KASILAG V. HARTFORD INVESTMENT FINANCIAL SERVICES



Several shareholders in the Hartford Funds brought this lawsuit, alleging that the investment adviser, Hartford Investment Financial Services, was charging excessive investment management and Rule 12b-1 fees, in violation of Section 36(b) of the Investment Company Act of 1940.  Section 36(b) of the Act imposes a fiduciary duty on investment advisers with respect to the compensation they receive for providing services to mutual funds.

 

The original Complaint was filed in U.S. District Court for the District of New Jersey on February 25, 2011. The Defendant filed a Motion to Dismiss and it was granted in September 2011, although the Plaintiffs were permitted to amend their Complaint.  After the Plaintiffs filed an Amended Complaint, the Defendant moved to dismiss it again. 

 

In this lawsuit, the Plaintiffs allege that Hartford pays sub-advisors to perform "substantially all" of the investment management services that it provides to the Funds, at a fraction of the fees it charges for similar services. The Amended Complaint states that the management fees Hartford charges the Funds are, on average, three times (and sometimes more than five times) the amount Hartford pays its sub-advisors for substantially the same investment management services.

 

On December 17, 2012, the Court denied the Defendant's Motion to Dismiss on the claim of excessive investment management fees, concluding that the Plaintiffs' Complaint alleges sufficent facts to create a plausible inference that Hartford's management fees are so disproportionately large that they bear no reasonable relationship to the services rendered and could not have been the product of arm's length bargaining. The Court agreed with the Defendant on the Rule 12b-1 claim, determining that the Plaintiffs' allegations are "sparse and conclusory" and fail to state a claim under Section 36(b).

 

The case has been in a discovery phase on the claim of excessive investment management fees.  On March 24, 2016, the Court approved a summary judgment motion by the defendants on the issue of the fund board's oversight process involving advisory contracts.  The Court denied Hartford's summary judgment motion on the excessive fee claims and so now the case will proceed to trial.

  • Judge Rules on Summary Judgment Motions
    On March 24, 2016, the Court approved Hartford's summary judgment motion on the fund board's oversight process involving advisory fee contracts. The Court denied the management company's motion for summary judgment on the excessive fee claims and so now the case proceeds to trial.
  • Court Issues Order on Pending Motions
    On March 24, 2016, the District Court issued an order disposing of various motions filed by both parties. The Court's opinion will be issued publicly in ten days with redactions of confidential information. The case now heads to trial.
  • Court Denies Defendant's Motion to Dismiss
    On December 17, 2012, the District Court denied the Defendant's Motion to Dismiss on the claim of excessive investment management fees. The Court determined that the Plaintiffs' 80-page Complaint alleges sufficient facts to satisfy their burden at this early stage of the proceedings. Construing all of the facts in the Plaintiffs' favor, a plausible inference arises that Hartford's management fees are so disproportionately large that they bear no reasonable relationship to the services rendered and could not have been the product of arm's length bargaining. The Court granted the Defendant's Motion to Dismiss on the Rule 12b-1 claim, finding that the allegations made by the Plaintiff were "sparse and conclusory." The case now proceeds to trial on the excessive management fee claim.
  • Defendant Files Reply Memorandum
    On April 20, 2012, the Defendant filed a Reply Memorandum in support of its Motion to Dismiss. The Defendant alleges that the Plaintiffs rely largely on industry-wide allegations and conclusory assertions regarding Hartford's services that are not supported by the documentation in the case.
  • Plaintiffs File Brief in Opposition to Motion to Dismiss
    On March 21, 2012, the Plaintiffs filed a brief in opposition to the Defendant's Motion to Dismiss. In the brief, the Plaintiffs argue that their Complaint states a plausible claim that Hartford charged excessive management and Rule 12b-1 fees, in violation of Section 36(b) of the Investment Company Act.
  • Defendant Files Motion to Dismiss the Amended Complaint
    On January 17, 2012, the Defendant filed a Motion to Dismiss the Plaintiffs' Amended Complaint. The Defendant asserts that the Amended Complaint fails to state a claim upon which relief can be granted under the stringent pleading requirements of the U.S. Supreme Court.
  • Plaintiffs File Amended Complaint
    In response to the dismissal by the District Court of the Plaintiffs' original Complaint, the Plaintiffs filed an Amended Complaint on November 14, 2011. This Amended Complaint addressed the issues raised by the Court when it granted a Motion to Dismiss earlier in the proceeding.
  • Court Grants Defendant's Motion to Dismiss the Original Complaint
    On September 13, 2011, the District Court granted the Defendant's Motion to Dismiss the original Complaint and provided the Plaintiffs with an opportunity to file an amended Complaint.
  • Defendant Files Reply Memorandum
    On July 11, 2011, the Defendant filed a Reply Memorandum in support of its Motion to Dismiss. The Reply Memorandum argues that the Plaintiffs' Complaint fails to state a plausible claim that Hartford's investment management and Rule 12b-1 fees are so disproportionately large that they bear no reasonable relationship to the services rendered.
  • Plaintiffs File Brief Opposing Motion to Dismiss
    On June 27, 2011, the Plaintiffs filed a brief in opposition to the Defendant's Motion to Dismiss. The Plaintiffs assert that their Complaint, which was drafted in great detail with citation to supporting authority, states a plausible claim that Hartford has violated Section 36(b) of the Investment Company Act, by virtue of the disproportionality of its fees.
  • Defendant Files Motion to Dismiss the Complaint
    On May 12, 2011, the Defendant filed a Motion to Dismiss the Plaintiffs' Complaint. The Defendant alleges that the Complaint fails to state a claim of excessive management and Rule 12b-1 fees under the Investment Company Act.
  • Shareholders File Complaint Against Hartford Investment Financial Services
    On February 25, 2011, several shareholders of the Hartford Funds filed a Complaint against the Funds' investment adviser, Hartford Investment Financial Services. The Complaint alleges that Hartford charged excessive investment management and Rule 12b-1 fees, in violation of Section 36(b) of the Investment Company Act of 1940.

Several shareholders in the Hartford Funds brought this lawsuit, alleging that the investment adviser, Hartford Investment Financial Services, was charging excessive investment management and Rule 12b-1 fees, in violation of Section 36(b) of the Investment Company Act of 1940.  Section 36(b) of the Act imposes a fiduciary duty on investment advisers with respect to the compensation they receive for providing services to mutual funds.

 

The original Complaint was filed in U.S. District Court for the District of New Jersey on February 25, 2011. The Defendant filed a Motion to Dismiss and it was granted in September 2011, although the Plaintiffs were permitted to amend their Complaint.  After the Plaintiffs filed an Amended Complaint, the Defendant moved to dismiss it again. 

 

In this lawsuit, the Plaintiffs allege that Hartford pays sub-advisors to perform "substantially all" of the investment management services that it provides to the Funds, at a fraction of the fees it charges for similar services. The Amended Complaint states that the management fees Hartford charges the Funds are, on average, three times (and sometimes more than five times) the amount Hartford pays its sub-advisors for substantially the same investment management services.

 

On December 17, 2012, the Court denied the Defendant's Motion to Dismiss on the claim of excessive investment management fees, concluding that the Plaintiffs' Complaint alleges sufficent facts to create a plausible inference that Hartford's management fees are so disproportionately large that they bear no reasonable relationship to the services rendered and could not have been the product of arm's length bargaining. The Court agreed with the Defendant on the Rule 12b-1 claim, determining that the Plaintiffs' allegations are "sparse and conclusory" and fail to state a claim under Section 36(b).

 

The case has been in a discovery phase on the claim of excessive investment management fees.  On March 24, 2016, the Court approved a summary judgment motion by the defendants on the issue of the fund board's oversight process involving advisory contracts.  The Court denied Hartford's summary judgment motion on the excessive fee claims and so now the case will proceed to trial.

Document Title: 
Judge Rules on Summary Judgment Motions
Document Desc: 
On March 24, 2016, the Court approved Hartford's summary judgment motion on the fund board's oversight process involving advisory fee contracts. The Court denied the management company's motion for summary judgment on the excessive fee claims and so now the case proceeds to trial.
Document Title: 
Court Issues Order on Pending Motions
Document Desc: 
On March 24, 2016, the District Court issued an order disposing of various motions filed by both parties. The Court's opinion will be issued publicly in ten days with redactions of confidential information. The case now heads to trial.
Document Title: 
Court Denies Defendant's Motion to Dismiss
Document Desc: 
On December 17, 2012, the District Court denied the Defendant's Motion to Dismiss on the claim of excessive investment management fees. The Court determined that the Plaintiffs' 80-page Complaint alleges sufficient facts to satisfy their burden at this early stage of the proceedings. Construing all of the facts in the Plaintiffs' favor, a plausible inference arises that Hartford's management fees are so disproportionately large that they bear no reasonable relationship to the services rendered and could not have been the product of arm's length bargaining. The Court granted the Defendant's Motion to Dismiss on the Rule 12b-1 claim, finding that the allegations made by the Plaintiff were "sparse and conclusory." The case now proceeds to trial on the excessive management fee claim.
Document Title: 
Defendant Files Reply Memorandum
Document Desc: 
On April 20, 2012, the Defendant filed a Reply Memorandum in support of its Motion to Dismiss. The Defendant alleges that the Plaintiffs rely largely on industry-wide allegations and conclusory assertions regarding Hartford's services that are not supported by the documentation in the case.
Document Title: 
Plaintiffs File Brief in Opposition to Motion to Dismiss
Document Desc: 
On March 21, 2012, the Plaintiffs filed a brief in opposition to the Defendant's Motion to Dismiss. In the brief, the Plaintiffs argue that their Complaint states a plausible claim that Hartford charged excessive management and Rule 12b-1 fees, in violation of Section 36(b) of the Investment Company Act.
Document Title: 
Defendant Files Motion to Dismiss the Amended Complaint
Document Desc: 
On January 17, 2012, the Defendant filed a Motion to Dismiss the Plaintiffs' Amended Complaint. The Defendant asserts that the Amended Complaint fails to state a claim upon which relief can be granted under the stringent pleading requirements of the U.S. Supreme Court.
Document Title: 
Plaintiffs File Amended Complaint
Document Desc: 
In response to the dismissal by the District Court of the Plaintiffs' original Complaint, the Plaintiffs filed an Amended Complaint on November 14, 2011. This Amended Complaint addressed the issues raised by the Court when it granted a Motion to Dismiss earlier in the proceeding.
Document Title: 
Court Grants Defendant's Motion to Dismiss the Original Complaint
Document Desc: 
On September 13, 2011, the District Court granted the Defendant's Motion to Dismiss the original Complaint and provided the Plaintiffs with an opportunity to file an amended Complaint.
Document Title: 
Defendant Files Reply Memorandum
Document Desc: 
On July 11, 2011, the Defendant filed a Reply Memorandum in support of its Motion to Dismiss. The Reply Memorandum argues that the Plaintiffs' Complaint fails to state a plausible claim that Hartford's investment management and Rule 12b-1 fees are so disproportionately large that they bear no reasonable relationship to the services rendered.
Document Title: 
Plaintiffs File Brief Opposing Motion to Dismiss
Document Desc: 
On June 27, 2011, the Plaintiffs filed a brief in opposition to the Defendant's Motion to Dismiss. The Plaintiffs assert that their Complaint, which was drafted in great detail with citation to supporting authority, states a plausible claim that Hartford has violated Section 36(b) of the Investment Company Act, by virtue of the disproportionality of its fees.
Document Title: 
Defendant Files Motion to Dismiss the Complaint
Document Desc: 
On May 12, 2011, the Defendant filed a Motion to Dismiss the Plaintiffs' Complaint. The Defendant alleges that the Complaint fails to state a claim of excessive management and Rule 12b-1 fees under the Investment Company Act.
Document Title: 
Shareholders File Complaint Against Hartford Investment Financial Services
Document Desc: 
On February 25, 2011, several shareholders of the Hartford Funds filed a Complaint against the Funds' investment adviser, Hartford Investment Financial Services. The Complaint alleges that Hartford charged excessive investment management and Rule 12b-1 fees, in violation of Section 36(b) of the Investment Company Act of 1940.