Legal Recourse As a Tool for Chance. (The Mutual Fund Distribution Expense Mess‪)‬

A. Introduction If load fund boardrooms seem like an inhospitable place to look for 12b-1 reform, the same is true of the nation's courtrooms, at least to date. No lawsuit attacking 12b-1 plans has succeeded, and, as discussed above, suits contesting Class B share sales (funded with 12b-1 fees) on fraud or suitability grounds have not met much success. Derivative suit attacks mounted under state law on boards who approve 12b-1 plans are destined to fail in the face of directors' impressive defensive weaponry, consisting of the demand requirement, (391) special litigation committees, (392) the business judgment rule, and various statutes capping damages. Direct class action claims asserting state causes of action risk preemption under Securities Litigation Uniform Standards Act of 1998393 ("SLUSA"). No court has upheld a claim asserting an implied right of recovery under Rule 12b-1.