This lawsuit was initiated in U.S. District Court for the District of Minnestoa by shareholders of 11 mutual funds managed by Ameriprise Financial (formerly American Express Financial Corporation). The lawsuit alleges that Ameriprise Financial breached its duty under the Investment Company Act by "misleading the Board during the [advisory fee] negotiation and demanding excessive fees." According to the plaintiffs, Ameriprise Financial provides comparable advisory services to its institutional clients at substantially lower fees than what it charges its retail mutual funds.
On July 10, 2007, the District Court granted summary judgment for the defendants and the case was dismissed. The Court applied the Gartenberg factors and determined that the plaintiffs did not show that the advisory fees were "so disproportionately large that [they] bear no reasonable relationship to the services rendered and could not have been the product of arm's length bargaining." After this decision was issued, the plaintiffs appealed to the U.S. Court of Appeals for the Eighth Circuit.
The Eighth Circuit Court reversed this decision. The Court held that the District Court properly applied the Gartenberg factors, but erred in rejecting a comparison between the advisory fees charged to Ameriprise's institutional clients and its mutual fund clients. The Court stated that "the argument for comparing mutual fund advisory fees with the fees charged to institutional accounts is particularly strong in this case because the investment advice may have been essentially the same for both accounts."
In its opinion, the Eighth Circuit also noted a similar advisory fee case in the Seventh Circuit, Jones v. Harris Associates, a case which was successfully appealed to the U.S. Supreme Court.
The defendants appealed the Eighth Circuit decision in this case to the Supreme Court separately. After rendering its decision in the Jones case, the Court vacated the opinion in Gallus by the Eighth Circuit and remanded the case back to the Court of Appeals. The Eighth Circuit, in turn, remanded the case back to the District Court.
On December 10, 2010, the District Court reinstated its earlier summary judgment order and dismissed the case. The Court concluded that the Supreme Court adopted the Gartenberg framework in its Jones decision, and the Eighth Circuit specifically noted that the District Court properly applied the Gartenberg factors in its earlier decision.
The case then returned to the Eighth Circuit Court of Appeals. The plaintiffs argued that the District Court should have examined the discrepancy between the advisory fees charged to the retail mutual funds and the advisory fees charged to the investment adviser's institutional clients, instead of merely reinstating its 2007 summary judgment order. The defendants argued that the earlier summary judgment was properly reinstated by the District Court, as the fees charged by the investment adviser "passed muster" under the Gartenberg standards.
Briefs were filed in this case and oral argument was heard on November 17, 2011. On March 30, 2012, the 8th Circuit ruled in favor of Ameriprise Financial, finding that the advisory fee review process used by the fund board met the legal standards in the Gartenberg and Jones appellate decisions.