Attorneys representing mutual funds argued in a Baltimore federal court last Thursday to dismiss a bundle of civil lawsuits relating to the alleged favoring of wealthy customers that bilked long-term shareholders, the Associated Press reports.
The case pits a cross-section of investors nationwide against Janus Capital, Putnam Investments, Strong Capital Management, Alliance Capital and other mutual fund companies. All told, the case encompasses 200 legal complaints against 18 fund families, the AP report said.
John Donovan, a partner at Boston's Ropes & Gray, who is representing Putnam, MFS Investment Management and Scudder Mutual Funds, argued that fund directors have been aggressive in investigating the market-timing transgressions that ignited the lawsuits, the AP reported. He also said trustees have worked to assess the damages and negotiate with management to ensure that restitution will be paid.
On the other side of it, Mark Rifkind, an attorney for the plaintiffs, argued that fund boards have been negligent in supervising funds for years and, ultimately, failed to fulfill their fiduciary obligation.
The lawyers for both sides spent the first of two days of hearings arguing before U.S. District Judges J. Frederick Motz, Catherine Blake and Andre Davis, who have divided the workload with each one handling different groups of companies that are being sued.
The judges focused on allegations that advisors capitalized on market timing by collecting excessive fees for services they were not providing. As of Friday morning, no decision had been made whether to proceed with the case.