they owe no duty under ERISA to provide material information about Amgen stock to plan participants who must decide whether to invest in such stock. In other words, defendants contend that their fiduciary duties of loyalty and care to plan participants under ERISA, with respect to company stock, are less than the duty they owe to the general public under the securities laws. Defendants are wrong, as we made clear in Quan: We have recognized [that] . . . “[a] fiduciary has an obligation to convey complete and accurate information material to the 52 HARRIS V. AMGEN beneficiary’s circumstance, even when a beneficiary has not specifically asked for the information.” Barker [v. Am. Mobil Power Corp., 64 F.3d 1397, 1403 (9th Cir. 1995)]. “[T]he same duty applies to ‘alleged material misrepresentations made by fiduciaries to participants regarding the risks attendant to fund investment.’” Edgar [v. Avaya Inc., 503 F.3d 340, 350 (3d Cir. 2007)]. Quan, 623 F.3d at 886. We specifically endorsed the Third Circuit’s definition of materiality in Quan. We 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 whether to place or maintain monies in a particular fund.” Id. (quoting Edgar, 503 F.3d at 350) (internal quotation marks omitted). Defendants’ second argument is that plaintiffs have failed to show that they relied on defendants’ material omissions and misrepresentations. Defendants contend that plaintiffs must show that they actually relied on the omissions and misrepresentations. It is well established under Section 10(b) that a defrauded investor need not show actual reliance on the particular omissions or representations of the defendant. Instead, as the Supreme Court explained in Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct. 2179 (2011), the investor can rely on a rebuttable presumption of reliance based on the “fraud-on-the-market” theory: According to that theory, “the market price of shares traded on well-developed markets reflects all publicly available information, and, hence, any material misrepresentations.” HARRIS V. AMGEN 53 [Basic, Inc. v. Levinson, 485 U.S. 224, 246 (1988)]. Because the market “transmits information to the investor in the processed form of a market price,” we can assume, the Court explained [in Basic], that an investor relies on public misstatements whenever he “buys or sells stock at the price set by the market.” Id.[] at 244, 247. Erica P. John Fund, 131 S. Ct. at 2185; see also Conn. Ret. Plans & Trust, 133 S. Ct. 1184 (2013). We see no reason why ERISA plan participants who invested in a company stock fund whose assets consisted solely of publicly traded common stock should not be able to rely on the fraud-on-themarket theory in the same manner as any other investor in a publicly traded stock. Defendants’ final argument is that statements made to the Securities and Exchange Commission in documents required by the federal securities laws were not made in a fiduciary capacity, and that these statements therefore cannot be considered in an ERISA suit for breach of fiduciary duty. Although our circuit has not decided the issue, defendants might be correct if these documents had only been filed and distributed as required under the securities laws, for such acts would have been performed in a corporate capacity. See Lanfear v. Home Depot, Inc., 679 F.3d 1267, 1285 (11th Cir. 2012) (“When the defendants in this case filed the Form S-8s and created and distributed the stock prospectuses, they were acting in their corporate capacities and not in their capacity as ERISA fiduciaries.”); Kirschbaum, 526 F.3d at 257 (“REI was discharging its corporate duties under the securities laws, and was not acting as an ERISA fiduciary.”). However, defendants did more than merely file and distribute the 54 HARRIS V. AMGEN documents as required by the securities laws. See Varity Corp., 516 U.S. at 504 (fiduciary may be “communicating with [plan participants] both in its capacity as employer and in its capacity as plan administrator”) (emphasis in original). As they were required to do under ERISA, defendants prepared and distributed summary plan descriptions (“SPDs”) to Plan participants. See 29 U.S.C. § 1022(a) (requiring fiduciaries to provide a summary plan description). In the SPDs for both the Amgen and the AML Plans, defendants explicitly incorporated by reference Amgen’s SEC filings, including “The Company’s Annual Report on Form 10-K for the year ending December 31, 2006,” and “The Company’s Current Reports on Form 8-K filed on January 19, 2007, February 20, 2007, March 2, 2007, and March 12, 2007, respectively.” Plaintiffs allege that the defendants knew or should have known that statements contained in these filings, incorporated by reference into the SPDs, were materially false and misleading. We hold that defendants’ preparation and distribution of the SPDs, including their incorporation of Amgen’s SEC filings by reference, were acts performed in their fiduciary capacities. In so holding, we agree with the Sixth Circuit, which has held that such incorporation by reference is an act performed in a fiduciary capacity: Defendants exercised discretion in choosing to incorporate the [SEC] filings into the Plan’s SPD as a direct source of information for Plan participants about the financial health of [the company] and the value of its stock, an investment option under the plan. The SPD is a fiduciary communication to plan HARRIS V. AMGEN 55 participants and selecting the information to convey through the SPD is a fiduciary activity. Moreover, whether the fiduciary states information in the SPD itself or incorporates by reference another document containing that information is of no moment. To hold otherwise would authorize fiduciaries to convey misleading or patently untrue information through documents incorporated by reference, all while safely insulated from ERISA’s governing reach. Such a result is inconsistent with the intent and stated purposes of ERISA . . . and would create a loophole in ERISA large enough to devour all its protections. Dudenhoefer v. Fifth Third Bancorp, 692 F.3 410, 423 (6th Cir. 2012) (internal citation omitted); see also In re Citigroup ERISA Litigation, 662 F.3d 128, 144–45 (2d Cir. 2011) (noting that SEC filings had been incorporated in the Plans’ SPDs, but dismissing ERISA claim on the ground that plaintiffs had not sufficiently alleged that the defendant fiduciaries knew or should have known that the filings contained false information); Quan, 623 F.3d at 886 (assuming, “without deciding, that alleged misrepresentations in SEC disclosures that were incorporated into communications about an ERISA plan are ‘fiduciary communications’ on which an ERISA misrepresentation claim can be based.”) (citations omitted). The statements made in Amgen’s SEC filings and incorporated in the Plans’ SPDs may therefore be used under ERISA to show that defendants knew or should have known that the price of Amgen shares was artificially inflated, and to show that 56 HARRIS V. AMGEN plaintiffs presumptively detrimentally relied on defendants’ statements under the fraud-on-the-market theory. We therefore conclude that plaintiffs have sufficiently alleged that defendants have violated the duty of loyalty and care they owe as fiduciaries under ERISA. We emphasize, however, as to Counts II and III, that we have decided only that the complaint contains allegations with a sufficient degree of plausibility to survive a motion to dismiss under Rule 12(b)(6). A determination whether defendants have actually violated their fiduciary duties requires fact-based determinations, such as the likely effect of the alternative actions available to defendants, to be made by the district court on remand, with the assistance of expert opinion as appropriate.
The district court correctly concluded that Counts IV and V are derivative of Counts II and III. Because we reverse the district court’s dismissal of Counts II and III, we also reverse its dismissal of Counts IV and V. See In re Gilead Sciences Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).
Count VI alleges that defendants caused the Plans directly or indirectly to sell or exchange property with a party-ininterest, in violation of 29 U.S.C. § 1106(a). Specifically, Count VI alleges that Amgen and AML are parties-in-interest that concealed material information in order to inflate the price of Amgen stock sold to the Plans. In relevant part, 29 U.S.C. § 1106(a)(1) provides, HARRIS V. AMGEN 57 A fiduciary with respect to a plan shall not cause the plan to engage in a transaction, if he knows or should know that such transaction constitutes a direct or indirect – (A) sale or exchange, or leasing, of any property between the plan and a party in interest; . . . (D) transfer to, or use by or for the benefit of a party in interest, of any assets of the plan[.] A party in interest includes “any fiduciary” of a plan or “an employer” of the plan beneficiaries. 29 U.S.C. § 1002(14). Defendants did not argue in the district court that Count VI fails to state a prohibited transaction claim under § 1106(a)(1). Nor do they raise this argument on appeal. Instead, defendants argue that 29 U.S.C. § 1108(e) exempts the sale of employer stock from the restrictions of § 1106(a)(1). Section 1108(e) specifies that § 1106 does not prohibit the purchase or sale of employer stock if, as relevant here, (1) the sale price was the “price . . . prevailing on a national securities exchange”; (2) no commission is charged for the transaction, and (3) the plan is an EIAP. 29 U.S.C. §§ 1107(d)(5), (e)(1), 1108(e). In Howard v. Shay, 100 F.3d 1484, 1488 (9th Cir. 1996), we held that because § 1108(e) is an affirmative defense, a defendant has the burden to prove its applicability. We explained, “A fiduciary who engages in a self-dealing transaction pursuant to 29 U.S.C. § [1106(a)] has the burden of proving that he fulfilled his duties of care 58 HARRIS V. AMGEN and loyalty and that the ESOP received 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 [prohibited self-dealing transactions] the burden of proof is always on the party to the self-dealing transaction to justify its fairness [under a statutory exception].”). Citing Howard, the Eighth Circuit has held that a plaintiff need not plead in his complaint that a transaction was not exempt under § 1108(e). See Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 600–01 (8th Cir. 2009); see also Jones v. Bock, 549 U.S. 199, 211–12 (2007) (holding that a plaintiff need not plead the absence of an affirmative defense, even a defense like exhaustion of remedies, which is “mandatory”). Because the existence of an exemption under § 1108(e) is an affirmative defense, we can dismiss Count VI based on the § 1108(e) exemption only if the defense is “clearly indicated” and “appear[s] on the face of the pleading.” 5B Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1357 (3d ed. 2004); see also Jones, 549 U.S. at 215 (citing Wright & Miller for rule that affirmative defense must appear on the face of the complaint). Here, we cannot say that the face of the complaint clearly indicates the availability of a § 1108(e) defense.