Alert March 30, 2010

U.S. Supreme Court Issues Decision in Mutual Fund Excessive Fee Case

This afternoon, the U.S. Supreme Court (the “Supreme Court”) issued its opinion vacating the Seventh Circuit’s decision in Jones v. Harris Associates L.P., 527 F.3d 627 (7th Cir. 2008), an excessive fee suit under Section 36(b) of the Investment Company Act of 1940.  (For background on this case, see the March 10, 2009 and June 3, 2008 Alerts.).  In broad terms, the Supreme Court unanimously endorsed the multi-factor approach to Section 36(b) established by the Second Circuit in Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F.2d 923 (2d Cir. 1982) and rejected the Seventh Circuit’s approach to Section 36(b), which focused almost exclusively on a fund adviser’s disclosures in connection with the fee approval process.  A future edition of the Alert will provide a full discussion of this decision.