Great-West Victorious in 36(b) Appeal

The Tenth Circuit Court of Appeals handed a win to adviser Great-West in an appeal from a shareholder action under Section 36(b) of the 1940 Act initially filed in 2016. The plaintiffs in the case alleged the fund complex’s adviser, Great-West Capital Management, and its affiliated recordkeeper breached their fiduciary duties by collecting excessive compensation from fund assets. The plaintiffs had criticized the board’s oversight process and negotiating of fund fees, among other issues. In its decision, the court of appeals supported a previous ruling that  the board’s process for negotiating and reviewing investment-adviser compensation was sufficiently robust. The court observed that the district court found the board’s 15(c) process “followed best practices recommended by industry authorities.” The court also credited the testimony of an expert witness on the board’s behalf. In a client alert, lawyers from Dechert write that the Tenth Circuit’s opinion was notable both for its complete repudiation of the plaintiffs’ claims and for the emphasis it placed on the care and conscientiousness of the board of the funds in question.