Whether defendant breached the Investment Company Act (ICA) (15 USC § 80a-1 et seq.) by charging “excessive advisory fees” for advice on mutual funds; § 80a-35(b)(1)–(2) (referred to as § 36(b)); Jones v. Harris Assocs. L.P. (Jones II); Gartenberg v. Merrill Lynch Asset Mgmt., Inc. (2d Cir.); Jones v. Harris Assocs. L.P. (Jones III) (7th Cir.); Gallus v. Ameriprise Fin., Inc. (8th Cir.); Pirundini v. J.P. Morgan Inv. Mgmt. Inc. (SD NY); Migdal v. Rowe Price–Fleming Int’l, Inc. (4th Cir.)

The court held that defendant-J.P. Morgan Investment Management (JPMIM) was entitled to summary judgment on plaintiffs-shareholders’ claim that it breached its fiduciary duty under § 36(b) of the ICA where there was no question of fact that their adviser fees were not excessive. To succeed on § 36(b) claims, “a shareholder must prove that the challenged fee ‘is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.’” The court compared the fees charged to plaintiffs’ Funds with fees JPMIM charged other Funds for which it acted as “adviser.” The court noted that plaintiffs suggested as comparators Funds for which JPMIM acted as “subadvisers.” Applying the standard in Gartenberg, the court agreed with the district court’s ruling that plaintiffs’ Funds were “not comparable to the Subadvised Funds but are comparable to certain other mutual funds that realized similar performance.” JPMIM established that “the responsibilities JPMIM has as adviser to the Funds are different from those it has as subadviser to the Subadvised Funds, as are the associated risks.” Additionally, it showed that “compliance responsibilities” in subadviser situations “are generally lesser in scale and scope than the fund’s adviser’s compliance responsibilities.” Plaintiffs contended that whether the fee disparity was justified based on the provision of additional services constituted a fact question, precluding summary judgment. The court disagreed. Applying the other Gartenberg factors, it agreed with the district court that “JPMIM’s fees are in line with those of their peer groups; and . . . JPMIM provided a better than average rate of return than the peer groups once expenses (including advisory fees) are taken into account.” It also held that “the economies-of-scale factor weighs strongly against” plaintiffs. Thus, the court affirmed summary judgment for JPMIM.