Litigation and Enforcement Actions and Initiatives –

SECTION 36(b) LITIGATION –

Court Finds for Defendant Investment Adviser in Section 36(b) -

Excessive-Fee Case –

On August 5, 2019, the U.S. District Court for the Central District of California found for the defendant, Metropolitan West Asset Management, LLC (MetWest), following a bench trial in an excessive fee case brought under Section 36(b) of the Investment Company Act of 1940 by a shareholder of the MetWest Total Return Bond Fund. The plaintiff’s claim centered on a comparison between the fees charged by MetWest in its role as investment adviser to the fund versus the sub-advisory fees charged by MetWest in serving as a sub-adviser to unaffiliated funds. Specifically at issue in the trial were four of the Gartenberg factors: comparative fees, profitability, economies of scale and the independence of the independent directors and the care and conscientiousness with which they performed their duties—i.e., whether the board’s approval of the advisory fee deserved substantial deference by the court. The court had previously granted the defendant’s motion for summary judgment with respect to fall-out benefits and the nature and quality of services provided.