Baker v. American Century Investment Management, Inc.

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Counsel for American Century retained Cornerstone Research in an action alleging that the investment management company had charged excessive fees to its mutual fund customers.

Retained by Milbank, Tweed, Hadley & McCloy

Counsel for American Century retained Cornerstone Research in an action alleging that the investment management company had charged excessive fees to its mutual fund customers. We worked with two experts: Christine Hammer, a senior advisor with Cornerstone Research, and Professor Laura Starks of the University of Texas.

The dismissal eliminated claims involving several hundred million dollars.

Ms. Hammer reviewed American Century’s cost accounting system and the reasonableness of the company’s profitability. Professor Starks evaluated the differences between retail and institutional markets. Both experts’ findings were integral to the termination of the case, according to comments in the stipulation of dismissal by the court:

Plaintiffs have concluded that, if the case were tried, the court would likely determine that the compensation defendant received for managing the funds was fair and reasonable in light of the surrounding circumstances and that the fees are not disproportionate to the services rendered. Therefore, plaintiffs have concluded that the defendant has not violated its fiduciary duties under Section 36(b) of the Investment Company Act of 1940…

Just before the trial was to begin, plaintiffs agreed to a dismissal with prejudice and without costs. The dismissal eliminated claims involving several hundred million dollars in annual fees associated with more than $30 billion in managed assets. This was the first excessive fee case to reach resolution.

Case Experts

Christine M. Hammer

Certified Public Accountant;
Senior Advisor, Cornerstone Research

Laura T. Starks

Charles E. and Sarah M. Seay Regents Chair in Finance;
McCombs School of Business,
University of Texas at Austin