Federal Court Grants Summary Judgment to Fund Company in Excessive Fee Case
The United States District Court for Minnesota, specifically citing Jones v. Harris Associates, granted summary judgment to a mutual fund company accused of taking excessive fees in violation of Section 36(b) of the Investment Company Act. The Court’s previous grant of summary judgment had been overturned by the Eighth Circuit which opined that the District Court erred by not evaluating fee discrepancies with institutional separate accounts. The Supreme Court vacated the Eighth Circuit’s decision and remanded. The Court explained: “In Jones, the Supreme Court adopted the Gartenberg framework and reasoning that this Court used in reaching its summary judgment opinion. And, in its order reversing this Court, the Eighth Circuit specifically noted that this Court properly applied the Gartenberg factors. As such, nothing remains to be decided by this Court, and the Court’s summary judgment Order dated July 10, 2007, is properly reinstated.”
OUR TAKE: This decision lays to rest any argument that Jones v. Harris somehow opened the door to plaintiffs. Even though Justice Alito did not specifically state that firms need not consider fees on institutional separate accounts, the Gartenberg standard, as described in Jones, makes it nearly impossible for plaintiffs to win excessive fee cases.