Jones v. Harris Associates L.P. (2009)
- Docket
- 08-586
- Decided
- 2009-01-01
Summary
Question: Did the Seventh Circuit err in holding that claims alleging mutual fund management's fees were too high is not cognizable under Section 36(b) of the Investment Company Act, when that holding is in conflict with those in three other circuits? Conclusion: Yes. The Supreme Court held that the Seventh Circuit erred by not applying the Court's standard enunciated in Gartenberg v. Merrill Lynch Asset Management, Inc. . There, the Court held that in determining whether a claim is cognizable under Section 36(b) of the Investment Company Act requires a determination that the adviser charge a fee that is "so disproportionately large it bears no reasonable relationship to the services rendered." With Justice Samuel A. Alito writing for unanimous Court, it reasoned that the Gartenberg standard reflected the importance of determining whether a fee structure was the result of "arm's length bargaining" while also understanding that the Act provided other avenues to protect investors. Justice Clarence Thomas wrote separately, concurring. He disagreed that the Court was simply endorsing a Gartenberg standard. Rather, he noted that the Court did not endorse a "free-ranging judicial fairness review of fees" that Gartenberg , itself, might endorse.