8th Circuit Addresses Scope of Fiduciary Duty

A panel of the 8th Circuit Court of Appeals addressed the scope of the fiduciary imposed on advisors of mutual funds by the Investment Company Act.

The shareholders of 11 mutual funds had brought an action alleging that the fund manager had breached its fiduciary duty by misleading the funds’ board of directors during fee negotiations and demanding excessive fees.

The district court found summary judgment in favor of the manager based on an analysis of whether the fee was so large that it could not have been the product of arm’s-length negotiating according to the factors set forth in Gartenberg v. Merrill Lynch Asset Management.