The Past and Present of Mutual Fund Fee Litigation under Section 36(b)
Section 36(b) of the Investment Company Act permits mutual fund investors to sue funds for charging excessive asset management fees. This liability for excessive fees has proven to be one of the more problematic areas of mutual fund regulation. Fund complexes view the suits largely as unpredictable nuisances unrelated to fee levels, while for those concerned about mutual fund fees, section 36(b) has never resulted in a verdict for plaintiffs. The extremely fact-bound nature of the excessive fee standard as articulated in the seminal Gartenberg and Jones cases makes obtaining early dismissal of suits difficult and litigation lengthy and expensive. Settlements are common. There is little evidence that suits are effective in bringing fees down in sued funds or that such suits target particularly expensive funds. The goal of this chapter is to situate new developments in mutual fund fee litigation in the larger context of the history and development of the section.