The courts have dealt another setback to shareholders challenging the independence of mutual fund directors.
A U.S. magistrate in New Jersey has ruled that a shareholder's suit against Prudential Investments of Newark, N.J. is without merit and should be dismissed.
Magistrate Ronald J. Hedges said that investor Sheldon Krantz, a shareholder in Prudential's Jennison Growth Fund, failed to prove that directors lost their independence from Prudential because the directors received up to $135,000 in pay for their work overseeing Prudential funds.
"A careful review reveals that (the complaint) is almost completely devoid of allegations, conclusory or otherwise, that the directors are in fact controlled" by Prudential, Hedges said in a 13-page decision dated June 10. Krantz has a right to appeal the decision to U.S. District Judge Katherine S. Hayden. Joel Feffer, an attorney for Krantz, declined comment on Hedges' decision. A spokesperson for Prudential with knowledge of the decision was not available for comment.
The Prudential case is one of five similar pending cases in which Feffer's firm, Wechsler Harwood Halebian & Feffer of New York, represents shareholders. Although the cases are pending, judges in three of the cases have dismissed claims. Shareholders in each of those cases are engaged in legal moves to keep their claims alive. A federal court judge has yet to rule in the fourth case.
In each of the five cases, shareholders contend that directors lost their independence because they received substantial pay for serving on numerous fund boards within the same mutual fund complex.