UFCW LOCAL 1500 PENSION FUND , on behalf of itself and all others similarly situated v. Marissa Mayer

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UFCW LOCAL 1500 P ENSION FUND ,
on behalf of itself and all others
similarly situated,
Plaintiff-Appellant,
v.
M ARISSA M AYER ; DAVID F ILO; S UE
J AMES ; THOMAS J. M C INERNEY;
C HARLES R. S CHWAB ; H. LEE S COTT,
J R .; KENNETH A. GOLDMAN ;
R ONALD S. BELL; HENRIQUE DE
C ASTRO; M AX R. LEVCHIN; J ANE E.
S HAW; M AYNARD W EBB , J R .;
YAHOO ! INC ., Nominal Defendant,
Defendants-Appellees.
No. 17-15435
D.C. No.
3:16-cv-00478-
RS
OPINION
Appeal from the United States District Court
for the Northern District of California
Richard Seeborg, District Judge, Presiding
Argued and Submitted June 13, 2018
San Francisco, California
Filed July 12, 2018

-- 1 of 13 --

2 UFCW LOCAL 1500 P ENSION FUND V . M AYER
Before: Mary M. Schroeder, David M. Ebel,*
and John B. Owens, Circuit Judges.
Opinion by Judge Owens
SUMMARY**
Investment Company Act
The panel affirmed the district court’s dismissal of a
lawsuit bringing derivative claims against Yahoo! Inc.’s
board of directors and certain corporate officers, as well as
one direct claim against Yahoo!, under the Investment
Company Act.
The plaintiff alleged that when Yahoo! invested in
Alibaba.com, a Chinese retail website, Yahoo! violated the
conditions of its exemption, granted by the Securities and
Exchange Commission, from the registration requirements
of the ICA. The panel held that the plaintiff failed to state a
claim because the ICA does not establish a private right of
action for challenging the continued validity of an ICA
exemption.
* The Honorable David M. Ebel, United States Circuit Judge for the
U.S. Court of Appeals for the Tenth Circuit, sitting by designation.
** This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.

-- 2 of 13 --

UFCW LOCAL 1500 P ENSION FUND V . M AYER 3
COUNSEL
Richard L. Stone (argued), Blackner Stone & Associates PA,
Palm Beach, Florida; Ira M. Press and Peter S. Linden, Kirby
McInerney LLP, New York, New York; for Plaintiff-
Appellant.
Mark R. S. Foster (argued), Joshua A. Korr, and Jordan Eth,
Morrison & Foerster LLP, San Francisco, California, for
Defendants-Appellees.
OPINION
OWENS, Circuit Judge:
Plaintiff-Appellant UFCW Local 1500 Pension Fund
(“UFCW”) appeals from the district court’s dismissal of a
lawsuit bringing derivative claims against Yahoo! Inc.’s
board of directors and certain corporate officers, as well as
one direct claim against Yahoo!. We have jurisdiction under
28 U.S.C. § 1291, and we affirm.
I. BACKGROUND
A. Yahoo!, Alibaba, and the ICA
Back in 1995, Yahoo! helped pioneer what the Supreme
Court calls “the Cyber Age.” Packingham v. North
Carolina, 137 S. Ct. 1730, 1736 (2017). Using (for its time)
cutting-edge technology, Yahoo! enabled people to visit
websites previously inaccessible except to the most internet
savvy. Its promise as an internet search company was so
bright, in fact, that the 2000 movie Frequency featured
Yahoo! as the stock for the next millennium.

-- 3 of 13 --

4 UFCW LOCAL 1500 P ENSION FUND V . M AYER
Of course, Hollywood doesn’t always get it right.
Although Yahoo! has fared better than dot-com busts like
eToys and Pets.com, Yahoo!’s search engine technology
turned out to be closer in value to the Ark of the Covenant at
the end of Raiders of the Lost Ark than the Apple stock that
Lieutenant Dan purchased in Forrest Gump. Today we
“Google” things—we do not “Yahoo!” them (or “Alta
Vista,” “Excite,” or “Dogpile” them for that matter). But
during its marketplace decline this century, Yahoo! made a
savvy $1 billion investment in Alibaba.com, a Chinese retail
website.
Alibaba burgeoned into a behemoth. Alibaba was so
successful that by 2012 Yahoo! was able to sell just over half
of its Alibaba stock for $7.1 billion. And when Alibaba
conducted its initial public offering in 2014, $9.4 billion
more flowed into Yahoo!’s coffers essentially overnight. By
2016, Yahoo!’s remaining stake in Alibaba was worth some
$27 billion. That figure dwarfed the value of Yahoo!’s
internet business.
Investments in Alibaba and other ventures (such as
Yahoo! Japan) would normally subject Yahoo! to the
requirements of the Investment Company Act of 1940
(“ICA”). The ICA permits the Securities and Exchange
Commission (“the SEC” or “the Commission”) to regulate
more rigorously the activities of enterprises that qualify as
investment companies under section 3(a) of the statute. See
Northstar Fin. Advisors, Inc. v. Schwab Invs., 615 F.3d
1106, 1109–12 (9th Cir. 2010) (detailing the ICA and
describing it as “provid[ing] comprehensive regulation of
investment companies and the mutual fund industry”); see
also 15 U.S.C. § 80a-3(a). Such enterprises must register
with the SEC. If they do not, section 7(a) forbids them from,

-- 4 of 13 --

UFCW LOCAL 1500 P ENSION FUND V . M AYER 5
among other things, “engag[ing] in any business in interstate
commerce.” Id. § 80a-7(a)(4).
Any would-be investment company can try to avoid the
ICA’s registration requirements, however. Section 3(b)(2)
empowers the SEC, “upon application,” to exempt such a
company from the ICA’s requirements, if the SEC “finds and
by order declares” the company “to be primarily engaged in
a business or businesses other than that of investing,
reinvesting, owning, holding, or trading in securities.” Id.
§ 80a-3(b)(2). But what the SEC giveth, the SEC taketh
away. Section 3(b)(2) further provides that, “[w]henever the
Commission, upon its own motion or upon application, finds
that the circumstances which gave rise to the issuance of an
order granting an application [for an ICA exemption] no
longer exist, the Commission shall by order revoke” the
exemption. Id.
After entering into a joint venture to create Yahoo!
Japan, Yahoo! applied for an ICA exemption from the SEC.
The SEC granted Yahoo! a “temporary exemption” in April
2000 and then issued a “permanent order” exempting
Yahoo! from the ICA a few months later. Yahoo!’s ICA
exemption came with strings attached. Yahoo! could only
make investments “for bona fide business purposes” and had
to “refrain from investing or trading in [securities] for short-
term speculative purposes.” Despite those conditions,
Yahoo!’s investment in Alibaba, and filings detailing
Yahoo!’s Alibaba holdings, the SEC has not revoked
Yahoo!’s ICA exemption.
B. This Litigation
UFCW sued in January 2016, alleging that Yahoo! had
violated the conditions of its ICA exemption by investing in
Alibaba and, as a result, that Yahoo! had “been operating as

-- 5 of 13 --

6 UFCW LOCAL 1500 P ENSION FUND V . M AYER
an unregistered investment company” in violation of the ICA
since at least 2013. Based on that allegation, UFCW brought
derivative claims against an array of Yahoo! higher-ups, and
one direct claim against Yahoo! itself. UFCW sought to
(1) rescind the higher-ups’ employment contracts, (2) enjoin
Yahoo! from further performing contracts signed in
violation of the ICA and from selling any material assets,
and (3) recover damages for unjust enrichment.
Despite acknowledging that exempted companies must
comply with the conditions of their ICA exemptions, the
district court concluded that the ICA provides “no role for
the courts to find, in the first instance, that a company should
be stripped of its exemption and therefore deemed an
unregistered investment company.” For that reason, the
district court held that UFCW’s claims “all fail as a matter
of law” and dismissed UFCW’s suit.
II. DISCUSSION
UFCW conceded below and acknowledges on appeal
that its claims all rely on the allegation that Yahoo! violated
the conditions of its ICA exemption by investing in Alibaba.
But because no provision of the ICA establishes a private
right of action for challenging the continued validity of an
ICA exemption, UFCW’s claims fizzle faster than
Flooz.com.1
1 To the extent UFCW asserts that derivative claims do not require
a private right of action, it is mistaken. See, e.g., In re Digimarc Corp.
Derivative Litig., 549 F.3d 1223, 1226 (9th Cir. 2008) (affirming
dismissal of derivative claim brought under the Sarbanes-Oxley Act for
lack of a private right of action).

-- 6 of 13 --

UFCW LOCAL 1500 P ENSION FUND V . M AYER 7
A. Standard of Review
We review de novo a “decision involving interpretation
of a federal statute,” In re Digimarc Corp., 549 F.3d at 1229,
as we do a dismissal for failure to state a claim, Metzler Inv.
GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1061
(9th Cir. 2008). In this posture, we must accept as true the
operative complaint’s allegations and construe them in favor
of the nonmoving party, UFCW. See id. Our review “is
limited to the complaint, materials incorporated into the
complaint by reference, and matters of which [we] may take
judicial notice.” Id.
B. The ICA Does Not Establish A Private Right of
Action to Challenge the Continued Validity of an
ICA Exemption
“Like substantive federal law itself, private rights of
action to enforce federal law must be created by Congress.”
Alexander v. Sandoval, 532 U.S. 275, 286 (2001). Congress
may so empower litigants expressly or implicitly. Northstar,
615 F.3d at 1115. But even in the latter circumstance, the
“judicial task” remains “to interpret the statute Congress has
passed to determine whether it displays an intent to create
not just a private right but also a private remedy.” Sandoval,
532 U.S. at 286. Without evidence of a congressional intent
to create both a private right and a private remedy, a private
right of action “does not exist and courts may not create one,
no matter how desirable that might be as a policy matter, or
how compatible with the statute.” Id. at 286–87.
To create a private right, a statute must use rights-
creating language. See id. at 288. Language that “focus[es]
on the person regulated rather than the individuals protected”
will not do. Id. at 289. Rather, the statute must place “an
unmistakable focus” on the latter group. Ball v. Rodgers,

-- 7 of 13 --

8 UFCW LOCAL 1500 P ENSION FUND V . M AYER
492 F.3d 1094, 1106 (9th Cir. 2007) (quoting Gonzaga Univ.
v. Doe, 536 U.S. 273, 284 (2002)); accord AlohaCare v.
Hawaii, Dep’t of Human Servs., 572 F.3d 740, 746 (9th Cir.
2009). And to create a private remedy, a statute must (at the
very least) avoid remedy-foreclosing language. See In re
Digimarc, 549 F.3d at 1231. Language establishing an
express “remedial scheme[]” may “foreclose a[n implied]
private [right] of action to enforce even those statutes that
admittedly create substantive private rights.” Sandoval,
532 U.S. at 290. That is because providing for “one method
of enforcing” a private right “suggests that Congress
intended to preclude others.” Id.; see also Middlesex Cty.
Sewerage Auth. v. Nat’l Sea Clammers Ass’n, 453 U.S. 1,
14–15 (1981) (observing that “elaborate enforcement
provisions” mean that “it cannot be assumed that Congress
intended to authorize by implication additional judicial
remedies”).
The ICA provisions related to SEC registration and ICA
exemptions do not have rights-creating language. Section
7(a) of the ICA commands that “[n]o investment company”
shall, among other things, “engage in any business in
interstate commerce” unless it registers with the SEC.
15 U.S.C. § 80a-7(a)(4). That language mirrors section
13(a)’s command that “[n]o registered investment
company” shall, among other things, “change the nature of
its business”—a command that we have already held lacks
rights-creating language. Northstar, 615 F.3d at 1109–10
(quoting 15 U.S.C. § 80a-13(a)); id. at 1115.
Section 3(b)(2) of the ICA is “yet a step further
removed” from having rights-creating language, for that
provision “focuses neither on the individuals protected nor
even on the [parties] being regulated, but on the agenc[y]
that will do the regulating”—the SEC. Sandoval, 532 U.S.

-- 8 of 13 --

UFCW LOCAL 1500 P ENSION FUND V . M AYER 9
at 289. Again, section 3(b)(2) provides that “[w]henever the
Commission, upon its own motion or upon application, finds
that the circumstances which gave rise to [an ICA
exemption] no longer exist, the Commission shall by order
revoke such order.” 15 U.S.C. § 80a-3(b)(2) (emphasis
added). That language not only dooms any suggestion that
Congress intended to create a private right, it forecloses any
private remedy for alleged violations of an ICA exemption
beyond (at best) a chance to file with the SEC an
“application” for revocation of the exemption, subject to (if
anything) deferential judicial review. Id. §§ 80a-3(b)(2),
80a-42(a); see also 5 U.S.C. §§ 702, 706 (providing for
deferential judicial review of agency findings and
conclusions under the Administrative Procedure Act).
UFCW counters that, sections 7 and 3(b)(2)
notwithstanding, section 47(b) of the ICA establishes a
private right of action for challenging the continued validity
of an ICA exemption. Section 47(b) does no such thing.2 As
just explained, Congress contemplated that companies
would contravene the conditions of ICA exemptions and
concluded that the SEC, not the courts, should decide in the
first instance what to do when that happens. Congress has
thus “deliberately targeted” the “specific problem[]” alleged
here with a “specific solution[].” RadLAX Gateway Hotel,
LLC v. Amalgamated Bank, 566 U.S. 639, 645 (2012)
(quoting Varity Corp. v. Howe, 516 U.S. 489, 519 (1996)
(Thomas, J., dissenting)). That solution does not include
lawsuits challenging the continued validity of ICA
exemptions. So even if section 47(b) could be read as
implying a private right of action, section 3(b)(2) would still
bar lawsuits like UFCW’s under the “well established canon
2 Neither does section 44, as it is merely a jurisdictional provision.
See Northstar, 615 F.3d at 1117-18; see also 15 U.S.C. § 80a-43.

-- 9 of 13 --

10 UFCW LOCAL 1500 P ENSION FUND V . M AYER
of statutory interpretation” that “the specific governs the
general.” Id. (quoting Morales v. Trans World Airlines, Inc.,
504 U.S. 374, 384 (1992)).
More fundamentally, though, section 47(b) does not
establish a private right of action.3 Section 47(b) provides
that a “contract that is made, or whose performance involves,
a violation of [the ICA], or of any rule, regulation, or order
thereunder, is unenforceable by either party” to the contract
unless “a court” makes certain findings. 15 U.S.C. § 80a-
46(b)(1). So for a start, that language does not expressly
establish a private right of action, as “nothing in the text of
the section makes any mention of [one].” In re Digimarc,
549 F.3d at 1230; see also 15 U.S.C. § 80a-35(b) (expressly
establishing private right of action not applicable here by
providing that “[a]n action may be brought”). Instead,
section 47(b) on its face merely establishes what it says: that
contracts formed in violation of the ICA are usually
unenforceable. See, e.g., Santomenno, 677 F.3d at 186–87.
UFCW would nevertheless have us read section 47(b) as
implying a private right of action for any party to any
contract allegedly formed in violation of any ICA provision,
rule, regulation, or order to sue for rescission of that contract.
That we cannot do. In Northstar we held that the structure
3 To the extent statements suggesting to the contrary in Mathers
Fund, Inc. v. Colwell Co., 564 F.2d 780 (7th Cir. 1977), and Lessler v.
Little, 857 F.2d 866 (1st Cir. 1988), can be read as anything more than
dicta, we are skeptical that those cases remain good law after the
Supreme Court’s decision in Sandoval. We also agree with the Third
Circuit that the Supreme Court’s decision about a different statute in
Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11 (1979),
does not control our decision about the ICA. See Santomenno ex rel.
John Hancock Tr. v. John Hancock Life Ins. Co., 677 F.3d 178, 186-87
(3d Cir. 2012).

-- 10 of 13 --

UFCW LOCAL 1500 P ENSION FUND V . M AYER 11
of the ICA forecloses reading the statute as implying a
private of action “to enforce the individual provisions of the
Act.” 615 F.3d at 1116; see also Bellikoff v. Eaton Vance
Corp., 481 F.3d 110, 116–17 (2d Cir. 2007); Olmsted v.
Pruco Life Ins. Co. of N.J., 283 F.3d 429, 433 (2d Cir. 2002).
And although we did not specifically address section 47(b)
in Northstar, our reading of the ICA there demands that we
reject UFCW’s reading of the ICA here.
The ICA empowers “the SEC to enforce all of the
provisions of the [statute] by granting the [SEC] broad
authority to investigate suspected violations; initiate actions
in federal court for injunctive relief or civil penalties; and
create exemptions from compliance with any ICA
provision.” Northstar, 615 F.3d at 1116; see also 15 U.S.C.
§§ 80a-6(c), 80a-41. Congress, for that matter, has
demonstrated in this very statute that it “knew how to create
a private right of action to enforce a particular section of the
[ICA] when it wished to do so.” Northstar, 615 F.3d at 1117.
The ICA expressly authorizes “private suits for damages
against insiders of closed-end investment companies who
make short-swing profits” and derivative suits against “an
investment company’s advisor and its affiliates for breach of
certain fiduciary duties.” Id.; see also 15 U.S.C. §§ 80a-
29(h), 80a-35(b). This detailed statutory scheme, we
explained, indicated that Congress never intended further
private enforcement of the ICA. See Northstar, 615 F.3d at
1117.
Our reasoning made good sense in Northstar, and it
makes even better sense here. Consider the circumstances
of this case. UFCW sued while Yahoo! was negotiating a
multi-billion-dollar sale of its internet business, and UFCW
sought (among other things) an injunction preventing any
such sale. UFCW thus asserts the ability to halt a deal the

-- 11 of 13 --

12 UFCW LOCAL 1500 P ENSION FUND V . M AYER
SEC has not blocked for alleged violations of an ICA
exemption the SEC has not addressed, even though the SEC
has been made fully aware of the facts underlying those
alleged violations.
And that is not even the most awesome power UFCW
purports to possess. So far as we can tell, nothing in
UFCW’s reading of section 47(b) would stop UFCW from
seeking to rescind not just a handful of employment
contracts, but also every other contract Yahoo! has entered
into for the better part of a decade. If Congress really
intended to expose companies receiving an ICA exemption
to lawsuits of this unparalleled magnitude, it would have
expressed that intention clearly, not covertly. Congress,
after all, tends not to “hide elephants in mouseholes.”
Whitman v. Am. Trucking Ass’ns, Inc., 531 U.S. 457, 468
(2001).
Furthermore, at least when it comes to ICA exemptions,
UFCW’s position threatens to force courts and the SEC into
a tellingly odd game of chicken. For example, if a court
concluded in the first instance that a company had violated
its ICA exemption, and if circumstances had not changed
since the court’s decision, could the SEC re-exempt the
company as it saw fit? Or would the SEC, the body the ICA
expressly charges with considering changed circumstances
in the first instance, be bound by the court’s decision until
circumstances changed again? Either the court’s diligent
efforts get wasted, or the SEC’s express prerogatives get
thwarted. Pick your poison. Or better yet, barring a clear
congressional command to the contrary, decline the
“invitation to have one last drink.” Sandoval, 532 U.S. at
287. We choose temperance.
Because UFCW’s claims all hinge on the power to
challenge the continued validity of Yahoo!’s ICA

-- 12 of 13 --

UFCW LOCAL 1500 P ENSION FUND V . M AYER 13
exemption, and because the ICA accords UFCW no such
power, we affirm.
AFFIRMED.

-- 13 of 13 --