In what appears to be the first Appellate Court decisions on what plaintiffs need to allege to defeat a motion to dismiss for failing to state a cause of action in an excessive fees case since the Supreme Court decided Hughes v. Nothwestern, (See Justices Make Short Work of Northwestern University’s  Fiduciary Defense) the Ninth Circuit has reversed two lower court decisions granting defendant’s motion to dismiss.

In the first unpublished opinion, Davis v., issued April 8, 2022, while not actually citing Hughes, the court reversed the lower court decision citing the same Supreme Court cases that Hughes relied on such as Tibble v. Edison in finding the plaintiffs adequately alleged a breach of  the fiduciary duty of prudence.   That case held that fiduciaries have a duty to monitor investments in a plan and remove imprudent ones.  The Ninth Circuit found the plaintiff’s did state plausible claims that, if true, the defendants imprudently failed to select lower-cost share classes or collective investment trusts with substantially identical underlying assets.

The second case, Kong v. Trader Joe’s Company, another unpublished opinion decided April 15, 2022, also relied on Tibble.  However, the court  cited Hughes in acknowledging that the appropriate inquiry will necessarily be fact specific.  In that case plaintiff’s also alleged that Trader Joe’s failed to provide cost-effective investments with reasonable fees.

Both cases were sent back to the lower courts for trial.  These cases send the message to Federal District Courts in the Ninth Circuit (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington, Guam and the Northern Mariana Islands) that many excessive fee cases will have to be heard on the merits and not dismissed at the pleading stage.  This means the flood of cases will continue.