Gartenberg v. Merrill Lynch Asset Management, Inc. case brief

Gartenberg v. Merrill Lynch Asset Management, Inc. case brief summary
694 F.2d 923 (1982)

CASE SYNOPSIS

Appellants sought review of a judgment of the United States District Court for the Southern District of New York, dismissing their consolidated stockholders' derivative suits against appellees for violation of § 36(b) of the Investment Company Act, 15 U.S.C.S. § 80a-35(b).

CASE FACTS
Appellants, stockholders in a money market fund, filed stockholder derivative suits against appellees--the fund, the fund's manager, and an affiliated brokerage company--for violations of § 36(b) of the Investment Company Act, 15 U.S.C.S §80a-35(b). Appellants claimed the fees paid by the fund to the manager for services were so disproportionately large as to constitute a breach of fiduciary duty in violation of § 36(b).

DISCUSSION

• In a non-jury trial, the district court reviewed the evidence and concluded that the compensation paid to the manager was fair. 
• The court found that appellants failed to prove by a preponderance of the evidence a breach of fiduciary duty, taking into consideration: 
• 1) the high quality of the services rendered by the manager; 
• 2) the increased costs for the brokerage to process the fund shares; and
• 3) the fact that the manager did not charge a fee that was disproportionate to the services he rendered.

CONCLUSION

The court affirmed the dismissal of appellants' suit against appellees for breach of fiduciary duty in their administration of a money market fund because appellants failed to prove by a preponderance of the evidence that appellees paid disproportionately large fees to the fund's manager given the quality and quantity of his services.

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