Eighth Circuit Fees Decision Accepts Gartenberg Standard but Enhances Process Focus while Seventh Circuit Rejects Gartenberg Standard in Favor of Fiduciary Standards of Trust Law

May 19, 2009
In its long-awaited decision in Gallus v. Ameriprise Financial, Inc., the United States Court of Appeals for the Eighth Circuit adhered to the established standard for claims for breach of fiduciary duty under Section 36(b) of the Investment Company Act of 1940 set in Gartenberg v. Merrill Lynch Asset Mgmt., Inc., but with important departures that could encourage more investor litigation pursuant to that often-tried but never successful cause of action. Whether it does encourage more Section 36(b) litigation, however, is likely to turn on the outcome of the Supreme Court’s review next term of the Seventh Circuit’s controversial decision in Jones v. Harris Associates. This update discusses the case and its possible ramifications.