Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Monday, March 9, 2009

Surpreme Court Accepts Cert in 36(B) Excessive Fee Case

The U.S. Supreme Court accepted certiorari today in an important case involving a mutual fund holder's ability to challenge the investment adviser's fees as excessive under section 36(b) of the Investment Company Act.  In Jones v. Harris Associates, 527 F.3d 627 (7th Cir. 2008), a three-judge panel of the 7th Circuit, with Judge Easterbrook writing the opinion, held that investment advisory fees that were comparable to those of similar funds (and not otherwise unlawful under the ICA) were not excessive and specifically disapproved an earlier 2d Circuit opinion, Gartenberg v. Merrill Lynch Asset Management, 694 F.2d 923, as relying too little on markets:  "a fiduciary duty differs from rate regulation."  Judge Posner dissented from a subsequent denial of a petition to rehear the case en banc, 537 F.3d 728.  Professor Bill Birdthistle (Chicago-Kent) filed, on behalf of a group of law professors, an amicus brief urging the Court to accept cert and advises me that he plans to write a merits brief to explore the ramifications of Gartenberg/Harris Associates.

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