Echoing a complaint against Fidelity Investments filed by shareholders three weeks earlier, shareholders of T. Rowe Price have filed a suit challenging the independence of the Baltimore company's directors.
The suit, which is an amendment of one filed this summer, seeks repayment by the fund company of all the management fees it has earned in at least the last three years.
A lawyer for the fund company called the suit an "acknowledgement" that the company would win its motion to dismiss the earlier suit. The lawyer, Daniel A. Pollack of Pollack & Kaminsky of New York, said there was nothing new in the revised complaint.
The investors, David Migdal and Linda B. Rohrbaugh, said in the complaint filed Oct. 12 in U.S. District Court in Maryland, that T. Rowe Price had received "disproportionately large fees" as a result of allegedly invalid contracts between the funds and their adviser. The company dismissed the allegations as unfounded.
The original complaint, which Migdal filed in July, challenged the independence of directors serving on the board of the Rowe Price-Fleming International Stock fund. (MFMN 7/13). The complaint contends that the directors, who serve on multiple boards, are compensated at a level which makes it virtually impossible for them to act independently. Last summer, the defendants moved to dismiss that case.
Last week's allegations are similar to a complaint which a shareholder filed against Fidelity Management and Research and affiliates last month. Migdal's and Rohrbaugh's lead attorney, Ronald B. Rubin of Rockville, Md., also is a lawyer in the Fidelity case. Rubin declined to comment beyond the allegations in the amended complaint.
The amended complaint against T. Rowe Price also contended that the Investment Company Institute (ICI) was a "relevant non-party" to the case. The suit alleges that the ICI was affiliated with T. Rowe Price because ICI's board of governors is dominated by fund company executives.
The ICI is not named as a defendant in the case. The ability of the ICI to fairly represent both fund companies and shareholders has been questioned recently (MFMN10/12). Pollack called the suit's contention regarding the ICI, "absurd." An ICI spokesperson was unavailable for comment.
As of Aug. 31, T. Rowe Price had nearly $76 billion in assets under management in long-term open-end funds. It is the sixth largest fund company, according to Boston-based Financial Research Corp.