Navellier v. Sletten

Navellier Management, Inc. (NMI) was the original investment adviser for Navellier Series Fund (fund), a mutual fund founded by Louis Navellier. The fund’s independent trustees, upon advice of their counsel, Roy Adams, requested financial information from NMI for their annual review of the fund’s advisory contract with NMI. After NMI refused, the independent trustees declined to renew NMI’s contract and appointed Massachusetts Financial Services (MFS) to replace NMI on an interim basis. The independent trustees also removed Navellier and another NMI employee from their positions as interested trustees of the fund. After a vote by the fund’s shareholders to continue MFS’s appointment failed to receive the two-thirds majority needed for approval, the independent trustees reinstated NMI as the fund’s adviser and then resigned. NMI, Navellier, and the fund’s shareholders (plaintiffs) brought multiple claims against the independent trustees, Adams, MFS, and Arnold Scott, a former trustee of the MFS Series Trust who became a trustee of the fund after MFS was appointed as adviser (defendants). The district court dismissed all claims except those against the independent trustees for breach of fiduciary duty and corporate waste and counterclaims by the independent trustees for indemnification. After a jury found for the independent trustees on all counts, NMI, Navellier, and the fund’s shareholders appealed to the United States Court of Appeals for the Ninth Circuit on several issues, including the district court’s refusal to instruct the jury that § 15(c) of the Investment Company Act of 1940 (Company Act) requires shareholder approval to replace an investment adviser, absent an unforeseeable event, and the court’s dismissal of claims against MFS and Scott for breach of fiduciary duty and against Adams for breach of fiduciary duty and negligence.