The mutual fund industry won a big victory in court yesterday. The U.S. District Court in Minnesota ruled in favor of Ameriprise
in a lawsuit over fund fees. Ropes & Gray
partners John Donovan
and Rob Skinner
and associate Benjamin Halasz
to see the ruling.
The industry win in Gallus v. Ameriprise Financial, Inc.
follows the Supreme Court's ruling in another fund fee case, Jones v. Harris Associates
U.S. District Judge Frank Donovan reinstated the summary judgement that was granted to Ameriprise on July 10, 2007.
"Having considered the parties' submissions, the
Court's previous orders, the procedural posture of the case, and the United States Supreme Court's decision in Jones, the Court finds that a reinstatement of the Court's July 10, 2007 Order granting summary judgment to Defendants is appropriate," Donovan wrote. "In Jones, the Supreme Court adopted the Gartenberg framework and reasoning that this Court used in reaching its summary judgment opinion."
Given that this decision was handed down by a district court, expect the plaintiffs' attorneys to reach a bit higher and appeal soon.
An Amerprise spokesperson referred questions to Ropes and Gray (see press release from Ropes & Gray below). A rep for Kellogg, Huber, Hansen, Todd, Evans & Figel
, which represented the plaintiffs, was not immediately available for comment.
District Court Upholds Application of Jones v. Harris Associates
- Ropes & Gray litigators secure significant victory in mutual fund industry case -
Rejecting arguments that mutual fund fees are subject to newly-heightened review for "process" concerns, on December 9, the United States District Court for the District of Minnesota granted summary judgment to the defendants in Gallus v. Ameriprise Financial, Inc., reinstating the court's previous order from July 10, 2007. The Plaintiffs had argued that the U.S. Supreme Court's recent decision in Jones v. Harris Associates indicated that alleged process flaws in the approval of fund management contracts could alone form the basis for liability under the "excessive fees" provision of section 36(b) of the Investment Company Act of 1940, and that as a result the district court's prior grant of summary judgment to Defendants under the standard set forth in the Second Circuit's Gartenberg v. Merrill Lynch decision should be vacated. The court disagreed. It rejected the plaintiffs' defective process claims and held that, since the Supreme Court explicitly adopted the Gartenberg standard it had previously applied, reinstatement of summary judgment was appropriate. The Ropes & Gray litigation team representing Ameriprise was led by partners John Donovan and Rob Skinner and associate Benjamin Halasz.
These litigators previously led a Ropes & Gray team representing mutual fund advisor Harris Associates before the United States Supreme Court in Jones v. Harris Associates. The decision in Jones definitively established the standard governing claims of allegedly excessive mutual fund fees, reaffirmed the central role of independent directors in setting advisory fees, and rejected the plaintiffs' central argument that mutual fund fees should be judged primarily by comparison to fees charged other types of accounts.
Ropes & Gray has one of the largest and most experienced securities litigation practices in the country. The firm serves as general or special counsel to more than 100 public companies and advises more than 500 mutual funds or fund boards.
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