A lawsuit against American Century Investment Management charging that the company imposed excessively high mutual fund fees on three of its funds--and challenging the $1 billion in fees those funds charged between 2003 and 2006--has been dropped.
Analysis Group, an expert witness consultant to law firms and government agencies that worked with American Century's counsel, Milbank, Tweed, Hadley & McCloy, made the announcement yesterday. The trial had been scheduled to begin Aug. 7 in the U.S. District for the Western District of Missouri.
Professor R. Glenn Hubbard, dean of the Columbia Business School, and Professor Peter Tufano, senior associate dean of Harvard Business School, provided testimony to Analysis Group that showed the fees American Century charged were consistent with industry standards and met economies of scale. They also pointed to flaws in the plaintiff's arguments and in the testimony of their expert witnesses.
A week before the trial, the plaintiffs sought dismissal of the case, saying, "It is likely that the defendant will prevail on most of [the relevant] issues. If the case were tried, the court would likely determine that the compensation defendant received for managing the funds was fair and reasonable."
Milbank partner James N. Benedict called the dismissal "nothing short of a complete vindication for American Century and its mutual fund board. The case was the first legal test of plaintiffs' new legal theories challenging the level of mutual fund fees."