Rodney Jelinek v. Capital Research & Management

MEMORANDUM

Appellants appeal the district court’s judgment, following a bench trial, holding that the mutual fund investors failed to prove the Appellees breached the fiduciary-duty imposed by § 86(b) of the Investment Company Act of 1940. 15 U.S.C. § 80a-35(b) (hereinafter “the Act”). We affirm in large part for the reasons stated in the district court’s comprehensive order.

A. Issues of Law

The district court carefully applied the authoritative legal standard to determine if Appellees violated their fiduciary duty. The district court correctly applied the factors set forth in Gartenberg v. Merrill Lynch Asset Mgmt., Inc., 694 F.2d 923 (2d Cir.1982). Three months after the district court filed its order, the United States Supreme Court adopted the Gar-tenberg legal standard. Jones v. Harris Assocs. L.P., — U.S. -, 130 S.Ct. 1418, 1430 , 176 L.Ed.2d 265 (2010). Thus, we do not need to remand the action for further proceedings in light of the recent Jones decision.

The Act, Jones , and Gartenberg all require the court to calibrate the degree of deference afforded the independent directors’ expertise based on the care and conscientiousness with which they performed their duties.…