Mutual Fund Case Highlights Posner and Easterbrook ‘Judicial Fisticuffs’
The U.S. Supreme Court’s decision to grant cert in a case challenging mutual fund fees highlights “judicial fisticuffs” between two law-and-economics judges, Frank Easterbrook and Richard Posner, according to a law professor.
William Birdthistle, a Chicago-Kent law professor, points out that the federal appeals court decision curtailing suits by mutual fund investors featured dueling opinions by Easterbrook, in the majority, and Posner, the dissenting judge. Both are judges on the 7th U.S. Circuit Court of Appeals based in Chicago.
The issue in Jones v. Harris Associates, now before the Supreme Court, is “whether and according to what legal standard mutual fund shareholders may sue their financial advisers for exacerbating … losses by charging excessive fees,” according to a post by Birdthistle on the Conglomerate Blog.
Birdthistle, who wrote an amicus brief supporting the cert petitioners, says “the potential impact of the case is nearly universal and the sums at issue staggering,” given that more than 90 million Americans at one time held more than $17 trillion in investment accounts.
The law professor explains the judges’ differences in a note to the New York Times. Easterbrook, on the one hand, assumes a well-functioning market for investment advice and calls for greater deregulation of the industry. Posner, on the other hand, focuses on market failures and implicitly suggests a role for regulatory intervention.
Posner is writing a book that questions his own free market views. It is entitled A Failure of Capitalism.
