The Reserve Primary Fund - Securities Class Action

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Stanford Law School

The Reserve Primary Fund Summary: According to a press release dated September 19, 2008, a class action was filed against the financial adviser, the underwriter, and the trustees of the Reserve Fund ("Reserve Fund" or the "Trust"). The action was brought on behalf of investors who owned shares in any class of the Primary Fund (or the "Fund"), a series of the Reserve Fund, who had not requested redemption of their shares by 3 p.m. E.S.T. on Tuesday, September 16, 2008.

The Reserve Fund is an investment trust organized under Massachusetts law, headquartered in New York City. The Trust consists of Mutual Funds, of which the Primary Fund is a series. The Primary Fund is a money market mutual fund that is required, by law, to invest in only the highest quality securities and debt obligations. The complaint alleges that in violation of its legal obligations, as imposed by the Investment Company Act and the SEC's Rule 2A-7 thereunder, the Primary Fund had invested in, and continued to invest in, approximately $785 million in commercial paper and other debt obligations issued by Lehman Brothers Holdings, Inc. ("Lehman") (Pink Sheets:LEHMQ). As Lehman's financial difficulties mounted in recent months, its debt obligations became high-risk securities that were inappropriate for money market funds to hold.

The Complaint further alleges that by Friday, September 12, 2008, Lehman's financial situation had become desperate; yet defendants continued to hold the debt obligations. On September 15, 2008, when Lehman filed for bankruptcy, defendants were still holding onto $785 million of the Company's debt obligations, which were now worthless. By the afternoon of September 16, defendants had allowed about a dozen institutional investors to withdraw a total of over $40 billion from the fund, at the "net asset value" price of $1.00 per share. That is the per share value that the Reserve Fund, like virtually all money market funds, strives to maintain. However, the shares were actually worth less than that when they were redeemed. It was not until the markets closed on September 16 that defendants issued a press release announcing that the net asset value of the fund had belatedly been reduced to 97 cents per share, a shocking and extremely rare development known in the industry as "breaking the buck." The press release announced that investors who had sought redemption up to 3 P.M. that day would receive $1 per share, but that subsequent requests for redemption would be at the 97 cents price, and that payments for those shares would be withheld for up to 7 days.

As spelled out in the complaint, defendants violated Section 8 of the Investment Act of 1940 by deviating from the Fund's fundamental investment objectives without approval by the shareholders of the Fund and by allowing massive redemptions by a favored few investors at an inflated price of $1.00 per share. These actions gave an unfair advantage to certain fund investors at the expense of others, and in a manner which violated the Fund's stated procedure as well as defendants' fiduciary obligations to investors.

On February 11, 2009, this action and many others pending against The Reserve Fund has been coordinated or consolidated for pretrial proceedings under the Honorable Paul G. Gardephe in the Southern District of New York, 1:09-md-02011-PGG.

On August 26, 2009, Judge Paul G. Gardephe signed the Order consolidating the actions. According to the Order, for the foregoing reasons, Third Avenue Institutional International Value Fund, L.P.'s ("Third Avenue") motion for consolidation of the twelve above-captioned Reserve Primary Fund class action cases (08-cv-8060, 08-cv-8098, 08-cv-8103, 08-cv-8137, 08-cv-8139, 08-cv-8292, 08-cv-8593, 08-cv-8946, 08-cv-9525, 08-cv-9604, 08-cv-10006, 08-cv-10302) for pre-trial purposes is granted; these twelve actions shall be referred to collectively as In re: The Reserve Primary Fund Securities & Derivative Class Action Litigation, No. 08 Civ. 8060 (PGG) (the "Consolidated Reserve Primary Fund Class Action"). Further, Third Avenue's motion for appointment of Third Avenue as lead plaintiff in the Consolidated Reserve Primary Fund Class Action is granted, and Third Avenue's motion for appointment of Bernstein Litowitz Berger & Grossman LLP as lead counsel in the Consolidated Reserve Primary Fund Class Action is granted. All other motions in the twelve above-captioned Reserve Primary Fund class action cases are denied.

On January 10, 2010, a Consolidated Class Action Complaint was filed, adding both defendants and securities laws violations. The defendants responded by filing a motion to dismiss on September 3, 2010. The motion is currently pending before the Court.

INDUSTRY CLASSIFICATION:
SIC Code:
Sector: Financial
Industry: Other (Mutual Fund)

COMPANY/ISSUER NAME:	The Reserve Primary Fund
COMPANY/ISSUER TICKER:	RPRXX
COMPANY WEBSITE:	http://www.reservefunds.com/

FIRST IDENTIFIED COMPLAINT IN THE DATABASE

Jay Pomeranz, et al. v. The Primary Fund, et al.

COURT: S.D. New York	DOCKET NUMBER: 08-CV-08060
JUDGE NAME: Hon. Paul G. Gardephe
DATE FILED: 09/17/2008	SOURCE:
CLASS PERIOD START: 09/16/2008	CLASS PERIOD END: 09/17/2008
TYPE OF COMPLAINT: Complaint (Unamended and Unconsolidated)
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Wolf Popper, LLP 845 Third Avenue, New York, NY, 10022-6689 (voice) 877.370.7703, (fax) 212.486.2093, IRRep@wolfpopper.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 1

DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT
Complaint for Violation of the Investment Company Act of 1940 - Jury Trial Demanded
Type: Complaint		Date on the document: 09/17/2008
Order
Type: Order of Consolidation		Date on the document: 08/26/2009

REFERENCE COMPLAINT

In Re The Reserve Primary Fund Securities & Derivative Class Action Litigation

COURT: S.D. New York	DOCKET NUMBER: 08-CV-08060
JUDGE NAME:
DATE FILED: 01/05/2010	SOURCE:
CLASS PERIOD START: 09/28/2006	CLASS PERIOD END: 09/16/2008
TYPE OF COMPLAINT: Consolidated Complaint
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Bernstein Litowitz Berger & Grossmann LLP (New York, NY) 1285 Avenue of the Americas, 33rd Floor, New York, NY, 10019 (voice) 212.554.1400, (fax) 212.554.1444, blbg@blbglaw.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 1

DOCUMENTS FOR THE REFERENCE COMPLAINT
Consolidated Class Action Complaint
Type: Complaint		Date on the document: 01/05/2010
U.S. District Court Civil Docket
Type: Docket		Date on the document: 03/08/2011

OTHER DOCUMENTS
Class Action Complaint For Violation of Federal Securities Laws - Jury Trial Demanded
Case Name and/or Number: Ralph F. Miller, et al. v. The Reserve, et al.
Type: Complaint		Date on the document: 09/18/2008
Verified Complaint - Jury Trial Demanded
Case Name and/or Number: Third Avenue Institutional International Value Fund L.P., et al. v. The Reserve Fund, et al.
Type: Complaint		Date on the document: 09/19/2008
Notice Of Removal
Case Name and/or Number: Univision Communications Inc., et al v. The Reserve Fund
Type: Notice		Date on the document: 10/30/2008
Notice Of Removal
Case Name and/or Number: Clark Enterprises, Inc. et al v. The Reserve et al
Type: Complaint		Date on the document: 10/31/2008
Class Action Complaint For Violations Of Federal Securities Laws
Case Name and/or Number: Richard I. Wolgin, et al. v. The Reserve Primary Fund, et al.
Type: Complaint		Date on the document: 11/05/2008
Class Action Complaint
Case Name and/or Number: Pogozelki et al v. The Reserve Fund et al
Type: Complaint		Date on the document: 11/07/2008
U.S. District Court Civil Docket
Case Name and/or Number: Pogozelki et al. v. The Reserve Fund et al.
Type: Docket		Date on the document: 11/07/2008
Complaint For Violation Of Federal Securities Laws
Case Name and/or Number: Paul J. Kuznetz, et al. v. The Reserve Primary Fund, et al.
Type: Complaint		Date on the document: 11/18/2008
Notice of Removal
Case Name and/or Number: Caxton International Limited, et al. v. Reserve International Liquidity Fund, et al.
Type: Court Transfer Order		Date on the document: 01/27/2009
Transfer Order
Case Name and/or Number: In Re: The Reserve Fund Securities And Derivative Litigation
Type: Other		Date on the document: 02/11/2009
U.S. District Court Civil Docket (MDL Docket)
Case Name and/or Number: In Re The Reserve Fund Securities and Derivative Litigation
Type: Docket		Date on the document: 02/11/2009

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