Hebda v. Davis Selected Advisers LP



Two shareholders in the Davis New York Venture Fund filed an excessive fee lawsuit in June 2014, alleging that Davis charged advisory fees to the Fund that were as much as 96% higher than the advisory fees it was charging mutual funds where it serves as a subadviser. The suit was filed in U.S. District Court for the Southern District of New York. 

 

Under Section 36(b) of the Investment Company Act, the defendants owe a fiduciary duty to the Fund regarding the advisory fees paid by the Fund. The plaintiffs allege that this fiduciary duty has been breached by the receipt of excessive investment advisory fees that "could not have been the product of arm's length bargaining."  The plaintiffs seek to recover for the Fund any excessive advisory fees charged in violation of Section 36(b).

 

On September 19, 2014, this case was consolidated with Chill v. Davis Selected Advisers, LP.  At the Court's request, the plaintiffs filed an amended complaint on December 19, 2014.

 

The defendants filed a motion to dismiss the case on March 9, 2015.  The plaintiffs filed their opposition brief on April 15, 2015, and the Davis reply brief was filed shortly thereafter.

 

On November, 18, 2015, the Court denied the Davis motion to dismiss.  The case is now in discovery.

  • Court Denies Motion to Dismiss
    On November 18, 2015, the Court denied Davis' motion to dismiss the case, finding that the plaintiffs' allegations are sufficient to state their Section 36(b) claims.
  • Davis Files Its Reply Brief on the Motion to Dismiss
    On May 8, 2015, Davis filed its reply brief on the motion to dismiss. The brief argues that the allegations by the plaintiffs are conclusory and implausible.
  • Plaintiffs File Opposition Brief on Motion to Dismiss
    On April 15, 2015, the plaintiffs filed their opposition brief on the motion to dismiss. The plaintiffs argue that the large disparity between the fees charged to the New York Venture Fund and the subadvised funds cannot be explained by the differences in advisory services.
  • Defendants File Motion to Dismiss the Case
    On March 9, 2015, Davis Advisers filed a motion to dismiss the consolidated case. The defendants argue: (1) that a previous and unsuccessful fee case against Davis precludes this action; and (2) the complaint fails to satisfy the pleading standards for section 36(b) cases.
  • Plaintiffs File Amended Complaint
    At the Court's request, the plaintiffs filed an amended complaint on December 19, 2014.
  • Two Shareholders File Excessive Fee Lawsuit Against Davis Selected Advisers
    Two shareholders in the Davis New York Venture Fund filed a complaint on June 16, 2014, in U.S. District Court for the Southern District of New York. The complaint alleges that Davis charged an excessive advisory fee to the Fund, compared with the fees it was charging in arm's length negotiations with other mutual funds where it serves as a subadviser. As an example, the plaintiffs allege that the effective fee level for the New York Venture Fund was 50 basis points, compared to fee levels between 25 and 35 basis points for similar advisory services being provided to third-party mutual funds.

Two shareholders in the Davis New York Venture Fund filed an excessive fee lawsuit in June 2014, alleging that Davis charged advisory fees to the Fund that were as much as 96% higher than the advisory fees it was charging mutual funds where it serves as a subadviser. The suit was filed in U.S. District Court for the Southern District of New York. 

 

Under Section 36(b) of the Investment Company Act, the defendants owe a fiduciary duty to the Fund regarding the advisory fees paid by the Fund. The plaintiffs allege that this fiduciary duty has been breached by the receipt of excessive investment advisory fees that "could not have been the product of arm's length bargaining."  The plaintiffs seek to recover for the Fund any excessive advisory fees charged in violation of Section 36(b).

 

On September 19, 2014, this case was consolidated with Chill v. Davis Selected Advisers, LP.  At the Court's request, the plaintiffs filed an amended complaint on December 19, 2014.

 

The defendants filed a motion to dismiss the case on March 9, 2015.  The plaintiffs filed their opposition brief on April 15, 2015, and the Davis reply brief was filed shortly thereafter.

 

On November, 18, 2015, the Court denied the Davis motion to dismiss.  The case is now in discovery.

Document Title: 
Court Denies Motion to Dismiss
Document Desc: 
On November 18, 2015, the Court denied Davis' motion to dismiss the case, finding that the plaintiffs' allegations are sufficient to state their Section 36(b) claims.
Document Title: 
Davis Files Its Reply Brief on the Motion to Dismiss
Document Desc: 
On May 8, 2015, Davis filed its reply brief on the motion to dismiss. The brief argues that the allegations by the plaintiffs are conclusory and implausible.
Document Title: 
Plaintiffs File Opposition Brief on Motion to Dismiss
Document Desc: 
On April 15, 2015, the plaintiffs filed their opposition brief on the motion to dismiss. The plaintiffs argue that the large disparity between the fees charged to the New York Venture Fund and the subadvised funds cannot be explained by the differences in advisory services.
Document Title: 
Defendants File Motion to Dismiss the Case
Document Desc: 
On March 9, 2015, Davis Advisers filed a motion to dismiss the consolidated case. The defendants argue: (1) that a previous and unsuccessful fee case against Davis precludes this action; and (2) the complaint fails to satisfy the pleading standards for section 36(b) cases.
Document Title: 
Plaintiffs File Amended Complaint
Document Desc: 
At the Court's request, the plaintiffs filed an amended complaint on December 19, 2014.
Document Title: 
Two Shareholders File Excessive Fee Lawsuit Against Davis Selected Advisers
Document Desc: 
Two shareholders in the Davis New York Venture Fund filed a complaint on June 16, 2014, in U.S. District Court for the Southern District of New York. The complaint alleges that Davis charged an excessive advisory fee to the Fund, compared with the fees it was charging in arm's length negotiations with other mutual funds where it serves as a subadviser. As an example, the plaintiffs allege that the effective fee level for the New York Venture Fund was 50 basis points, compared to fee levels between 25 and 35 basis points for similar advisory services being provided to third-party mutual funds.