High court not swayed to regulate fund fees

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By Jesse J. Holland ASSOCIATED PRESS

Several Supreme Court justices seemed unsympathetic Monday to calls for the courts to get involved in reining in what investors are calling "excessive" fees on mutual funds, a popular investment vehicle for millions of Americans.

Some of the justices suggested that a regulatory agency might be in a better position to determine whether the fees are appropriate. They also said consumers always have recourse to switch to another fund if they aren't happy with the fee amounts.

"It makes a lot more sense to have the [Securities and Exchange Commission] regulate rates than to have courts do it, doesn't it?" Chief Justice John G. Roberts Jr. said during court arguments.

Mutual funds have become a popular way for Americans to invest, with more than $10 trillion in assets placed in mutual fund investment vehicles such as 529 college education plans or 401(k) retirements plans. The more money the adviser charges in fees, the less money goes into the mutual fund for investors.

In the case before the high court, Jerry N. Jones, Mary F. Jones and Arline Winerman sued Harris Associates LP, which advises on the Oakmark complex of mutual funds. The plaintiffs, who own shares in several Oakmark funds, say that Harris' fees are so high they violate the federal Investment Company Act, which is supposed to curb excessive investment adviser fees.

Courts previously have used a standard that investment advisers violate federal law when their fees are so disproportionately high they bear "no reasonable relationship to the services rendered." But lower courts dismissed this lawsuit, saying such suits cannot be brought unless shareholders can prove that the adviser misled the fund directors who approved the fee.

In other court action Monday, the justices:

*Refused to consider the case of a Yemeni detainee held at Guantanamo Bay, Cuba, despite a lower court order for his release. Without giving an explanation, the court said it would not take up the case of Yasin Muhammed Basardh, who was ruled not guilty of terrorism charges by a U.S. court some six months ago but remains incarcerated at Guantanamo.

*Left in place a judge's ruling that allowed prosecutors to charge a reputed Ku Klux Klansman with kidnapping more than 40 years after two black men were abducted and killed in rural Mississippi. The justices rejected a plea from the 5th U.S. Circuit Court of Appeals to rule on whether too much time had elapsed for the case against James Ford Seale to go forward.

*Turned away another appeal to stop the release of documents generated for sexual abuse lawsuits against priests in a Roman Catholic diocese in Connecticut. The court refused to hear an appeal from the Diocese of Bridgeport, which has been fighting for years to prevent the release of the documents. Last month, the justices refused to grant a delay, at least while they considered the diocese's full appeal.

*Will decide whether two people can do the work of five when it comes to resolving labor-management disputes in the workplace. The National Labor Relations Board, which for decades has had the responsibility to police many of these disputes, has operated with only two members - and three vacancies - for more than a year. The reason for this is that Democrats who retook control of Congress in 2006 objected to President George W. Bush's labor policies, and refused to confirm his nominees.