OPINION OF THE COURT
Plаintiff, a shareholder in the Prudential Jennison' Growth Fund (the “Fund”), brought this action pursuant to § 36(b) of the Investment Company Act of 1940, as amended (the “ICA”), 15 U.S.C. § 80a-35(b), against Prudential Investment Fund Management LLC, the investment adviser to the Fund (the “adviser”), and Prudential Investment Management Serviсes LLC (collectively, “Prudential”). 1 Plaintiff alleged that the investment advisers received excessive compensation in breach of their “fiduciary duty with respect to compensation” set forth in § 36(b) of the ICA, 15 U.S.C. § 80a-35(b). The District Court entered an order dismissing thе action for failure to state a claim. Fed.R.Civ.P. *142 12(b)(6). Because we agree that Plaintiff has failed to state a claim that the compensation received by the investment advisers was received in breach of their fiduciary duty, we affirm the оrder of the District Court.
I. Allegations and Standard of Review
Section 36(b) of the ICA provides that an investment adviser has a “fiduciary duty with respect to the receipt of compensation.” 15 U.S.C. § 80a-35(b). Section 36(b) also provides for a private cause of action by a sharehоlder against the investment adviser and principal underwriter “for breach of fiduciary duty in respect of ... compensation” paid by a fund. Id. Section 10(a) of the ICA, 15 U.S.C. § 80a-10(a), mandates that at least 40% of the members of the governing board of every registered investment company not be “interested persons,” i.e., they must be independent of the investment adviser. Such directors are generally referred to as independent directors. Section 15(c) of the ICA, 15 U.S.C. § 80a-15(c), mandates that every agreement with an investment adviser or distributor be approved by a majority of independent directors. The Amended Complaint seeks to recover the fees paid by the Fund to its investment adviser and distributor, pursuant to management and distribution agreements which were allegedly entered into in violation of §§ 10(a) and 15(c) of the ICA. 18 U.S.C. §§ 80a-10(a), 80a-15(c). The Amended Complaint also contends that the fees authorized were excessive.
Plaintiffs Amended Complaint alleges that none of the members of the Fund’s board are independent, as required by § 10(a), because they serve on numerous other boards for various Prudential funds and receive a large aggregate compensation for their combined services. Plaintiff contends that under such a scenario the independent directors are actually “controlled” by Prudential. Thus, Plaintiff submits that the management and distribution agreements, which establish the fees paid by the Fund to the investment adviser and distributor, were not properly apprоved as required under § 15(c). Accordingly, Plaintiff argues that the receipt of funds from invalid agreements is a breach of the Defendants’ fiduciary duty to negotiate at arm’s length under § 36(b). Finally, Plaintiff contends that in addition to violating the independence requirement of § 36(b), the Defendants also violated § 36(b) because their adviser-manager’s fees agreement were so disproportionately large that fees amounted to a breach of their fiduciary duty.
Defendants urge that the only facts plеaded were that directors served on multiple boards and were well-compensated. They contend that this was inadequate support either for the claim that the fees were excessive or for the claim that these directоrs were “controlled” by the financial adviser. The District Court adopted the Defendants’ view, and dismissed the amended complaint.
Our review of a dismissal pursuant to Fed.R.Civ.P. 12(b)(6) is plenary.
Langford v. City of Atlantic
City,
II. Dismissal For Failure to State a Claim
This case is one of five virtually identical actions filed by Plaintiffs counsel in district courts in four separate circuits. All of the other courts, including the courts of appeals for the Fourth Circuit and the Second Circuit, have rejected Plaintiffs arguments.
See Migdal v. Rowe Price-Fleming Int'l, Inc.,
The complaint in the Fourth Circuit asserted two related claims:
First, plaintiffs alleged that the investment advisers breached their fiduciary duty under Section 36(b) because the fees they received were excessive. Second, plaintiffs contended that the “independent” directors of each of the mutual funds were not actually disinterested parties as required by the ICA. See 15 U.S.C. §§ 80a-10(a) and 80a-15(c). Specifically, sеveral of the funds’ disinterested directors served on the boards of between twenty-two and thirty-eight other funds within the T. Rowe Complex. For their services, these directors received aggregate compensation of either $65,000 or $81,000 for their services on these multiple boards. Plaintiffs alleged that since forty percent of the boards were not disinterested, the advisory agreements could not have been properly approved as required by Section 15(c). Therefore, the dеfendant investment advisers breached their fiduciary duty under Section 36(b) by failing to negotiate their advisory agreements at arm’s length.
The Fourth Circuit first rejected thе claim that the defendants violated § 36(b) because the fees they received were excessive. “In order to determine whether a fee is excessive for purposes of Section 36(b), a court must examine the relationship betwеen the fees charged and the services rendered by the investment adviser.” Id. at 327. Since the plaintiffs failed to allege any “facts pertinent to this relationship between fees and services,” the court concluded that dismissal pursuant to 12(b)(6) was appropriate. We adopt the Fourth Circuit rationale, and, applying it to the Amended Complaint before us, conclude that dismissal for failure to state a claim with respect to excessive compensation was aрpropriate since Plaintiff failed to allege any facts indicating that the fees received were disproportionate to services rendered.
The Fourth Circuit also rejected the claim that the “independent” directors wеre “interested” as a result of their participation on multiple boards and receipt of compensation therefrom. Noting that there “is a presumption under the ICA that natural persons are disinterested, see 15 U.S.C. § 80a-2(a)(9),” the court conсluded that the plaintiffs allegations failed to overcome that presumption. Id. at 331. In support of that conclusion, the court pointed out that “neither the ICA nor the SEC proscribes the use of multi-board membership within mutual fund complexes.” Id. at 330. In fact, as noted, “mem *144 bership on the boards of several funds within a mutual fund complex is the prevailing practice in the industry.... Indeed, the SEC has recently reaffirmed its position that ‘a director of a fund who is also a director of another fund managed by the same adviser generally would not be viewed as an interested person of the fund under section 2(a)(9) solely as a result of this relationship.’ ” Id. (internal citations omitted). We agree with the Fourth Circuit’s ratio decidendi. In the Amended Complaint, Plaintiff has failed to allege any facts that, if true, would support a claim that the “independent” directors of the Fund were actually “interested.” 2 Notwithstanding Plaintiffs characterization that this imposes on him a “heightened standard” of pleading, we agree with the District Court that the statutory scheme here is such that only by alleging facts that, if proved, would render the directors interested will plaintiff be able to overcome the presumption to the contrary. This he did not do. Accordingly, the District Court acted properly in granting the motion to dismiss.
III. Denial of Leave to Amend
Plаintiff also contends that the District Court abused its discretion in denying him leave to amend his Amended Complaint. We review for abuse of discretion.
See Lake v. Arnold,
Plaintiff claims that he was not “on notice” of the defects in his Complaint because the dеcision relied upon by the District Court in granting Prudential’s 12(b)(6) motion was decided after Plaintiff
*145
filed Ms Amended Complaint. We find this argument unpersuasive. First, Prudential cited
Olesh v. Dreyfus Corp.,
No. CV-94-1664,
Second, we note that Migdal, the case on which we primarily rely in reaching our conclusion, and which was also relied оn by the District Court, was decided before Plaintiff filed his opposition to Prudential’s motion to dismiss the Amended Complaint; Migdal was decided on January 20, 1999, and Plaintiff filed his opposition papers on February 26, 1999. Thus, we agree with the District Court that Plaintiff was on notice, prior tо filing his Amended Complaint and before respondmg to the second motion to dismiss, not only of the potential problems with the allegations in his Complaint, but also of the developing case law in this area. As such, the District Court did not abuse its discretion in. dеnying Plaintiff leave to amend his Amended Complaint.
The order of the District Court dismiss-mg Plaintiffs complaint and denying leave to amend will be affirmed.
Notes
. The original Complaint was filed on August 7, 1998. Defendants moved to dismiss the Complaint arguing, inter alia, that Plaintiff lacked standing to assert dеrivative-type claims on behalf of any Prudential Funds other than the one for which he was a shareholder. In response, Plaintiff filed an Amended Complaint on December 10, 1998, which was substantially similar to the original Complaint except that it asserted claims only on behalf of the Fund, and not on behalf of all similarly situated Prudential funds.
. The District Court also concluded that Plaintiff lacked standing because he failed to allege damages, as is necessary under Article Ill’s “case or controversy” requirement.
See Rosetti v. Shalala,