Litigation Tracker

CMFI is monitoring important court cases affecting the rights of individual mutual fund investors.

• IN RE AMERICAN MUTUAL FUNDS FEE LITIGATION
  Two plaintiff law firms initiated this lawsuit on behalf of the shareholders of the American Funds, alleging that the payment of advisory, Rule 12b-1, and administrative service fees by the Funds were improper, excessive, and not in the interest of shareholders.  This lawsuit also contends that these fees charged to the Funds and their shareholders were not reasonably related to the services provided.

• KORLAND V. CAPITAL RESEARCH AND MANAGEMENT CO.
  A shareholder of the EuroPacific Growth Fund, part of the American Funds, initiated a lawsuit against the investment adviser of this Fund, Capital Research & Management Company, and the distributor of Fund shares, American Funds Distributors, Inc.  This lawsuit seeks to recover for the Fund excessive and disproportionate Rule 12b-1 fees and investment advisory fees paid by the Fund to the defendants, in violation of their fiduciary duties under Section 36(b) of the Investment Company Act of 1940.

• TURNER V. DAVIS SELECTED ADVISERS
  A shareholder of Davis New York Venture Fund initiated a lawsuit against the investment adviser (Davis Selected Advisers) and the distributor (Davis Distributors) of this Fund.  This lawsuit seeks to recover for the Fund certain excessive and disproportionate fees paid by the Fund to the defendants, who allegedly breached their fiduciary duties to the Fund under Section 36(b) of the Investment Company Act of 1940.

• SMITH V. FRANKLIN TEMPLETON DISTRIBUTORS, INC.
  A shareholder of the Franklin Custodian Funds initiated a lawsuit on behalf of the Funds against the trustees of the Funds and the distributor of the Funds (Franklin/Templeton Distributors).  The lawsuit alleges that the defendants approved “asset-based compensation” to broker-dealers holding mutual fund shares in a brokerage account, contrary to the Investment Advisers Act of 1940 and a recent D.C. Circuit Court of Appeals case, Financial Planning Association v. SEC. 

• SMITH V. OPPENHEIMER FUNDS DISTRIBUTOR, INC.
  A shareholder of the Oppenheimer Gold & Special Minerals Fund initiated a lawsuit on behalf of the Fund against the trustees of the Fund and the distributor of the Fund (Oppenheimer Funds Distributor).  The lawsuit alleges that the defendants approved “asset-based compensation” to broker-dealers holding mutual fund shares in a brokerage account, contrary to the Investment Advisers Act of 1940 and a recent D.C. Circuit Court of Appeals case, Financial Planning Association v. SEC. 

• WIENER V. EATON VANCE DISTRIBUTORS, INC.
  A shareholder of the Eaton Vance Municipals Trust initiated a lawsuit on behalf of the Trust against the trustees of these mutual funds and the distributor of the Trust (Eaton Vance Distributors).  The lawsuit alleges that the defendants approved “asset-based compensation” to broker-dealers holding mutual fund shares in a brokerage account, contrary to the Investment Advisers Act of 1940 and a recent D.C. Circuit Court of Appeals case, Financial Planning Association v. SEC. 
• CURRAN V. PRINCIPAL MANAGEMENT CORPORATION
  A shareholder in the Principal Funds initiated a lawsuit against the Funds’ adviser (Principal Management Corporation) and distributor (Principal Funds Distributor).  The Complaint seeks to rescind the investment advisory agreements and distribution plans and recover fees charges by the defendants.  The Complaint alleges that the defendants breached their fiduciary duty to the shareholders of the Funds by using multiple layers of advisory fees that the plaintiff believes are excessive.  The Complaint also alleges that Rule 12b-1 fees for sales and distribution activities are also excessive.
• KREEK V. WELLS FARGO & COMPANY
  This is a class action lawsuit against Wells Fargo for creating undisclosed material conflicts of interest by entering into revenue-sharing agreements with broker-dealers and other intermediaries selling the Wells Fargo Funds.
• JONES V. HARRIS ASSOCIATES (OAKMARK FUNDS)
  This lawsuit was initiated by shareholders in the Oakmark Funds, alleging that the investment adviser was charging advisory fees that were disproportionate to the services provided and not within the range of what would have been negotiated in an arm's length transaction. The case has been to the U.S. Supreme Court, which confirmed the Gartenberg standards and described the fiduciary duty owed to investors by an investment adviser as a test of whether or not the transaction carries the earmarks of an arm's length transaction.  
• GALLUS V. AMERIPRISE FINANCIAL (RIVERSOURCE FUNDS)
  This lawsuit was initiated by shareholders of 11 mutual funds managed by Ameriprise Financial. The lawsuit alleges that Ameriprise Financial breached its duty under the Investment Company Act by charging substantially higher advisory fees to its retail mutual funds than what it charges its institutonal clients for similar services. This case has been to the U.S. Supreme Court and is now before the Eighth Circuit Court of Appeals.