Supreme Court Grants Certiorari in Jones v. Harris Associates L.P.

On March 9, the U.S. Supreme Court granted the plaintiffs' petition for a writ of certiorari in Jones v. Harris Associates L.P., an excessive-fee case brought under Section 36(b) of the Investment Company Act of 1940. As discussed in a previous Morgan Lewis client alert regarding this case, the Seventh Circuit's May 2008 decision in Jones disagreed with the approach that the Second Circuit took to such cases in Gartenberg v. Merrill Lynch (1982). Gartenberg set forth a six-factor test, frequently used by mutual fund directors in reviewing advisers' fees, that assisted courts in determining whether an adviser was charging "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."

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