# *Jones v. Harris Associates*

September 4, 2009 • Legal Briefs 

By [Timothy Sandefur](https://www.cato.org/people/timothy-sandefur) and [Ilya Shapiro](https://www.cato.org/people/ilya-shapiro) 

[ 

Download PDF 

](https://www.cato.org/sites/cato.org/files/pubs/pdf/jones-v-harris-associates.pdf) 

Learn more about [Cato’s Amicus Briefs Program](/about/cato-amicus-program).

The Investment Company Act of 1940 places on investment advisers a fiduciary duty with respect to the compensation they receive for the services they provide their clients. In this case, shareholders in various mutual funds contend that their adviser’s fees were excessive and violated the ICA. The Seventh Circuit affirmed the judgment of the district court that the fees were not excessive but also expressly disapproved of the Second Circuit’s methodology for evaluating such claims. Judge Frank Easterbrook’s opinion explains that the ICA creates a fiduciary duty but does not act as a rate regulator, and that judicial price-setting does not accompany fiduciary duties. Judge Richard Posner, writing for five judges, dissented from the denial of an en banc rehearing. The Supreme Court agreed to review case to settle the circuit split. Cato filed an amicus brief in support of the investment adviser. Our brief makes three arguments: 1) All persons have a fundamental human right to whatever compensation their contracting partners freely and honestly choose to pay them; 2) courts have no power to second-guess the reasonableness of any salary or compensation agreement honestly and freely signed by both contracting parties; and 3) the ICA’s fiduciary duty requires only fair dealing, not any particular outcome.

[![Media Name: jones-v-harris-associates.jpg](/sites/cato.org/files/styles/serial_cover_phone/public/pubs/covers/jones-v-harris-associates.jpg?itok=npxgrbj6)](https://www.cato.org/sites/cato.org/files/pubs/pdf/jones-v-harris-associates.pdf) 

### Download This Legal Brief

##### *Jones v. Harris Associates* 

[ 

Download PDF 

](https://www.cato.org/sites/cato.org/files/pubs/pdf/jones-v-harris-associates.pdf) 

##### About the Authors 

[![Media Name: tim-sandefur-cropped.jpg](/sites/cato.org/files/styles/author_picture/public/authors/crops/tim-sandefur-cropped.jpg?itok=CejcNcC1)](/people/timothy-sandefur) 

##### [Timothy Sandefur](/people/timothy-sandefur)

Vice President for Legal Affairs, Scharf-Norton Center for Constitutional Litigation, Goldwater Institute

[ 

](https://twitter.com/timothysandefur) 

[![Ilya Shapiro](/sites/cato.org/files/styles/author_picture/public/2021-01/Ilya%20Shapiro.jpg?itok=m1_rdWBG)](/people/ilya-shapiro) 

##### [Ilya Shapiro](/people/ilya-shapiro)

Former Vice President and Director, Robert A. Levy Center for Constitutional Studies, Cato Institute

[![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) 
This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/). 

[ 

Download PDF 

](https://www.cato.org/sites/cato.org/files/pubs/pdf/jones-v-harris-associates.pdf)