Excessive Management Fees

Our attorneys have tried and won the three leading "excessive fee" cases under Section 36(b)

Gartenberg v. Merrill Lynch Asset Management, Inc., 528 F.Supp. 1038 (S.D.N.Y. 1981), aff’d, 694 F.2d 923 (2d Cir. 1982), cert. denied, 461 U.S. 906 (1983) (Gartenberg I)
Representation of Merrill Lynch in the first excessive management fee case to be tried under Section 36(b) of the 1940 Act. Plaintiff alleged that the more than $250 million in fees paid to the investment adviser of the $19 billion Merrill Lynch Ready Assets Trust money market fund were excessive and disproportionate to the services rendered, constituting a breach of fiduciary duty under Section 36(b). After a full bench trial, the district court dismissed the complaint on the merits, holding that the fee was fair to the fund and its shareholders. On appeal, the Second Circuit affirmed the dismissal, holding that plaintiffs had failed to prove a breach of fiduciary duty.

Gartenberg v. Merrill Lynch Asset Management, Inc., 573 F. Supp. 1293 (S.D.N.Y. 1983), aff’d, 740 F.2d 190 (2d Cir. 1984) (Gartenberg II)
Representation of Merrill Lynch in the second excessive management fee action to be tried under Section 36(b) of the 1940 Act. Following the dismissal of Gartenberg I, supra, plaintiff commenced a second action that alleged the payment of excessive fees by the Merrill Lynch Ready Assets Trust to its investment adviser during a different time period. After a full bench trial, the district court, applying the standards established by the Second Circuit in Gartenberg I, found the adviser’s fees to be reasonable and dismissed the complaint on the merits. The Second Circuit affirmed.

Krinsk v. Fund Asset Management LP, 715 F. Supp. 472 (S.D.N.Y. 1988), aff’d, 875 F.2d 404 (2d Cir.), cert. denied, 483 U.S. 919 (1989)
Representation of Merrill Lynch in an action brought by a shareholder of the $23 billion CMA money market fund against the fund’s adviser and affiliates, alleging receipt of excessive management and distribution fees under Sections 12(b) and 36(b) of the 1940 Act. The case analyzed for the first time the propriety of a Rule 12b-1 plan. After a full trial on the merits, the district court dismissed plaintiff’s claims with prejudice. The decision was affirmed by the Second Circuit.

Our attorneys have obtained the voluntary dismissal of two other “excessive fee” cases on the eve of trial with no settlement recovery or payment of attorneys fees

Baker v. American Century Investments, No. 04-4039-CV-C-ODS
(W.D. Mo. 2006)
Representation of American Century Investments in an action challenging over $1 billion in investment management fees paid by three of the largest American Century mutual funds during the period 2003–2006. Just one week before trial was to begin—after two-and-a-half years of litigation and after the parties filed their primary pre-trial submissions—plaintiffs agreed to dismiss the action with no settlement recovery or payment of attorneys fees. In the stipulation of dismissal, plaintiffs conceded that American Century would have prevailed on most of the disputed issues and that the court would have concluded that the challenged fees were fair and reasonable in light of the surrounding circumstances and did not constitute a violation of Section 36(b). The dismissal came after the court granted two pre-trial motions that eviscerated plaintiffs’ case. The first severely limited the testimony of three of plaintiffs’ expert witnesses, and the other excluded all evidence concerning American Century’s separate accounts and subadvised funds, including the fees associated with those products.

Batra v. Investors Research Corp., Nos. 89-0528-CV-W-6, 91-0190-CV-W-6 (W.D. Mo. 1993)
Representation of American Century Investments (then known as Twentieth Century Companies) in an action alleging that the fees paid to the investment adviser of the Twentieth Century funds were excessive and disproportionate the services provided, constituting a breach of fiduciary duty under Section 36(b). Mere weeks before trial was to begin, after the parties had concluded both fact and expert discovery and filed their principal pre-trial submissions, plaintiff voluntarily dismissed the action with no settlement recovery or payment of attorneys fees. In so doing, plaintiff conceded that his claims were not meritorious and that there was no substantial likelihood that he would prevail at trial.

Other selected excessive management fee cases:

• Andre v. Merrill Lynch Ready Assets Trust, 97 F.R.D. 699 (S.D.N.Y. 1983), aff’d, No. 83-7279 (2d Cir. 1984)

• Ashare v. Brill, 560 F. Supp. 18 (S.D.N.Y.), appeal dismissed, 742 F.2d 1441 (2d Cir. 1983)

• Green v. Fund Asset Management LP, 19 F. Supp. 2d 227 (D.N.J. 1998); 53 F. Supp. 2d 723 (D.N.J. 1999), rev’d, 245 F.3d 214 (3d Cir. 2001);
  147 F. Supp. 3d 318 (D.N.J. 2001), aff’d, 286 F.3d 682 (3d Cir. 2002)

• Gross v. National Liquid Reserves, Inc., [1984 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 99,618 (S.D.N.Y. 1984)

• In re American Mutual Funds Fee Litigation, 2005 WL 3989803
  (C.D. Cal. 2005)

• Kalman v. CMA Money Fund (S.D.N.Y.)

• Kaplan v. Dreyfus Corp. (S.D.N.Y.)

• Krantz v. Prudential Investments Fund Management LLC, 77 F. Supp. 2d 559 (D.N.J. 1999), aff’d, 305 F.3d 140 (3d Cir. 2002)

• Krasner v. Dreyfus Corp., 500 F. Supp. 36 (S.D.N.Y. 1980); 90 F.R.D. 665 (S.D.N.Y. 1981)

• Krueger v. Neuberger Berman, No. 05 Civ. 1316 (TPG)  (S.D.N.Y.)

• Nelson v. AIM Advisors, Inc., Fed. Sec. L. Rep. (CCH) ¶ 91,725, 2002 WL 442189 (S.D. III. 2002)

• Rosenfeld v. Merrill Lynch Asset Management, Inc. (S.D.N.Y.)

• Three Bridges Investment Group v. Liberty All Star Equity Fund,
  88-CV-00573-WGY (D. Mass. 1988)