06/19/2026
Managing Partner and Head of Litigation Jonathan Gardner spoke to The National Law Journal about what the recent U.S. Supreme Court decision holding that private parties cannot sue to rescind a contract under Section 47(b) of the Investment Company Act of 1940 (ICA) means for the future of shareholders rights litigation.
The ruling restricts a field of litigation that had been growing among activist investors, such as Saba Capital Management, who purchase large stakes in low-performing, closed-end funds to influence investing behavior. Saba brought claims under Section 47(b) of the ICA after a group of targeted funds adopted measures limiting shareholders’ voting power. Saba argued that these resolutions violated the ICA’s requirements that each share of an investment company carry equal voting rights. However, the Supreme Court determined that Section 47(b) does not create a private right of action and that only the SEC has the power to enforce this provision.
Jonathan acknowledges that the ruling “erodes a little bit of shareholder rights” and “erodes transparency to some degree.” However, he emphasizes that investors still have viable avenues for pursuing claims. “Activist shareholders by definition are going to use whatever tools they have available to them,” and this may include bringing state-based claims in state court.
Jonathan also observes that Section 47(b) of the ICA was not widely used amongst shareholders—highlighting that, in his 30 years as a plaintiffs’ shareholder advocate, he’s focused on bringing cases under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Jonathan goes on to note that the SEC is still empowered to bring cases under Section 47(b) of the ICA and that in the future “you might see an uptick in the SEC bringing these proceedings.”
Read the full article here: https://www.law.com/nationallawjournal/2026/06/17/dont-expect-investor-suits-against-funds-to-end-even-after-scotus-imposition-of-curbs/
