Jones v. Harris Associates L.P.

Investors (plaintiffs) in mutual funds advised by Harris Associates (defendant) sued under § 36(b) of the Investment Company Act, alleging Harris charged fees disproportionate to what would result from genuine arm's-length negotiation. The district court, applying the Gartenberg standard, granted Harris summary judgment after comparing Harris's fees to what it charged other clients and to what other advisers charged similar funds; the Seventh Circuit affirmed but criticized Gartenberg, reasoning that full disclosure to the fund's board was enough to insulate any fee level from challenge, and rejected the district court's comparative fee analysis. The Supreme Court granted certiorari to clarify the correct § 36(b) standard.