SOURCE: Bernstein Liebhard LLP

February 17, 2010 15:01 ET

Bernstein Liebhard LLP Announces Victory for Shareholders in the United States Court of Appeals for the Second Circuit

NEW YORK, NY--(Marketwire - February 17, 2010) -  On February 16, 2010, Bernstein Liebhard LLP, on behalf of its client, Operating Local 649 Annuity Trust Fund ("Local 649"), obtained a decision from the United States Court of Appeals for the Second Circuit, which strongly supports shareholder rights under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Operating Local 649 Annuity Trust Fund v. Smith Barney Fund Mgmt. LLC, 07-5125-cv (2d Cir. Feb. 16, 2010).

The case, a class action on behalf of all investors who purchased, redeemed, or held shares in the 105 mutual funds that are part of the Smith Barney family of funds (the "Funds"), concerns allegedly false and misleading statements and omissions of material fact by Smith Barney Asset Management LLC ("Smith Barney") relating to a contract for transfer agent services. Lead Plaintiff Local 649 alleged that Smith Barney negotiated a contract for transfer agent services that saddled the Funds with excessive, misleadingly disclosed fees, a significant portion of which were, in essence, kicked back to a Smith Barney affiliate. 

Rejecting Smith Barney's arguments about the alleged non-materiality of their statements, the Second Circuit stated, among other things, that "[t]he veracity of a statement or omission is measured not by its literal truth, but by its ability to accurately inform rather than mislead prospective buyers."

The Second Circuit also held that Local 649 had adequately alleged loss causation, stating that "the defendants' misrepresentations proximately resulted in the regular deduction of identifiable amounts that would not have been deducted had defendants conformed their conduct to what the law required. The... losses were real ones because the deductions used to fund the transfer agent 'fees' diminished for Local 649 (and other shareholders) money under management and, as a result, negatively and predictably impacted returns."

Bernstein Liebhard has pursued hundreds of securities and consumer cases and recovered approximately $2 billion for its clients. It has been named to The National Law Journal's "Plaintiffs' Hot List" in each of the last seven years.

If you have any questions about this matter please contact U. Seth Ottensoser or Joseph R. Seidman, Jr. at (877) 779-1414. You can view a copy of the decision online at

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ATTORNEY ADVERTISING. © 2010 Bernstein Liebhard LLP. The law firm responsible for this advertisement is Bernstein Liebhard LLP, 10 East 40th Street, New York, New York 10016, (212) 779-1414. Prior results do not guarantee or predict a similar outcome with respect to any future matter.

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