JONES V. HARRIS ASSOCIATES (OAKMARK FUNDS)



This lawsuit was initiated by shareholders in the Oakmark Funds, alleging that the investment adviser was charging advisory fees that were "disproportionate to the services rendered" and "not within the range of what would have been negotiated at arm's length in light of all the surrounding circumstances."

 

The case was dismissed by the District Court and upheld by the U.S. Court of Appeals for the Seventh Circuit. In a dissenting opinion, Judge Richard Posner urged a re-examination of the issues in this case and expressed concern that Harris Associates charges its retail funds more than twice what it charges institutional investors. The Seventh Circuit decision was then appealed to the U.S. Supreme Court.

 

In a unanimous decision, the Supreme Court upheld the Gartenberg standards that have been used in these cases for years and described the fiduciary duty owed to investors by an investment adviser as a test of "whether or not under all the circumstances the transaction carries the earmarks of an arm's length bargain."

 

This case was remanded back to the Seventh Circuit.  On August 6, 2015, the Court affirmed the 2007 decision by the District Court in favor of Harris Associates.  The Court stated that the Supreme Court's approach to 36(b) cases does not allow a court to assess the fairness or reasonableness of advisers' fees.  Instead, the goal is to identify the "outer bounds of arm's length bargaining and not engage in rate regulation."  The record before the District Court indicated that the fees charged by Harris Associates were comparable to that produced by bargaining at other mutual fund complexes, which the Court argued was the "bargaining range."

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This lawsuit was initiated by shareholders in the Oakmark Funds, alleging that the investment adviser was charging advisory fees that were "disproportionate to the services rendered" and "not within the range of what would have been negotiated at arm's length in light of all the surrounding circumstances."

 

The case was dismissed by the District Court and upheld by the U.S. Court of Appeals for the Seventh Circuit. In a dissenting opinion, Judge Richard Posner urged a re-examination of the issues in this case and expressed concern that Harris Associates charges its retail funds more than twice what it charges institutional investors. The Seventh Circuit decision was then appealed to the U.S. Supreme Court.

 

In a unanimous decision, the Supreme Court upheld the Gartenberg standards that have been used in these cases for years and described the fiduciary duty owed to investors by an investment adviser as a test of "whether or not under all the circumstances the transaction carries the earmarks of an arm's length bargain."

 

This case was remanded back to the Seventh Circuit.  On August 6, 2015, the Court affirmed the 2007 decision by the District Court in favor of Harris Associates.  The Court stated that the Supreme Court's approach to 36(b) cases does not allow a court to assess the fairness or reasonableness of advisers' fees.  Instead, the goal is to identify the "outer bounds of arm's length bargaining and not engage in rate regulation."  The record before the District Court indicated that the fees charged by Harris Associates were comparable to that produced by bargaining at other mutual fund complexes, which the Court argued was the "bargaining range."

Document Title: 
Seventh Circuit Court of Appeals Rules for Harris Associates
Document Desc: 
On August 6, 2015, the Seventh Circuit Court of Appeals affirmed the 2007 ruling by the District Court in favor of Harris Associates. The Court restated the Supreme Court's approach to Rule 36(b) cases and found that the record before the District Court established that Harris's fees were within a reasonable "bargaining range."
Document Title: 
Plaintiffs File Supplemental Statement with Seventh Circuit Court of Appeals
Document Desc: 
On June 23, 2010, the plaintiffs filed a supplemental statement with the Seventh Circuit Court of Appeals.
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Defendants File Supplemental Statement with Seventh Circuit Court of Appeals
Document Desc: 
On June 14, 2010, the defendants filed a supplemental statement with the Seventh Circuit Court of Appeals.
Document Title: 
Defendants File Statement of Position with the Seventh Circuit Court of Appeals
Document Desc: 
On May 24, 2010, the defendants filed a statement of position with the Seventh Circuit Court of Appeals.
Document Title: 
Plaintiffs File Statement of Position with the Seventh Circuit Court of Appeals
Document Desc: 
On May 24, 2010, the plaintiffs file a statement of position with the Seventh Circuit Court of Appeals.
Document Title: 
U.S. Supreme Court Issues Decision in Jones v. Harris Associates
Document Desc: 
On March 30, 2010, the U.S. Supreme Court issued its decision in Jones v. Harris Associates. In a unanimous ruling, the Court upheld and clarified the Gartenberg standards for evaluating the compensation paid to investment advisers to a mutual fund. The basic standard advocated by the Court is "whether or not under all the circumstances the transaction carries the earmarks of an arm's length bargain." This case was remanded back to the Seventh Circuit Court of Appeals.
Document Title: 
U.S. Supreme Court Hears Oral Arguments in Jones v. Harris Associates
Document Desc: 
On November 2, 2009, the U.S. Supreme Court heard oral arguments in Jones v. Harris Associates.
Document Title: 
Plaintiffs File Reply Brief in Jones Case
Document Desc: 
On September 28, 2009, the plaintiffs filed a reply brief in Jones v. Harris Associates before the U.S. Supreme Court.
Document Title: 
Mutual Fund Directors Forum Files Amicus Brief in Jones Case
Document Desc: 
On September 3, 2009, the Mutual Fund Directors Forum filed an amicus brief with the U.S. Supreme Court in support of defendant in Jones v. Harris Associates.
Document Title: 
CATO Institute Files Amicus Brief in Jones Case
Document Desc: 
On September 3, 2009, the CATO Institute filed an amicus brief with the U.S. Supreme Court in support of the defendant in Jones v. Harris Associates.
Document Title: 
Investment Company Institute Files Amicus Brief in Jones Case
Document Desc: 
On September 3, 2009, the Investment Company Institute filed an amicus brief with the U.S. Supreme Court in support of the defendant in Jones v. Harris Associates.
Document Title: 
Fidelity Management & Research Company Files Amicus Brief in Jones Case
Document Desc: 
On September 3, 2009, the Fidelity Management & Research Company filed an amicus brief with the U.S. Supreme Court in Jones v. Harris Associates.
Document Title: 
Independent Directors Council Files Amicus Brief in Jones Case
Document Desc: 
On September 3, 2009, the Independent Directors Council filed an amicus brief with the U.S. Supreme Court in support of the defendant in Jones v. Harris Associates.
Document Title: 
Chamber of Commerce Files Amicus Brief in Jones Case
Document Desc: 
On September 3, 2009, the U.S. Chamber of Commerce filed an amicus brief with the U.S. Supreme Court in support of the defendant in Jones v. Harris Associates.
Document Title: 
Law and Finance Professors File Amici Brief in Jones Case
Document Desc: 
On September 3, 2009, a group of law and finance professors and scholars filed an amicus brief with the U.S. Supreme Court in support of the defendant in Jones v. Harris Associates.
Document Title: 
SIMFA Files Amicus Brief in Jones Case
Document Desc: 
On August 27, 2009, the Securities Industry and Financial Markets Association (SIFMA) filed an amicus brief with the U.S. Supreme Court in support of the defendant in Jones v. Harris Associates.
Document Title: 
Defendant Files Brief with U.S. Supreme Court
Document Desc: 
On August 27, 2009, the defendant Harris Associates filed its brief with the U.S. Supreme Court.
Document Title: 
Academics File Amici Brief in Jones Case
Document Desc: 
On June 17, 2009, three professors and academics—Robert Litan, Joseph Mason, and Ian Ayres—filed an amici brief with the U.S. Supreme Court in support of the plaintiff in Jones v. Harris Associates.
Document Title: 
NASAA Files Amicus Brief in Jones Case
Document Desc: 
On June 17, 2009, the North American Securities Administrators Association (NASAA) filed an amicus brief with the U.S. Supreme Court in support of the plaintiff in Jones v. Harris Associates.
Document Title: 
NASCAT Files Amicus Brief in Jones Case
Document Desc: 
On June 17, 2009, the National Association of Shareholder and Consumer Attorneys (NASCAT) filed an amicus brief with the U.S. Supreme Court in support of the plaintiff in Jones v. Harris Associates.
Document Title: 
Two Law Professors File Amici Brief in Jones Case
Document Desc: 
On June 17, 2009, two law professors—Deborah DeMott and Mark Ascher—filed an amici brief with the U.S. Supreme Court in support of the plaintiff in Jones v. Harris Associates.
Document Title: 
Law Professors File Amici Brief in Jones Case
Document Desc: 
On June 15, 2009, several scholars at American law schools filed an amici brief with the U.S. Supreme Court in support of the plaintiff in Jones v. Harris Associates.
Document Title: 
AARP and CFA File Amicus Brief in Jones Case
Document Desc: 
On June 15, 2009, the American Association of Retired Persons (AARP) and the Consumer Federation of America (CFA) filed an amicus brief with the U.S. Supreme Court in support of the plaintiff in Jones v. Harris Associates.
Document Title: 
United States Files Brief with the U.S. Supreme Court
Document Desc: 
On June 15, 2009, the United States filed its brief with the U.S. Supreme Court in Jones v. Harris Associates.
Document Title: 
John Bogle Files Amicus Brief in Jones Case
Document Desc: 
On June 15, 2009, Vanguard founder John C. Bogle filed an amicus brief with the U.S. Supreme Court in support of the plaintiff in Jones v. Harris Associates.
Document Title: 
Plaintiff Files Brief with the U.S. Supreme Court
Document Desc: 
On June 10, 2009, the plaintiffs filed their writ of certiorari brief with the U.S. Supreme Court in Jones v. Harris Associates.
Document Title: 
Dissenting Opinion on Denial of Petition for Rehearing
Document Desc: 
On August 8, 2008, the Seventh Circuit Court of Appeals denied the petition for rehearing. Five judges, including Judge Richard Posner, dissented on the denial of the rehearing en banc. In his dissenting opinion, Judge Posner raised concerns about the investment adviser charging its "captive" funds more than twice what it charges independent funds (i.e. institutional investors). The case was appealed to the U.S. Supreme Court and the Court accepted the case on March 9, 2009.
Document Title: 
Seventh Circuit Court of Appeals Decision in Jones Case
Document Desc: 
On May 19, 2008, the Seventh Circuit Court of Appeals affirmed the District Court decision in Jones v. Harris Associates.
Document Title: 
District Court Decision in Jones Case
Document Desc: 
On February 27, 2007, the District Court granted the Defendant's Motion for Summary Judgment and dismissed the case.
Document Title: 
Plaintiffs File Opposition Brief to Motion for Summary Judgment
Document Desc: 
On October 10, 2006, the plaintiffs filed their brief in opposition to the defendants’ Motion for Summary Judgment.
Document Title: 
Defendant Files Motion for Summary Judgment
Document Desc: 
On September 12, 2006, the defendant filed a Motion for Summary Judgment.
Document Title: 
District Court Denies Motion to Dismiss
Document Desc: 
On April 7, 2005, the District Court denied the defendant's Motion to Dismiss.
Document Title: 
Plaintiffs File Part II Memorandum Opposing Motion to Dismiss
Document Desc: 
On March 15, 2005, the plaintiffs filed Part II of their Memorandum in Opposition to the defendant’s Motion to Dismiss.
Document Title: 
Plaintiffs File Part I Memorandum Opposing Motion to Dismiss
Document Desc: 
On March 15, 2005, the plaintiffs filed Part I of their Memorandum in Opposition to the defendant’s Motion to Dismiss.
Document Title: 
Defendant Files Motion to Dismiss
Document Desc: 
On March 1, 2005, the defendant filed its Motion to Dismiss the lawsuit.