United States District Court, D. Maryland
CHRISTOPHER ZOIDIS, et al. Plaintiffs
T. ROWE PRICE ASSOCIATES, INC. Defendant
MEMORANDUM & ORDER DENYING MOTION TO
J. Garbis United States District Judge
Court has before it Defendant T. Rowe Price Associates,
Inc.'s Motion to Dismiss for Failure to State a Claim
[ECF No. 34] and the materials relating thereto submitted by
the parties. The Court has held a hearing and has had the
benefit of the arguments of counsel.
times relevant hereto, Defendant, T. Rowe Price Associates,
Inc. (“TRP”) has been an investment manager and
adviser to various mutual funds. Some 90 or so of these can
be referred to as “affiliated” mutual funds that
TRP created, and distributes and sells to the public. Also,
it advises funds created by others, e.g.,
John Hancock, and is compensated for services rendered to
are seven individuals who, at times pertinent hereto, have
owned shares in eight of the affiliated mutual
funds advised and managed by TRP (“the
on behalf of the Eight Funds, filed this case against TRP in
the Northern District of California asserting claims under
Section 36(b) of the Investment Company Act(“ICA”), 15 U.S.C. §
80a-35(b). Pursuant to 28 U.S.C. § 1404(a), the case has
been transferred to the District of Maryland, the location of
TRP's principal place of business. Order, ECF No. 48.
instant motion, TRP seeks dismissal of all claims pursuant to
Rule 12(b)(6)of the Federal Rules of Civil
motion to dismiss filed pursuant to Rule 12(b)(6) tests the
legal sufficiency of a complaint. A complaint need only
contain “‘a short and plain statement of the
claim showing that the pleader is entitled to relief, '
in order to ‘give the defendant fair notice of what the
. . . claim is and the grounds upon which it
rests.'” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007) (alteration in original) (citations
omitted). When evaluating a 12(b)(6) motion to dismiss, a
plaintiff's well-pleaded allegations are accepted as true
and the complaint is viewed in the light most favorable to
the plaintiff. However, conclusory statements or “a
formulaic recitation of the elements of a cause of action
will not [suffice].” Id. A complaint must
allege sufficient facts “to cross ‘the line
between possibility and plausibility of entitlement to
relief.'” Francis v. Giacomelli, 588 F.3d
186, 193 (4th Cir. 2009) (quoting Twombly, 550 U.S.
into whether a complaint states a plausible claim is
“‘a context-specific task that requires the
reviewing court to draw on its judicial experience and common
sense.'” Id. (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 679 (2009)). Thus, if “the
well-pleaded facts [contained within a complaint] do not
permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged - but it has not
‘show[n]' - ‘that the pleader is entitled to
relief.'” Id. (quoting Iqbal, 556
U.S. at 679 (alteration in original)).
requests the Court to take judicial notice of various
documents [ECF No. 35].
considering a Rule 12(b)(6) motion, the court may take
judicial notice of public records, including statutes, and
“may also ‘consider documents incorporated into
the complaint by reference, ' ‘as well as those
attached to the motion to dismiss, so long as they are
integral to the complaint and authentic.'”
United States ex rel. Oberg v. Pennsylvania Higher Educ.
Assistance Agency, 745 F.3d 131, 136 (4th Cir. 2014)
the Court will take judicial notice of those documents
incorporated into the complaint by reference (ECF No. 34,
Exs. A, B, D, and F). The Court will also take judicial
notice of public documents filed with the Securities and
Exchange Commission (“S.E.C.”) (ECF No. 34, Exs.
E, C, G, and H) and publicly filed court documents in
unrelated 36(b) actions (ECF No. 34, Exs. I and K).
the Court will not take judicial notice of the Morningstar
documents (ECF No. 34, Exs. J1-J8). These documents are not
referenced in the Complaint. Moreover, they are not
warranted to be accurate. Opp'n 1-2, ECF No. 36.
Investment Company Act Liability
36(b) of the ICA provides that an investment adviser, such as
TRP, has a fiduciary duty with regard to registered
investment companies, such as the Eight Funds, regarding
compensation for services.
[T]he investment adviser of a registered investment company
shall be deemed to have a fiduciary duty with respect to the
receipt of compensation for services . . . paid by such
registered investment company . . . to such investment
15 U.S.C. § 80a-35(b).
§ 36(b) provides that security holders, such as
plaintiffs, may sue the investment advisor for breach of that
An action may be brought under this subsection by . . . a
security holder of such registered investment company on
behalf of such company, against such investment adviser . . .
for breach of fiduciary duty in respect of such compensation
. . . paid by such registered investment company . . . to
such investment adviser . . . .
face liability under § 36(b), an investment adviser must
charge a fee that 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 v. Harris Assocs. L.P., 559
U.S. 335, 346 (2010); Migdal v. Rowe Price-Fleming
Int'l, Inc., 248 F.3d 321, 326 (4th Cir. 2001).
“That is, a breach [of fiduciary duty] occurs when the
fees charged are excessive or disproportionate to the
services rendered.” Migdal, 248 F.3d at
determine if fees are excessive or disproportionate to the
services rendered, it is necessary to consider all pertinent
facts and circumstances. Jones, 559 U.S. at 344. In
Jones, the Supreme Court noted the approach of the
Second Circuit utilized in Gartenberg v. Merrill Lynch
Asset Mgmt., ...