Litigation Team Wins Ninth Circuit Affirmance of Trial Verdict in Favor of MetWest

A Ropes & Gray litigation team won a recent Ninth Circuit ruling that affirms the team’s 2019 trial victory on behalf of Metropolitan West Asset Management, LLC (“MetWest”) in a case where the plaintiff-shareholder alleged that MetWest charged excessive advisory fees to its flagship fund, the MetWest Total Return Bond Fund. After a 2018 bench trial, the district court ruled in favor of MetWest. The plaintiff appealed the ruling, but, on September 17, 2020, the Ninth Circuit decisively rejected the plaintiff’s appeal. The appeals court determined that the plaintiff’s contentions did not require oral argument and, less than three weeks after the case was submitted for decision, issued a brief opinion resolving every issue in MetWest’s favor and upholding the district court’s decision. 

The Ninth Circuit’s affirmance is important because it lets stand the district court’s thorough post-trial opinion, which conducted an exhaustive review of the trial evidence and explained why each of the plaintiff’s theories was flawed. The case against MetWest was part of a wave of cases brought under Section 36(b) of the Investment Company Act of 1940 after the Supreme Court’s 2010 ruling in Jones v. Harris Associates L.P. (a case handled by Ropes & Gray). Like in other cases, the district court found defective the plaintiff’s proposed reliance on a comparison of the Total Return Bond Fund’s advisory fee to the lower subadvisory fees MetWest charged to external funds, because MetWest “provides substantially different services and takes on substantially different risks” as adviser and sponsor of a proprietary fund. The district court had adopted a number of positions advanced by Ropes & Gray that other courts have chosen not to reach, including emphasizing the “competitive business environment in which the managers and sponsors of mutual funds compete for investor assets.”

On appeal, the Ropes & Gray team was led by litigation & enforcement senior counsel John Donovan and litigation & enforcement partners Rob Skinner and Amy Roy (all of Boston), and included litigation & enforcement associates Devon Caton (Boston), Cole Goodman (Boston), and Stephanie Dowd (Boston). Lead litigation paralegal Sharma Austin-Ross, senior litigation paralegal Jenn Mayo, and litigation program paralegal Erin Morris (all of Boston) provided invaluable assistance.