United States Ninth Circuit

In this shareholder class action brought on behalf of investors who alleged that defendant-managers of a mutual fund failed to adhere to the fund's fundamental investment objectives, the district court's dismissal is reversed in part and vacated in part, where: 1) the named plaintiff, a registered investment adviser and financial planning firm that managed accounts on behalf of investors and had over 200,000 shares of the fund under its management had standing because it filed a supplemental pleading under Federal Rule of Civil Procedure 15(d) after obtaining an assignment of claim from an investor in the fund; 2) the fund shareholders' adoption of the investment objectives added a structural restriction on the power conferred on the fund trustees that could only be changed by a vote of the shareholders, and created a contract between the trustees and fund investors; 3) the operative complaint properly stated a claim that defendants breached their fiduciary duties by failing to ensure that the fund was managed in accordance with the fundamental investment objectives and by changing the objectives without obtaining required shareholder authorization; and 4) plaintiff adequately alleged that the investors were third-party beneficiaries of the Investment Advisory and Administration Agreement between Schwab Trust and Schwab Advisor.

Appellate Information

• Decided 03/09/2015
• Published 03/09/2015

Judges

• Korman

Court

• United States Ninth Circuit

Counsel