On September 3, 2009, twenty-five corporate law and finance professors and scholars – including several contributors to this blog – filed an amici curiae brief in the case of Jones et al. v. Harris Associate L.P. The case is now pending before the United States Supreme Court. The brief is available here, and the names of those joining the brief are listed at the bottom of this post. The Supreme Court is currently scheduled to hear the case on November 2, 2009.

The Harris case is an appeal of the Seventh Circuit, in an opinion written by Judge Frank Easterbrook, noted previously on this blog here and here. That decision upheld the trial court’s dismissal of the case against Harris Associates, a mutual fund advisor, on the ground that as long as a mutual fund adviser does not breach the fiduciary duty owed to shareholders by failing to disclose all pertinent facts or otherwise hindering the fund’s directors from negotiating a favorable price, no judicial review of the reasonableness of the adviser’s fee is required to dismiss a claim under Section 36(b) of the Investment Company Act (ICA).

Judge Easterbrook’s opinion rejected the long-followed Second Circuit decision in Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F.2d 923 (2d Cir. 1982). Gartenberg, while respecting deliberations of independent directors, required courts to consider those deliberations in light of multiple factors in determining whether investment adviser fees were excessive and, in dicta, suggested that evidence of comparable fees and competition among advisors should not be given much weight. A decision by the Seventh Circuit declining to rehear the case en banc generated a dissent from Judge Richard Posner.

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