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In re Blackrock Mutual Funds Advisory Fee Litigation

United States District Court, D. New Jersey

June 13, 2018

In re BLACKROCK MUTUAL FUNDS ADVISORY FEE LITIGATION Global Allocation Fee Schedule (2013-2015) AUM Percentage (%) of AUM Equity Dividend Fee Schedule (2013) AUM Percentage (%) of AUM Eguity Dividend Fee Schedule (2014-15) AUM Percentage (%) of AUM The Independent Advisers' Advison Fees for the Subadvised Funds Allian z GA Fund Transameric a GA Fund Jackson GA Fund MassMutua 1GA Fund VALI CED Fund Lincol n ED Fund MassMutua l ED Fund

          REDACTED OPINION

          Hon. Freda L. Wolfson United States District Judge.

         Defendants BlackRock Advisors, LLC ("BRA"), BlackRock Investment Management, LLC ("BRIM"), and BlackRock International Limited ("BRIL") (collectively, "BlackRock" or "Defendants")[1] move for summary judgment, pursuant to Federal Rule of Civil Procedure 56, on Plaintiffs Owen Clancy, Cindy Tarchis, and Brendan Foote's (collectively, "Plaintiffs") Consolidated Complaint (the "Complaint"). Plaintiffs are shareholders in two mutual funds managed by BRA, the BlackRock Global Allocation Fund, Inc. ("Global Allocation") and the BlackRock Equity Dividend Fund ("Equity Dividend") (collectively, the "Funds"). The Complaint asserts claims under § 36(b) of the Investment Company Act of 1940 (the "ICA" or "Act"), 15 U.S.C. § 80a-35(b), alleging that Defendants breached their fiduciary duties by receiving excessive investment advisory fees from the Funds. Plaintiffs oppose Defendants' Motion, and have also moved to preclude Defendants from relying on certain evidence and arguments, pursuant to Federal Rule of Civil Procedure 3 7, on the ground that Plaintiffs failed to produce complete discovery as to those topics.

         This Court held oral argument on Defendants' Motion on May 29, 2018. For the reasons that follow, Defendants' Motion for Summary Judgment is granted, insofar as Defendants seek a ruling that the decision of the Funds' board of directors and board of trustees to approve BRA's advisory fees with the Funds is entitled to substantial deference, and denied, insofar as Defendants seek the dismissal of Plaintiffs' claims. Plaintiffs' Motion to Preclude is denied without prejudice.

         I. BACKGROUND[2]

         A. The Parties

         Plaintiff Owen Clancy has been a shareholder of Global Allocation since October 2011, and filed suit against Defendants on February 21, 2014. Defendants' Local Civil Rule 56.1 Statement of Material Facts Not in Dispute ("SOF"), 1.[3] Plaintiff Brendan Foote has been a shareholder of Global Allocation since June 2012, and commenced his case against Defendants on March 28, 2014. Id. at 2. Plaintiff Cynthia Tarchis has been a shareholder of Global Allocation since 1993 and Equity Dividend since 2012. Id. at 3. Tarchis joined this action on June 16, 2015. Id.

         BlackRock was established in 1988, and is one of the world's largest investment advisers, with over $4 trillion in assets under management ("AUM"). Id. at 20. BlackRock provides investment advice and invests capital on behalf of a broad array of clients through various investment products, including open-end and closed-end mutual funds, exchange-traded funds ("ETFs"), and other pooled investment vehicles. Id. at 21.

         B. The Funds

         The Funds are open-end mutual funds, [4] registered with the United States Securities and Exchange Commission (the "Commission" or "SEC") under the ICA. Id. at ¶ 4. Global Allocation began offering shares for sale to the public on February 3, 1989. Id. at ¶ 8. From February 21, 2013 through November 2015 (the "Relevant Period"), [5] Global Allocation had AUM of between $51 billion and $58 billion. Id. at ¶¶ 12-13. Equity Dividend began offering shares for sale to the public on November 25, 1987. Id. at ¶ 14. During the Relevant Period, Equity Dividend managed between $20 billion and $30 billion in assets. Id. at ¶ 19.

         1. The Funds' Investment Management Agreements with BRA

         As with most mutual funds, the Funds do not have employees or facilities of their own. Plaintiffs' Supplemental Statement of Disputed Material Facts ("PSSOF"), ¶ 5. Pursuant to investment management agreements ("IMAs") with Global Allocation and Equity Dividend, BRA, a subsidiary of BlackRock, serves as the investment adviser to the Funds. SOF ¶¶ 26-27. The IMAs are reviewed annually, and are subject to the approval of Global Allocation's board of directors and Equity Dividend's board of trustees (collectively, the "Board").[6] Id. at ¶ 27. Pursuant to the IMAs, BRA provides investment advisory services[7] to the Funds, including: (i) "supervising] and manag[ing] the investment and reinvestment of the [Funds'] assets"; (ii) "supervising] continuously the investment program of the [Funds] and the composition of [their] investment portfolio[ s ]"; (iii) "arrang[ing] .. . for the purchase and sale of securities and other assets held in the investment portfolio of the [Funds]"; (iv) "provid[ing] investment research to the [Funds]"; and (v) "select[ing] brokers" to execute the transactions for the [Funds]." PSSOF 20; Certification of Andrew Muscato in Support of Defendants' Motion for Summary Judgment ("Muscato Cert."), Ex. 14, GA Fund IMA at §§ 2, 4(b)(i); Muscato Cert., Ex. 15, ED Fund IMA at §§ 2, 4(b)(i).

         In exchange for providing advisory services to the Funds, the IMAs require the Funds to pay BRA an annual advisory fee (the "Advisory Fee"). SOF 29. The Advisory Fee is calculated as a percentage of the Funds' AUM, pursuant to a fee schedule containing "breakpoints, " which operate to reduce BRA's Advisory Fee as the Funds' AUM increase. Id. The following table depicts Global Allocation's fee schedule during the Relevant Period:

Global Allocation Fee Schedule (2013-2015)
AUM
Percentage (%) of AUM

Up to $10 billion

.75%

$10 billion to $15 billion

.69%

$15 billion to $20 billion

.68%

$20 billion to $25 billion

.67%

$25 billion to $30 billion

.65%

$30 billion to $40 billion

.63%

$40 billion to $60 billion

.62%

$60 billion to $80 billion

.61%

Over $80 billion

.60%

Id. at ¶ 68. Under this fee schedule, the effective Advisory Fee received by BRA from Global Allocation was .66% of AUM in 2013 and 2014, and .67% of AUM in 2015. Id. at ¶ 69. In total, Global Allocation paid BRA more than $1.2 billion in Advisory Fees during the Relevant Period ($412, 500, 349 in 2013 $441, 347, 281 in 2014 $407, 768, 884 in 2015). PSSOF ¶ 24. The pro rata amount of BRA's Advisory Fee allocable to each of the Fund's shareholders during the same period ranged between $6 and $7 for every $1, 000 invested. SOF ¶ 70.

         Likewise, under its IMA with Equity Dividend, BRA received an Advisory Fee calculated as a percentage of Equity Dividend's AUM, pursuant to a fee schedule that included breakpoints. Id. at ¶¶ 71-72. In 2013, BRA's Advisory Fee from Equity Dividend was calculated pursuant to the following fee schedule:

Equity Dividend Fee Schedule (2013)
AUM
Percentage (%) of AUM

Up to $8 billion

.60%

$8 billion to $10 billion

.56%

$10 billion to $12 billion

.54%

$12 billion to $17 billion

.52%

$17 billion to $25 billion

.51%

$25 billion to $35 billion

.50%

$35 billion to $50 billion

.49%

Over $50 billion

.48%

         Id. at 73. In 2014 and 2015, BRA's Advisory Fee from Equity Dividend was adjusted in accordance with the following fee schedule:

Eguity Dividend Fee Schedule (2014-15)
AUM
Percentage (%) of AUM

Up to $8 billion

.60%

$8 billion to $10 billion

.56%

$10 billion to $12 billion

.54%

$12 billion to $17 billion

.52%

$17 billion to $25 billion

.51%

$25 billion to $30 billion

.50%

$30 billion to $40 billion

.49%

Over $40 billion

.48%

Id. at 74. Under those fee schedules, the effective Advisory Fee received by BRA from Equity Dividend during the Relevant Period was .54% of AUM. Id. at 76. Equity Dividend paid BRA over $450 million in Advisory Fees during that time ($144, 192, 714 in 2013 $162, 300, 957 in 2014 $151, 855, 019 in 2015). PSSOF ¶25. The pro rata amount of BRA's Advisory Fee allocable to each of Equity Dividend's shareholders during the Relevant Period ranged between $5 and $6 for every $1, 000 invested. SOF 77.

         2. The Funds' Separate Expense Agreements with BRA

         Apart from BRA's Advisory Fee under the IMAs, the Funds also have separate agreements with BRA that provide for the payment of certain expenses incurred by BRA, including accounting, transfer agency, professional, and registration fees. Id. at 78. Pursuant to a Shareholders Administrative Services Agreement (the "SAS Agreement") with BRA, the Funds reimburse BRA for the expenses that it incurs in providing the personnel and infrastructure required to operate a Shareholder Service Center.[8] Id. at 79. Under the SAS Agreement, Global Allocation reimbursed BRA for $764, 594 of expenses in 2013, $543, 076 of expenses in 2014, and $601, 419 of expenses in 2015. Id. at 81. Additionally, Equity Dividend reimbursed BRA for $370, 634 of expenses in 2013, $133, 544 of expenses in 2014, and $191, 989 of expenses in 2015. Id.

         The Funds also have an Accounting Support Services Agreement (the "Accounting Agreement"), which requires the Funds to partially reimburse BRA for the pro rata share of expenses that BRA incurs in providing certain specified accounting services to the Funds, up to an annual maximum of $1.6 million in the aggregate. Id. at 83. The parties dispute whether the services provided pursuant to the Accounting Agreement overlap with the services that BRA renders to the Funds under the IMAs. See id.; PRSOF at 83. Under the Accounting Agreement, Global Allocation reimbursed BRA for $584, 806 of expenses in 2013 and $597, 630 of expenses in 2014. SOF 83. Equity Dividend reimbursed BRA for $300, 993 of expenses under the Accounting Agreement in 2013, and $306, 211 of expenses in 2014. Id. at 84. The expenses paid by the Funds under both the SAS Agreement and the Accounting Agreement required the Board's approval. Id.

         3. The Funds' Agreements with Third-Party Service Providers

         Through various agreements with the Funds, third-party service providers also assist in performing various operations necessary to operate the Funds. PSSOF 6. In that regard, under an Administrative Services Agreement (the "State Street Adm. Agreement") between the Funds and State Street Bank and Trust Company ("State Street"), State Street performs administrative[9] and accounting services[10] for the Funds. Id. at ¶¶ 28-30. The parties dispute the number of employees that provide services for the Funds under the State Street Adm. Agreement. Id. at ¶ 32; Defendants' Response to Plaintiffs' Supplemental Local Civil Rule 56.1 Statement ("DRSOF"), ¶ 32. The State Street Adm. Agreement requires the Funds to pay an annual fee to State Street that is calculated as a percentage of the Funds' AUM, plus additional monthly expenses. PSSOF ¶ 33. Under this agreement, Global Allocation paid State Street $19, 820, 722 in administrative fees from 2013 to 2016, and Equity Dividend paid State Street administrative fees of $9, 834, 041 during the same period. Id. at ¶¶ 34-35.

         The Funds also entered into a Transfer Agency and Shareholders Services Agreement (the "BNY Agreement") with BNY Mellon Investment Servicing (US) Inc. ("BNY"), pursuant to which BNY served as the Funds' transfer agent, registrar, dividend disbursing agent, and shareholder servicing agent during the Relevant Period. Id. at ¶ 37. According to Plaintiffs, the services that BNY performs for the Funds under the BNY Agreement include: preparing and certifying shareholder lists in conjunction with proxy solicitations; processing and accounting for purchases and redemptions of the Funds' shares, dividends, and distributions; mailing all communications by the Funds to its shareholders; tracking the cumulative effects (gains/losses) of as-of transactions on the Funds' net asset value ("NAV"); and maintaining accurate records of shareholder accounts.[11] Id. at¶38. Plaintiffs assert that BNY also reports to the Funds on: NA V gains and losses; account activities; fund details; reconciliations; daily prices; correspondence tracking; Rule 12b-l and load commission reports; trade monitoring reports; and compliance certifications.[12] Id. at 39. For the fiscal years 2013 to 2016, Global Allocation paid BNY $208, 793, 219 in fees under the BNY Agreement. Id. at 41. During the same period, Equity Dividend paid BNY $150, 303, 636 in fees under the BNY Agreement. Id. at 42.

         Additionally, Global Allocation entered into an agreement (the "BBH Custodian Agreement") with Brown Brothers Harriman & Co. ("BBH"), under which BBH served as the custodian and foreign custody manager for Global Allocation during the Relevant Period. Id. at 44. Pursuant to the BBH Custodian Agreement, BBH provides custodial, [13] tax, [14] and proxy[15]services to Global Allocation. Id. at ¶¶ 45-48. For the fiscal years 2013 to 2016, Global Allocation paid BBH $22, 437, 592 in fees under the BBH Custodian Agreement. Id. at 50. Similarly, Equity Dividend entered into an agreement (the "State Street Custodian Agreement") with State Street, whereby State Street served as Equity Dividend's custodian during the Relevant Period. Id. at 52. Plaintiffs assert, and Defendants contest, that State Street performs substantially the same custodial services for Equity Dividend that BBH provides to Global Allocation. See Id. at 53; DRSOF 53. From 2013 to 2016, Equity Dividend paid State Street $4, 560, 375 in custodial fees under the State Street Custodian Agreement. PSSOF 55.

         Finally, the Funds have a distribution agreement (the "Distribution Agreement") with BlackRock Investments, Inc. ("BlackRock Investments"), pursuant to which BlackRock Investments serves as the principal underwriter and distributor for the Funds. Id. at 57. According to Plaintiffs, under the Distribution Agreement, BlackRock Investments is responsible fr sales and promotional activities for the Funds, including coordinating and overseeing distribution partners, maintenance of state registration, monitoring market timing, and related distribution services.[16] Id. at 58. Pursuant to the Distribution Agreement, the Funds pay a distribution fee and service or account maintenance fee to BlackRock Investments. Id. at 59. For the fiscal years 2013 to 2016, Global Allocation paid BlackRock Investments $803, 669, 615 in service and distribution fees under the Distribution Agreement. Id. at 60.

         C. Board Oversight of the Funds

         1. The Board

         BRA and the Funds are overseen by the Board. SOF 30. During the Relevant Period, the Board was comprised of thirteen individuals. Id. at 31. From a statutory perspective, ten of the thirteen Board members (collectively, the "Independent Trustees") were not "interested persons, " as that term is defined under § 80a of the ICA. Id. at ¶ 31; see 15 U.S.C. §§ 80a-10(a) and 80a-2(a)(l 9(B). The Board is comprised of individuals hailing from diverse professional backgrounds, including chief executive officers of various corporations, law firm partners, firmer high-ranking government officials, and a graduate professor at Harvard University's Graduate School of Business Administration. SOF, ¶34. The Chairman of the Board, Robert Hernandez (the "Board Chairman"), is an Independent Trustee and has served as a member of the Board for ten years. Id. at ¶ 32. The Board has five standing committees: the Audit Committee, the Governance and Nominating Committee, the Compliance Committee, the Performance Oversight Committee, and the Executive Committee (collectively, the "Standing Committees"). Id. at ¶ 53. Each Standing Committee is chaired by an Independent Trustee, and with the exception of the Executive Committee, the Standing Committees met regularly each quarter throughout the Relevant Period to discuss action items pertaining to their respective responsibilities. Id. at ¶¶ 53-64.

         Under the ICA, the Board is charged with overseeing various aspects of the Funds' management, including reviewing and approving the Funds' IMAs and BRA's Advisory Fee on an annual basis. Id. at ¶ 33. During the Relevant Period, the Board met regularly, holding two-day meetings each quarter, and additional ad-hoc in person or telephonic meetings as necessary. Id. at ¶¶ 39-41. In the course of performing its oversight responsibilities, the Board received and reviewed voluminous materials pertaining to various aspects of the Funds' operations and performance throughout the Relevant Period, as well as additional information on a broad range of new developments and emerging issues. Id. at ¶¶ 42-44. For example, the Board received an update regarding BlackRock's pricing philosophy, including the factors that BRA considers annually when formulating its Advisory Fee proposal to the Board. Id. at ¶ 44. The Board also met with senior BlackRock personnel, including its Chairman and Chief Executive Officer, the heads of its investment divisions, and the Funds' portfolio managers. Id. at ¶¶ 45-50. For example, in May 2015, the Board met with the team responsible for Global Allocation's investment management to discuss, among other things, Global Allocation's performance relative to peer funds managed by BRA's competitors. Id. at ¶ 46. During the Relevant Period, the Board also met with leaders in various fields of interest, including a 2013 presentation from the Chairman of the SEC. Id. at ¶ 52.

         The Board receives assistance from various third-party service providers in discharging its duties under the ICA. Id. at ¶ 35. In that regard, during the Relevant Period, the law firm of Debevoise & Plimpton LLP (the "Board's Counsel"), in its role as counsel to the Board, provided advice to the Board regarding, inter alia, issues related to the renewal of the Funds' IMAs with BRA. Id. at ¶¶ 36, 93. During the same period, the law firm of Willkie Farr & Gallagher LLP (the "Funds' Counsel") served as counsel to the Funds, providing legal advice regarding the duties of the Board in connection with reviewing the contracts between the Funds and their service providers. Id. at ¶ 37. Moreover, the Board received analysis and information from the following third-party service providers: (i) Lipper, Inc. ("Lipper"), a financial services company that provided the Board with data and information regarding the Funds' performance and fees relative to peer funds; (ii) Moraingstar, Inc. ("Moraingstar"), an investment management company that provided the Board with analysis and ratings of the Funds' performance relative to peer funds [17]; (iii) PricewaterhouseCoopers ("PwC"), a third-party firm that, at least on one occasion, provided the Board with analysis of the cost allocation methodology employed by BRA to estimate its profitability in managing the Funds; and (iv) Ernst & Young LLP ("E&Y"), a third-party firm that provided analysis of the structure of BRA's Advisory Fee. Id. at 38.

         2. The Board's Process for Approving BRA 's Advisory Fee

         In addition to its quarterly meetings, the Board met each April during the Relevant Period to consider, among other things, whether to renew the Funds' IMAs with BRA (the "Fee Approval Meeting").[18] Id. at ¶¶ 39-41. Planning for the relevant Fee Approval Meetings occurred months in advance, and involved BlackRock, the Board's Counsel, and Lipper. Id. at 88. Prior to the Fee Approval Meetings, the Board received extensive information, spanning more than 25, 000 pages of material potentially relevant to BRA's Advisory Fee, including comparative fee and performance data from Lipper, and information on each of the factors outlined in Gartenberg v. Merrill Lynch Asset Mgmt., Inc., 694 F.2d 923 (2d Cir. 1982)[19] and adopted in Jones v. Harris Assocs. L.P., 559 U.S. 335 (2010).[20] Id. at ¶¶ 95, 97. As the Board Chairman testified, in deciding whether to approve BRA's proposed Advisory Fee, the Board looked at "the Gartenberg factors and anything else we consider[ ed] relevant, " including each of the Gartenberg factors. Deposition Transcript of Robert Hernandez ("Hernandez Dep."), 35:3-11. At a subsequent meeting, usually held in May, the Board voted on whether to renew BRA's Advisory Fee. SOF 87.

         During and after the Fee Approval Meetings that were held in 2013, 2014, and 2015, the Board and the Board's Counsel also submitted to BlackRock written questions and requests for additional information and materials.[21] Id. at 142. During the Relevant Period, BlackRock provided over 300 pages of written responses and materials to the Board's follow-up inquiries. Id. at 143. For example, in 2014, the Board asked BlackRock for additional information regarding the fees that BlackRock receives for advisory services rendered to institutional investors, and requested that BlackRock perform a review of the advisory fee breakpoints contained in fee schedules across all funds under BlackRock's management. Id. at 145. The parties dispute the adequacy of BlackRock's responses to these inquiries. See id.; PRSOF 145.

         On at least two occasions during the Relevant Period, the Board negotiated to obtain fee concessions in favor of shareholders. First, in 2014, the Board asked BlackRock to consider a voluntary fee reduction as a result of Equity Dividend's performance and BRA's estimated profit margin. SOF 146. Although BlackRock initially rejected the Board's overtures, - based on its belief that Equity Dividend was priced competitively and the fact that additional breakpoints had been added to Equity Dividend's fee schedule in recent years - BlackRock ultimately agreed to modify the breakpoints in Equity Dividend's fee schedule to provide for reductions in BRA's Advisory Fee. See Id. at 146. Additionally, in 2015, the Board asked BlackRock to agree to a temporary reduction in BRA's Advisory Fee for the Funds. SOF 148. After initially objecting to these proposed fee reductions, BlackRock later agreed to temporarily waive a portion (.025%) of Equity Dividend's management fee. Id. at 148.

         D. BRA's Services to the Funds

         To operate the Funds, BRA relies on a team of investment and non-investment personnel, including portfolio managers, senior analysts, quantitative strategists, marketing and communications strategists, research analysts, and administrative staff. Se Id. at ¶¶ 149-150. It is undisputed that BRA provides certain investment advisory services to the Funds in exchange fr the Advisory Fee, including investment research, securities selection and trading, and risk management. Id. at 149. The parties diverge, however, on the degree to which BRA, as opposed to third-party firms, provides the additional services necessary to operate the Funds, and as to whether BRA is compensated for any such additional services under the Advisory Fee, as opposed to under separate agreements.

         According to Defendants, in addition to investment advisory services, BRA performs or oversees the following services (collectively, the "Support Services") required to operate the Funds: (i) providing accounting services, including the publication and verification of Funds' NAY, id. at ¶¶ 154-58; (ii) designing and implementing the Funds' compliance program, id. at ¶¶ 159-176; (iii) providing legal services to the Funds, id. at ¶¶ 177-84; (iv) supporting the Board in performing its reporting and management duties, id. at ¶¶ 185-97; (v) hiring and overseeing the Funds' service providers, including the Funds' accountant, custodian, and transfer agent, id. at ¶¶ 198-222; (vi) coordinating and ensuring compliance with the Funds' regulatory reporting and financial disclosure requirements, id. at ¶¶ 223-30; (vii) overseeing the Funds' distribution partners and the distribution of the Funds' shares through various distribution channels, id. at ¶¶ 231-34; (viii) managing the Funds' dividend requirements, id. at ¶¶ 235-36; (ix) complying and managing tax issues confronted by the Funds, id. at ¶¶ 237-39; and (x) providing recordkeeping services. Id. at ¶¶ 241-43. Defendants contend that BRA performs these Support Services in exchange for the Advisory Fee.

         Conversely, Plaintiffs maintain that the Support Services are not performed by BRA under the IMAs or in exchange for the Advisory Fee. PSSOF¶ 27. In that regard, Plaintiffs point to the language of the Funds' contracts with third-party service providers - including the State Street Adm. Agreement, the BNY Agreement, the BBH Custodian Agreement, the State Street Custodian Agreement, and the Distribution Agreement - and contend that many of the Support Services identified by Defendants are actually provided by third-party service providers, fr a separate fee. See Id. at ¶¶ 2 7-61.

         Moreover, Plaintiffs assert that, to the extent BRA plays a role in providing any of the Support Services to the Funds, the Funds pay fees and expenses to BRA separate from the Advisory Fee. See Id. at ¶¶ 62-78. Specifically, Plaintiffs claim that, pursuant to certain reimbursement provisions in the IMAs, BRA receives separate compensation for various Support Services, including separate compensation for compliance services such as the compensation of the Funds' Chief Compliance Officer ("CCO"). See Id. at ¶¶ 62-67. Plaintiffs also assert that the Funds have reimbursed BRA fr accounting services under the terms of the Accounting Agreement, and have reimbursed BRA for shareholder services pursuant to the SAS Agreement. See Id. at ¶¶ 68-73. Finally, Plaintiffs contend that the Funds pay directly for certain operating expenses, including for reimbursement of the CCO's compensation and disinterested directors' fees, printing expenses, professional fees, registration fees, and other miscellaneous expenses. See Id. at ¶¶ 74-76. In total, Plaintiffs assert that, in addition to and apart from the Advisory Fee, Global Allocation paid BRA and third-party service providers approximately $846, 095, 752 in fees and expenses during the Relevant Period, with Equity Dividend paying approximately $330, 617, 830 in additional expenses and fees over the same timeframe. Id. at ¶¶ 77-78.

         E. The Subadvised Funds

         The core of this case surrounds the scope and extent of the services that BRIM, an affiliate of BlackRock, performs as a subadvisor for seven mutual funds (collectively, the "Subadvised Funds")[22] organized and sponsored by various financial institutions unaffiliated with BlackRock, which serve as the investment advisers for the Subadvised Funds (collectively, the "Independent Advisers").[23] SOF ¶¶ 244-45. Like the Funds, the Subadvised Funds are open-end mutual funds registered under the ICA. PSSOF¶ 80. Each Subadvised Fund has its own board of directors or trustees. SOF ¶¶ 253, 255. The Subadvised Funds retain their own service providers, including advisers, transfer agents, and custodians. Id. at ¶ 255, PSSOF¶ 83. These service providers conduct the Subadvised Funds' operations under the oversight of the Independent Advisers. Id. at ¶ 255; PSSOF¶ 83.

         Through subadvisory agreements with the Independent Advisers, BRIM renders subadvisory services to the Subadvised Funds in exchange for a fee (the "Subadvisory Fee"). SOF ¶ 244; PSSOF ¶ 85. The parties agree that BRIM performs substantially the same investment advisory (i.e., portfolio management) services for the Subadvised Funds that BRA performs for the Funds, including using substantially the same investment strategies, research and analysis, and systems, technology, and other resources in providing investment advisory services. SOF ¶¶ 261-63; PRSOF ¶¶ 261-63. Outside of portfolio management services, however, the parties significantly dispute the scope and extent of the subadvisory services that BRIM renders to the Subadvised Funds. See SOF ¶¶ 257-93; PRSOF ¶¶ 257-93; PSSOF ¶¶ 88-126; DRSOF ¶¶ 88-126. Specifically, the parties dispute whether BRIM performs the same Support Services, such as risk management, legal and compliance services, shareholder services, and accounting services, for the Subadvised Funds that BRA performs for the Funds, and, to the extent that BRIM does perform any of the same Support Services for the Subadvised Funds, the parties dispute the scope and extent of BRIM's role in providing those services. See SOF ¶¶ 257-93; PRSOF ¶¶ 257-93; PSSOF ¶¶ 88-126; DRSOF ¶¶ 88-126.

         In the same way that BRA receives an Advisory Fee from the Funds, the Independent Advisers receive an advisory fee fr performing advisory services for the Subadvised Funds. SOF 256. During the Relevant period, those fees were as follows:

The Independent Advisers' Advison Fees for the Subadvised Funds
Allian
z GA
Fund
Transameric
a GA Fund
Jackson
GA
Fund
MassMutua
1GA
Fund
VALI
CED
Fund
Lincol
n ED
Fund[24]
MassMutua
l ED Fund

2013

.75%

.68%

.74%

.80%

.73%

.75%

.65%

2014

.75%

.72%

.72%

.80%

.72%

.74%

.65%

2015

.75%

.69%

.72%

.78%

.72%

.73%

.65%

SOF ¶256.

         Additionally, as noted, BRIM received a Subadvisory Fee for providing services to the Subadvised Funds. See Id. at SOF ¶¶ 294-303. During the Relevant Period, BRIM's Subadvisory Fee was calculated pursuant to the following fee schedules:

Jackson GA Fund and the Allianz GA Fund. .42% for the first $500 million of AUM; .40% for AUM between $500 million and $1 billion; and .375% for AUM over $1.5 billion. Id. at ¶¶ 294-95.
Transamerica GA Fund . .44% for the first $100 million of AUM and .32% for AUM over $100 million.[25] Id. at 296.
MassMutual GA Fund . .60% of AUM up to $500 million and .40% of AUM over $500 million. Id. at ¶ 297.
Lincoln ED Fund. Before October 2015, BRIM received .35% AUM up to $250 million; .325% of AUM from $250 million to $500 million; .30% of AUM from $500 million to $1 billion; and .275% of AUM over $1 billion. Id. at¶298. After October 2015, BRIM received .325% of AUM up to $250 million; .305% of AUM from $250 million to $500 million; .275% of AUM from $500 million to $1 billion; and .255% of AUM over $1 billion. Id. at 299.
MassMutual ED Fund. .375% of AUM up to $250 million; .35% of AUM from $250 million to $500 million; .325% of AUM from $500 million to $1 billion; and .30% of AUM over $1 billion.[26] Id. at 300.
V ALIC ED Fund: BRIM received .35% AUM up to $250 million; .325% AUM from $250 million to $500 million; .30% AUM from $500 million to $1 billion; and .275% AUM over $1 billion.[27] Id. at 301.

         II. PROCEDURAL HISTORY

         Following the consolidation of their various individual actions, Plaintiffs filed the Consolidated Complaint on May 27, 2014, asserting two claims against Defendants under § 36(b) of the ICA. ECF Nos. 19, 27. On September 25, 2017, Defendants filed the instant Motion for Summary Judgment. ECF Nos. 100-01. Defendants' Motion has been fully briefed. ECF Nos. 110, 117. Plaintiffs filed a Motion to Preclude Defendants from relying upon certain evidence on November 11, 2017, which Motion has also been fully briefed. ECF Nos. 108-09, 115-16, 119. On May 29, 2018 this Court held oral argument on Defendants' Motion. ECF No. 144.

         III. STANDARD OF REVIEW

         Summary judgment is appropriate where the Court is satisfied that "there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law." FED. R. Crv. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1366 (3d Cir. 1996). A factual dispute is genuine only if there is "a sufficient evidentiary basis on which a reasonable jury could find for the non-moving party, " and it is material only if it has the ability to "affect the outcome of the suit under governing law." Kaucher v. County of Bucks, 455 F .3d 418, 423 (3d Cir. 2006); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment. Anderson, 477 U.S. at 248. "In considering a motion for summary judgment, a district court may not make credibility determinations or engage in any weighing of the evidence; instead, the non-moving party's evidence 'is to be believed and all justifiable inferences are to be drawn in his favor."' Marino v. Ids. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004) (citation omitted).

         The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex, 4 77 U.S. at 322. If the movant satisfies its initial burden, the nonmoving party cannot rest upon mere allegations in the pleadings to withstand summary judgment; rather, the nonmoving party "must counter with specific facts which demonstrate that there exists a genuine issue for trial." Orson, 79 F.3d at 1366. Specifically, the nonmoving party "must make a showing sufficient to establish the existence of each element of his case on which he will bear the burden of proof at trial." Huangy, BP Amoco Corp, 271 F.3d 560, 564 (3d Cir. 2001); see Orsatti v. New Jersey State Police, 71 F.3d 480, 484 (3d Cir. 1995) ("[A] plaintiff cannot resist a properly supported motion for summary judgment merely by restating the allegations of his complaint, but must point to concrete evidence in the record that supports each and every essential element of his case."). Thus, "a mere 'scintilla of evidence' in the nonmovant's favor" is insufficient to create a genuine issue of fact." Ramara, Inc. v. Wesiield Ins. Co., 814 F.3d 660, 666 (3d Cir. 2016) (citation omitted); see Lackey v. Heart of Lancaster Reg'l Med. Ctr., 704 Fed.Appx. 41, 45 (3d Cir. 2017) ("There is a genuine dispute of material fact if the evidence is sufficient for a reasonable factfinder to return a verdict for the nonmoving party."). Ultimately, it is not the Court's role to make findings of fact, but to analyze the facts presented and determine if a reasonable jury could return a verdict for the nonmoving party. See Brooks v. Kyler, 204 F.3d 102, 105 n. 5 (3d Cir. 2000).

         IV. MOTION FOR SUMMARY JUDGMENT

         A. The Investment Company Act of 1940

         The Investment Company Act of 1940 "regulates investment companies, including mutual funds." Jones, 559 U.S. at 338. A mutual fund, which may have no employees of its own, is typically created and managed by a separate entity known as an investment adviser. Id.; Sivolella v. AXA Equitable Life Ins. Co., No. 11-4194, 2016 WL 4487857, at *1 (D.N.J. Aug. 25, 2016). The investment adviser selects the fund's directors, manages its investments, and provides additional managerial services for the fund. See Jones, 559 U.S. at 338; Burks v. Lasker, 441 U.S. 471, 481 (1979). Because the investment adviser often provides the fund with almost all managerial services, including supervision of the fund's daily operations and selection of its board members, "a mutual fund cannot, as a practical matter sever its relationship with the adviser. Therefore, 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 of the American economy." Burks, 441 U.S. at 481 (citing S. REP. No. 91-184, p. 5 (1969)); see Daily Income Fund, Inc. v. Fox, 464 U.S. 523, 536 (1984).

         Congress enacted the ICA in response to "the potential for abuse inherent in the structure of investment companies." Burks, 441 U.S. at 480. "Recognizing that the relationship between a find and its investment adviser was 'fraught with potential conflicts of interest, "' the ICA provides various protections to mutual fund shareholders. Jones, 559 U.S. at 339 (quoting Daily Income Fund, 464 U.S. at 536). Among other things, the ICA regulates transactions between investment funds and their advisers, limits the number of persons affiliated with the investment adviser who may serve on the fund's board of directors, and requires that the board of directors and shareholders of the fund approve the fees received by the fund's investment advisers. See Jones, 559 U.S. at 339; Daily Income Fund, 464 U.S. at 537.

         Mutual funds enjoyed enormous growth in the years following the passage of the ICA, "prompting a number of studies of the effectiveness of the Act in protecting investors." Daily Income Fund, 464 U.S. at 537. In particular, several studies commissioned or authored by the SEC "identified problems relating to the independence of investment company boards and the compensation received by investment advisers." Jones, 559 U.S. at 339. As a response to those issues, Congress amended the ICA in 1970, bolstering shareholder protections in two primary ways. Id.

         First, recognizing that scrutiny of investment adviser compensation by a fully informed, independent board of directors serves as the principal check on conflicts of interest within mutual funds, the amendments imposed heightened requirements for independence on the board. See Id. In that regard, the amendments provided that no more than sixty percent of a fund's board of directors may be "persons who are interested persons of such registered company, " i.e., persons who have an interest in or affiliation with the investment adviser.[28] 15 U.S.C. § 80a-10(a); Jones, 559 U.S. at 339. The ICA assigned those board members "a host of special responsibilities involving supervision of management and financial auditing." Burks, 441 U.S. at 483. For example, the independent directors "must 'review and approve the contracts of the investment adviser, ' annually, and a majority of these directors must approve an adviser's compensation." Jones, 559 U.S. at 340 (quoting Burks, 441 U.S. at 483); see 15 U.S.C. § 80a-15(c).

         Second, and most relevant to the instant action, the ICA "imposed upon investment advisers a 'fiduciary duty' with respect to compensation received from a mutual fund, and granted individual investors a private right of action for breach of that duty." Jones, 559 U.S. at 340 (citing 15 U.S.C. § 80a-35(b)). In that regard, prior to the adoption of the 1970 amendments, "shareholders challenging investment adviser fees under state law were required to meet common-law standards of corporate waste, under which an unreasonable or unfair fee might be approved unless the court deemed it 'unconscionable' or 'shocking, ' and security holders challenging adviser fees under the [ICA] itself had been required to prove gross abuse of trust." Jones, 559 U.S. at 340 (citation and internal quotation marks omitted). The "fiduciary duty" standard contained in§ 36(b) represented a "delicate compromise, " because, even though it is "more favorable to shareholders than the previously available remedies, " it does not "permit a compensation agreement to be reviewed in court for 'reasonableness.'" Jones, 559 U.S. at 341. Among other features, § 36(b) places the burden of proving a breach of fiduciary duty on the plaintiff. See 15 U.S.C. § 80a-35(b).

         B. Section 36(b) Excessive Fee Claims

         In the case at bar, Plaintiffs challenge BRA's Advisory Fee as excessive under § 36(b) of the ICA. In Jones, the Supreme Court resolved a split among the Courts of Appeals over the proper standard for claims brought pursuant to§ 36(b). See 559 U.S. at 343. In determining the meaning of the phrase "fiduciary duty" within the context of§ 36(b), the Jones Court explained that "' [ t ]he essence of the test is whether or not under all the circumstances the transaction carries the earmarks of an arm's length bargain."' Id. at 347 (quoting Pepper v. Litton, 308 U.S. 295, 299 (1939)). Thus, for liability to attach 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, 559 U.S. at 346.

         In determining whether an investment adviser has breached its fiduciary duty by charging an excessive fee under § 3 6(b), Jones teaches that "all relevant circumstances be taken into account, " including the factors set forth in Gartenberg v. Merrill Lynch Asset Mgmt., Inc., 694 F.2d 923 (2d Cir. 1982). Jones, 559 U.S. at 347; see Gallus v. Ameriprise Fin., Inc., 675 F.3d 1173, 1178 (8th Cir. 2012) ("[A]II relevant circumstances must be taken into account, and the benchmark for reviewing challenged fees is 'the range of fees that might result from arm's-length bargaining."') (citation omitted). The Gartenberg factors include: (1) the nature and quality of the services provided to fund shareholders; (2) the profitability of the fund to the adviser; (3) fall-out benefits - i.e., collateral benefits accruing to the investment adviser due to the existence of the fund; (4) economies of scale; (5) comparative fee structures; and (6) the independence and conscientiousness of the trustees. See Jones, 559 U.S. at 345 n. 5 (citing Gartenberg, 694 F.2d at 929-32).

         Of particular note, the Jones Court explained that Gartenberg s approach, which directs courts to consider the independence and conscientiousness of the board of directors in its decision to approve the adviser's fee, properly "reflects § 36(b)'s place in the [ICA's] statutory scheme." Jones, 559 U.S. at 348. In that regard, "scrutiny of investment adviser compensation by a fully informed mutual fund board is the 'cornerstone of the [ICA's] effort to control conflicts of interest within mutual funds.'" Jones, 559 U.S. at 348 (quoting Burks, 441 U.S. at 482). Specifically, the ICA places disinterested directors in the role of "independent watchdogs, " who furnish a check upon the relationship between mutual funds and their investment advisers. See Burks, 441 U.S. at 484. "To provide these directors with the information needed to judge whether an adviser's compensation is excessive, the Act requires advisers to furnish all information 'reasonably ... necessary to evaluate the terms' of the adviser's contract, and gives the SEC the authority to enforce that requirement." Jones, 559 U.S. at 348 (citing 15 U.S.C. §§ 80a-15(c) and 80a-41). Thus, Congress structured the ICA such that "actions under § 36(b), on the one hand, and directorial approval of adviser contracts, on the other, [would] act as independent checks on excessive fees." Daily Income Fund, 464 U.S. at 541; Jones, 559 U.S. at 348 ("Board scrutiny of adviser compensation and shareholder suits under § 36(b), are mutually reinforcing but independent mechanisms for controlling conflicts.").

         In recognition of the watchdog role imposed on disinterested directors, the Act directs courts to give board approval of an adviser's compensation "such consideration ... as is deemed appropriate under all the circumstances." 15 U.S.C. § 80a-35(b). Interpreting this statutory language, the Jones Court observed that a "measure of deference to a board's judgment may be appropriate in some instances, " but "the appropriate measure of deference varies depending on the circumstances." Jones, 559 U.S. at 349. "Where a board's process for negotiating and reviewing investment-adviser compensation is robust, a reviewing court should afford commensurate deference to the outcome of the bargaining process." Jones, 559 U.S. at 351 (emphasis added). Indeed, it would have been "paradoxical for Congress to have been willing to rely largely upon 'watchdogs' to protect shareholder interests and yet, where the 'watchdogs' have done precisely that, require that they be totally muzzled." Burks, 441 U.S. at 485. Thus, "if the disinterested directors considered the relevant factors, their decision to approve a particular fe agreement is entitled to considerable weight, even if a court might weigh the factors differently." Jones, 559 U.S. at 351.

         Conversely, "where the board's process was deficient or the adviser withheld important information, the court must take a more rigorous look at the outcome. When an investment adviser fails to disclose material information to the board, greater scrutiny is justified because the withheld information might have hampered the board's ability to function as 'an independent check upon the management."' Jones, 559 U.S. at 351-52 (quoting Burks, 441 U.S. at 484).

         Ultimately, however, "the standard for fiduciary breach under § 36(b) does not call for judicial second-guessing of informed board decisions" or "require courts to engage in a precise calculation of fees representative of arm's-length bargaining." Jones, 559 U.S. at 352. To the contrary, Congress' approach in§ 36(b) recognizes that that courts are ill-suited to render precise fees calculations. Id. at 353. As a result, although the conflicts of interest inherent in the structure of mutual funds warrant some judicial restraint "'upon the unfettered discretion of even disinterested mutual fund directors, ' ... they do not suggest that a court may supplant the judgment of disinterested directors apprised of all relevant information, without additional evidence that the fee exceeds the arm's-length range." Id. at 352 (quoting Burks, 441 U.S. at 481).

         Following Jones, plaintiffs bringing cases under § 36(b) of the ICA have, primarily, asserted one of two theories. Sean M. Murphy et al., Developments in Litigation Under Section 36(b) of the 1940 Act I (2017). First, in "manager of managers" cases, plaintiffs challenge an investment adviser's fees as excessive, based on allegations that, even though the adviser has delegated the majority of the services necessary to operate a fund to a subadviser, the adviser is receiving a fee much larger than the fee received by the subadviser for those same services. Id.; see, e.g., Kasilag v. Hartford Inv. Fin. Servs., LLC, No. 11-1083, 2017 WL 773880 (D.N.J. Feb. 28, 2017); Sivolella v. AXA Equitable Life Ins. Co., No. 11-4194, 2016 WL 4487857 (D.N.J. Aug. 25, 2016); Zehrer v. Harbor Capital Adiors, Inc., No. 14-789, 2018 WL 1293230 (N.D. Ill. Mar. 13, 2018). Second, in "reverse manager of managers" cases, plaintiffs allege that an investment adviser's fee is excessive because it is substantially higher than the subadvisory fee that the same adviser charges to perform substantially the same services as a subadviser for an independent third-party fund. MURPHY ET AL., supra, at 1; see, e.g., Goodman v. J.P. Morgan Iv. Mgmt., Inc., No. 14-414, 2018 WL 1247459 (S.D. Ohio Mar. 9, 2018); Pirundini v. J.P. Morgan Inv. Mgmt. Inc., No. 17-3070, 2018 WL 1084140 (S.D.N.Y. Feb. 14, 2018); Kennis v. Metro. W. Asset Mgmt., LLC, No. 15-8162, 2017 WL 8784 796 (CD. Cal. Sept. 22, 2017); Zoidis v. T. Rowe Price Assocs., Inc., No. 16-2786, 2017 WL 1196585 (D. Md. Mar. 31, 2017); In re Davis New York Venture Fund Fee Litig., No. 14-4318, 2015 WL 7301077 (S.D.N.Y. Nov. 18, 2015). This is a reverse manager of managers case.

         C. Deference to Board Approval

         The evaluation of an investment adviser's fiduciary duty "must take into account both procedure and substance, " and thus, the first phase of this Court's review requires it to "calibrat[e] the degree of deference" that is due the Board's decision to approve BRA' s Advisory Fee. Jones, 559 U.S. at 351-52; see Gallus, 675 F.3d at 1178 ("Although § 36(b) is 'sharply fcused' on whether the fees are excessive, we evaluate the fee-negotiation process to determine the degree of deference that is due a board's decision to approve the adviser's fees."). Unless the Board's process was deficient or BlackRock withheld material information from the Board, the Board's decision to approve BRA's Advisory Fee is entitled to considerable weight. Jones, 559 U.S. at 351. Because Plaintiffs have failed to raise a triable issue of fact regarding the Board's process for negotiating and reviewing BRA's Advisory Fee, the Court will accord the Board's decision to approve BRA's Advisory Fee substantial deference.

         To begin, the undisputed facts demonstrate that the Board's process for reviewing BRA's Advisory Fee was robust. In that regard, it is undisputed that, in addition to quarterly meetings, the Board, which was comprised of a supermajority of well-qualified individuals who met the statutory requirements for independence under 15 U.S.C. § 80a-10(a), held a Fee Approval Meeting each April to consider whether to approve BRA's Advisory Fee. See SOF 87. Planning for the Fee Approval Meetings occurred months in advance, and involved BlackRock, the Board's Counsel, and Lipper. Id. at 88. Both before and after the relevant Fee Approval Meetings, the Board received extensive information, comprising more than 25, 000 pages of material, relevant to BRA's Advisory Fee with the Funds, including comparative fee and performance data from Lipper and information on each of the Gartenberg factors. See Id. at ¶¶ 95, 97. In that regard, when asked what the Board considered in deciding whether or not to approve BRA's Advisory Fee, the Board Chairman testified as follows: "Short answer would be the Gartenberg factors and anything else we consider relevant." Hernandez Dep. at 35:3-11. The Board Chairman's testimony is corroborated by Global Allocation's October 31, 2015 Annual Report, which provides that:

In approving the continuation of the [IMA], the Board considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Fund and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Fund; (d) the Fund's costs to investors compared to the costs of Expense Peers and performance compared to the relevant performance comparison as previously discussed; (e) the sharing of potential economies of scale; (f) fll-out benefits to BlackRock and its affiliates as a result of its relationship with the Fund; and (g) other factors deemed relevant by the Board Members.

Muscato Cert., Ex. 2., Oct. 31, 2015 BlackRock Global Allocation Fund, Inc. Annual Report, BLKRK-CLANCY0098429, at 8493-95.

         Indeed, while, as discussed below, Plaintiffs contest the level of detail and information reviewed by the Board and argue that the Board "primarily considered the Lipper Materials it received in February when approving the Funds' fees, not the Gartenberg factors, " PRSOF ¶ 97 (emphasis in original), Plaintiffs do not dispute that the Gartenberg factors were, in fact, considered. See SOF ¶ 97; PRSOF ¶ 97. Specifically, although Plaintiffs contest the accuracy and reliability of many of the materials provided to the Board, it is undisputed that the Board reviewed the following information in connection with each of the Gartenberg factors:

Nature and Quality of BRA's Services. The Board reviewed data from Lipper comparing the Funds' performance to peer funds over one, three, five, and ten-year periods, as well as Morningstar's analysis of the Funds.[29] SOF ¶¶ 99-105. The Board also received presentations regarding BRA's advisory and non-advisory operations, including its corporate structure, investment personnel, and administrative personnel, as well as memoranda pertaining to BRA' s oversight of service providers. Id. at ¶¶ 107, 109.
Comparative Fees. The Board reviewed a memorandum (the "Fee Comparison Memorandum") each year apprising the Board of the services that BlackRock renders to investment vehicles other than the Funds, including the Subadvised Funds.[30] Id. at ¶¶ 114-15. The Board also reviewed comparative fee data prepared by Lipper regarding the BRA's Advisory Fee for the Funds compared to the advisory fees received by other investment advisers from comparable funds.[31] Id. at ¶¶ 116-18.
Fund Profitability. The Board received annual reports prepared by BlackRock regarding BlackRock's profitability (the "15(c) Profit Report"), including estimates of its company-wide profit margin and BRA's profit margin for its management of the Funds. Id. at, , 124-125. The materials disclosed three different measures of BRA's estimated profit[32]margin for the proceeding year for managing the Funds. See Id. at ¶¶ 126-27. In 2014, the Board retained PwC to review BlackRock's methodology for estimating its profitability from managing the Funds. Id. at 130. Based on its review, PwC determined that the process, methodologies, and disclosure practices employed by BlackRock to estimate those profit margins were aligned with PwC's guiding principles and industry practice. Id. at 131.
Economies of Scale. The Board received an annual memorandum prepared by BlackRock pertaining to whether BRA realized economies of scale, and the extent to which any realized benefits from economies of scale were shared with shareholders. For example, the memoranda explained how BRA shared economies of scale with the Funds and shareholders through breakpoints in BRA's Advisory Fee schedules.[33] The Board also requested, and received, at least one presentation regarding economies of scale. Id. at ¶¶ 132-38.
Fall-Out Benefits. The Board received a memorandum each year addressing "fall-out benefits"; i.e., the collateral benefits that accrued to BlackRock or its affiliates based on their relationship with the Funds. Id. at 141.

         The record also demonstrates that, after the relevant Fee Approval Meetings, the Board submitted follow-up questions to, and requested additional information from, BlackRock regarding the Board's review and approval of BRA's Advisory Fee, and that the Board received approximately 300 pages of materials in response to those inquiries. Id. at 143. Finally, prior to approving BRA's Advisory Fee, the Board negotiated to obtain at least one fee concession and additional breakpoints in BRA's fee schedule. Id. at ¶¶ 75, 144-48.

         Despite these extensive procedures for reviewing BRA's Advisory Fee, based on statements in the overview section of a 2014 document that was provided to the Board in connection with the renewal of BRA's IMA with the Funds (the "Contract Renewal Presentation"), Plaintiffs contend that the Board's process for reviewing fees was flawed. See PSSOF, 166 (citing Muscato Cert., Ex. 66, 2014 Contract Renewal Overview Presentation at BLKRK-CLANCY0000158). Specifically, Plaintiffs focus on a portion of the Contract Renewal Presentation titled, "Product Pricing Philosophy, " which provides as follows:

Open-end Funds in the XXXXX quartiles of their peer groups[34] are generally considered to be appropriately priced.
Funds persistently in the XXXXX quartile are considered "outliers, " and BlackRock will assess whether pricing should be adjusted, given the specific circumstances of the fund and competitive considerations.

Id. Relying on those statements, Plaintiffs argue that the Board's process was deficient, because it assumed that a fund is appropriately priced if it falls within the XXXXX quartile of its peer group, with no additional evaluation performed unless a fund is persistently in the XXXXX quartile. See Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion for Summary Judgment ("Pls.' Opp."), at 33. In that connection, Plaintiffs maintain that a "negotiating stance that seeks only to obtain a fee within the range of the Funds' peers-as opposed to a true arm's length negotiation to secure the lowest fee for the Funds' shareholders- is acquiescence, not a 'robust review process.'" Id.

         Plaintiffs' arguments regarding the Board's process for negotiating fees are unavailing, because the ICA does not impose a duty on the board of directors of a mutual fund to negotiate the lowest possible advisory fee as compensation for an investment adviser's services, and thus, the Board's purported failure to secure the lowest fees for the Funds' shareholders provides no basis for undermining the Board's decision to approve BRA's Advisory Fee. See Goodman, 2018 WL 1247459 at * 18 ("Section 36(b) does not create a duty that advisers and administrators receive the lowest possible fee amount as compensation for the services they provide."). Indeed, presented with facts closely resembling those at issue in this case, the court in Zehrer rejected the same argument, finding that the plaintiff failed to present a genuine dispute of fact as to the adequacy of the board's approval process. Zehrer, 2018 WL 1293230 at *7. In Zehrer, it was undisputed that the board: (i) was comprised of well-qualified, disinterested individuals; (ii) met numerous times throughout the year to review and approve the investment advisory agreements at issue; (iii) requested and reviewed materials relevant to all Gartenberg factors before approving those agreements; and (iv) negotiated over the terms of the advisory fee agreement, obtaining additional breakpoints on at least one occasion. Id. Despite these stipulated facts, the plaintiffs there argued that the court should not give deference to the board's decisions, in relevant part, because the board failed to negotiate each year for the lowest possible advisory fees. Id. The Zehrer court rejected the plaintiffs' critique of the board's process, finding that the board's "passive" stance towards negotiating further fee reductions or breakpoints was insufficient to undermine the board's process. Id. ("Even if the Board might have driven a harder bargain, the legal standard does not require that."). Similarly, here, the record shows that the Board considered each of the Gartenberg factors, and negotiated for fee concessions on behalf of the Funds. Under these circumstances, it is beyond dispute that the Board's process for reviewing and negotiating BRA's Advisory Fee with the Funds was robust.

         However, my finding that the Board's process for reviewing BRA's Advisory Fee was robust does not end the inquiry. Rather, I must still determine whether BRA failed to disclose material information to the Board, thereby hindering the Board's ability to function as an independent check on management. See Jones, 559 U.S. at 351-52. In arguing that the Board's approval is not entitled to deference in this case, Plaintiffs argue that deficiencies in the information that BlackRock provided to the Board rendered the Board insufficiently informed and unable to effectively negotiate BRA's Advisory Fee. See Pls.' Opp. at 31-32. Specifically, Plaintiffs contend that:

1. The Fee Comparison Memoranda that BlackRock provided to the Board comparing the services that BlackRock provides to its different clients, including to the Subadvised Funds, included a chart that failed to accurately portray the services provided by BRA to the Funds and by BRIM to the Subadvised Funds, see Id. at 31;
2. BlackRock provided only selective information regarding the distribution-related costs of providing investment management services to mutual funds and other types of clients, leading the Board to incorrectly conclude that the costs of managing the Funds ...

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