Jones v. Harris Resource Center
On March 30, 2010, in a unanimous decision, the United States Supreme Court endorsed the well-tested legal framework articulated in the Second Circuit’s 1982 decision in Gartenberg v. Merrill Lynch Asset Management (commonly called the Gartenberg standard). This standard—used by courts since 1982 to assess claims of excessive fund advisory fees—formed the framework used by fund boards in considering advisory fees as part of the annual advisory contract review process.
Specifically, the Court held that, in order to be found liable in a shareholder suit brought under Section 36(b) of the Investment Company Act of 1940, an investment adviser must charge a fee that is “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.”
This page has background information about this important case and the Court’s decision.