UNITED STATES DISTRICT COURT DISTRICT OF … v... · 2016-11-29 · united states district court ....

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

IN RE RUSSELL INVESTMENT COMPANY SHAREHOLDER LITIGATION

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Lead C.A. No. 1:13-cv-12631-LTS (Consolidated with No. 1:14-cv-14358-LTS) REQUEST FOR ORAL ARGUMENT REDACTED DOCUMENT

PLAINTIFF'S BRIEF IN RESPONSE TO DEFENDANTS'

MOTION FOR SUMMARY JUDGMENT

Case 1:13-cv-12631-WGY Document 135 Filed 08/22/16 of 39

TABLE OF CONTENTS

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TABLE OF AUTHORITIES

CASES PAGE(S)

Amron v. Morgan Stanley Inv. Advisors Inc., 464 F.3d 338 (2d Cir. 2006)...............................................................................................11

Asociación de Periodistas de P.R. v. Mueller, 529 F.3d 52 (1st Cir. 2008) ..................................................................................................3

Bennett v. Fid. Mgmt. & Research Co., No. C.A. 04-11651-MLW, 2011 WL 98837 (D. Mass. Jan. 10, 2011) ...........................3, 9

Curran v. Principal Mgmt. Corp, LLC, No. 4:09-CV-00433, 2010 WL 2889752 (S.D. Iowa June 8, 2010) ....................................3

Daily Income Fund, Inc. v. Fox, 464 U.S. 523 (1984) .............................................................................................................2

Dumond v. Mass. Fin. Servs. Co., No. CIV. A. 04-11458-GAO, 2006 WL 149038 (D. Mass. Jan. 19, 2006) .......................22

Evangelist v. Fid. Mgmt. & Research Co., 554 F. Supp. 87 (D. Mass. 1982) .......................................................................................26

Forsythe v. Sun Life Fin., Inc., 417 F. Supp. 2d 100 (D. Mass. 2006) ..................................................................................6

Gallus v. Ameriprise Fin., Inc., 561 F.3d 816 (8th Cir. 2009) .............................................................................................17

Gallus v. Ameriprise Fin., Inc., 675 F.3d 1173 (8th Cir. 2012) ................................................................................... passim

Gallus v. Ameriprise Financial, Inc., 497 F. Supp. 2d 974 (D. Minn. 2007) ................................................................................13

Gartenberg v. Merrill Lynch Asset Management., Inc., 694 F.2d 923 (2d Cir. 1982) ................................................................................................14

Geshke v. Crocs, Inc., 740 F.3d 74 (1st Cir. 2014) ..................................................................................................3

In re Am. Mut. Funds Fee Litig., No. CV 04-5593, 2009 WL 5215755 (C.D. Cal. Dec. 28, 2009) ................................12, 20

Johnson v. Indymac Mortg. Servicing, No. CIV.A. 12-10808-MBB, 2014 WL 1652594 (D. Mass. Apr. 22, 2014) .....................19

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Jones v. Harris Assocs. L.P., 611 F. App'x 359 (7th Cir. 2015) ............................................................................... passim

Jones v. Harris, 559 U.S. 335 (2010) ................................................................................................... passim

Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90 (1991) ...............................................................................................................2

Kasilag v. Hartford Investment Financial Services, LLC, No. CV11-1083, 2016 WL 1394347 (D.N.J. Apr. 7, 2016) ...................................... passim

Migdal v. Rowe Price-Fleming Int'l, Inc., 248 F.3d 321 (4th Cir. 2001) .............................................................................................11

Reso ex rel. Artisan Int'l Fund v. Artisan Partners Ltd. P'ship, No. 11-CV-873-JPS, 2011 WL 5826034 (E.D. Wis. Nov. 18, 2011) ..................................3

S.E.C. v. Am. Birthright Trust Mgmt. Co., No. 9266, 1980 WL 25434 (Dec. 30, 1980) ...........................................................................6

Santomenno v. Transamerica Life Ins. Co., 310 F.R.D. 451 (C.D. Cal. 2015) .......................................................................................29

Schuyt v. Rowe Price Reserve Fund, Inc., 663 F. Supp. 962 (2d Cir. 1987) ..................................................................................12, 20

Sins v. Janus Capital Mgmt., LLC, Civ. A. No. 04-1647, 2006 WL 3746130 (D. Colo. Dec. 15, 2006) ..................................22

Siupa v. Astra Tech, Inc., No. CIV.A. 10-10525-LTS, 2013 WL 212613 (D. Mass. Jan. 18, 2013)..........................19

Sivolella v. AXA Equitable Life Ins. Co, No. 3:11-cv-04194 (D.N.J.) .......................................................................................4, 5, 18

Strougo v. BEA Associates, 188 F. Supp. 2d 373 (S.D.N.Y. 2002)..........................................................................14, 15

The R.W. Grand Lodge of F. & A.M. of Pa. v. Salomon Bros. All Cap Value Fund, 425 F. App'x 25 (2d Cir. 2011) .................................................................................. passim

STATUTES, RULES & OTHER AUTHORITIES

Fed. R. Civ. P. 56(a) ........................................................................................................................3

H.R. Rep. No. 2337 (1966) ......................................................................................................28, 29

S. Rep. No. 91-184 (1969), reprinted in 1970 U.S.C.C.A.N. 4897 .....................................2, 15, 24

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Clifford E. Kirsch, Mutual Funds and Exchange Traded Funds, §42:2.1[A], at 42-5-42-6 (3rd ed. 2016) .........................................................................................................29

H. Norman Knickle, The Mutual Fund's Section 15(c) Process: Jones v. Harris, The SEC and Fiduciary Duties of Directors, 31 Boston L.J. 265, 336 (2011-2012)..........................................................................................................................6

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TABLE OF ABBREVIATIONS

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I. PRELIMINARY STATEMENT

Defendants RIMCo and RFSC are the adviser and administrator for the ten Russell mutual

funds at issue here. Defendants have breached their fiduciary duty under Section 36(b) by charging

fees that are "so disproportionately large" that they "bear[] no reasonable relationship to the services

rendered" and that the fees "could not have been the product of arm's length negotiations." Jones v.

Harris, 559 U.S. 335, 336-37 (2010) ("Jones").

That Defendants charge excessive fees is apparent from a comparison of those fees and

Defendants' costs to provide services to the Funds.

Further demonstrating that the fees charged are excessive,

Similarly,

Further, RFSC

Notwithstanding substantial factual support for Plaintiff's claims, Defendants seek the drastic

remedy of summary judgment―knowing full well that every other Section 36(b) action premised on

the "manager-of-managers" theory has survived summary judgment.

Defendants ask this Court to decide its summary judgment motion based solely on approval of the

fees by the Funds' Board, without any scrutiny of the substantive fairness of the fees charged in

relation to the services provided. Such deference to board process is inconsistent with the legislative

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intent and history of Section 36(b) and the holding in Jones. No matter how robust the process, any

analysis under Section 36(b) must include consideration of the fees themselves.

In any event, Defendants' arguments regarding both the board's approval process and the

substantive fairness of the advisory and administrative fees charged to the Funds are plagued by

factual disputes that foreclose summary judgment.

II. LEGAL STANDARDS

A. Background to and Legal Standard for Section 36(b)

"Unlike most corporations, an investment company is typically created and managed by a

pre-existing external organization known as an investment adviser," which "selects the fund's

directors, manages the fund's investments, and provides other services." Daily Income Fund, Inc. v.

Fox, 464 U.S. 523, 536 (1984). As a result, the "forces of arm's-length bargaining do not work in the

mutual fund industry in the same manner as they do in other sectors" since "a mutual fund cannot, as

a practical matter, sever its relationship with the adviser," which is still true today. S. Rep. No. 91-

184, at 5 (1969), reprinted in 1970 U.S.C.C.A.N. 4897, 4901; SAMF, ¶53.

Because of its concern that this structure had led to excessive fees in the mutual fund

industry, Congress enacted Section 36(b) in order to provide fund shareholders with a stronger legal

remedy to challenge excessive fees. S. Rep. No. 91-184, at 5. The new "fiduciary duty" imposed on

mutual fund investment advisers with respect to fees was intended to be a significant departure from

the prior '"corporate waste"' standard—which was highly deferential to board approval. Id. at 5.

Because Congress found mutual fund board directors could not be relied upon to protect investors

against excessive fees, less deference to board approval was appropriate.1

In Jones, the Supreme Court adopted a standard of liability for Section 36(b) cases that

1 Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 108 (1991) ("Congress added § 36(b) to the ICA in 1970 because it concluded that the shareholders should not have to 'rely solely on the fund's directors to assure reasonable adviser fees, notwithstanding the increased disinterestedness of the board.'").

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focuses on the relationship between the adviser's compensation and the services it provides—the

adviser is liable if its compensation is so disproportionately large that it bears no reasonable

relationship to the services rendered and could not have been the product of arm's-length bargaining.

Jones, 559 U.S. at 346. The Court emphasized that all "relevant circumstances" must be considered.

Jones, 559 U.S. at 344-45, 349. While the Court mentioned certain factors considered by prior

courts, including the so-called "Gartenberg factors," it did not require that those factors be

considered or limit consideration of other facts and circumstances. Jones, 559 U.S. at 344-45. Thus,

Defendants are wrong to suggest that Plaintiff must prove each of the Gartenberg factors at the

summary judgment stage in order to prevail.2 Rather, Plaintiff's only burden is to show, based on the

totality of the "relevant circumstances," that Defendants' fees bear no reasonable relationship to their

services.3

B. Summary Judgment Is Generally Inappropriate in Section 36(b) Cases

Summary judgment is appropriate only where "there is no genuine dispute as to any material

fact." Fed. R. Civ. P. 56(a); Geshke v. Crocs, Inc., 740 F.3d 74, 77 (1st Cir. 2014) (courts must

interpret the evidence and draw all reasonable inferences in the light most favorable to the

nonmoving party). At summary judgment, "the court's focus is not 'to weigh the evidence and

determine the truth of the matter but to determine whether there is a genuine issue for trial.'"

Asociación de Periodistas de P.R. v. Mueller, 529 F.3d 52, 56 (1st Cir. 2008).

2 Mot. at 19-29 (headings imply Plaintiff has the burden to prove each factor); Jones, 559 U.S. at 347; Hartford, 2016 WL 1394347, at *21 (denying motion for summary judgment where the plaintiff had not presented evidence creating triable issues on each factor); Reso ex rel. Artisan Int'l Fund v. Artisan Partners Ltd. P'ship, No. 11-CV-873-JPS, 2011 WL 5826034, at *5 (E.D. Wis. Nov. 18, 2011) (plaintiff not required to address all of the Gartenberg factors "so long as the totality of the alleged facts gave rise to an inference that a particular fee was disproportionately large"). 3 Jones, 559 U.S. at 347; Curran v. Principal Mgmt. Corp, LLC, No. 4:09-CV-00433, 2010 WL 2889752, at *9 (S.D. Iowa June 8, 2010); Bennett v. Fid. Mgmt. & Research Co., No. C.A. 04-11651-MLW, 2011 WL 98837, at *1 (D. Mass. Jan. 10, 2011) (considering several factors other than the Gartenberg factors).

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Section 36(b) cases are fact-intensive and rarely resolved on summary judgment.4 To date,

not one Section 36(b) action involving a manager-of-managers structure has been dismissed at

summary judgment. In fact, of the three such cases to reach this stage, one settled during the

pendency of the summary judgment ruling, and the motions in the other two were denied. See P Ex.

LLL (Order, Sivolella v. AXA Equitable Life Ins. Co, No. 3:11-cv-04194 (D.N.J.) (denying motion

for summary judgment); Kasilag v. Hartford Investment Financial Services, LLC, No. CV11-1083

(RMB/KWM), 2016 WL 1394347, at *19 (D.N.J. Apr. 7, 2016); P Ex. KKK (Curran v. Principal

Mgmt. Corp., LLC, No. 4:09-CV-00433 (S.D. Iowa May 17, 2013)) (court docket #164 advising case

settled while motion for summary judgment pending).

Section 36(b) actions involving the manager-of-managers structure are particularly ill-suited

for summary judgment because the core set of facts—specifically, an investment adviser's delegation

of its primary responsibilities while retaining for itself a substantial portion of the fees

charged―create "overwhelming" factual disputes that "[c]ertainly ... [are] not subject to summary

judgment." P Ex. MMM (AXA Transcript) at 49:9-15 ("[T]he number of facts that are in dispute is

overwhelming.... I mean how do you resolve those without some kind of trial?"). As the AXA and

Hartford courts concluded, the manager-of-managers structure creates, at a minimum, triable issues

of fact regarding: (i) the importance and scope of the oversight services performed by the adviser

versus the day-to-day services performed by the sub-adviser (P Ex. MMM (AXA Transcript) at 78-

79; Hartford, 2016 WL 1394347, at *15-16); (ii) the appropriate method of recording subadvisory

fees and reporting profitability information (P Ex. MMM (AXA Transcript) at 80-81; Hartford, 2016

WL 1394347, at *16-17); (iii) the salience of comparative fee structures (and fee data) in the mutual

4 Defendants contend that Plaintiff faces a high hurdle (Mot. at 16), but their cases are inapposite because they pre-date Jones, which set the Section 36(b) standard. Only two post-Jones cases have been resolved by summary judgment and neither is analogous for the reasons set forth herein. Gallus v. Ameriprise Fin., Inc., 675 F.3d 1173 (8th Cir. 2012); Jones v. Harris Assocs. L.P., 611 F. App'x 359 (7th Cir. 2015) ("Jones II").

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fund industry (P Ex. MMM (AXA Transcript) at 81-82; Hartford, 2016 WL 1394347, at *18); and

(iv) whether economies of scale exist and the extent to which they are shared with investors (P Ex.

MMM (AXA Transcript) at 82-83; Hartford, 2016 WL 1394347, at *18).

Tellingly, Defendants do not attempt to distinguish the factual issues raised in this case from

those that rendered summary judgment inappropriate in AXA and Hartford. In fact, Defendants

ignore AXA altogether, and instead rely on Jones II to argue summary judgment is proper whenever

defendant's: (i) advisory fees are similar to "fees charged at other mutual fund complexes"; and

ii) advisory services are "not worth less" than services provided by advisers to "other fund

complexes." Mot. at 16-17 (citing Jones II, 611 F. App'x at 360). Defendants' reliance on this Jones

II is misguided for at least two reasons. First, the holding in Jones II that mutual fund fee and

performance comparisons are dispositive factors blatantly disregards the Supreme Court's guidance

rejecting any such "categorical rules" regarding fee comparisons. Id.; Jones, 559 U.S. at 349.

Indeed, the Supreme Court specifically warned against relying on the very factor—mutual fund fee

comparisons—that underlies the Jones II decision, noting that such "comparisons are problematic"

because the fees charged by other advisers "may not be the product of … arm's-length bargaining."

Jones, 559 U.S. at 336, 350-51. Second, Jones II is factually distinguishable from this case (and

AXA and Hartford) because it did not involve the use of sub-advisers. Moreover, the holding in

Jones II hinged on institutional fee comparisons, and did not involve the numerous factual issues

present here with respect to other aspects of the fees. Jones II, 611 F. App'x at 361.

III. THERE ARE NUMEROUS TRIABLE FACTS THAT PRECLUDE SUMMARY JUDGMENT

A. There Are Triable Facts as to Whether RIMCo's Advisory Fees Are Excessive

1. There Are Genuine Disputes of Fact Regarding the Nature of Services a. RIMCo's Compensation Must Be Evaluated in Comparison to

the Services RIMCo Provides

Under Section 36(b), the nature and quality of each service provided by the Defendants must

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agreement."8 ICI Rep. at 1. ICI holds that the board must "consider the fee paid to the principal

adviser in light of the specific services performed by the principal adviser versus those that are

delegated to the subadviser" to evaluate an adviser's fees in a manner consistent with the 1940 Act

requirements. Id. at 11.

Inexplicably, Defendants argue that this Court should limit its inquiry to the "total advisory

fee" without reference to the allocation of that fee between RIMCo and the Money Managers or the

relationship between the compensation that RIMCo ultimate retains and the services it provides.

Mot. at 3-4. But even if the Court ultimately must evaluate the overall advisory fee charged by

RIMCo, it must—as part of that evaluation—evaluate the amount of the advisory fee retained by

RIMCo in comparison to the services provided by RIMCo.

SAMF, ¶7.

Id.

This analysis is particularly salient here because RIMCo's and RFSC's services are

Id. Thus,

Id.

Further, the portion of the advisory fee passed through to the Money Managers was

negotiated at arm's-length and concededly represents fair value for the services provided by the

Money Mangers. Accordingly, RIMCo's retained fee cannot be justified by the Money Managers'

services; it must be justified, if at all, by RIMCo's services. And, insofar as RIMCo's retained fee is

8 ICI's Independent Directors Council Task Force Report, Board Oversight of Subadvisers ("ICI Rep."), January 2010, https://www.idc.org/pdf/idc_10_subadvisers.pdf.

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a. Fee Comparisons with Mutual Fund Peers Are Generally Irrelevant

Courts have expressed skepticism as to the probative value of comparisons with mutual fund

peers. Jones specifically warned against investment advisers relying on such comparisons to justify

their fees, as Defendants have done here, reasoning that "these comparisons are problematic because

these fees, like those challenged, may not be product of negotiations conducted at arm's-length."

Jones, 559 U.S. at 350-51.21 Given that the core inquiry under Section 36(b) is to determine what the

fees would be in a competitive market, it is unhelpful to look at the fees of other mutual fund advisers

(which are subject to the same conflicts of interest) unless it can be shown that the peers' fees were

negotiated at arm's-length. Jones, 559 U.S. at 351-352; Gartenberg v. Merrill Lynch Asset

Management., Inc., 694 F.2d 923, 929 (2d Cir. 1982). Defendants fail to present such evidence.

Mot. at 24-26; SAMF, ¶54. The cases Defendants cite—Jones II and Strougo v. BEA Associates,188

F. Supp. 2d 373, 384-85 (S.D.N.Y. 2002)—for the notion that mutual fund fee comparisons are

21 See, e.g., Gartenberg, 694 F.2d at 929 ("If rates charged by the many other advisers were an affirmative competitive criterion, there would be little purpose in Section 36(b). Congress however recognized that because of the potential incestuous relationships ... other factors may be more important in determining whether a fee is so excessive as to constitute a breach of fiduciary duty"); id. ("Competition between money market funds for shareholder business does not support an inference that competition must therefore also exist between [investment advisers] for fund business.").

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C. There Is a Material Factual Dispute as to Whether the Board's Approval of the Fees for the Funds Is Entitled to any Deference and if so, the Extent of any Such Deference

Defendants argue both that the Board, because of its supposed thorough process in reviewing

and negotiating fees, is entitled to substantial deference as a matter of law for its approval of the fees

and that under Section 36(b), this entitles them to prevail in this case without any scrutiny of the fees

themselves. Mot. at 17-19. As shown below, Defendants are wrong on both counts.

1. Board Process Alone Is Not Enough to Defeat Liability As an initial matter, Defendants misstate the governing standard in arguing that the Court

should merely defer to the Board's approval of Defendants' fees because of the supposed

thoroughness of the Board's process in reviewing and negotiating them. In Jones, the Supreme Court

expressly rejected this proposition, holding that "a fee may be excessive [under Section 36(b)] even if

it was negotiated by a board in possession of all relevant information." 559 U.S. at 351.

The legislative history and purpose of Section 36(b) also reflects that Board approval was not

to be a dispositive factor. Indeed, Congress expressly stated that Board "consideration would not be

38 See R.W. Grand Lodge, 425 F. App'x at 30 (holding defendants committed "a garden variety breach of fiduciary duty" under Section 36(b) by "inflat[ing] the price of the ... services ... and pocket[ing] the difference between what they charged and what the services were worth").

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controlling in determining whether or not the fee encompassed a breach of fiduciary duty." S. Rep.

No. 91-184, at 4910. In addition, the SEC proposed the creation of Section 36(b) and Congress

adopted the new right of action based on their conclusion that directors were not in a position to

protect shareholders from excessive fees because of the general lack of arm's-length bargaining

between the Board and investment adviser. S. Rep. No. 91-184, at 4898 (adopting a new legal

remedy for mutual fund shareholders under section 36(b) because of the conflicted nature of the

relationship between trustees and the investment advisers in negotiating fees).39

2. Board Approval Is Entitled to Substantial Deference Only If It Followed a Robust Process Which It Did not Do Here

Although the Supreme Court confirmed that Board process was not the defining factor in the

Section 36(b) analysis, it did state that board approval could be entitled to some level of deference

based on the strength of the process and the degree to which the board was fully informed. Jones,

559 U.S. at 351. But the Supreme Court made it clear that board approval is entitled to substantial

deference only if the board employed a robust process for reviewing and negotiating fees and

received all material information in reviewing the fees. Id. at 351-52 (stating that "where the board's

process was deficient or the adviser withheld important information," the court must scrutinize the

fees more closely). Conversely, the Supreme Court noted that lesser deference would be afforded

where, as is the case here, either the Board's process for reviewing or negotiating fees was deficient

or adviser withheld any material information. Id.; Gallus, 675 F.3d at 1180.

In arguing broadly that the Board's approval is entitled to substantial deference,

39 That Congress intended to limit the weight of board approval in Section 36(b) cases is further reflected by the fact that in passing this provision, Congress expressly rejected the prior corporate waste standard as being too deferential to board approval. S. Rep. No. 91-184, at 4901 (deciding that the standard of corporate waste is unduly restrictive and recommending that it be changed); id. at 4910 (rejecting the corporate waste test).

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E. Defendants' Public Disclosure of Their Fees and the SEC's issuance of the Exemptive Order Are Irrelevant to the Determination Here

Defendants also imply that publicly disclosing the amount of fees they receive and the SEC's

granting of exemptive relief to permit them to use sub-advisers for the Funds somehow validate the

fee rates charged to the Funds. See Mot. at 1, 12. However, the mere fact that Defendants disclose

fee information to shareholders does not demonstrate in any way that the fees are reasonable.

Indeed, the SEC proposed the enactment of Section 36(b) based in part on the limitations of

disclosure in ensuring reasonable fees for shareholders. H.R. Rep. No. 2337, at 127-28, 147-49. The

SEC concluded in its 1966 Report, and which is still true today, regardless of how informed

shareholders were, they have almost no power to effect a change in the fees of a fund.46 Further,

there is widespread evidence that, despite the disclosure requirements, mutual fund shareholders

generally have a low understanding and awareness of the fees they pay.47 As a result, mutual fund

46 See H.R. Rep. No. 2337, at 128, 148 (1966) (noting the lack of practical alternatives available to dissenting shareholders, limited shareholder rights, the lack of incentives to collectively organize, and the difficulty for lay shareholders to analyze the fairness of fees). 47 See Kate Stalter, The Investment Fees You Don't Realize You're Paying, Dec. 15, 2014, http://money.usnews.com/money/personal-finance/mutual-funds/articles/2014/12/15/the-investment-fees-you-dont-realize-youre-paying (referencing survey which revealed lack of understanding of mutual fund investors about the amount of fees they paid); see also Morgan Housel, Stop Deluding Yourself About Investing Expenses, Apr. 10, 2015, http://wsj.com/articles/stop-deluding-yourself-about-investing-expenses-1428669774 (citing to study making similar conclusions).

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shareholders are not able to effectively monitor and analyze whether each particular fee they are

paying is reasonable relative to the services provided.48

Additionally, Defendants' suggestion that the SEC's issuance of an exemptive order allowing

RIMCo to use a manager-of-managers structure is tantamount to endorsement of the fee structures

for the Funds misconstrues the nature of the SEC's review. In considering whether to grant an

exemptive order, the SEC is primarily concerned about the adequacy of the disclosures regarding the

arrangement and does not evaluate the fairness of fees charged in such arrangement.49 RIMCo's

Exemptive Order does not reflect, , that the SEC

reviewed or evaluated whether the fees were reasonable to shareholders. See Mot. at 12; In re Frank

Russell Company, et al., ICA Release No. 30556 (June 12, 2013); SAMF, ¶143.

IV. CONCLUSION

Defendants' motion for summary judgment should be denied.

DATED: August 22, 2016 Respectfully submitted, ROBBINS ARROYO LLP /s/ Edward B. Gerard

EDWARD B. GERARD (pro hac vice) BRIAN J. ROBBINS

STEPHEN J. ODDO (pro hac vice) JENNY L. DIXON (pro hac vice)

600 B Street, Suite 1900 San Diego, CA 92101 Telephone: (619) 525-3990

48 H.R. Rep. No. 2337, at 128 (noting the difficulty for shareholders to appreciate and analyze the fairness of mutual fund fees because of the complexity of the determination); Santomenno v. Transamerica Life Ins. Co., 310 F.R.D. 451, 465 (C.D. Cal. 2015) (noting the inability of shareholders to monitor the appropriateness of their total fees). 49 Clifford E. Kirsch, Mutual Funds and Exchange Traded Funds, §42:2.1[A], at 42-5-42-6 (3rd ed. 2016) (noting that orders typically are subject to certain disclosure requirements, including the filing of an information statement containing information about the sub-adviser); Proposing Release for Rule 15a-5, U.S. Securities and Exchange Commission, available online at https:// www.sec.gov/rules/proposed/33-8312.pdf (stating that, in permitting exemptive relief under the proposed Rule 15a-5, the SEC seeks "to assure that investors in manager-of-managers funds are fully informed" about the arrangement).

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Facsimile: (619) 525-3991 [email protected] [email protected] [email protected] [email protected]

HUTCHINGS, BARSAMIAN, MANDELCORN & ZEYTOONIAN, LLP THEODORE M. HESS-MAHAN (BBO #557109) 110 Cedar Street, Suite 250 Wellesley Hills, MA 02481 Telephone: (781) 431-2231 Facsimile: (781) 431-8726 [email protected]

ZWERLING, SCHACHTER & ZWERLING, LLP JEFFREY C. ZWERLING (pro hac vice) ROBIN F. ZWERLING (pro hac vice) SUSAN SALVETTI (pro hac vice) ANDREW W. ROBERTSON (pro hac vice) 41 Madison Avenue New York, NY 10010 Telephone: (212) 223-3900 Facsimile: (212) 371-5969 [email protected] [email protected] [email protected] [email protected]

Attorneys for Plaintiff Fred McClure

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CERTIFICATE OF SERVICE

I hereby certify that on August 22, 2016 this document was filed through the Court's

CM/ECF system and will be sent electronically to the registered participants identified in the Notice

of Electronic Filing (NEF).

/s/ Edward B. Gerard EDWARD B. GERARD

1113645

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