Industry Groups File Amicus Briefs in Supreme Court Fee Case (Jones v. Harris Assoc.)


Nov. 2, 2009 -- The U.S. Supreme Court heard oral arguments in Jones v. Harris Associates on November 2, 2009. As you may recall from Vista360’s July 2009 HIT list, this case involves a suit brought by mutual fund shareholders against Harris Associates, a mutual fund investment adviser. The shareholders are accusing Harris Associates of charging excessive advisory fees and violating their fiduciary duty under Section 36(b) of the Investment Company Act. The case surrounds the standard by which federal courts evaluate excessive fee cases brought by shareholders. For the past 30 years the standard has been the Gartenberg standard, which states that a fund adviser violates its fiduciary duty to shareholders if they charge a fee “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.”

The Investment Company Institute (ICI) and the Independent Director’s Council (IDC) both submitted amicus1 briefs on September 3, 2009 to the U.S. Supreme Court. The ICI filed their brief supporting the Gartenberg approach and asserting it provides “real and substantial protection to investors.” IDC’s brief details the responsibilities of independent directors of fund boards and their meticulous fund advisory fee evaluation and approval processes. On August 27, 2009 the Securities Industry and Financial Markets Association (SIFMA) filed an amicus brief in support of the mutual fund investment adviser. Additionally, a number of other trade groups have filed amicus briefs in this case. The U.S. Supreme Court ruling on the case is anticipated during the summer of 2010.

1An amicus brief is a legal opinion, not solicited by any of the parties involved in a case, providing the court with information on a point of law that may assist the court in a case. The court has the discretion to allow the brief or not.










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