Portfolio Mismanagement

We successfully defended Alliance Capital Management in the trial of what may be the largest portfolio mismanagement action ever filed.

We represented Alliance Capital Management in a widely publicized state court action brought by the Florida State Board of Administration, the third-largest public pension fund in the United States. The SBA alleged that the Alliance Capital portfolio manager responsible for the account should not have invested $300 million in Enron in the face of alleged “red flags” about Enron’s financial condition in the months leading up to the company’s bankruptcy. In addition, the SBA alleged that Alliance Capital misrepresented its investment process and improperly invested in hundreds of securities that were not given the highest rating by Alliance Capital's internal research analysts. The complaint asserted claims for breach of contract, breach of fiduciary duty, fraud, negligence, and violations of state securities laws and sought over $3.6 billion in damages. After a seven-week trial, the jury dismissed all of the claims against Alliance Capital and found the SBA liable to Alliance Capital for $1.2 million in unpaid advisory fees. The jury verdict was listed as one of the Top 10 Defense Wins of 2005 by the National Law Journal.

We also represented Alliance Capital in similar class and derivative litigation filed in federal court under the 1933 Act and the 1940 Act. Plaintiffs alleged that Alliance Capital mismanaged the Premier Growth Fund by investing in Enron stock and by failing to follow the investment process outlined in the fund’s prospectus.

Other cases:

• Benak v. Alliance Capital Management LP, 2004 WL 1459249 (D.N.J. 2004)
  
  
• Goggins v. Alliance Capital Management LP, 349 F. Supp. 2d 882 (D.N.J. 2004)