UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF PENNSYLVANIA

______________________________________________________________________________

B.E. BINFORD, JACKIE BINFORD and

HENRY WYNDEL, on Behalf of Themselves

and All Others Similarly Situated,

Plaintiffs, 

v.

JOHN J. BRENNAN, CHARLES D. ELLIS,

RAJIV L. GUPTA, JOANN HEFFERNAN,

BURTON G. MALKIEL, ALFRED M.

RANKIN, JR., J. LAWRENCE WILSON, THE

VANGUARD CORPORATION, VANGUARD

ADVISERS, INC., MELLON CAPITAL

MANAGEMENT COMPANY, WELLINGTON

MANAGEMENT COMPANY, LLP, JOHN A.

LEVIN & COMPANY, FRANKLIN

PORTFOLIO ASSOCIATES, LLC,

PROVIDENT INVESTMENT COUNCIL, INC.,

TURNER INVESTMENT PARTNERS, INC.,

GRANAHAN INVESTMENT

MANAGEMENT, INC., CHARTWELL

INVESTMENT PARTNERS, BARROW,

HANLEY, MEWHINNEY & STRAUSS, INC.,

GRANTHAM MAYO VAN OTTERLOO &

COMPANY, LLC, BERNSTEIN

INVESTMENT RESEARCH AND

MANAGEMENT, EQUINOX CAPITAL

MANAGEMENT, LLC, HOTCHKIS & WILEY

CAPITAL MANAGEMENT, LLC, TUKMAN

CAPITAL MANAGEMENT, INC., and JOHN

DOES NO. 1 through 100,

Defendants. 

JURY TRIAL DEMANDED

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Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 1 of 22
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______________________________________________________________________________

CLASS ACTION COMPLAINT

_________________________________________________________________ ______________________________________________________________________________

INTRODUCTION

1. This is a national class action lawsuit on behalf of investors in open-ended mutual

funds with equity securities holdings in the Vanguard Family of Funds (the “Funds”) against the

Defendant directors, investment advisors, and affiliates of the Funds alleging that the Defendants

breached fiduciary duties and duties of care owed directly to the Plaintiffs and members of the Class,

including duties arising under Sections 36(a), 36(b), and 47(b) of the Investment Company Act of

1940 (ICA), 15 U.S.C. § 80a et seq., by failing to ensure that the Funds participated in securities

class action settlements for which the Funds were eligible. B.E. Binford, Jackie Binford and Henry

Wyndel file on their own behalf, as well as representatives of a Class of all persons who owned

Funds at any time during the time period of January 10, 2002 to the present. Plaintiffs seek

compensatory damages, disgorgement of the fees paid to the investment advisors, and punitive

damages. 

2. Over 90 million Americans entrust their savings to the directors and advisors of

mutual funds. Mutual funds are so attractive and popular because they purport to provide

professional money management services to investors who otherwise would not be able to afford

such services. Rather than select and monitor the securities that make up her portfolio, an investor

pools her money with other investors in a mutual fund and entrusts complete control and dominion

over her investments to the directors and advisors of the mutual fund. As a result of this relationship

of special trust, directors and advisors of mutual funds owe a fiduciary duty directly to each

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 2 of 22
1 There were 1,517 federal class action lawsuits brought under the Securities Acts between 1996 and

2003. Securities Class Action Case Filings. 2003: A Year in Review. Cornerstone Research.

3

individual investor in the fund and are required to act with the highest obligations of good faith,

loyalty, fair dealing, due care, and candor.

3. “A mutual fund is a ‘mere shell,’ a pool of assets consisting mostly of portfolio

securities that belong to the individual investors holding shares in the fund.” Tannenbaum v. Zeller,

552 F.2d 402, 405 (2d Cir. 1977). Each investor who pools his money with others in a mutual fund

owns a proportionate share of the total assets of the mutual fund. The value of each investor’s

portion of those pooled assets is determined by taking the market value of all of the fund’s portfolio

securities, adding the value of any other fund assets, subtracting fund liabilities, and dividing the

result by the number of shares outstanding. United States v. Cartwright, 411 U.S. 546, 548 (1973).

This so-called “per share net asset value” (NAV) is computed daily so that any gain or loss in fund

assets is immediately allocated to the individual investors as of that specific date. Accordingly,

mutual funds are unlike conventional corporations in that any increase or decrease in fund assets is

immediately passed on or allocated to the fund investors as of the date of the relevant recalculation

of the NAV. 

4. In the mid to late 1990s, the number of investor securities class action lawsuits

against publicly traded companies alleging violations of the Securities Act of 1933 and the Securities

Exchange Act of 1934 (collectively the “Securities Acts”) exploded.1

 In the fall of 2001, suits

brought pursuant to the Securities Acts became magnified by the popular press after the corporate

scandals and misdeeds at Enron, WorldCom, Tyco, and Adelphia. When a recovery is achieved in

a securities class action lawsuit, investors who owned shares in the company settling the lawsuit

have the option to either: (1) opt-out of the class action and pursue their own remedy or (2) remain

in the class and participate in the recovery achieved. The process by which a member of the class

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 3 of 22
2 Because the full extent of Defendants’ breaches of fiduciary duty have yet to be revealed or have

subsequently stopped, the Class Period will be expanded forward to include the period of time between January 10,

2005 and the date of the cessation of the unlawful activities detailed herein.

4

collects the money to which he is entitled is intentionally quite simple in order to encourage

participation. A class member completes a short form called a Proof of Claim and submits it to the

Claims Administrator. After the Claims Administrator receives all Proof of Claim forms, it

disperses money from the settlement fund to those persons and entities with valid claims.

5. Defendants serve in various capacities as mutual fund directors, advisors, and

affiliates as will be identified herein. The Funds were putative members of dozens of class actions

brought under the Securities Acts, by virtue of Funds owning the securities against which the suits

were brought. However, upon information and belief that the allegations are likely to have

evidentiary support and upon the representation that they will be withdrawn or corrected if

reasonable opportunity for further investigation or discovery indicates insufficient evidentiary

support (hereafter “upon information and belief”), Defendants failed to ensure that the Funds

participated in (or opted out of) many of these class action settlements. As a result, because of

Defendants’ refusal to complete and submit a short form, monies contained in dozens of Settlement

Funds, which rightfully belonged to the Funds’ investors have gone unclaimed. Defendants’ failure

to protect the interests of Fund investors by recovering monies owed them is a breach of the

fiduciary duty they each owe directly to Plaintiffs and members of the Class.

6. The class period begins January 10, 2002. On or before that date, the Defendants

began the illegal conduct complained of herein. The Class consists of all persons who owned one

of the Funds at any time between January 10, 2002 through January 10, 2005 and who suffered

damages thereby.2

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 4 of 22
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JURISDICTION AND VENUE

7. This court has jurisdiction over the subject matter of this action pursuant to Section

36(b) and 44 of the Investment Company Act, 15 U.S.C. § 30a-35(b) & -43, and 28 U.S.C. §

1331(a). This Court has supplemental jurisdiction, pursuant to 28 U.S.C. § 1367(a), over the state

law claims asserted herein because they arise out of a common nucleus of operative facts and are

part of the same case or controversy as plaintiffs’ federal claims.

8. Venue is proper in this District because the acts and omissions complained of herein

occurred in this District and Parent Company Defendant was, at all relevant times, and still is,

headquartered in Harrisburg, Pennsylvania.

9. In connection with the acts and practices alleged herein, Defendants directly or

indirectly used the instrumentalities of interstate commerce, including the mail systems, interstate

telephone communications, and the facilities and instrumentalities of the national securities markets

and national securities exchanges.

PARTIES

Plaintiffs.

10. A. Plaintiff B.E. Binford resides in Harris County, Texas, and at all relevant times

owned one of the Funds.

B. Plaintiff Jackie Binford resides in Harris County, Texas, and at all relevant

times owned one of the Funds.

C. Plaintiff Henry Wyndel resides in Smith County, Texas, and at all relevant

times owned one of the Funds.

Defendants.

11. Defendant The Vanguard Corporation is the ultimate parent of Vanguard Advisers,

Inc. Through its subsidiaries and divisions, The Vanguard Corporation markets, sponsors, and

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 5 of 22
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provides investments advisory, distribution and administrative services to the Vanguard Family of

Funds, which consists of approximately 102 funds. The Vanguard Corporation shall be referred to

herein as the “Parent Company Defendant.” The Vanguard Corporation maintains its principal

executive offices at 1601 N. Front Street, Harrisburg, Pennsylvania 17102.

12. John J. Brennan, Charles D. Ellis, Rajiv L. Gupta, JoAnn Heffernan, Burton G.

Malkiel, Alfred M. Rankin, Jr., and J. Lawrence Wilson are each members of the Board of Directors

for the Funds. The Funds’ Board of Directors oversee the management of the Funds. Collectively,

these defendants shall be referred to as the “Director Defendants.”

13. A. Defendant Vanguard Advisers, Inc. is a registered investment advisor and has

the responsibility for the day-to-day management of the Vanguard Family of Funds. Vanguard

Advisers, Inc. has approximately $691 billion in assets under management in total. Vanguard

Advisers, Inc. is located at 100 Vanguard Blvd, Malvern, Pennsylvania, 19355.

B. Defendant Mellon Capital Management Corporation is a registered investment

advisor and has the responsibility for the day-to-day management of the Vanguard Family of Funds.

Mellon Capital Management Corporation is located at 595 Market Street, Suite 3000, San Francisco,

California, 94105.

C. Defendant Primecap Management Company is a registered investment advisor

and has the responsibility for the day-to-day management of the Vanguard Family of Funds.

Primecap Management Company is located at 225 South Lake Avenue, Pasadena, California, 91101.

D. Defendant Wellington Management Company, LLP is a registered investment

advisor and has the responsibility for the day-to-day management of the Vanguard Family of Funds.

Wellington Management Company, LLP is located at 75 State Street, Boston, Massachusetts, 02110.

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 6 of 22
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E. Defendant John A. Levin & Company is a registered investment advisor and

has the responsibility for the day-to-day management of the Vanguard Family of Funds. John A.

Levin & Company is located at One Rockefeller Plaza, 19th Fl, New York, New York, 10020.

F. Defendant Franklin Portfolio Associates, LLC is a registered investment advisor

and has the responsibility for the day-to-day management of the Vanguard Family of Funds.

Franklin Portfolio Associates, LLC is located at Two International Place, Boston, Massachusetts,

02110.

G. Defendant Provident Investment Council, Inc. is a registered investment

advisor and has the responsibility for the day-to-day management of the Vanguard Family of Funds.

Provident Investment Council, Inc. is located at 300 North Lake Avenue, Pasadena, California,

91101.

H. Defendant Turner Investment Partners, Inc. is a registered investment advisor

and has the responsibility for the day-to-day management of the Vanguard Family of Funds. Turner

Investment Partners, Inc. is located at 1205 Westlakes Drive, Suite 100, Berwyn, Pennsylvania,

19312.

I. Defendant Granahan Investment Management, Inc. is a registered investment

advisor and has the responsibility for the day-to-day management of the Vanguard Family of Funds.

Granahan Investment Management, Inc. is located at 275 Wyman Street, Waltham, Massachusetts,

02451.

J. Defendant Chartwell Investment Partners is a registered investment advisor and

has the responsibility for the day-to-day management of the Vanguard Family of Funds. Chartwell

Investment Partners is located at 1235 Westlakes Drive, Suite 400, Berwyn, Pennsylvania 19312.

K. Defendant Barrow, Hanley, Mewhinney & Strauss Inc. is a registered

investment advisor and has the responsibility for the day-to-day management of the Vanguard

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 7 of 22
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Family of Funds. Barrow, Hanley, Mewhinney & Strauss Inc. is located at One McKinney Plaza,

3232 McKinney Avenue, 15th Fl, Dallas, Texas, 75204.

L. Defendant Grantham Mayo Van Otterloo & Company, LLC is a registered

investment advisor and has the responsibility for the day-to-day management of the Vanguard

Family of Funds. Grantham Mayo Van Otterloo & Company, LLC is located at 40 Rowes Wharf,

Boston, Massachusetts, 02110.

M. Defendant Bernstein Investment Research and Management is a registered

investment advisor and has the responsibility for the day-to-day management of the Vanguard

Family of Funds.Bernstein Investment Research and Management is located at 767 5th Avenue, New

York, New York, 10153.

N. Defendant Equinox Capital Management, LLC is a registered investment

advisor and has the responsibility for the day-to-day management of the Vanguard Family of Funds.

Equinox Capital Management, LLC is located at 590 Madison Avenue, 41st Fl, New York, New

York, 10022.

O. Defendant Hotchkis & Wiley Capital Management, LLC is a registered

investment advisor and has the responsibility for the day-to-day management of the Vanguard

Family of Funds. Hotchkis & Wiley Capital Management, LLC is located at 725 South Figueroa

Street, 39th Fl,Los Angeles, California, 90017.

P. Defendant Tukman Capital Management, Inc. is a registered investment

advisor and has the responsibility for the day-to-day management of the Vanguard Family of Funds.

Tukman Capital Management, Inc. is located at 60 East Sir Francis Drake Boulevard, Larkspur,

California, 94939. Collectively, Vanguard Advisers, Inc., Mellon Capital Management Corporation,

Primecap Management Company, Wellington Management Company, LLP, John A. Levin &

Company, Franklin Portfolio Associates, LLC, Provident Investment Council, Inc., Turner

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 8 of 22
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Investment Partners, Inc., Granahan Investment Management, Inc., Chartwell Investment Partners,

Barrow, Hanley, Mewhinney & Strauss Inc., Grantham Mayo Van Otterloo & Company, LLC,

Bernstein Investment Research and Management, Equinox Capital Management, LLC, Hotchkis &

Wiley Capital Management, LLC, and Tukman Capital Management, Inc. shall be referred to as the

“Advisor Defendants.”

14. The true names and capacities of Defendants sued herein as John Does 1 through 100

are often active participants with the above-named Defendants in the widespread unlawful conduct

alleged herein whose identities have yet to be ascertained. Such Defendants served as fiduciaries

on behalf of fund investors. Plaintiffs will seek to amend this complaint to state the true names and

capacities of said Defendants when they have been ascertained.

15. Collectively, all Defendants named above shall be referred to herein as “Defendants.”

CLASS ACTION ALLEGATIONS

16. This action is brought by Plaintiffs as a class action, on their own behalf and on

behalf of all others similarly situated, under the provisions of Rule 23 of the Federal Rules of Civil

Procedure for compensatory and punitive damages, forfeiture of all commissions and fees paid by

the Class, costs, and attorneys fees. Plaintiffs seek certification of this action as a class action on

behalf of all persons owning one of the Funds at any time between January 10, 2002 through January

10, 2005, and who were damaged by the conduct alleged herein. This case is properly brought as

a class action under Rule 23 of the Federal Rules of Civil Procedure for the reasons set forth in the

following paragraphs.

17. The members of the Class are so numerous that joinder of all members is

impracticable. While the exact number of the Class members is unknown to Plaintiffs at this time

and can only be ascertained through appropriate discovery, Plaintiffs believe that there are tens of

thousands of members in the proposed Class. Record owners of the Funds during the relevant time

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 9 of 22
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period may be identified from records maintained by the Defendants and may be notified of the

pendency of this action by mail, using a form of notice similar to that customarily used in securities

class actions.

18. Plaintiffs’ claims are typical of the claims of the members of the Class as all members

of the Class are similarly affected by Defendants’ wrongful conduct that is complained of herein.

19. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

(a) Whether Defendants owe the investors in the fund a fiduciary duty to submit Proof

of Claim forms on behalf of the Funds in settled securities cases;

(b) Whether Defendants owe the investors in the fund a duty of care to act in a

reasonable manner to protect and maximize Fund investors’ investments by

participating in settled securities class actions;

(c) In which securities class action settlements the Funds were eligible to participate;

(d) Whether Defendants submitted Proof of Claim forms (or opted out of the class action

and pursued their own remedy) for those securities class action settlements in which

Funds were eligible to participate;

(e) To what extent the member of the Class have sustained damages and the proper

measure of such damages.

20. The claims of the Plaintiffs, who are representatives of the Class herein, are typical

of the claims of the Class in that the claims of all members of the Class, including the Plaintiffs,

depend on a showing of the acts or omissions of the Defendants giving rise to the right of the

Plaintiffs to the relief sought herein. There is no conflict between any individual named Plaintiff and

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 10 of 22
11

other members of the Class with respect to this action, or with respect to the claims for relief set

forth herein.

21. The named Plaintiffs are the representatives parties for the Class and are able to and

will fairly and adequately protect the interests of the Class. The attorneys for the Plaintiffs are

experienced and capable in civil litigation and class actions.

22. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the

damages suffered by individual Class members may be relatively small, the expense and burden of

individual litigation make it virtually impossible for members of the Class to individually redress

the wrongs done to them. There will be no difficulty in the management of this action as a class

action. A class action will redress the Defendants’ wrongful conduct described herein.

SUBSTANTIVE ALLEGATIONS

23. At all relevant times during the Class Period, the Vanguard Family of Funds held

assets of approximately $691 billion. Approximately 71 of the 102 Funds have the stated investment

objective of owning equity securities, varying among the funds as to the preferred market

capitalization and market sector of the companies owned. As such, throughout the Class Period, the

Vanguard Funds held billions of dollars of investments in equity security traded on the United

States’ stock exchanges.

24. During the Class Period, hundreds of securities class action cases were settled (the

“Securities Class Actions”). Of the Securities Class Actions, the Funds were eligible to participate

in the recovery in a significant number of the cases by virtue of their ownership of the securities

during the requisite time period of each case. While not an exhaustive list, upon information and

belief, the Funds owned shares and had valid claims in many, if not all, of the following securities

class action cases:

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 11 of 22
12

Case Style Class Period Deadline to

Submit Proof

of Claim

In re Accelr8 Technology Corp. Securities Litigation 10/7/97 - 11/16/99 6/16/2003

In re Acrodyne Communications, Inc. 1/1/98 - 8/14/00 8/24/2001

Lewis v. Advanced Technical Products, Inc. et al. 4/22/98 - 4/28/00 2/1/2003

In re Allaire Corporation Securities Litigation 12/7/99 - 9/18/00 12/18/2003

In re Anicom, Inc. Securities Litigation 2/17/99 - 7/18/00 1/24/2003

In re Applied Digital Solutions Litigation 1/19/00 - 5/21/02 3/15/2004

In re ATI Technologies, Inc. Securities Litigation 1/13/00 - 5/24/00 5/26/2003

Bryant v. Avado Brands, Inc., et al. (Applesouth) 5/26/95 - 9/24/96 3/5/2003

In re Avant! Corporation Securities Litigation 6/6/95 - 12/6/95 7/19/2001

In re Bergen Brunswig Corp. Securities Litigation 3/16/99 - 10/14/99 8/13/2001

In re Brightpoint, Inc. Securities Litigation 1/29/99 - 1/31/02 8/29/2003

Sinay v. Boron LePore & Associates, Inc. et al. 5/5/98 - 2/4/99 7/17/2002

In re California Software Corporation Securities Litigation 2/9/00 - 8/6/00 3/26/2002

In re Campbell Soup Co. Securities Litigation 9/8/97 - 1/8/99 7/10/2003

Katz v. Carnival Corporation et al. 7/28/98 - 2/28/00 2/6/2004

In re CHS Electronics, Inc. Securities Litigation 8/7/97 - 5/13/99 3/31/2002

Deborah Anderton v. ClearOne Communications, Inc. et al. 4/17/01 - 1/15/03 4/8/2004

Sherma v. Cole National Corporation, et al. 1/31/98 - 5/16/03 10/28/2003

In re Commtouch Software LTD. Securities Litigation 4/19/00 - 2/13/01 9/3/2003

In re Conseco, Inc. Securities Litigation 4/28/99 - 4/14/00 11/30/2002

In re Covad Communications Group Securities Litigation 4/19/00 - 6/24/01 2/4/2003

In re Cutter & Buck Inc. Securities Litigation 6/1/00 - 8/12/02 1/12/2004

Graf v. CyberCare Inc. et al. 1/4/99 - 5/12/00 1/24/2003

Maley v. DelGlobal Technologies Corporation et al. 11/6/97 - 11/6/00 1/7/2002

In re Dollar General Corporation Securities Litigation 3/5/97 - 1/14/02 7/8/2002

In re DOV Pharmaceutical, Inc. Securities Litigation 4/25/02 - 12/20/02 6/16/2003

In re DPL, Inc. Securities Litigation 11/15/98 - 8/14/02 3/1/2004

In re DrKoop.Com, Inc. Securities Litigation 6/8/99 - 12/7/02 1/14/2002

In re ECI Telecom LTD Securities Litigation 5/12/00 - 2/14/01 1/14/2003

In re eConnect, Inc. Securities Litigation 11/18/99 - 3/13/00 10/12/2001

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 12 of 22
13

In re Mex. Corporation Securities Litigation 4/9/01 - 5/23/01 1/16/2004

In re Emulex Corporation Securities Litigation 1/18/01 - 2/9/01 10/27/2003

In re Engineering Animation Securities Litigation 2/19/98 - 10/1/99 6/1/2001

In re Envoy Corporation Securities Litigation 2/12/97 - 8/18/98 2/20/2004

In re Federal-Mogul Corp. Securities Litigation 10/22/98 - 5/25/00 1/9/2004

In re Fidelity Holdings, Inc. Securities Litigation 6/24/99 - 4/17/00 4/21/2003

In re Finova Group Inc. Securities Litigation 1/14/99 - 11/13/02 9/30/2002

In re Flir Systems, Inc. Securities Litigation 3/3/99 - 3/6/00 5/3/2001

In re FPA Medical Management, Inc. Securities Litigation 1/3/97 - 5/14/98 11/25/2003

In re Gateway, Inc. Securities Litigation 4/14/00 - 2/28/01 9/30/2002

In re Gliatech Inc. Securities Litigation 4/9/98 - 8/29/00 5/3/2003

Pirelli Armstrong et al. v. Hanover Compressor Co., et al. 5/4/99 - 12/23/02 3/12/2004

Warstadt et al. v. Hastings Entertainment, Inc., et al. 6/12/98 - 5/2/00 4/24/2003

White v. Heartland High-Yield Municipal Bond Fund, et al. 1⁄2/97 - 10/16/00 11/18/2002

In re HI/FN, Inc. Securities Litigation 7/26/99 - 11/7/99 9/20/2003

In re Homestore.com, Inc. Securities Litigation 1/1/00 - 12/21/01 12/5/2003

In re IBP, Inc. Securities Litigation 2/7/00 - 1/25/01 10/31/2003

Fogel v. Information Management Associates, Inc., et al. 8/12/99 - 11/18/99 1/17/2003

In re InaCom Corp. Securities Litigation 11/9/98 - 5/17/00 2/12/2003

In re Independent Energy Holdings PLC 2/14/00 - 9/8/00 12/3/2002

In re InterSpeed, Inc. Securities Litigation 9/24/99 - 10/6/00 8/10/2001

In re IXL Enterprises, Inc. Securities Litigation 11/30/99 - 9/1/2000 8/20/2003

Garza v. JD Edwards & Company et al. 1/22/98 - 12/3/98 5/6/2002

In re JDN Realty Corporation Securities Litigation 2/15/97 - 4/12/00 12/15/2001

Harold Ruttenberg, et al. (Just for Feet, Inc.) 4/12/99 - 11/3/99 11/13/2002

In re L90, Inc. Securities Litigation 4/28/00 - 5/9/03 5/18/2004

In re Landry’s Seafood Restaurants, Inc. Sec. Litigation 12/19/97 - 9/18/98 7/19/2002

In re Legato Systems, Inc. Securities Litigation 4/22/99 - 5/17/00 9/30/2002

Molholt v. Loudcloud Inc., et al. 3/8/01 - 5/1/01 10/29/2003

In re Lucent Technologies Inc. Securities Litigation 10/26/99 - 12/21/00 3/31/2004

In re M&A West, Inc. Securities Litigation 10/4/99 - 12/28/00 3/4/2004

Dusek v. Mattel, Inc., et al. 2/2/99 - 10/1/99 10/23/2003

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 13 of 22
14

Haack v. Max Internet Communications, Inc., et al. 11/12/99 - 5/12/00 11/25/2002

In re Medi-Hut Co., Securities Litigation 11/7/99 - 8/19/03 7/2/2004

In re Medirisk, Inc. Securities Litigation 5/4/98 - 6/30/98 4/30/2004

In re MicroStrategy Inc. Securities Litigation 6/11/98 - 3/20/00 9/3/2001

In re Mitek Systems, Inc. Securities Litigation 12/27/99 - 9/29/00 4/8/2002

In re MP3.Com, Inc. Securities Litigation 1/13/00 - 9/7/00 8/9/2001

In re Mpower Communications Corp. Securities Litigation 2/4/00 - 9/7/00 8/29/2003

In re MSC Industrial Direct Co., Securities Litigation 1/11/99 - 8/5/02 4/30/2004

In re MTI Technology Corp. Securities Litigation, II 7/22/99 - 7/2/00 9/2/2003

In re Navigant Consulting, Inc. Securities Litigation 1/1/99 - 11/19/99 3/22/2001

In re NetEase.Com, Inc. Securities Litigation 7/3/00 - 8/31/01 6/13/2003

In re Netsolve Incorporated Securities Litigation 4/18/00 - 8/18/00 9/13/2002

In re Network Associates Inc. Securities Litigation 1/20/98 - 4/6/99 6/14/2002

In re Network Associates, Inc. II Securities Litigation 4/15/99 - 12/26/00 3/2/2004

New Era of Networks, Inc. 10/29/98 - 7/6/99 12/31/2001

Norman v. New Era Of Networks, Inc., et al. 10/18/00 - 1/5/01 8/12/2002

In re Newpower Holdings, Inc. Securities Litigation 10/5/00 - 12/5/01 4/7/2004

In re Nice Systems, Ltd. Securities Litigation 11/3/99 - 2/7/01 5/1/2003

In re Nike, Inc. Securities Litigation 6/29/00 - 2/26/01 3/10/2003

Stuart Markus, et al v. The Northface, Inc. 4/24/77 - 4/1/99 5/24/2001

In re Northpoint Communications Group, Inc. Sec. Litigation 8/8/00-11/29/00 2/11/2004

In re Nuance Communications, Inc. 1/31/01 - 3/15/01 12/15/2003

In re On-Point Technology Systems, Inc. Securities Litigation 5/19/97 - 4/7/00 8/21/2001

In re Onyx Software Corporation Securities Litigation Pursuant to 2/2001

Offering

6/28/2004

In re Optical Cable Corporation Securities Litigation 6/14/00 - 9/26/01 11/1/2002

In re Oxford Health Plans, Inc. Securities Litigation 11/6/96 - 12/9/97 7/11/2003

In re Paradyne Networks, Inc. Securities Litigation 3/20/00 - 9/28/00 7/12/2004

In re Party City Corporation Securities Litigation 2/26/98 - 3/18/99 8/12/2003

In re P-COM, Inc. Securities Litigation 4/15/97 - 9/11/98 3/15/2002

In re Penn Treaty Schwab Corporation Sec. Litig. 7/23/00 - 3/29/01 2/23/2004

In re PeopleSoft, Inc. Securities Litigation 5/27/98 - 1/28/99 9/4/2001

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 14 of 22
15

In re Performance Technologies, Inc. Securities Litigation 2/2/00 - 5/19/00 7/18/2003

In re PhyCor Corporation Securities Litigation 4/22/97 - 9/22/98 8/5/2002

In re Pilot Network Services, Inc. Securities Litigation 8/11/98 - 10/17/00 5/2/2002

In re PSS World Medical, Inc. Securities Litigation 10/26/99 - 10/3/00 5/14/2004

In re Reliance Securities Litigation 3/14/95 - 11/14/97 3/23/2002

In re Rent-Way Securities Litigation 12/10/98 - 10/27/00 11/23/2003

In re Rite Aid Corporation Securities Litigation 5/2/97 - 11/10/99 6/30/2003

In re Robotic Vision Systems, Inc. Securities Litigation 1/27/00 - 5/15/01 8/11/2003

Paul Ruble v. Rural / Metro Corporation et al. 4/24/97 - 6/11/98 12/15/2003

Stanley v. Safeskin Corporation, et al. 2/18/98 - 3/11/99 4/28/2003

In re Sagent Technology Inc. Securities Litigation 10/21/99 - 4/18/00 5/27/2003

In re SCB Computer Technology, Inc. Securities Litigation 11/19/97 - 4/14/00 3/20/2002

Lone Star et al. v. Schlotzsky’s Inc., et al. 9/24/1997 5/23/2002

In re Select Comfort Corporation Securities Litigation 12/3/98 - 6/7/99 4/30/2003

In re Sensormatic Electronics Corp. Securities Litigation 8/8/00 - 4/26/01 11/14/2003

Steinbeck v. Sonic Innovations, Inc. et al. 5/2/00 - 10/24/00 6/21/2004

Klein v. Southwest Gas Corporation, et al. 12/14/98 - 1/21/00 11/5/2001

In re Starnet Communications Int’l, Inc. Sec. Litigation 3/11/99 - 8/20/99 9/20/2002

In re Steven Madden Ltd. Securities Litigation 6/21/97 - 6/20/00 6/18/2004

In re Supervalu, Inc. Securities Litigation 7/19/99 - 7/25/02 8/2/2004

In re Sykes Enterprises, Inc. Securities Litigation 7/27/98 - 9/18/00 4/9/2003

In re Synsorb BioTech, Inc. Securities Litigation 4/4/01 - 12/10/01 1/10/2004

In re Take Two Interactive Software, Inc. Securities Litigation 2/24/00 - 12/17/01 1/2/2003

In re Team Communications Group, Inc. Securities Litigation 11/19/99 - 3/16/01 8/22/2002

In re Telxon Corporation Securities Litigation 5/21/96 - 2/23/99 6/11/2004

Spiegel v. Tenfold Corporation, et al. 5/21/99 - 4/12/01 1/9/2003

In re THG, Inc. Securities Litigation 10/26/99 - 5/24/00 6/30/2003

In re Turnstone Systems, Inc. Securities Litigation Pursuant to 9/2/00 10/31/2003

In re Tut Systems, Inc. Securities Litigation 7/20/00 - 1/31/01 6/21/2004

In re UniStar Financial Service Corp. Securities Litigation 10/15/98 - 7/20/99 8/17/2001

In re US Franchise Systems, Inc. Securities Litigation 5/6/99 - 10/29/99 6/5/2002

In re US Interactive, Inc. Securities Litigation 2/10/00 - 11/8/00 12/2/2003

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 15 of 22
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O’Neal Trust v. VanStar Corporation, et al. 3/11/96 - 3/14/97 11/26/2001

Rasner v. Vari-L Company, Inc. et al. 12/17/97 - 7/6/00 5/5/2003

Helwig v. Vencor, Inc. et al. 2/10/97 - 10/21/97 6/14/2002

In re Versata, Inc. Securities Litigation 3/2/00 - 4/30/01 3/17/2003

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In re Vision America, Inc. Securities Litigation 11/5/98 - 3/24/00 7/30/2002

In re Vision America, Inc. Securities Litigation 4/24/99 - 3/24/00 10/8/2003

In re The Warnaco Group, Inc. Securities Litigation 9/17/97 - 7/19/00 3/5/2004

In re Waste Management Inc. Securities Litigation 6/11/99 - 11/9/99 7/15/2002

In re Westell Technologies, Inc. Securities Litigation 6/27/00 - 11/18/00 8/31/2003

In re Ziff Davis Inc. Securities Litigation 4/29/98 - 11/8/98 4/5/2002

25. If the Defendants had submitted Proof of Claim forms on behalf of the Funds in these

cases and all others to which the Funds had valid claims, the settlement funds would have increased

the total assets held by the Funds, and such increase would have been allocated immediately to the

then-current investors upon the recalculation of the Net Asset Value (NAV).

26. However, upon information and belief, the Defendants failed to submit Proof of Claim

forms in these cases and thereby forfeited Plaintiffs’ rightful share of the recover obtained in the

securities class actions.

27. By virtue of their position as investment advisors to the Funds with complete control

of Plaintiffs’ investments, the Investment Advisor Defendants (and any sub-advisors and affiliates)

directly owed Plaintiffs and other fund investors a fiduciary duty to act in their best interests. See

Huddleston v. Infertility Center of America, Inc., 31 Pa. D. & C.4th 128, 178 (Pa. Ct. Common Pls.

1996). Likewise, the individual defendants, as well as Directors of mutual funds, owe a fiduciary

duty to fund shareholders. See Id. 

28. Plaintiffs entrusted Defendants to fulfill their fiduciary duties and not knowingly to

refuse to recover money rightfully belonging to the Fund investors at the time of settlement

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 16 of 22
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disbursement. As the Fund investors’ fiduciary, only Defendants were able to submit the necessary

Proof of Claim forms to recover the share of the settlements allocated to the Fund and Fund

investors in the securities class action suits. Plaintiffs did not receive notice of the proposed

settlements nor did they have the option of submitting a Proof of Claim form in their individual

capacities as individual investors. Plaintiffs and member of the Class trusted Defendants to carry

out this simple task on their behalf, and, on information and belief, Defendants failed to do so. By

failing to submit Proof of Claim forms, Defendants breached the fiduciary duty and standard of care

that they owed directly to Plaintiffs and members of the Class.

Standing.

29. The Funds were all created and sponsored by the Parent Company Defendant. The

day-to-day operations of the Funds are managed by the same Investment Advisor or a sub-advisor

who reports to the Advisor. The Funds have the same directors who meet for all the funds at once.

All of the contracts for all of the Funds are identical for the purposes of this action. The Funds share

many expenses between and among one another. The same policy or custom related to participation

in securities class action settlements applies to all the Funds. Plaintiffs therefore bring this action

on behalf of all the Funds.

COUNT I

BREACH OF FIDUCIARY DUTY

30. Plaintiffs repeat and re-allege each of the preceding allegations as though fully set

forth herein.

31. All of the Defendants owed fiduciary duties directly to Plaintiffs and members of the

Class and were required to act with the highest obligations of good faith, loyalty, fair dealing, due

care, and candor.

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 17 of 22
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32. As set forth above, on information and belief, the Defendants breached the fiduciary

duties they owed directly to Plaintiffs and members of the Class by failing to submit Proof of Claim

forms or to otherwise participate in settled securities class actions and thereby recover money

rightfully belonging to the Fund investors. Plaintiffs and members of the class have been injured

as a direct, proximate, and foreseeable result of such breach on the part of the Defendants and have

suffered substantial damages.

33. Because the Defendants breached their fiduciary duties owed directly to Plaintiffs

and members of the Class, Plaintiffs are entitled to compensatory damages, and Defendants must

forfeit all fees and commission they received from Plaintiffs and members of the Class. See

Maritrans v. Pepper, Hamilton, & Scheetz, 529 Pa. 241 (1992). 

34. Because the Defendants acted with reckless and willful disregard for the rights of

Plaintiffs and members of the Class, the Defendants are liable for punitive damages in an amount

to be determined by the jury.

COUNT II

NEGLIGENCE AGAINST ALL DEFENDANTS

35. Plaintiffs repeat and re-allege each of the preceding allegations as though fully set

forth herein.

36. Defendants owed a duty of care directly to Plaintiffs and members of the Class to act

in a reasonable manner and to protect and maximize each individual’s investments in the Funds. By

failing to submit Proof of Claim forms or to otherwise participate in settled securities class actions,

on information and belief, Defendants did not conform to the duty they owed. As a direct and

proximate result, Plaintiffs and members of the Class have been damaged by millions of dollars.

COUNT III

VIOLATION OF SECTION 36(a) OF THE INVESTMENT COMPANY ACT

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 18 of 22
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37. Plaintiffs repeat and re-allege each of the preceding allegations as though fully set

forth herein.

38. Under Section 36(a) of the ICA, all of the Defendants are deemed to have a fiduciary

duty to the Plaintiffs and all members of the Class.

39. On information and belief, all Defendants breached their fiduciary duty arising under

Section 36(a) of the ICA by failing to submit Proof of Claim forms or to otherwise participate in

settled securities class actions and thereby recover money rightfully belonging to the Fund investors

and which would have been immediately allocated to investors through the recalculation of the Net

Asset Value.

40. Plaintiffs and members of the Class have been injured as a direct, proximate, and

foreseeable result of such breach on the part of the Defendants and have suffered substantial

damages.

COUNT IV

VIOLATION OF SECTION 36(b) OF THE INVESTMENT COMPANY ACT

(AGAINST ADVISOR DEFENDANTS AND PARENT COMPANY DEFENDANT)

41. Plaintiffs repeat and re-allege each of the preceding allegations as though fully set

forth herein.

 42. Under Section 36(b) of the ICA, the Advisor Defendants, the Parent Company

Defendant, and other affiliates of the Advisor Defendants are deemed to have a fiduciary duty with

respect to the receipt of compensation for services, or of payments of a material nature, paid by the

Fund and Fund investors.

43. The Advisor Defendants, the Parent Company, and other affiliates, upon information

and belief, breached their fiduciary duty arising under Section 36(b) of the ICA by failing to submit

Proof of Claim forms or to otherwise participate in settled securities class actions and thereby

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 19 of 22
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recover money rightfully belonging to the Fund investors and which would have been immediately

allocated to the individual investors through the recalculation of the NAV.

44. Plaintiffs and members of the Class have been injured as a direct, proximate, and

foreseeable result of such breach on the part of the Defendants and have suffered substantial

damages.

COUNT V

VIOLATION OF SECTION 47(b) OF THE INVESTMENT COMPANY ACT

(AGAINST ADVISOR DEFENDANTS AND PARENT COMPANY DEFENDANT)

45. Plaintiffs repeat and re-allege each of the preceding allegations as though fully set

forth herein.

46. Pursuant to Section 47(b) of the ICA, 15 U.S.C. 80a-46(b), any contract made in

violation, or performance of which results in violation, of the ICA is declared unenforceable.

47. For reasons alleged herein, the Agreements between the Advisor Defendants (and the

Parent Company and other Affiliates) and the Funds were performed, on information and belief, in

violation of the Investment Company Act and are therefore unenforceable.

48. Under Section 47(b) of the ICA, 15 U.S.C. 80a-46(b), the advisory agreements may

be voided, and the Advisor Defendants, the Parent Company Defendant, and other affiliates are

liable to return to the Funds and Fund investors all of the fees and consideration of any kind paid

to them during the time period that the violations occurred.

49. Plaintiffs demand a jury trial.

WHEREFORE, Plaintiffs demand judgment against Defendants as follows:

(a) Recognizing, approving and certifying the Class as specified herein.

(b) In favor of the Class for compensatory and punitive damages, forfeiture of all

commissions and fees paid by the Class, plus the costs of this action together with reasonable

attorneys fees.

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 20 of 22
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(c) For such other and further relief as this Court deems just.

Dated: January 10, 2005

RESPECTFULLY SUBMITTED,

__________________________________________

BRODSKY & SMITH, LLC

Evan J. Smith

Marc L. Ackerman

Two Bala Plaza, Suite 602

Bala Cynwyd, PA 19004

(610) 667-6200

(610) 667-9029 fax

Randall K. Pulliam

BARON & BUDD, P.C.

3102 Oak Lawn Ave.

Suite 1100

Dallas, Texas 75219-4281

(214) 521-3605

(214) 520-1181 fax

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 21 of 22
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J. Allen Carney

Hank Bates

CAULEY BOWMAN CARNEY & WILLIAMS, LLP

11311 Arcade Dr.

Suite 200

Little Rock, Arkansas 72212

(501) 312-8500

(501) 312-8505 fax

Case 2:05-cv-00112-PBT Document 1 Filed 01/10/05 Page 22 of 22