McClure v. Russell Investment Management Company



On October 17, 2013, a shareholder of several Russell Funds filed a complaint against Russell Investment Management in the U.S. District Court for Massachusetts. The complaint alleges that Russell is collecting large investment management fees and then using sub-advisers at a much lower cost to perform the actual investment management work.

 

The complaint states that in fiscal year 2012, Russell was paid more than $164 million in investment management fees from the mutual funds involved. Of that amount, Russell paid its sub-advisers $57 million for investment management services, while retaining $107 million for itself. The plaintiff alleges that Russell breached its fiduciary duty under Section 36(b) of the Investment Company Act by charging its mutual funds these excessive fees.

 

On December 8, 2014, the plaintiff filed a second complaint against Russell, expanding his subadviser claims to include excessive administrative fees.  These two cases were consolidated on March 10, 2015.

 

After a period for discovery, Russell filed a motion for summary judgment in June 2016.  The Court granted Russell's motion regarding the plaintiff's claims involving board independence, economies of scale, and comparative fees.  On November 15, 2016, the Court denied the defendants' motion for summary judgment regarding the other Gartenberg factors, including profitability, nature and quality of services, and fallout benefits.  A trial was expected in the spring of 2017; however, the plaintiff voluntarily dismissed the case on March 3, 2017.

On October 17, 2013, a shareholder of several Russell Funds filed a complaint against Russell Investment Management in the U.S. District Court for Massachusetts. The complaint alleges that Russell is collecting large investment management fees and then using sub-advisers at a much lower cost to perform the actual investment management work.

 

The complaint states that in fiscal year 2012, Russell was paid more than $164 million in investment management fees from the mutual funds involved. Of that amount, Russell paid its sub-advisers $57 million for investment management services, while retaining $107 million for itself. The plaintiff alleges that Russell breached its fiduciary duty under Section 36(b) of the Investment Company Act by charging its mutual funds these excessive fees.

 

On December 8, 2014, the plaintiff filed a second complaint against Russell, expanding his subadviser claims to include excessive administrative fees.  These two cases were consolidated on March 10, 2015.

 

After a period for discovery, Russell filed a motion for summary judgment in June 2016.  The Court granted Russell's motion regarding the plaintiff's claims involving board independence, economies of scale, and comparative fees.  On November 15, 2016, the Court denied the defendants' motion for summary judgment regarding the other Gartenberg factors, including profitability, nature and quality of services, and fallout benefits.  A trial was expected in the spring of 2017; however, the plaintiff voluntarily dismissed the case on March 3, 2017.

Document Title: 
Plaintiff's Stipulation of Dismissal
Document Desc: 
As the case was heading to trial, the plaintiff voluntarily agreed to dismiss the case with prejudice on March 3, 2017.
Document Title: 
District Court Rules on Summary Judgment Motion
Document Desc: 
In a decision rendered on November 15, 2016, the District Court granted Russell's motion for summary judgment regarding the plaintiff's claims involving board independence, economies of scale, and comparative fees. The Court denied the defendant's motion regarding other Gartenberg factors, including profitability, nature and quality of services, and fallout benefits.
Document Title: 
Russell Files Reply Brief
Document Desc: 
On October 3, 2016, Russell filed a reply brief on its motion for summary judgment. Russell argues that the plaintiff has not "identified a triable issue of fact with respect to any of the Gartenberg factors."
Document Title: 
Plaintif's Response to Motion for Summary Judgment
Document Desc: 
The plaintiff responded to the Russell motion for summary judgment on August 22, 2016. The plaintiff argues that both the Russell board's fee approval process and the substantive fairness of the advisory and administrative fees charged to the Funds involve factual disputes that foreclose summary judgment.
Document Title: 
Russell Files Motion for Summary Judgment
Document Desc: 
In its June 2016 motion for summary judgment, Russell argues that the Funds' advisory and sub-advisory fees were approved after "diligent consideration by eminent, well-informed, and entirely independent trustees." And the fees are "squarely on par with the fees paid by many other, comparable funds in the mutual fund industry."
Document Title: 
Plaintiff Expands Lawsuit to Include Excessive Administrative Fees
Document Desc: 
On December 8, 2014, the plaintiff in this case filed a second complaint against Russell Investments that expands his subadviser claims to include excessive administrative fees.
Document Title: 
Russell Files Answer to Complaint
Document Desc: 
On January 27, 2014, Russell filed its Answer to the Complaint.
Document Title: 
Shareholder Files Excessive Fee Complaint Against Russell Investment Management
Document Desc: 
On October 17, 2013, a shareholder of the Russell Funds filed an excessive fee complaint against Russell Investment Management, alleging that Russell was collecting large investment management fees and then using sub-advisers to perform the actual investment management work at a much lower cost.