Alert November 18, 2008

Plaintiffs in Excessive Fee Suit Against Mutual Fund Adviser Seek Supreme Court Review of Seventh Circuit Decision Rejecting Gartenberg Analysis

The plaintiff shareholders in an excessive fee suit brought under Section 36(b) of the Investment Company Act of 1940, as amended (the “1940 Act”), against an adviser (the “Adviser”) for registered open-end funds (the “Funds”) in which they had invested have filed a petition for a writ of certiorari seeking Supreme Court review of the decision in Jones v. Harris Associates L.P., 527 F.3d 627 (7th Cir. 2008) (“Harris Associates”).  Harris Associates affirmed the dismissal by the US District Court for the Northern District of Illinois (Eastern Division) of the plaintiff’s suit (as discussed in the June 3, 2008 Alert).  The plaintiffs’ filing follows a unanimous vote by a panel of the US Court of Appeals for the Seventh Circuit (the “Seventh Circuit”) to deny a petition for rehearing of its decision in Harris Associates (as discussed in the August 19, 2008 Alert).  A request for rehearing en banc was also narrowly denied, occasioning a dissent by one of the Seventh Circuit’s leading judges.  Although it affirmed the District Court’s decision, Harris Associates expressly rejected the multi-factor analysis for suits under Section 36(b) of the 1940 Act established by the US Court of Appeals for the Second Circuit in Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F.2d 923 (2d Cir. 1982).  The split in authority among the circuits on this issue created by Harris Associates is the basis for the plaintiff’s request for review.  A response to the petition is due on December 3, 2008.