• Plaintiffs Petition for Rehearing and Petition for Rehearing En Banc of the Decision in Jones v. Harris Associates
  • August 11, 2008
  • Law Firm: Wilmer Cutler Pickering Hale and Dorr LLP - Office
  • On June 2, 2008, Plaintiffs petitioned the United States Court of Appeals for the Seventh Circuit for a rehearing and petitioned for a rehearing en banc regarding the Court of Appeals decision on May 19, 2008 in Jones v. Harris Associates, in which the Court of Appeals rejected a claim that advisory fees charged for the Oakmark family of funds were excessive and violated Section 36(b) of the Investment Company Act. 

    The Seventh Circuit decision captured the attention of the investment management industry and the media because, while the appellate court affirmed the district court’s previous decision that Oakmark’s advisory fees were not excessive, it rejected the “Gartenberg approach.”  Instead, the appellate court articulated a new test for reviewing advisory fee challenges under Section 36(b), stating “A fiduciary duty differs from rate regulation.  A fiduciary must make full disclosure and play no tricks but is not subject to a cap on compensation.  The trustees (and in the end investors, who vote with their feet and dollars), rather than a judge or jury, determine how much advisory services are worth.”

    For more information, see http://www.wilmerhale.com/publications/whPubsDetail.aspx?publication=8329.