NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

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No. 19-1557

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IN RE: BLACKROCK MUTUAL FUNDS ADVISORY FEE LITIGATION

 Owen Clancy, Cindy Tarchis and Brendan Foote,

 on behalf of the BlackRock Global Allocation Fund

 and the BlackRock Equity Dividend Fund,

 Appellants

 _______________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. Nos. 3-14-cv-01165, -01991, -02097, -02863, -01403)

District Judge: Honorable Freda L. Wolfson

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Submitted Under Third Circuit LAR 34.1(a)

January 22, 2020

Before: AMBRO*

, MATEY and FUENTES, Circuit Judges.

(Filed: May 28, 2020)

* The Honorable Thomas A. Ambro recused himself from this matter after 

submission but before this opinion was filed. This opinion is filed by a quorum of the panel 

pursuant to 28 U.S.C. § 46(d) and Third Circuit I.O.P. Chapter 12.
2

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OPINION†

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MATEY, Circuit Judge.

Some shareholders (the “Shareholders”) of two mutual funds found the fees charged 

by BlackRock, their investment advisor, a little too high. Perhaps far too high. In any case, 

their counsel registered their displeasure through a lawsuit under Section 36(b) of the 

Investment Company Act (“ICA”), codified at 15 U.S.C. § 80a–35(b), alleging breach of 

fiduciary duty. The District Court narrowed the dispute by granting BlackRock partial 

summary judgment and then, after a trial, found insufficient support for the Shareholders’ 

remaining claims. Finding no error in either decision, we will affirm.

I. BACKGROUND

BlackRock manages two mutual funds known as the BlackRock Global Allocation 

Fund and the BlackRock Equity Dividend Fund (the “Advisory Funds”).

1 BlackRock also 

serves as the Advisory Funds’ investment manager, supervising all of their day-to-day 

operations. BlackRock received compensation for that work, receiving “Advisory Fees” 

representing a fixed percentage of the Advisory Funds’ assets. These services are not 

unique to the Advisory Funds, and other financial institutions also hire BlackRock for

portfolio management. For example, it provides investment management services to a 

† This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7, does 

not constitute binding precedent.

1 “BlackRock” collectively refers to Defendants BlackRock Advisors, LLC; 

BlackRock Investment Management, LLC; and BlackRock International Limited.
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group of insurance companies, which includes managing seven smaller mutual funds (the 

“Subadvisory Funds”). The Subadvisory Funds also pay BlackRock management fees (the 

“Subadvisory Fees”). A contract governs all of this advisory work, overseen by 

BlackRock’s board of directors (“the Board”)2 directing the Advisory Funds, and separate 

boards directing the Subadvisory Funds. The Board annually reviews its management 

agreements and sets BlackRock’s advisory fees.

And that brings us to this dispute, where the Shareholders claim the Advisory Fees 

that the Advisory Funds paid to BlackRock beginning in 2013 were excessive under 

Section 36(b) of the ICA. 15 U.S.C. § 80a–35(b). The Shareholders make a simple 

argument: BlackRock provides roughly the same management services to the Advisory and 

Subadvisory Funds, yet the Advisory Fees cost more. The District Court granted 

BlackRock partial summary judgment, holding the Board approval of the Advisory Fees 

deserved deference. Then, following a trial, the District Court found the Shareholders failed 

to prove BlackRock charged excessive fees. The Shareholders timely appealed, and we 

will affirm both the pretrial and post-trial decisions of the District Court.3

II. BLACKROCK DID NOT BREACH ITS FIDUCIARY DUTY

The ICA both “impose[s] upon investment advisers a fiduciary duty with respect to 

compensation received from a mutual fund” and “grant[s] individual investors a private 

right of action for breach of that duty.” Jones v. Harris Assocs. L.P., 559 U.S. 335, 340 

2 The Board of Directors for the Global Allocation Fund is made up of the same 

people who make up the Board of Trustees for the Equity Dividend Fund.

3 The District Court had jurisdiction under 15 U.S.C. §§ 80a–35(b)(5), 80a–43, and 

28 U.S.C. § 1331. We have jurisdiction under 28 U.S.C. § 1291.
4

(2010) (internal quotation marks omitted). An actionable breach of duty can include a 

management fee “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.” Id. at

346. Unreasonableness turns on “all relevant circumstances,” id. at 347, including, for 

example, the fees of similarly situated funds, profitability, and economies of scale, see id.

at 344 & n.5 (citing Gartenberg v. Merrill Lynch Asset Mgmt., Inc., 694 F.2d 923, 929–32 

(2d Cir. 1982)). We turn to those circumstances. 

A. The Board’s Robust Procedures Deserve Substantial Deference

First, we consider the District Court’s grant of partial summary judgment,4 mindful

that “[w]here 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.” Id. at 351. Applying that standard, the District Court 

held it was “beyond dispute” that the Advisory Funds’ Board performed an independent 

and adequate review. (App. at 38.) And with independence and rigor comes “considerable 

weight” to its decision. Jones, 559 U.S. at 351.

4 We review a grant of partial summary judgment de novo. Morgan v. Covington 

Township, 648 F.3d 172, 177 (3d Cir. 2011). Summary judgment is appropriate if, drawing 

all inferences in favor of the non-moving party, “the movant shows that there is no genuine 

dispute as to any material fact and the movant is entitled to judgment as a matter of law.” 

Fed. R. Civ. P. 56(a); see also Shuker v. Smith & Nephew, PLC, 885 F.3d 760, 770 (3d Cir. 

2018). “An issue is genuine only if there is a sufficient evidentiary basis on which a 

reasonable jury could find for the non-moving party, and a factual dispute is material only 

if it might affect the outcome of the suit[.]” Kaucher v. County of Bucks, 455 F.3d 418, 423 

(3d Cir. 2006).
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Not so, say the Shareholders. They point to alleged misrepresentations and 

omissions by BlackRock they claim tainted the Board’s review. It is true that when a 

“board’s process was deficient or the adviser withheld important information,” courts must 

take a closer look at the outcome. Id. But even a closer look at the undisputed facts about

the Board’s composition and actions bolsters, rather than undermines, the approval process.

First, the Shareholders point to a checklist given to the Board that outlines support 

services offered to the Advisory Funds and the Subadvisory Funds. The Shareholders argue 

the checklist does not provide a full picture of the management duties of the different funds.

But as the District Court explained, the Board received many other materials highlighting 

the different management tasks, grounding the conclusion that the services offered to the 

Subadvisory Funds were not comparable to those of the Advisory Funds. See Goodman v. 

J.P. Morgan Inv. Mgmt., Inc., 954 F.3d 852, 865–66 (6th Cir. 2020) (“although [the 

adviser] may not have presented to the Board all the information [plaintiffs] wanted, the 

Board still engaged in a thoughtful review process that considered substantial information 

from [the adviser] about the Funds and Subadvised Funds, as well as information from 

independent third parties”). In other words, the Board had ample information detailing the 

differences between the Advisory and Subadvisory Funds, regardless of any omissions in 

the checklist.

Second, the Shareholders allege that BlackRock failed to quantify the full cost of 

their support services, including possible economies of scale. But the Board determined 

that it did not need the cost information to determine that the Subadvisory Funds were not 
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comparable. Even so, the Board had access to information explaining efficiencies and scale 

when making its decisions.

Finally, the Shareholders contend that the Board just didn’t drive a hard enough 

bargain, and merely rubberstamped the requested fees. But more than once, the Board did 

negotiate in favor of the Advisory Funds. That is enough for arm’s-length bargaining.

Jones, 559 U.S. at 352 (prohibiting courts from “second-guessing . . . informed board 

decisions” and “engag[ing] in a precise calculation of fees representative of arm’s-length 

bargaining”).

In all, the Shareholders do not point to anything substantial enough to suggest the 

Board’s process was so flawed that it did not deserve “commensurate deference,” id. at 

351, particularly given what we know about the Board. It met annually to consider the 

Advisory Fees, and then again to vote on their approval. The Board reviewed a cornucopia 

of documents detailing the Advisory Funds. It posed questions to BlackRock, generating 

hundreds of pages of response, and won concessions on behalf of the Advisory Funds. A 

majority of the directors are independent, and all have substantial professional experience. 

This is precisely the sort of robust detached review expected under Jones. Thus, “where 

the watchdogs have done precisely” what is required of them, they should not “be totally 

muzzled,” and the District Court’s grant of partial summary judgment was not erroneous. 

Id. at 349 (internal quotation marks omitted).
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B. The District Court Did Not Commit Clear Error in its Post-Trial Holdings

“On appeal from a bench trial, our court reviews a district court’s findings of fact 

for clear error and its conclusions of law de novo.” VICI Racing, LLC v. T-Mobile USA, 

Inc., 763 F.3d 273, 282–83 (3d Cir. 2014). Clear error requires findings “completely devoid 

of minimum evidentiary support displaying some hue of credibility or bear[ing] no rational 

relationship to the supportive evidentiary data.” Berg Chilling Sys., Inc. v. Hull Corp., 369 

F.3d 745, 754 (3d Cir. 2004). And we give “even greater deference to the trial court’s 

findings” when they “are based on determinations regarding the credibility of witnesses.” 

Anderson v. Bessemer City, 470 U.S. 564, 575 (1985). As compelling arguments and 

corroborating facts buttress the District Court’s holdings, the Shareholders cannot meet 

this exacting standard.

1. Comparative Fee Structure

The Shareholders contend that the District Court should have compared the 

Advisory Funds’ fees with those of the Subadvisory Funds. But the District Court’s 

detailed analysis of the issue shows that, though there is overlap, the services offered in the 

two types of mutual funds are likely too different to warrant a comparison. See Goodman, 

954 F.3d at 858 (finding “comparisons to the Subadvised Funds were inapt”). Rather, the

fees were “squarely in line with their peers during the relevant period, typically falling in 

the second and third quartiles.” (App. at 156.) And while the Shareholders’ expert offered 

a different view, the District Court described him as “lacking,” “unprepared,” and not 

“particularly helpful, knowledgeable, or convincing in his opinions on the issues.” (App. 

at 140 n.28.) Those credibility assessments, of course, receive significant deference.
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Anderson, 470 U.S. at 575. All things considered, the District Court’s conclusion that the 

Subadvisory Funds were not comparable is not “completely devoid of minimum 

evidentiary support.” Berg Chilling Sys., 369 F.3d at 754.

2. Profitability

The Shareholders argue that BlackRock’s profits on the fees were exorbitant. 

Naturally, BlackRock is free to earn a profit. See Jones, 559 U.S. at 346. Rather, we are 

concerned only with fees “so disproportionately large that . . . [they] could not have been 

the product of arm’s-length bargaining.” Id. That leaves the Shareholders forced to argue, 

again, that the fees must be too high, because they exceeded those paid by the Subadvisory

Funds. But, again, the District Court reasonably found that the two types of funds are not 

comparable; the Shareholders’ expert who described them as comparable was not all that 

credible; and the Advisory Funds’ fees were reasonable compared to its competitors. So 

again, there was no clear error.

3. Economies of Scale

Finally, the Shareholders argue that there must have been efficiencies generated by 

the economies of scale as the Advisory Funds grew, meaning BlackRock enjoyed greater 

gains without greater costs. They rely on a quantitative analysis by the same expert the 

District Court did not find credible. In his analysis, the expert relied on estimates he 

gathered from various BlackRock documents. Instead, the District Court was persuaded by 

BlackRock’s expert and other witnesses who testified that the Shareholders’ conclusions 
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improperly extrapolated estimates into incongruous contexts. We see no basis to disagree 

with the District Court’s considered and balanced findings. 

III. CONCLUSION

For these reasons, we will affirm the District Court.