U.S. Chamber Urges Supreme Court to Reject Regulation-by-Litigation Approach for Mutual Fund Fees

In Jones v. Harris Associates, Chamber warns that frivolous litigation hurts investors

WASHINGTON, D.C.-Today, the U.S. Chamber of Commerce filed a friend-of-the-court brief in the United States Supreme Court in Jones v. Harris Associates, L.P., urging the Court to head off a new wave of frivolous lawsuits regarding the management fees that mutual funds pay their investment advisers.

"If the Court lowers the standard for litigation challenging management fees, it will open the floodgates to meritless lawsuits," said Robin Conrad, executive vice president of the National Chamber Litigation Center, the Chamber's public policy law firm. "It shouldn't be up to the trial bar to decide how much mutual funds pay their investment advisers."

In this case, certain mutual fund shareholders sued the fund's investment adviser, Harris Associates, alleging that the investment adviser charged excessive management fees for its services. The U.S. Court of Appeals for the Seventh Circuit ruled that the fees were not excessive or the result of unfair bargaining. In the appeal to the U.S. Supreme Court, NCLC argued in its amicus brief that the plaintiffs' position was too broad and would transgress the SEC's exclusive authority to regulate the behavior of mutual funds and their investment advisers in this context. NCLC also warned against making it easier for plaintiffs to sue investment advisers.

"Litigation like this isn't about protecting investors from poor investment advice," said Conrad. "The plaintiffs' bar is targeting the well-performing mutual funds because they hope to extract huge settlements. The high cost of fending off frivolous litigation is ultimately passed on to mutual funds and their shareholders."

NCLC is the public policy law firm of the U.S. Chamber of Commerce that advocates fair treatment of business in the courts and before regulatory agencies.

The U.S. Chamber is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector, and region.

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