District Court Upholds Application of Jones v. Harris Associates
Ropes & Gray litigators secure significant victory in mutual fund industry case
Rejecting arguments that mutual fund fees are subject to newly heightened review for “process” concerns, on December 9, the United States District Court for the District of Minnesota granted summary judgment to the defendants in Gallus v. Ameriprise Financial, Inc.
, reinstating the court’s previous order from July 10, 2007. The Plaintiffs had argued that the U.S. Supreme Court’s recent decision in Jones v. Harris Associates
indicated that alleged process flaws in the approval of fund management contracts could alone form the basis for liability under the “excessive fees” provision of section 36(b) of the Investment Company Act of 1940, and that as a result the district court’s prior grant of summary judgment to Defendants under the standard set forth in the Second Circuit’s Gartenberg v. Merrill Lynch
decision should be vacated. The court disagreed. It rejected the plaintiffs’ defective process claims and held that, since the Supreme Court explicitly adopted the Gartenberg standard it had previously applied, reinstatement of summary judgment was appropriate. The Ropes & Gray litigation team representing Ameriprise was led by partners John Donovan
and Rob Skinner
These litigators previously led a Ropes & Gray team representing mutual fund advisor Harris Associates before the United States Supreme Court in Jones v. Harris Associates
. The decision in Jones definitively established the standard governing claims of allegedly excessive mutual fund fees, reaffirmed the central role of independent directors in setting advisory fees, and rejected the plaintiffs’ central argument that mutual fund fees should be judged primarily by comparison to fees charged other types of accounts.
To read more on Jones v. Harris Associates
, please click here
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