American Funds received good news last week when the United States Court of Appeals for the Ninth Circuit upheld the dismissal of an excessive fee suit, In Re American Mutual Funds Fee Litigation. Morningstar reported the news in its latest "Fund Times" column.

At the end of 2009, a federal district court Judge ruled that the case had to be tossed from court, and plaintiff law firm Milberg appealed to the Ninth Circuit in February 2010.

This is not the first fee suit victory for mutual fund firms. At the end of 2010, another district sided with Columbia parent Ameriprise in a similar fee suit. Meanwhile, in March 2010 the Supreme Court itself entered the frame, overruling a dismissal of another fee suit, this one against Natixis subsidiary Harris Associates (which runs the Oakmark Funds). The high court also stood firmly by a 28-year-old precedent, Gartenberg v. Merrill Lynch Asset Management, which defined a fee as excessive if it 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." 

Edited by: Neil Anderson, Managing Editor


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