Nearly 200 lawyers packed a U.S. District Court room in Baltimore yesterday to argue over how to proceed with nearly 200 lawsuits against 16 mutual fund companies accused of trading abuses that have cost investors millions of dollars.
The hearing before a panel of four federal judges marked the beginning of a huge litigation that follows allegations of widespread market timing and late-trading at some of the nation's largest mutual fund families. A judicial panel decided in February to transfer all of the cases to Baltimore.
Speaking to attorneys yesterday, U.S. District Judge J. Frederick Motz expressed surprise at the growing number of cases and underscored the enormous public interest in the cases.
"The matters in dispute affect public confidence in securities markets," Motz said in his opening remarks.
Motz stressed that the legions of attorneys involved should not expect to "get rich" off the case.
"If there is a recovery, the bulk should go to those injured, and not lawyers," he said.
Much of the discussion yesterday focused on how to organize the cases and who should act as lead counsel. The cases will be handled by Motz and Judges Catherine Blake, Frederick Stamp and Andre Davis.
Henry Hopkins, a corporate attorney for Baltimore mutual fund firm T. Rowe Price Group, credited Motz for moving the cases along at a fast clip.
"He's very organized and very disciplined, and I think he exercises good judgment," he said.
T. Rowe Price is a minor defendant in the mutual fund litigation. It has been accused in one lawsuit of not properly using the "fair value" pricing method for certain international funds. Regulators have encouraged fund companies to use fair value pricing to discourage abusive market timing in their funds.
Wasting no time, Motz encouraged attorneys for the mutual fund companies and plaintiffs to start thinking now about how to quickly settle the cases.
Some of the fund families involved have already set aside money to pay claims by shareholders who say they were hurt by the trading abuses. Bank of America, one of six major defendants in the cases, has set aside $375 million to settle claims and pay penalties set by regulators. Alliance Capital Management agreed to fines and settlement charges totaling $600 million, some of which will be reserved for shareholders.
First, the plaintiffs have to determine who will take the lead in arguing the cases. Attorney David Bershad, who represents the Ohio Tuition Pension Plan, said a group of plaintiffs attorneys had met before yesterday's hearing and determined that clients with the largest financial interest in the funds should take the lead.