Facts of the Case:
Plaintiffs were investors in several mutual funds managed by Harris Associates. They filed suit in an Illinois federal district court arguing Harris' fees were too high and thus violated Section 36(b) of the Investment Company Act of 1940. The district court dismissed the case.
On appeal, the U.S. Court of Appeals for the Seventh Circuit affirmed. The court held that Section 36(b) did not permit judicial regulation of mutual fund management fees. It acknowledged that management had a fiduciary duty to investors, but that did not imply judicial regulation of management's fees was appropriate. Rather, the court stated that market forces were best able to determine the appropriateness of fees.
