Obeslo v. Great-West Capital Management LLC



On January 29, 2016, three shareholders in the Great-West Funds filed a 36(b) excessive fee lawsuit against Great-West Capital Management in U.S. District Court for the District of Colorado.

 

The plaintiffs' complaint alleges that Great-West retained more than two-thirds of its advisory fees for 21 retail mutual funds, while delegating substantially all of the investment advisory services to third-party sub-advisers.

 

As an example, Great-West collected $25.3 million in advisory fees for four index funds in 2014.  Great-West then paid approximately $973,000 to sub-advisers to provide the actual advisory services, while retaining $24.3 million to supervise the sub-advisers.  During the same year, Great-West received $73.6 million in advisory fees for 17 mutual funds that are actively managed.  Great-West paid $24.7 million in fees to multiple sub-advisers and retained $48.9 million to supervise the sub-advisers.

 

On May 2, 2016, Great-West filed a motion to dismiss the case.  The plaintiffs responded with an opposition brief and Great-West filed a reply brief.

 

The case is in discovery while the motion to dismiss is pending.  On April 3, 2017, the plaintiffs filed a second amended complaint, and on September 27, 2017, the plaintiffs filed a third amended complaint.

 

Great-West filed a motion to dismiss the third amended complaint on October 11, 2017.  The plaintiffs filed an opposition brief on November 1, and Great-West filed its reply brief on November 15, 2017.

 

 

  • Great-West Files Reply Brief
    Great-West filed its reply brief on November 15, 2017. Great-West argues that the case should be dismissed because the plaintiffs cannot sue on behalf of the entire Great-West fund complex. Great-West also argues that a 401(k) plan does not have standing under Section 36(b) of the Investment Company Act.
  • Plaintiffs File Opposition Brief
    The plaintiffs filed their brief in opposition to the motion to dismiss on November 1, 2017. The plaintiffs argue that they are seeking to recover the damages their investment company suffered as a result of Great-West's fiduciary breach in taking excessive fees from its mutual funds. In such derivative actions, it is the injury to the investment company, not the plaintiffs, that establishes standing for the purposes of a Section 36(b) claim under the Investment Company Act.
  • Great-West Files Motion to Dismiss the Case
    Great-West filed a motion to dismiss the third amended complaint on October 11, 2017. Great-West alleges the following: (1) the plaintiffs may only bring claims as current shareholders in a particular Great-West fund; (2) individual shareholders may not have standing when they do not own share classes that pay the challenged administrative fees; and (3) a 401(k) plan has no right of action under Section 36(b) of the Investment Company Act.
  • Plaintiffs File Third Amended Complaint
    On September 27, 2017, the plaintiffs filed their third amended complaint.
  • Plaintiffs File Second Amended Complaint
    On April 3, 2017, the plaintiffs filed a second amended complaint.
  • Great-West Files Reply Brief
    On June 24, 2016, Great-West filed its reply brief. Great-West argues that the plaintiffs cannot bring claims on behalf of Great-West funds that they do not own and the complaint filed by the plaintiffs does not state a plausible claim for relief.
  • Plaintiffs File Opposition Brief
    On June 10, 2016, the plaintiffs filed a brief in opposition to the motion to dismiss. The plaintiffs state that Great-West does not actually provide investment management services to the funds, but instead hires others to do so. Great-West is responsible for minor supervision over the advisory services to the funds, yet it retains the vast majority of the fees for itself.
  • Great-West Files Motion to Dismiss
    On May 2, 2016, Great-West filed a motion to dismiss the case. Great-West states that the complaint does not allege the elements of a claim against any one fund. Instead, the plaintiffs are using "group pleading" allegations that apply to many different funds.
  • Shareholders File Excessive Fee Complaint Against Great-West Capital Management
    On January 29, 2016, three shareholders filed an excessive fee complaint against Great-West Capital Management. The complaint alleges that Great-West retained more than two-thirds of the advisory fees it collected while delegating substantially all of its investment advisory services to third-party sub-advisers.

On January 29, 2016, three shareholders in the Great-West Funds filed a 36(b) excessive fee lawsuit against Great-West Capital Management in U.S. District Court for the District of Colorado.

 

The plaintiffs' complaint alleges that Great-West retained more than two-thirds of its advisory fees for 21 retail mutual funds, while delegating substantially all of the investment advisory services to third-party sub-advisers.

 

As an example, Great-West collected $25.3 million in advisory fees for four index funds in 2014.  Great-West then paid approximately $973,000 to sub-advisers to provide the actual advisory services, while retaining $24.3 million to supervise the sub-advisers.  During the same year, Great-West received $73.6 million in advisory fees for 17 mutual funds that are actively managed.  Great-West paid $24.7 million in fees to multiple sub-advisers and retained $48.9 million to supervise the sub-advisers.

 

On May 2, 2016, Great-West filed a motion to dismiss the case.  The plaintiffs responded with an opposition brief and Great-West filed a reply brief.

 

The case is in discovery while the motion to dismiss is pending.  On April 3, 2017, the plaintiffs filed a second amended complaint, and on September 27, 2017, the plaintiffs filed a third amended complaint.

 

Great-West filed a motion to dismiss the third amended complaint on October 11, 2017.  The plaintiffs filed an opposition brief on November 1, and Great-West filed its reply brief on November 15, 2017.

 

 

Document Title: 
Great-West Files Reply Brief
Document Desc: 
Great-West filed its reply brief on November 15, 2017. Great-West argues that the case should be dismissed because the plaintiffs cannot sue on behalf of the entire Great-West fund complex. Great-West also argues that a 401(k) plan does not have standing under Section 36(b) of the Investment Company Act.
Document Title: 
Plaintiffs File Opposition Brief
Document Desc: 
The plaintiffs filed their brief in opposition to the motion to dismiss on November 1, 2017. The plaintiffs argue that they are seeking to recover the damages their investment company suffered as a result of Great-West's fiduciary breach in taking excessive fees from its mutual funds. In such derivative actions, it is the injury to the investment company, not the plaintiffs, that establishes standing for the purposes of a Section 36(b) claim under the Investment Company Act.
Document Title: 
Great-West Files Motion to Dismiss the Case
Document Desc: 
Great-West filed a motion to dismiss the third amended complaint on October 11, 2017. Great-West alleges the following: (1) the plaintiffs may only bring claims as current shareholders in a particular Great-West fund; (2) individual shareholders may not have standing when they do not own share classes that pay the challenged administrative fees; and (3) a 401(k) plan has no right of action under Section 36(b) of the Investment Company Act.
Document Title: 
Plaintiffs File Third Amended Complaint
Document Desc: 
On September 27, 2017, the plaintiffs filed their third amended complaint.
Document Title: 
Plaintiffs File Second Amended Complaint
Document Desc: 
On April 3, 2017, the plaintiffs filed a second amended complaint.
Document Title: 
Great-West Files Reply Brief
Document Desc: 
On June 24, 2016, Great-West filed its reply brief. Great-West argues that the plaintiffs cannot bring claims on behalf of Great-West funds that they do not own and the complaint filed by the plaintiffs does not state a plausible claim for relief.
Document Title: 
Plaintiffs File Opposition Brief
Document Desc: 
On June 10, 2016, the plaintiffs filed a brief in opposition to the motion to dismiss. The plaintiffs state that Great-West does not actually provide investment management services to the funds, but instead hires others to do so. Great-West is responsible for minor supervision over the advisory services to the funds, yet it retains the vast majority of the fees for itself.
Document Title: 
Great-West Files Motion to Dismiss
Document Desc: 
On May 2, 2016, Great-West filed a motion to dismiss the case. Great-West states that the complaint does not allege the elements of a claim against any one fund. Instead, the plaintiffs are using "group pleading" allegations that apply to many different funds.
Document Title: 
Shareholders File Excessive Fee Complaint Against Great-West Capital Management
Document Desc: 
On January 29, 2016, three shareholders filed an excessive fee complaint against Great-West Capital Management. The complaint alleges that Great-West retained more than two-thirds of the advisory fees it collected while delegating substantially all of its investment advisory services to third-party sub-advisers.