Laborers' Local 265 Pension Fund v. iShares Trust

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 14a0247p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________

LABORERS’ LOCAL 265 PENSION FUND; PLUMBERS ┐
and PIPEFITTERS LOCAL NO. 572 PENSION FUND, │
Plaintiffs-Appellants, │
│ No. 13-6486
v. │
>
│
iSHARES TRUST et al., │
Defendants-Appellees. │
┘
Appeal from the United States District Court
for the Middle District of Tennessee at Nashville.
No. 3:13-cv-00046—Aleta Arthur Trauger, District Judge.
Argued: July 30, 2014

Decided and Filed: September 30, 2014

Before: BOGGS, CLAY, and GILMAN, Circuit Judges.

_________________

COUNSEL

ARGUED: C. Mark Pickrell, THE PICKRELL LAW GROUP, P.C., Nashville, Tennessee, for
Appellants. Seth M. Schwartz, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, New
York, New York, for Appellees. ON BRIEF: C. Mark Pickrell, William G. Brown, THE
PICKRELL LAW GROUP, P.C., Nashville, Tennessee, James G. Stranch, III, J. Gerard Stranch
IV, Michael G. Stewart, Michael J. Wall, BRANSTETTER, STRANCH & JENNINGS, PLLC,
Nashville, Tennessee, Jenny L. Dixon, ROBBINS ARROYO LLP, San Diego, California, for
Appellants. Seth M. Schwartz, Jeremy A. Berman, SKADDEN, ARPS, SLATE, MEAGHER &
FLOM LLP, New York, New York, John R. Jacobson, Milton S. McGee, III, RILEY
WARNOCK & JACOBSON, PLC, Nashville, Tennessee, Bruce H. Schneider, STROOCK &
STROOCK & LAVAN LLP, New York, New York, for Appellees.

1
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 2

_________________

OPINION
_________________

RONALD LEE GILMAN, Circuit Judge. An affiliate of the investment advisor for
iShares mutual fund functions as a middleman between iShares and those who seek to borrow
iShares’s securities holdings, charging a fee of 35% for all net revenue received by iShares from
such lending activity. The plaintiff shareholders challenge this fee as excessive under the
Investment Company Act of 1940 (ICA), 15 U.S.C. § 80a-1 et seq. Their complaint was
dismissed by the district court for failure to state a claim. For the reasons set forth below, we
AFFIRM the judgment of the district court.

I. BACKGROUND

A. Factual background

Securities lending promotes market efficiency and liquidity by making securities readily
available to a variety of borrowers, including short-sellers. The Second Circuit has described the
practice as follows:

Securities lending is an important and significant business that describes the
market practice whereby securities are temporarily transferred by one party (the
lender) to another (the borrower). The borrower is obliged to return the securities
to the lender, either on demand, or at the end of any agreed term. For the period
of the loan the lender is secured by acceptable assets delivered by the borrower to
the lender as collateral. Typically, the collateral—which, in the United States,
often takes the form of cash—is valued at 102% [to] 105% of the market value of
the loaned securities. The borrower of securities may be motivated by any
number of factors, including the desire to cover a short position, to sell the
borrowed securities in hopes of buying them back at a lower price before
returning them to the lender, or to gain tax advantages associated with the
temporary transfer of ownership of the securities.

United States v. Zangari, 677 F.3d 86, 88 (2d Cir. 2012) (internal citations, footnotes, and
quotation marks omitted).

The plaintiffs in this case are two pension funds that are shareholders in exchange-traded
funds issued by iShares, Inc. and iShares Trust (collectively iShares). iShares, as part of its
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 3

mutual-fund operations, lends its securities holdings to various borrowers. This lending activity
generates substantial revenue for iShares because borrowers must post cash collateral and pay
interest on their loans. BlackRock, Inc., which is not named as a defendant, is the corporate
parent of iShares. Defendant BlackRock Institutional Trust Company, N.A. (BTC), a wholly
owned subsidiary of BlackRock, serves as iShares’s lending agent. BTC functions as a
middleman between iShares and those who seek to borrow iShares’s securities holdings. In
exchange for its services as lending agent, BTC receives 35% of all securities-lending net
revenue. The parties refer to this percentage as the “lending fee.”

Defendant BlackRock Fund Advisors (BFA) is a wholly owned subsidiary of BTC. BFA
is the investment adviser for iShares and manages the funds’ portfolios pursuant to an
investment-advisory agreement. Under this agreement, BFA receives a separate fee that is not at
issue in this case.

The plaintiffs allege, among other things, that BFA and BTC violated Section 36(a) and
Section 36(b) of the ICA, 15 U.S.C. § 80a-35(a), (b), by charging an excessive lending fee.
According to the plaintiffs, the fee charged by BTC bears no relationship to the actual services
rendered.

B. Procedural background

The plaintiffs filed suit in federal district court against BFA, BTC, individual iShares
directors, and several nominal defendants in January 2013. In response, the defendants moved
under Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the complaint for failure
to state a claim. The district court granted the defendants’ motion and dismissed the complaint
in August 2013. Although the district court granted the plaintiffs leave to amend their complaint,
the plaintiffs instead filed this appeal following the entry of a final judgment.

The plaintiffs do not object to the practice of securities lending in general, but they do
object to the 35% lending fee that BTC charges. They specifically allege that:

66. BFA, acting as investment adviser to iShares and the Funds, has retained
BTC, its parent company, to manage the lending of securities owned by iShares
ETF’s, including the Funds.
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 4

...
70. BTC’s securities lending fees with respect to the Funds are set out in an
Amended and Restated Securities Lending Agreement with iShares, Inc. and
iShares Trust, among other entities. That agreement provides that BTC shall be
provided a fee of 35% of the “net amount earned on securities lending activities.”
This 35% fee is, standing alone, disproportionally large and far higher than would
be negotiated with all unaffiliated agent[s] in an arms length transaction.
...
73. These securities lending fees charged to iShares investors are
disproportionately large—“about three times more than what is typical in the
industry.”

(Verif. Compl. ¶¶ 66, 70, 73)

The plaintiffs’ verified complaint contains three counts. In the first count, the plaintiffs
assert derivative claims under Section 36(b) of the ICA against BFA, BTC, and the individual
iShares directors. They allege that BTC’s 35% lending fee is excessive and bears no relationship
to the actual services rendered.

In the second count, the plaintiffs assert a claim under Section 47(b) of the ICA. They
allege that the contracts “obligating iShares or any Fund to pay BTC or BFA or affiliates fees
arising out of securities lending transactions . . . were performed in violation of the [ICA] and are
therefore unenforceable.” The plaintiffs contend that the contracts were made in “violation of at
least four provisions of the [ICA]—Sections 17(d), 17(e), 36(a) and 36(b).” They do not,
however, appeal the district court’s dismissal of this count.

In the third count, the plaintiffs assert a derivative claim under Section 36(a) of the ICA
against BFA, BTC, and the individual iShares directors. They allege that the defendants
breached their fiduciary duties to the shareholders by “using investor assets for the benefit of
their hedge funds and short-selling operations, without compensating investors in line with
compensation that would have been paid based on arm’s length transactions.”

In response, the defendants argued that (1) the Section 36(b) claim is barred by the terms
of a 2002 exemption order issued by the Securities and Exchange Commission (SEC) to
BlackRock’s predecessor-in-interest in which the SEC permitted the securities-lending
operations at issue here, and (2) Section 36(a) of the ICA does not provide an implied private
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 5

right of action. The district court, after agreeing with both of the defendants’ arguments,
dismissed the complaint for failure to state a claim. Although the dismissal was without
prejudice, the plaintiffs chose not to amend their complaint. The district court then entered a
final judgment against the plaintiffs in October 2013. This timely appeal followed.

II. ANALYSIS

A. Standard of review

We review de novo a district court’s decision to grant a motion to dismiss for failure to
state a claim. Lambert v. Hartman, 517 F.3d 433, 438–39 (6th Cir. 2008). In reviewing the
grant of such a motion, we construe the complaint in the light most favorable to the plaintiff and
accept all factual allegations as true. Id. at 439. “To survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)).

B. The district court did not err in dismissing the Section 36(b) claim

The plaintiffs first contend that the district court erred in dismissing their Section
36(b) claim against BFA. They frame the relevant issue on appeal as whether “Section 36(b)
provides a remedy against the investment adviser, BFA, for excessive compensation paid to both
it and its affiliate, BTC.” The plaintiffs argue that Section 36(b) permits a lawsuit against an
investment adviser for excessive compensation even where (as is the case here) the SEC has
blessed the securities-lending operations of an affiliated lending agent (BTC).

Section 36(b) of the ICA provides as follows:

For the purposes of this subsection, the investment adviser of a registered
investment company shall be deemed to have a fiduciary duty with respect to the
receipt of compensation for services, or of payments of a material nature, paid by
such registered investment company, or by the security holders thereof, to such
investment adviser or any affiliated person of such investment adviser. An action
may be brought under this subsection by the Commission, or by a security holder
of such registered investment company on behalf of such company, against such
investment adviser, or any affiliated person of such investment adviser, or any
other person enumerated in subsection (a) of this section who has a fiduciary duty
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 6

concerning such compensation or payments, for breach of fiduciary duty in
respect of such compensation or payments paid by such registered investment
company or by the security holders thereof to such investment adviser or person.

15 U.S.C. § 80a-35(b).

Closely related to Section 36(b) of the ICA is Section 17, which imposes broad
restrictions on transactions between registered investment companies and their affiliates. See
id. § 80a-17(a) (listing prohibited transactions); see also id. § 80a-17(d) (prohibiting certain joint
transactions among affiliates). The defendants do not dispute that BFA and BTC are affiliates
under the ICA. A subsection of Section 36(b), however, contains a carve-out provision, which
states that “[t]his subsection shall not apply to compensation or payments made in connection
with transactions subject to section 80a-17 of this title [i.e., Section 17 of the ICA], or rules,
regulations, or orders thereunder.” Id. § 80a-35(b)(4).

As relevant here, the SEC has the authority to issue exemption orders under the ICA.
15 U.S.C. § 80a-6(c). In 2002, BlackRock’s predecessor-in-interest received such an order from
the SEC. The exemption order permits iShares to “pay an affiliated lending agent, and the
lending agent to accept, fees based on a share of the revenues generated from securities lending
transactions and to lend portfolio securities to affiliated broker-dealers.” In re Maxim Series
Fund, Inc., Investment Company Act Release No. 25878, 2002 SEC LEXIS 3327 (Dec. 27,
2002).

In their briefs, the plaintiffs acknowledge the existence of the 2002 exemption order.
They nevertheless contend that their Section 36(b) claim against BFA remains unaffected by the
order because BTC’s compensation as the lending agent should be imputed to BFA “for purposes
of deciding whether BFA [breached] its fiduciary duty” as iShares’s investment adviser. In
essence, the plaintiffs’ argument is that BTC’s lending fee should be aggregated with BFA’s
separate investment-advisory fee in order to determine whether BFA violated its fiduciary duty
by receiving excessive compensation.

The Second Circuit has rejected a similar argument regarding the aggregation of separate
fees. In Meyer v. Oppenheimer Management Corp., 895 F.2d 861 (2d Cir. 1990), an individual
shareholder filed a derivative suit under the ICA against a money-market mutual fund and its
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 7

investment adviser, alleging that the adviser’s fees and the distribution fees received by the
adviser’s affiliates were excessive. The plaintiff specifically argued that the adviser’s fees and
the distribution fees should be aggregated for the purpose of analyzing his Section 36(b) claim.
In rejecting the plaintiff’s aggregation argument, the Meyer court explained that

Section 36(b) of the Act imposes a fiduciary duty on investment advisers and
affiliated persons regarding the receipt of compensation for services, or of
payments of a material nature. An advisory fee violates Section 36(b) if it is so
disproportionately large that it bears no reasonable relationship to the services
rendered and could not have been the product of arm’s-length bargaining.
. . . [W]e [have] stated that [a] claim that payments made under Rule 12b–1
[which permits the use of fund assets to compensate brokers for the brokers’ sale
and distribution-related expenses] are excessive when combined with advisory
fees, where both payments are made to affiliated persons of an investment
adviser, is cognizable under [S]ection 36(b). This statement stands only for the
proposition that the costs of 12b–1 plans involving such affiliates as well as
advisory fees are subject to review under Section 36(b). Were such review not
available, investment advisers might be able to extract additional compensation
for advisory services by excessive distributions under a 12b–1 plan. The statement
does not, however, stand for the additional proposition that 12b–1 payments to an
adviser’s affiliates are to be aggregated with advisory fees to determine the merits
of a Section 36(b) claim. The two kinds of payments are for entirely different
services, namely advice on the one hand and sales and distribution on the other.
If the fee for each service viewed separately is not excessive in relation to the
service rendered, then the sum of the two is also permissible.

Id. at 866 (emphasis added) (internal citations and quotation marks omitted).

The logic of Meyer applies with equal force to the present case. BTC receives a fee of
35% in exchange for its services as lending agent. The allegations in the complaint focus on this
lending fee. Nowhere in the complaint do the plaintiffs protest the separate fee that BFA
receives pursuant to its investment-advisory agreement with iShares. The plaintiffs have
therefore forfeited their aggregation argument. See Owens Corning v. Nat’l Union Fire Ins. Co.,
257 F.3d 484, 493 n.4 (6th Cir. 2001) (holding that allegations made for the first time on appeal
are forfeited unless plain error exists). And even if the complaint had contained specific
allegations protesting BFA’s investment-advisory fee, that fee is altogether separate from the
lending fee charged by BTC and thus provides no logical basis for aggregating the two. See
Meyer, 895 F.2d at 866.
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 8

None of the plaintiffs’ arguments to the contrary are persuasive. First, the plaintiffs point
to the legislative history of Section 36(b)(4) in support of their contention that BTC’s lending-fee
compensation should be aggregated with BFA’s investment-advisory fee in determining whether
BFA violated Section 36(b). The plaintiffs then cite cases that have characterized certain
portions of Section 36(b) as ambiguous, thereby making inquiry into the legislative history of
Section 36(b) appropriate. See Jones v. Harris Assocs. L.P., 559 U.S. 335, 345 (2010)
(characterizing the phrase “fiduciary duty with respect to the receipt of compensation” as
ambiguous); Fogel v. Chesnutt, 668 F.2d 100, 112 (2d Cir. 1981) (same).

But even if certain portions of Section 36(b) are ambiguous, this does not mean that the
relevant carve-out provision in Section 36(b)(4) is ambiguous. The carve-out provides that
Section 36(b) “shall not apply to compensation or payments made in connection with
transactions subject to section 80a-17 of this title, or rules, regulations, or orders thereunder.”
15 U.S.C. § 80a-35(b)(4). Because the SEC’s 2002 exemption order authorizes transactions that
would otherwise be prohibited by Section 17, the carve-out provision in Section 36(b)(4) is
triggered and the plaintiffs’ Section 36(b) claim must fail. There is accordingly no need to
examine the legislative history. See Roberts v. Hamer, 655 F.3d 578, 583 (6th Cir. 2011) (“If the
words are plain, they give meaning to the act, and it is neither the duty nor the privilege of the
courts to enter speculative fields in search of a different meaning.”) (internal quotation marks
omitted).

In any event, the legislative history of Section 36(b)(4) is of little help to the plaintiffs.
They principally rely on then-SEC Chairman Hamer Budge’s congressional-hearing testimony
that “any amounts received from whatever source by an investment adviser, its affiliates and
other persons . . . in transactions subject to section 17 or 22 could, of course, be taken into
account in determining whether the advisory fees meet the standards of section 36(b).” But the
complaint is focused on BTC’s lending fee, not on BFA’s investment-advisory fee. And, as
explained above, these separate fees may not be aggregated in a single Section 36(b) claim. The
plaintiffs’ reliance on former Chairman Budge’s testimony also suffers from the fact that such
testimony is typically accorded little weight. See Pub. Citizen v. Farm Credit Admin., 938 F.2d
290, 292 (D.C. Cir. 1991) (per curiam) (noting that the “testimony of witnesses before
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 9

congressional committees prior to passage of legislation is generally weak evidence of legislative
intent”).

Section 36(b)(3) of the ICA further undermines the plaintiffs’ argument. That section
provides in relevant part that “[n]o such action shall be brought or maintained against any person
other than the recipient of such compensation or payments.” 15 U.S.C. § 80a-35(b)(3). Because
BFA is not the “recipient” of the 35% lending fee, the plain text of Section 36(b)(3) strongly
suggests that no action may be brought against BFA on the basis of the fee charged by BTC.

Finally, the plaintiffs argue that the SEC has adopted their position that “compensation
earned by an investment adviser or affiliate from securities lending . . . is governed by the
fiduciary duty set out in Section 36(b) even where the SEC has permitted the securities lending
operations in question.” The plaintiffs cite in support a 1995 no-action letter in which the SEC’s
Division of Investment Management staff declined to recommend any enforcement action under
Section 17 of the ICA against an investment company that wished to compensate its affiliate for
services that the affiliate would provide in connection with a securities-lending program. See
Norwest Bank Minn., N.A., SEC No-Action Letter, 1995 WL 329622 (May 25, 1995). In the
letter, the SEC staff opined that “[S]ection 36(b) of the Investment Company Act expressly
places a fiduciary duty on investment advisers with respect to any compensation paid to affiliated
persons of the adviser.” Id. at *4 n.14.

The Norwest no-action letter, however, is distinguishable because the investment
company seeking nonenforcement assurances from the SEC staff in Norwest did not already
possess an exemption order from the SEC expressly permitting the securities-lending operations.
Nor was the carve-out provision of Section 36(b)(4) at issue in the Norwest no-action letter.
Compare id. at *5 (providing nonenforcement assurances rather than an exemption order
pursuant to Section 36(b)(4)), with In re Maxim Series Fund, Inc., Investment Company Act
Release No. 25878, 2002 SEC LEXIS 3327, at *3 (Dec. 27, 2002) (granting the requested
exemptions under Section 17 and approving the securities-lending operations).

And the SEC, contrary to the plaintiffs’ representations at oral argument, retains in all
instances the authority to enforce Section 36(b) and ensure compliance with its exemption
orders. See 15 U.S.C. § 80a-35(b) (explaining that an “action may be brought under [Section
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 10

36(b)] by the Commission”); id. § 80a-41 (containing the general enforcement provision of the
ICA that authorizes the SEC to investigate and bring actions to enjoin violations of the ICA).
For all of these reasons, the district court did not err in dismissing the plaintiffs’ Section 36(b)
claim against BFA.

C. The district court did not err in dismissing the Section 36(a) claim

We now turn to the issue of whether Section 36(a) of the ICA provides an implied private
right of action. This is an issue of first impression in the Sixth Circuit. See M.J. Whitman & Co.,
Inc. Pension Plan v. Am. Fin. Enters., Inc., 552 F. Supp. 17, 22 (S.D. Ohio 1982) (holding that
no implied private right of action exists under Section 36(a) of the ICA), aff’d on other grounds,
725 F.2d 394 (6th Cir. 1984). Other circuits are split on this issue, although all circuits that have
considered it in the wake of Alexander v. Sandoval, 532 U.S. 275 (2001), have held that an
implied private right of action does not exist. Compare Bellikoff v. Eaton Vance Corp., 481 F.3d
110, 114 (2d Cir. 2007) (per curiam) (holding that Section 36(a) of the ICA does not provide an
implied private right of action), with Moses v. Burgin, 445 F.2d 369, 373 (1st Cir. 1971) (holding
that the pre-1970 version of Section 36 of the ICA provides an implied private right of action).

Section 36(a) reads as follows:

The Commission is authorized to bring an action in the proper district court of the
United States, or in the United States court of any territory or other place subject
to the jurisdiction of the United States, alleging that a person who is, or at the time
of the alleged misconduct was, serving or acting in one or more of the following
capacities has engaged within five years of the commencement of the action or is
about to engage in any act or practice constituting a breach of fiduciary duty
involving personal misconduct in respect of any registered investment company
for which such person so serves or acts, or at the time of the alleged misconduct,
so served or acted—
(1) as officer, director, member of any advisory board, investment adviser, or
depositor; or
(2) as principal underwriter, if such registered company is an open-end company,
unit investment trust, or face-amount certificate company.
If such allegations are established, the court may enjoin such persons from acting
in any or all such capacities either permanently or temporarily and award such
injunctive or other relief against such person as may be reasonable and
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 11

appropriate in the circumstances, having due regard to the protection of investors
and to the effectuation of the policies declared in section 80a–1(b) of this title.

15 U.S.C. § 80a-35(a) (emphasis added).

The plaintiffs argue that the text and structure of the ICA, along with its legislative
history, compel the conclusion that an implied private right of action exists under Section 36(a).
But as the Sixth Circuit recently explained:

A private right of action is the right of an individual to bring suit to remedy or
prevent an injury that results from another party’s actual or threatened violation of
a legal requirement. The fact that a federal statute has been violated and some
person harmed does not automatically give rise to a private cause of action in
favor of that person. Private rights of action to enforce federal law must be
created by Congress. Congress may create a private right of action expressly or
by implication. The judicial task is 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.
....
. . . [T]he Supreme Court [has] set forth four factors for evaluating whether a
statute implicitly creates a private right of action: (1) whether the plaintiff is one
of the class for whose especial benefit the statute was enacted; (2) whether there is
any indication of legislative intent, explicit or implicit, either to create such a
remedy or to deny one; (3) whether it is consistent with the underlying purposes
of the legislative scheme to imply such a remedy for the plaintiff; and (4) whether
the cause of action is one traditionally relegated to state law, in an area basically
the concern of the States, so that it would be inappropriate to infer a cause of
action based solely on federal law. The Court has since clarified that these factors
are not entitled to equal weight. The central inquiry is whether Congress intended
to create a private right of action. Unless this congressional intent can be inferred
from the language of the statute, the statutory structure, or some other source, the
essential predicate for implication of a private remedy simply does not exist.
. . . The question [of] whether Congress intended to create a private right of action
[is] definitively answered in the negative where a statute by its terms grants no
private rights to any identifiable class. For a statute to create such private rights,
its text must be phrased in terms of the persons benefited. Statutes that focus on
the person regulated rather than the individuals protected create no implication of
an intent to confer rights on a particular class of persons.

Mik v. Fed. Home Loan Mortg. Corp., 743 F.3d 149, 158–59 (6th Cir. 2014) (internal citations
and quotation marks omitted) (some alterations omitted).
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 12

The threshold question is thus whether the text or the structure of the ICA indicates an
intent by Congress to create an implied private right of action under Section 36(a). Starting with
the first sentence of Section 36(a) (“The Commission is authorized to bring an action . . . .”), we
believe that the presumptive answer is “No.” This conclusion is bolstered by the language in
Section 42 that “empower[s] the Securities and Exchange Commission to enforce all ICA
provisions.” Santomenno ex rel. John Hancock Trust v. John Hancock Life Ins. Co., 677 F.3d
178, 186 (3d Cir. 2012) (citing 15 U.S.C. § 80a-41).

The Supreme Court, moreover, has explained that the “express provision of one method
of enforcing a substantive rule suggests that Congress intended to preclude others.” Alexander
v. Sandoval, 532 U.S. 275, 290 (2001). This principle is fully applicable to the ICA, which was
amended in 1970 to add Section 36(b)’s private right of action. See 15 U.S.C. § 80a-35. The
creation of an express private right of action in Section 36(b) strongly implies the absence of
such a right in Section 36(a). See Touche Ross & Co. v. Redington, 442 U.S. 560, 572 (1979)
(“Obviously, then, when Congress wished to provide a private damage remedy, it knew how to
do so and did so expressly.”); see also Olmsted v. Pruco Life Ins. Co. of N.J., 283 F.3d 429, 433
(2d Cir. 2002) (“Congress’s explicit provision of a private right of action to enforce one section
of a statute suggests that omission of an explicit private right to enforce other sections was
intentional.”).

Nor does the text of Section 36(a) contain any rights-creating language. It instead
focuses on the “person[s] regulated rather than the individuals protected.” See Sandoval,
532 U.S. at 289; see also Bellikoff v. Eaton Vance Corp., 481 F.3d 110, 116 (2d Cir. 2007)
(per curiam) (noting the absence of any rights-creating language in Section 36(a) of the ICA). In
sum, neither the text nor the structure of the ICA demonstrates an intent by Congress to provide
an implied private right of action under Section 36(a).

We find the plaintiffs’ arguments to the contrary unpersuasive. First, although the
plaintiffs invoke the broad remedial purposes of the ICA, generalized references to the remedial
purposes must yield to the unambiguous text and structure of a statute. See Touche Ross & Co.,
442 U.S. at 578 (explaining that even if a statute was enacted with a broad remedial purpose, this
fact “will not justify reading a provision ‘more broadly than [the statute’s] language and the
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 13

statutory scheme reasonably permit’”). The plaintiffs also point to the legislative history
surrounding the 1970 and 1980 amendments to the ICA, but the legislative history of a statute is
irrelevant where “neither the text nor the statutory structure indicate that Congress intended to
provide a private right of action.” Mik, 743 F.3d at 160; see also Bellikoff, 481 F.3d at 117
(declining to accord weight to the legislative history of the ICA and explaining that the “analysis
ends . . . because the text and the structure of the ICA reveal no ambiguity about Congress’s
intention to preclude private rights of action”); Olmsted, 283 F.3d at 435 (“Where the text of a
statute is unambiguous, judicial inquiry is complete . . . .”) (internal quotation marks omitted).

Finally, even if we were to consider the legislative history of the 1970 and 1980
amendments to the ICA, this would not save the plaintiffs’ argument. For starters, the 1970
amendments to the ICA created an express private right of action under Section 36(b), which
counsels against finding an implied private right of action in Section 36(a). The 1980
amendments to the ICA, moreover, dealt with business-development companies and had nothing
to do with private rights of action. See Bancroft Convertible Fund, Inc. v. Zico Inv. Holdings
Inc., 825 F.2d 731, 735 (3d Cir. 1987) (discussing the 1980 amendments to the ICA).
Furthermore, the post-enactment legislative history relied upon by the plaintiffs has little
probative value because a post-enactment legislative body has no special insight regarding the
intent of a past legislative body. See Penn. Med. Soc. v. Snider, 29 F.3d 886, 898 (3d Cir. 1994)
(“Post-enactment legislative history is not a reliable source for guidance.”); Cont’l Can Co. v.
Chicago Truck Drivers, Helpers & Warehouse Workers Union (Ind.) Pension Fund, 916 F.2d
1154, 1157 (7th Cir. 1990) (observing that “‘subsequent legislative history’ [is] an oxymoron”
and that “the legislative history of a bill is valuable only to the extent it shows genesis and
evolution”).

III. CONCLUSION

For all of the reasons set forth above, we AFFIRM the judgment of the district court.