Two shareholders in the First Eagle Global and Overseas Funds filed a lawsuit against First Eagle Investment Management on May 7, 2014, in U.S. District Court in Delaware. This lawsuit alleges that First Eagle is charging excessive advisory fees to these two Funds, compared to the fee levels it is charging to provide similar services as a subadviser to third-party mutual funds.
In its complaint, the plaintiffs allege that First Eagle is charging the Global and Overseas Funds an advisory fee rate of 75 basis points, when it is charging other funds a rate that is 25 to 37 basis points lower in providing subadvisory services. The plaintiffs alleged that First Eagle is breaching its fiduciary duty under Section 36(b) of the Investment Company Act and requests the recovery of any excessive fees to the Funds.
On July 14, 2014, First Eagle filed a motion to dismiss the complaint. In its brief, First Eagle argues that the plaintiffs have not alleged sufficient facts that the funds' advisory fees are excessive. The plaintiffs filed their opposition brief on September 11, 2014.
The motion to dismiss was referred to a Magistrate Judge who filed a report and recommendation on October 8, 2015. The Report recommends that the motion to dismiss be denied, as the plaintiffs' complaint contains sufficiently specific factual allegations to meet the liberal pleading standard at this stage of the proceedings.
On December 9, 2015, the District Court accepted the Magistrate Judge's recommendation and denied First Eagle's motion to dismiss the case. The Judge ruled that the plaintiffs met their burden of presenting sufficiently specific factual allegations to avoid a motion to dismiss.