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Case Basics
Docket No. 
Jerry N. Jones, et al.
Harris Associates L.P.
(argued the cause for the petitioners)
(Assistant to the Solicitor General, Department of Justice, for the United States, as amicus curiae, supporting the petitioners)
(argued the cause for the respondent)
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.


Did the Seventh Circuit err in holding that claims alleging mutual fund management's fees were too high is not cognizable under Section 36(b) of the Investment Company Act, when that holding is in conflict with those in three other circuits?

Decision: 9 votes for Jones, 0 vote(s) against
Legal provision: §36(b)(1) of the Investment Company Act of 1940

Yes. The Supreme Court held that the Seventh Circuit erred by not applying the Court's standard enunciated in Gartenberg v. Merrill Lynch Asset Management, Inc.. There, the Court held that in determining whether a claim is cognizable under Section 36(b) of the Investment Company Act requires a determination that the adviser charge a fee that is "so disproportionately large it bears no reasonable relationship to the services rendered." With Justice Samuel A. Alito writing for unanimous Court, it reasoned that the Gartenberg standard reflected the importance of determining whether a fee structure was the result of "arm's length bargaining" while also understanding that the Act provided other avenues to protect investors.

Justice Clarence Thomas wrote separately, concurring. He disagreed that the Court was simply endorsing a Gartenberg standard. Rather, he noted that the Court did not endorse a "free-ranging judicial fairness review of fees" that Gartenberg, itself, might endorse.

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JONES v. HARRIS ASSOCIATES L.P.. The Oyez Project at IIT Chicago-Kent College of Law. 26 August 2015. <>.
JONES v. HARRIS ASSOCIATES L.P., The Oyez Project at IIT Chicago-Kent College of Law, (last visited August 26, 2015).
"JONES v. HARRIS ASSOCIATES L.P.," The Oyez Project at IIT Chicago-Kent College of Law, accessed August 26, 2015,