MEMORANDUM AND ORDER
Plaintiff William Stegall seeks recovery for himself and others similarly situated from certain directors, investment advisers, and affiliates of the John Hancock Family of Funds (the “Funds”). Plaintiff contends that defendants improperly failed to participate in securities class actions in which the Funds were putative members. Defendants have moved to dismiss the action. For the reasons provided below, that motion will be granted.
I. Standard of Review
In considering a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), a court must take well-pled factual allegations in the complaint as true and must make all reasonable inferences in favor of the plaintiff.
Watterson v. Page,
A reviewing court is not entirely constrained by the four corners of the complaint. Consideration may also be given to “documents the authenticity of which are not disputed by the parties; for official public records; for documents central to plaintiffs claim; or for documents sufficiently referred to in the complaint.”
Watterson,
II. Background
The John Hancock Family of Funds consists of approximately 33 funds and is part of the larger corporate body whose parent is John Hancock Financial Services, Inc., referred to by plaintiff as the Parent Company Defendant. The remaining defendants are directors, advisors, and affiliates of the Funds. (Compl.lffl 11-15). As owners of securities, the Funds were putative class members in a number of class action *361 lawsuits brought against publicly traded companies for alleged violations of securities law. Defendants allegedly did not ensure participation of the Funds in the lawsuits.
Consequently, plaintiff — who “at all relevant times owned one of the Funds,” (Compl.l 10) — now seeks to recover losses resulting from those failures to participate in class action lawsuits. And, because the Funds share the same corporate parent and conduct themselves according to identical policies, plaintiff seeks to bring this action “on behalf of all the Funds.” The losses allegedly stem from settlement monies that, if properly claimed by defendants as fiduciaries for plaintiff and the proposed class, would have increased the overall assets held by the Funds.
Recovery is sought under five counts: (1) breach of fiduciary duty; (2) negligence; (3) violation of section 36(a) of the Investment Company Act (“ICA”), 15 U.S.C. § 80a-35(a); (4) violation of section 36(b) of the ICA, 15 U.S.C. § 80a-35(b); and (5) violation of section 47(b) of the ICA, 15 U.S.C. § 80a-46(b). In response, defendants press a series of arguments in seeking dismissal of the complaint, to which I now turn.
III. Discussion
Mutual funds are customarily organized by large financial institutions to offer investors the opportunity, through pooling of resources, to enjoy the benefits of professional money managers. Seeking to address the inherent conflicts of interest of fund managers and the abuses that inevitably resulted, Congress enacted the ICA to protect investors who entrusted their money to such investment company funds. See H.R.Rep. No. 76-2639, at 10 (1940) (statute was “needed to protect small investors from breaches of trust upon the part of unscrupulous managements and to provide such investors with a regulated institution for the investment of their savings”). The statutory scheme addresses a number of distinct concerns arising out of “breaches of trust” by money managers, from provisions regarding the nature of board control to protection against excessive fees. Taken as a whole, the statute serves to establish the best interests of shareholders — and not managers — as the lodestar. Here, plaintiff contends defendants lost sight of this overarching responsibility. Defendants respond with a series of arguments attacking the adequacy of plaintiffs complaint.
A. Standing
Defendants argue, as grounds to dismiss plaintiffs entire complaint, that Mr. Stegall lacks standing to seek recovery for the harm alleged. Standing is a threshold question and, as the First Circuit quite recently observed, it “comprises a mix of constitutional and prudential criteria.”
Osediacz v. City of Cranston,
the Supreme Court has embellished the constitutional requirements attendant to standing with an array of prudential monitions. The prudential aspects of standing include “the general prohibition on a litigant’s raising another person’s legal rights, the rule barring adjudication of generalized grievances more appropriately addressed in the representative branches, and the requirement that a plaintiffs complaint fall within the zone of interests protected by the law invoked.”
Osediacz,
In his complaint, Mr. Stegall simply alleged that he “at all relevant times owned one of the Funds.” (ComplJ 10) In his narrative response to defendants’ motion, plaintiff specifies that he owns shares in the John Hancock Small Cap Fund, which is in a series of funds issued by John Hancock Investment Trust II (the “Trust”). 2 (PL’s Mem. Opp. at 5.) Defendant contends that this provides an insufficient showing of standing, in so far as plaintiff has failed to “(1) identify a single injury to his fund or any of the funds within the Trust, (2) identify a single class action settlement that any of the funds within the Trust were eligible for and (3) to identify any injury caused by any of the Defendants with respect to the management of the funds in the Trust.” (Def.’s Reply at 3)
As an initial matter, plaintiff argues in his opposition that as an owner of a fund with the investment company, the Trust, he “has individual standing to pursue claims involving all of the funds within the [Trust].” (Pl.’s Mem. Opp. at 5.) I take this as a concession that he does not claim to have standing to seek recovery for injuries suffered by funds outside of the Trust. In any event, I find that he has no standing to pursue claims for other funds within the Trust, but rather only for those he himself owns.
Plaintiff distinguishes investment companies, such as the Trust, from individual unincorporated funds, such as the Small Cap Fund, arguing that the latter is a mere shell. For that reason, plaintiff argues that injuries to his fund confer standing to seek recovery for injuries suffered by all funds overseen by the Trust. Plaintiffs characterization of mutual funds, however, does not comport with the case law. In certain contexts, “each fund is a separate corporate entity with separate management contracts and share distribution plans .... ”
Wicks v. Putnam Investment Mgmt., LLC,
That conclusion is not altered where, as here, each fund is not separately incorporated. In
Williams v. Bank One Corp.,
There is no precise parallel to the described arrangement in the corporate world, but the closest analogy still seems to be that of separate subsidiaries (the various mutual funds) that share a common parent (the Massachusetts business trust). What controls over the other factors identified in counsel’s submission is the total separateness of the beneficial interest in the funds, with Williams being a shareholder in only two of them. Williams’ small holdings in those two funds provide no justification for using them as a springboard for him to act on behalf of the umbrella Massachusetts trust — indeed, any allegation of Williams’ ownership interest in that entity is conspicuously absent from the Derivative Complaint. And as for the other One Group Funds, any notion of Williams being able to bootstrap upstream to the business trust and thence downstream to the other separate funds clearly has nothing at all to commend it.
Id. at *1. Plaintiff has offered nothing more persuasive here to commend the concept of his sharing an injury suffered by funds in which he had no ownership interest. His beneficial interest extends only to the investment decisions of the Small Cap Fund and does not permit him to bootstrap claims arising out of investment decisions made in relation to other funds in which he was not a participant.
Accordingly, plaintiff would have standing to seek recovery for injuries to the Small Cap Fund.
3
All other defendants would have to be dismissed from the action. As the court explained in
Eaton Vance,
[t]he named plaintiffs in this case are seeking to sue four mutual funds, each of which is a separate defendant. Yet the named plaintiffs never purchased shares in or conducted any other business with two of the four funds, namely, the Institutional and Advisers funds. The named plaintiffs have therefore not been injured by Institutional and Advisers funds. Because the plaintiffs cannot “demonstrate the requisite case or controversy between themselves personally and [the Institutional and Advisers funds], ‘none may seek relief on behalf of himself or any other member of the class.’ ” The named plaintiffs’ claim against the Institutional and Advisers funds are therefore dismissed; the named plaintiffs are also precluded from representing investors who purchased shares in those two funds.
Id. at 41 (citations omitted). So too here.
In any event, plaintiffs claims — whether against the Trust or the Small Cap Fund — fail on other grounds.
Cf. Jacobs v. Bremner,
*364 B. Derivative v. Direct
Defendants contend that plaintiffs § 36(a) claim was brought improperly as a direct action. To resolve that question, I must look to the law of the Funds’ state of corporation,
Kamen v. Kemper Fin. Servs.,
Plaintiffs allegations relate to a diminution in the total assets of the Funds and only derivatively did this injury harm each shareholder.
See Miller,
In short, what differentiates a direct from a derivative suit is neither the nature of the damages that result from the defendant’s alleged conduct, nor the identity of the party who sustained the brunt of the damages, but rather the source of the claim of right itself. If the right flows from the breach of a duty owed by the defendants to the corporation, the harm to the investor flows through the corporation, and a suit brought by the shareholder to redress the harm is one “derivative” of the right retained by the corporation. If the right flows from the breach of a duty owed directly to the plaintiff independent of the plaintiffs status as a shareholder, investor, or creditor of the corporation, the suit is “direct.”
Branch v. Ernst & Young U.S.,
In arguing that his claims can be brought directly, plaintiff first relies on the Second Circuit’s decision in
Strougo v. Bassini,
In Strougo, the court discussed numerous cases in which majority or controlling shareholders caused injuries unique to minority shareholders. The court then dismissed the plaintiffs’ claims, because, unlike the plaintiffs in the cases which the court had reviewed, the plaintiff in Strougo did not allege that he was a “minority shareholder whose owner *365 ship interest was diluted disproportionately to that of majority shareholders.” The complaint in the case at bar alleges that all of the common shareholders sustained the same injuries as a result of the compensation scheme. The existence of preferred shares, standing alone, does not render the common shareholders’ injuries distinct from the Funds’ injuries.
[i]n Strougo ... the individual shareholders were able to demonstrate an independent injury, and therefore, could bring direct actions. For example, the court in Strougo permitted a direct action because “the acts that allegedly harmed the shareholders increased the Funds’ assets.” Accordingly, the corporation could not pursue relief for the injuries because they were suffered by the shareholders alone. Further, Strougo directly undercuts Plaintiffs’ argument by reasoning that a “diminution in value of the corporate assets is insufficient direct harm to give the shareholder standing to sue in his own right.”
Id.,
Plaintiff turns next to the nature of the mutual fund corporate structure in support of the contention that his claims may be brought directly. Observing that mutual funds have been described as “mere shells,”
see Tannenbaum v. Zeller,
Plaintiff offers that
[t]he value of each investor’s portion of those pooled assets is determined by *366 taking the market value of all of the fund’s portfolio securities, adding the value of any other fund assets, subtracting fund liabilities (primarily fees paid to Defendants), and dividing the result by the number of shares outstanding. This so-called “per share net asset value” (NAV) is computed daily so that any gain or loss in fund assets is immediately allocated to the individual investors as of that specific date. Accordingly, mutual funds are unlike conventional corporations in that any increase or decrease in fund assets is immediately passed on or allocated to the fund investors as of the date of the relevant recalculation of the NAV.
(PL’s Mem. Opp. at 10.) When plaintiff refers to increases in assets being “passed on or allocated” he means in terms of the daily pro forma calculations and not actual distributions. I do not see how that calculation is materially different from fluctuating daily prices of shares held by stockholders of publicly traded corporations. The assets remain those of the fund, as the earnings are of a corporation until distributed. The mutual fund participant has a right to those assets, but that right derives from — is derivative of — the fund.
In
Green,
the court addressed the question of whether plaintiffs’ ICA claims were derivative under both Massachusetts and Minnesota law. Although plaintiffs’ complaint there, like Mr. Stegall’s here, did not allege a distinct injury, they “argue[d] that nonetheless[ ] their injury [was] unique.”
Quite simply, the funds owned the securities and the funds were able to participate in class-action settlements. The fact that Defendants allegedly failed to ensure participation injured the funds. The [plaintiffs’] injury is identical to every other investor’s in that their pro rata share of the fund allegedly would have been more valuable had Defendants participated in the settlement.
Mutchka v. Harris,
In short, the pooling of resources, collective assets, expenses, and management to a great extent restrict the duties owed to individual investors. That defendants do not owe a duty directly to plaintiff in this setting is not the same as saying that no duties to individual investors are owed. In the context of the mutual fund, at least so far as decisions affecting all shareholders in the same way are concerned, managers owe a duty to the fund itself. Plaintiff enjoys the benefits of that duty, but does so derivatively. Consequently, he is empowered to enforce that duty, but must do so on behalf of the fund after providing the fund an opportunity to take action on its own behalf. In sum, “a complaint alleging mismanagement or wrongdoing on the part of corporate officers or directors normally states a claim of wrong to the corporation” and “is properly derivative.”
Jackson,
28 Mass.App.Ct. at
*367
925,
Plaintiff brought the actions directly and made no demand on defendants. For that reason, all counts other than that under § 36(b) must be dismissed.
C. Section 36(a)
In addition to their standing and derivative action arguments, defendants contend that § 36(a) of the ICA provides no private right of action, thereby barring plaintiff from pressing the third count of his complaint. Section 36(a) of the ICA provides:
The Commission is authorized to bring an action ... alleging that a person serving or acting in one or more of the following capacities has engaged ... in any act or practice constituting a breach of fiduciary duty involving personal misconduct in respect of any registered investment company for which such person so serves or acts—
(1) as officer, director, member of any advisory board, investment adviser, or depositor; or
(2) as principal underwriter, if such registered company is an open-end company, unit investment trust, or face-amount certificate company.
15 U.S.C. § 80a-35(a). 7
Plaintiff, although conceding that § 36(a) provides no express private right of action, offers that “over the course of the last four decades, courts in nearly every circuit have implied such [private rights of action] under section 36(a) of the ICA.”
(See
Pl.’s Opp. at 14) The examples provided, however, reach only so close in time as 1998, three years prior to the Supreme Court’s decision in
Alexander v. Sandoval,
The Supreme Court took the opportunity in
Sandoval
to clarify the appropriate approach to implied causes of .action. It
*368
referenced “the understanding of private causes of action that held sway 40 years ago” and was “captured by the Court’s statement in
J.I. Case Co. v. Borak,
Sandoval
further refined the analysis, requiring courts to focus more closely on whether the statutory intent to “create not just a private right but also a private remedy.”
Sandoval,
*369
The Second Circuit relied on three factors in deciding that no implied right of action exists under §§ 26(f) and 27(i) of the ICA.
Cf. DH2,
The second basis
Olmsted
cited for finding no implied right of action was that “ § 42 of the ICA ... explicitly provides for enforcement of all ICA provisions, including §§ 26(f) and 27(i), by the Securities and Exchange Commission through investigations and civil suits for injunctions and penalties.”
Olmsted,
The express provision of one method of enforcing a substantive rule suggests that Congress intended to preclude others .... Sometimes the suggestion is so strong that it precludes a finding of congressional intent to create a private right of action, even though other aspects of the statute ... suggest the contrary.
Sandoval,
The third element of the
Olmsted
reasoning was reference to § 36(b)’s explicit provision for a private right of action. As
Olmsted
observed, “Congress’s explicit provision of a private right of action to enforce one section of a statute suggests that omission of an explicit private right to enforce other sections was intentional.”
Olmsted,
The plaintiffs argue that drawing this inference from § 36(b) 9 is precluded by our holding in Fogel v. Chestnutt,668 F.2d 100 (2d Cir.1981), cert. denied,459 U.S. 828 ,103 S.Ct. 65 ,74 L.Ed.2d 66 (1982). However, in Fogel we merely assumed that when Congress added § 36(b) to the ICA in 1970 it did not intend to overrule previous decisions recognizing implied rights of action in the statute. Id. at 111. The instant case is distinguishable because no court of which we are aware has recognized a private right of action to enforce §§ 26(f) and 27(i). Certainly no court could have done so before 1970 because these sections were not added to the ICA until 1996. See National Securities Markets Improvement Act of 1996, Pub.L. No. 104-290, §§ 205(a), (b), 110 *370 Stat. 3416, 3429. We express no opinion on the current validity of our assumption in Fogel because in this case we interpret sections added after Congress created the private right of action in § 36(b).
Olmsted,
I am required, by contrast, to interpret a statutory section predating congressional creation of § 36(b)’s private right of action, which, one could argue, could permit drawing a different conclusion regarding § 36(a) than regarding later-added sections of the ICA. 10
A foundation upon which the implied right of action rested prior to
Sandoval
was the legislative history surrounding the addition of subsection (b) to § 36. In
Young v. Nationwide Life Ins.,
Although it can be argued that
Sandoval
simply clarifies the
Cort
approach in place
*371
when
Bancroft
and
Fogel
were decided, it has done so in a way that calls into serious question reliance on the “broader context” of statutes where, as here, the “language itself’ and “the specific context in which that language is used,”
Robinson v. Shell Oil Co.,
Nor do we agree ... that our cases interpreting statutes enacted prior to Cort v. Ash have given “dispositive weight” to the “expectations” that the enacting Congress had formed “in light of the ‘contemporary legal context.’” ... We have never accorded dispositive weight to context shorn of text. In determining whether statutes create private rights of action, as in interpreting statutes generally, legal context matters only to the extent it clarifies text.
Sandoval,
In the end, despite courts having found an implied right of action under § 36(a) prior to
Sandoval,
the Supreme Court decision simply cannot be sidestepped by the plaintiff here. As the court in
Jacobs
observed, in addressing claims identical to those before me,
“Sandoval ...
establishes that the text of the statute — and not any ‘contemporary legal context’ — must be the touchstone of any private right of action.”
[t]he absence of rights-creating language, the existence of an alternative method of enforcement, and the existence of an explicit private right of action for another provision of the statute creates the strong presumption that Congress did not intend to create private rights of action under §§ 34(b), 36(a), or 48(a).
The statute, as written, provides that the SEC can enforce § 36(a) and that both the SEC and private investors can enforce § 36(b).
13
Only by ignoring the dictates of
Sandoval
and relying on prior precedent implying a right of action under
Cort
could I find a private right of action here.
See Dull,
D. Section 36(b)
In his complaint, plaintiff alleges that
[t]he Advisor Defendants, the Parent Company, and other affiliates, upon information and belief, breached their fiduciary duty arising under Section 36(b) of the ICA by failing to submit Proof of Claim forms or otherwise participate in settled securities class actions and thereby recover money rightfully belonging to the Fund investors and which would have been immediately allocated to the individual investors through the recalculation of the NAV.
(ComplA 43) Pursuant to § 36(b) of the ICA, “the investment adviser of a registered investment company shall be deemed to have a fiduciary duty with respect to the *373 receipt of compensation for services, or of payments of a material nature, paid by such registered investment company, or by the security holders thereof, to such investment adviser .... ” 15 U.S.C. § 80a-35(b). Claims may be brought under this section not only by the investment company but also “by a security holder of such registered investment company on behalf of such company ....” Id. There being no dispute that § 36(b) provides for a private right of action and assuming plaintiff may bring this claim directly, 16 I take up defendants’ argument that plaintiffs complaint does not plead a violation of § 36(b).
In
Gartenberg v. Merrill Lynch Asset Mgmt., Inc.,
In Krantz, Judge Saris cited the six Gartenberg factors to consider when determining whether an advisory fee is excessive:
1) the nature and quality of the services provided to fund shareholders; 2) the profitability of the fund to the adviser-manager; 3) economies of scale in operating the fund as it grows larger; 4) comparative fee structures; 5) fallout benefits, i.e., indirect profits to the adviser attributable in some way to the existence of the fund; and 6) the independence and conscientiousness of the directors.
Krantz,
“To survive a motion to dismiss, a complaint may not simply allege in a conclusory manner that advisory fees are ‘excessive.’ ”
Migdal v. Rowe Price-Fleming Int’l, Inc.,
At a minimum, plaintiff must demonstrate some nexus between the alleged violation of a fiduciary duty and the excessiveness of the fees charged (e.g., lack of arm’s length negotiation, refusal to pass along economies of scale, poor overall performance of the fund, comparison to fees charged by comparable fund).
Cf. Migdal,
*375
In his complaint, plaintiff described what he believes is a deficiency in the services provided by defendants, but has not explained how any fees charged were excessive in light of those services (in essence, the reverse of the plaintiffs’ failure in
Migdal
).
19
To permit the claim to survive in such an instance would turn any breach of a fiduciary duty into a section 36(b) violation.
See Mutchka,
The
Migdal
approach has been described as “a narrow view of section 36(b),” limiting it “exclusively to challenges to the fees themselves.”
Rohrbaugh,
Even those cases described by
Rohrbaugh
as representing “a broader view” of section 36(b),
Rohrbaugh,
Finally, quite recently in
Strigliabotti,
There is some sweeping language to be found in isolated cases that at first glance could potentially aid plaintiffs cause.
25
Upon closer inspection, those cases are equally unavailing. In
Krantz v. Prudential Investments Fund Mgmt. LLC,
Plaintiff also relies upon intermediate state appellate court decisions from New York and Illinois. In
Royal Carbo Corp. v. Flameguard, Inc.,
Quite recently in
Hogan,
the court rejected a call to expand § 36(b) to the identical breach of duty pled here, rejecting comparisons to
Krantz
and
Royal Carbo,
and “[fjinding
Mutchka
and related case law persuasive.”
E. Section 47(b)
Plaintiff concedes that, “[a]s Defendants recognize, ICA § 47(b) provides a remedy rather than a distinct cause of action or basis of liability.” (Pl.’s Mem. Opp. at 19.) Consequently, having insufficiently pled his underlying causes of action, plaintiffs § 47(b) also fails.
See Mutchka,
IV. Conclusion
For the aforementioned reasons, the motion to dismiss of defendants is hereby GRANTED.
Notes
. The party seeking to invoke federal jurisdiction, most commonly, as here, the plaintiff, "bears the burden of pleading and proof on each step of the standing pavane.”
Osediacz
*362
v.
City of Cranston,
. Although this information is not in the relevant pleadings, I will, for purposes of the discussion here, analyze the standing issue assuming the truth of the proffer regarding fund ownership. Plaintiff has not, however, named either the Small Cap Fund or the Trust as a defendant in this action. Nevertheless, counsel for defendants agreed at the July 26, 2005, hearing that those parties would be bound by my determination of the motion to dismiss.
. Defendants contend that plaintiff has failed to adequately demonstrate that the Small Cap Fund was injured by a failure to participate in a class action settlement. I assume that plaintiff's proffered argument and statement of ownership in that fund is a representation that, given leave to amend, he would be able to plead such a fact. In any event, because the complaint fails in other, incurable, ways, the issue is immaterial to resolution of the motion.
. Defendants have requested that I not exercise jurisdiction over the state claims. I must, however, apply Massachusetts law to the question of whether plaintiffs claims are derivative in nature. Consequently, I inquired of the parties whether they would view my resolution of that question as binding upon them in any future action brought in state court. The parties stipulated that they would.
. Moreover, Maryland law controlled in Strougo. Under Maryland law, a party may bring a suit directly so long as the alleged injury is distinct from that of the corporation and need not show, as they must in Massachusetts, that the alleged injury is distinct “from that of other shareholders.” Strougo, 282 F.3d at 171.
. Even if I were to find that a mutual fund were a shell, that does not end the inquiry. More traditional corporate entities are legal creations of often shell-like quality themselves.
. Although the relevant provision is 15 U.S.C. § 80a-35,it is commonly referred to as § 36. Similarly, 15 U.S.C. § 80a-46(b) will be discussed as § 47(b).
See infra; Jacobs v. Bremner,
.
Cf. Chamberlain v. Aberdeen Asset Mgmt. Ltd.,
. Section 80a-35(b) of the ICA is commonly referred to, as it is herein, as § 36(b).
. Consequently, I do not wholly adopt
Mutchka's
observation that the "fact that
Olmsted
dealt with different sections of the ICA does not detract from the applicability of its statutory analysis here.”
Mutchka,
. Plaintiff cites
Fogel
as finding an implied right of action under § 36(a). Although Judge Friendly is quite clear that the addition of § 36(b) did not abolish previously recognized implied rights under the ICA, he qualified that finding with the language "other than § 36.”
Fogel,
. The court went on to add that the Second Circuit decision in
Strougo v. Bassini,
.
Dull,
The plain language of Section 36(a) unambiguously states that the Commission can bring an action under it. It does not provide for a private right of action.
In contrast to Section 36(a), Section 36(b) of the ICA explicitly provides for a private right of action.
"Obviously ... when Congress wished to provide a private damage remedy, it knew how to do so and did so expressly.”
. As an alternative argument, defendants contend that plaintiff has inadequately alleged violations of § 36(a). Defendants argue that § 36(a)'s reference to “personal misconduct” relates only to self-dealing, citing
In re Nuveen Fund Litig.,
Because the claim fails on other grounds, I do not reach the merits of that argument. Cf. Young, 2 F.Supp.2d at 927 (refusing to interpret § 36(a) to cover only allegations of self-dealing).
. Justice Kennedy observed that
As we have repeatedly held, the authoritative statement is the statutory text, not the legislative history or any other extrinsic material. Extrinsic materials have a role in statutory interpretation only to the extent they shed a reliable light on the enacting Legislature’s understanding of otherwise ambiguous terms. Not all extrinsic materials are reliable sources of insight into legislative understandings, however, and legislative history in particular is vulnerable to two serious criticisms. First, legislative history is itself often murky, ambiguous, and contradictory. Judicial investigation of legislative history has a tendency to become, to borrow Judge Leventhal’s memorable phrase, an exercise in " 'looking over a crowd and picking out your friends.’ ” Second, judicial reliance on legislative materials like committee reports, which are not themselves subject to the requirements of Article I, may give unrepresentative committee members — or, worse yet, unelected staffers and lobbyists — both the power and the incentive to attempt strategic manipulations of legislative history to secure results they were unable to achieve through the statutory text. We need not comment here on whether these problems are sufficiently prevalent to render legislative history inherently unreliable in all circumstances, a point on which Members of this Court have disagreed. It is clear, however, that in this instance both criticisms are right on the mark.
Exxon Mobil,
. Despite the statute's use of the language "on behalf of such company,” defendants claim that the "only claim that a fund shareholder may assert directly is the claim under Section 36(b) of the ICA.” (Def.'s Mem. at 15.) This does not seem to be seriously in dispute. In
Mutchka v. Harris,
In the final analysis, because plaintiff fails to state a cause of action under § 36(b), it is immaterial whether he may bring the claim directly.
Cf. Jacobs,
Jacobs has framed his Section 36(b) claim as a direct action against defendants. Because Section 36(b) speaks in terms of an action "by a security holder of such registered investment company on behalf of such company,” some courts have read that language as referring to derivative actions — or even as limiting the availability of relief under Section 36(b) to derivative actions alone [citing Mutchka ].
Such a limited reading might perhaps cut Jacobs’ Section 36(b) claim off at the pass. But our Court of Appeals has said that even though the statutory text does not appear to permit direct claims, the determination of what constitutes a claim "should generally draw upon state corporation law.” If then Massachusetts law would conceptualize the rights and injuries asserted by Jacobs as direct, Section 36(b)'s language could perhaps accommodate that definition so long as doing so would still be consistent with the [ICA’s] general purpose of providing shareholder relief.
. The
Miller
court added in a footnote that "[b]ecause the Seventh Circuit has not addressed these issues, the Court accords substantial weight to the
Migdal
opinion,”
Miller,
. The
Rohrbaugh
court further noted, in clarifying this point, that, "in fashioning 36(b), Congress was uniquely concerned with providing a remedy in federal court for fee arrangements or contracts that resulted in excessive compensation to investment advisors.”
. In Migdal, the plaintiff included information in its complaint about the fee but did not sufficiently plead facts establishing the inadequate nature of the services provided for that fee.
. In
Eaton Vance,
Judge Koeltl further finds that the § 36(b) claims must be dismissed against certain defendants who had not been recipients of the allegedly excessive fees.
See Eaton Vance,
.Cf. Miller,
The Amended Complaint do[es] not address whether the fees charged are disproportionate to the services rendered for a particular fund. The Court finds Plaintiffs’ assertions: (1) that the fees are higher than those charged to other funds[;] (2) that the fees increased rapidly in recent years; (3) that the economies of scale are not being passed on to shareholders; and (4) that Defendants were motivated by their own interests in *376 determining the level and propriety of these investment advisory and distribution fees are conclusory and are not sufficient to state [a] claim under § 36(b). Plaintiffs have not made any factual allegations that reflect deficiencies in the services provided or disproportionality between the value of those services and the distribution fees charged.
.
See also Rohrbaugh,
Plaintiffs attempt to rely on the following dicta in In re Nuveen Fund Litig.,1996 WL 328006 , at *5-6,1996 U.S. Dist. LEXIS 8071 , at *15 “36(b) may regulate more than the mere terms of the fee arrangement between the investment adviser and the investment company.” In fact, the district court dismissed the complaint for failure to challenge the fee arrangement, explaining:
Section 36(b) only imposes a direct fiduciary duty on the investment adviser with ‘respect to the receipt of compensation or payment for services.' It requires that the investment adviser not charge disproportionate fees for the services it provides, that it actually provides the services for which it obtains fees, ... the Complaint does not challenge the fee arrangement between the Advisor and the Funds...[.]
Id.
at
In
Green v. Nuveen Advisory Corp.,
. The court affirmed dismissal of the § 36(b) claim because plaintiff pled not a single instance where the "advisors improperly failed to deleverage the Funds in order to maximize their fees.”
Green,
. There should be no confusion about the nature of my findings here. To find plaintiff's complaint insufficient on this score is not equivalent to applying a heightened pleading requirement. What he describes, drawing all inferences in his favor and even assuming a relatively broad application of § 36(b), simply does not constitute a violation of § 36(b).
. "[I]n any event, this Court is bound by holdings, not language.”
Sandoval,
. In light of plaintiff’s failure to plead federal causes of action adequately, I will also dismiss his state claims.
Cf. Eaton Vance,