The U.S. Supreme Court overturned an appeals court ruling in the Jones v. Harris Associates excessive mutual fund fee case Tuesday and asked the trial court to reconsider the case.

A Chicago federal appeals court had rejected the case on grounds that such suits can only be heard when they involve fraud. The Supreme Court essentially ruled that this decision was made on the wrong grounds.

Dating back to 2004, the lawsuit claims that Harris Associates charged retail investors of its Oakmark Funds twice what it charged institutional investors.

In its ruling, the Supreme Court upheld Gartenberg v. Merrill Lynch Asset Management, a standard the mutual fund industry has embraced for protecting its practice of setting fees. The standard is the result of a 1982 decision by the Second U.S. Circuit Court of Appeals that allows fund company boards to determine fees as long as they are comparable to what would be set at an arm's-length distance.

The Chicago federal appeals court had ruled in Harris Associates' favor but not based on the Gartenberg standard. Instead, the court concluded that competition in the free market keeps mutual fund fees low, pointing out that thousands of mutual funds compete.

"The Supreme Court's unanimous decision brings stability and certainty for mutual funds, their directors and almost 90 million investors, by endorsing the Gartenberg standard under which courts have long considered claims of excessive fund advisory fees," said Investment Company Institute President and Chief Executive Officer Paul Schott Stevens. "This standard has well served the interests of funds and fund shareholders, who have seen their cost of investing fall by half in the last 20 years."

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