The Downside of Judicial Restraint: The (Non-)Effect of Jones V. Harris

Abstract

In Jones v. Harris, the Supreme Court rejected Judge Easterbrook's decision for the Seventh Circuit to narrow the grounds on which a mutual fund shareholder could win a fiduciary duty case against a mutual fund adviser under the Investment Company Act. In this article, I assess the likely impact of Jones and evaluate the Supreme Court's decision to exercise what might be called "judicial restraint" in its analysis. I show that the decision is unlikely to have a significant impact on fiduciary duty cases, and present preliminary data consistent with the idea that such cases are currently being brought against the wrong defendants (advisers to large funds) and not against the right ones (advisers charging extraordinarily high fees). I suggest that the "judicial restraint" exercised in Jones is in fact pernicious in this context, one in which courts must necessarily interpret a vague statute.