The original complaint charges Lord Abbett & Co. LLC, its partners, directors and trustees with violations of the Investment Company Act of 1940, the Investment Advisers Act of 1940, securities laws and for common law breach of fiduciary duties. More specifically, Lord Abbett and its partners, and the defendant entities that control them, breached their statutorily-defined fiduciary duties under Sections 36(a) and (b) of the Investment Company Act, and Sections 206 of the Investment Advisers Act, breached their common law fiduciary duties, and knowingly aided and abetted the brokers in the breach of fiduciary duties to their clients. Lord Abbett also violated Section 34(b) of the Investment Company Act, because it made untrue statements of material fact in fund registration statements, and material omissions, with respect to the procedure for determining the amount of fees payable to the Lord Abbett partners and with respect to the improper uses to which the fees were put. Additionally, the Lord Abbett Funds' directors and trustees breached their common law fiduciary duties to the Lord Abbett Funds investors by knowingly or recklessly allowing the improper conduct alleged herein to occur and harm Lord Abbett Funds investors.
The Complaint charges that, throughout the Class Period, defendants issued false and misleading statements in Lord Abbett Funds' registration statements and prospectuses and, as a result, plaintiffs and the Class were damaged. More specifically, the complaint alleges that Lord Abbett and its partners drew upon the assets of the Lord Abbett Funds to pay brokers to aggressively push Lord Abbett Funds over other funds, and that these payments were concealed from investors by disguising them as brokerage commissions. Such brokerage commissions, though paid from fund assets, were not disclosed to investors in the Lord Abbett Funds public filings or elsewhere. Thus, Lord Abbett Funds investors were induced to purchase Lord Abbett Funds by brokers who received undisclosed payments from Lord Abbett and its partners to push Lord Abbett Funds over other mutual funds and who therefore had an undisclosed conflict of interest. These payments were distinct from normal broker commissions, and thus the advice to invest in the Lord Abbett Funds was given by brokers who, far from giving impartial advice based on the expected return to the investor, were motivated by the promise of bonuses above and beyond their normal commission into channeling their clients' money into the Lord Abbett Funds regardless of the expected return, and thus investors were also damaged by the breach of the fiduciary duty owed by Lord Abbett, its partners, directors and trustees, to protect the Lord Abbett Funds and their investors from actions by the fund advisors performed for their own interests and detrimental to the interest of the Funds and their investors.
In addition, the complaint alleges that the assets of the Funds were improperly used to pay overhead and other marketing costs, costs which should have been paid by the Fund advisor and its partners as a cost of doing business, but which they illegally dipped into the Fund assets for, that is, into the pockets of holders of Lord Abbett Funds. This practice was also not disclosed to investors. In effect, Lord Abbett and its partners 'skimmed' from the Lord Abbett Funds to finance their ongoing marketing campaign in a manner that violated securities laws. These practices drained profits from the Lord Abbett Funds, which ought to have inured to the holders of the funds themselves, and were not disclosed to investors, such nondisclosure itself being a violation of securities laws. The Lord Abbett Funds' directors and trustees, who purported to be Lord Abbett investor watchdogs, knowingly or recklessly, permitted this conduct to occur.
The following Lord Abbett Funds are subject to this lawsuit:
Lord Abbett All Value Fund (Nasdaq: LAVYX, LDFVX, GILAX, GILBX, LAVPX)
Lord Abbett Alpha Series Fund (Nasdaq: ALFBX, ALFAX, ALFCX)
Lord Abbett America's Value Fund (Nasdaq: LAMPX, LAMYX, LAMAX, LAMCX, LAMBX)
Lord Abbett Balanced Series Fund (Nasdaq: BFLAX, LABFX, LABBX, LABPX)
Lord Abbett Developing Growth Fund (Nasdaq: LAGWX, LADBX, LADCX, LADPX, LADYX)
Lord Abbett Florida Fund (Nasdaq: LAFLX, FLLAX)
Lord Abbett Global Equity Fund (Nasdaq: LAGEX, LAGCX, LAGBX)
Lord Abbett Growth Opportunities Fund (Nasdaq: LMGAX, LMGYX, LMGBX, LMGCX, LGOPX)
Lord Abbett International Core Equity Fund (Nasdaq: LICAX, LICBX, LICCX, LICYX, LICPX)
Lord Abbett International Opportunities Fund (Nasdaq: LINBX, LINCX, LAIEX, LINYX, LINPX)
Lord Abbett Large-Cap Growth Fund (Nasdaq: LLRCX, LACGX, LALYX, LALCX, LALBX, LLCPX)
Lord Abbett Large-Cap Value Fund (Nasdaq: LRLPX,LARBX,LRLCX,LAYRX, LALAX, LLCBX, LLCCX, LALPX, LLCYX)
Lord Abbett Mid-Cap Value Fund (Nasdaq: LAVLX, LMCBX, LMCCX, LMCYX, LMCPX)
Lord Abbett Small-Cap Blend Fund (Nasdaq: LSBPX, LSBYX, LSBAX, LSBBX, LSBCX)
Lord Abbett Small-Cap Value Fund (Nasdaq: LRSYX, LSRCX, LRSCX, LRSBX, LRSPX)
Lord Abbett Bond-Debenture Fund (Nasdaq: LBNBX, LBNYX, LBNDX, LBNPX, BDLAX)
Lord Abbett California Fund (Nasdaq: LCFIX, CALAX)
Lord Abbett Connecticut Fund (Nasdaq: LACTX)
Lord Abbett Convertible Fund (Nasdaq: LACFX, LBCFX, LACCX, LCFPX, LCFYX)
Lord Abbett Core Fixed Income Fund (Nasdaq: LCRAX, LCRPX, LCRBX, LCRCX)
Lord Abbett Affiliated Fund (Nasdaq: LAFPX, LAFFX, LAFBX, LAFCX, LAFYX)
Lord Abbett Georgia Fund (Nasdaq: LAGAX)
Lord Abbett Global Income Fund (Nasdaq: LAGIX, LAIBX, GBLAX, LGIPX)
Lord Abbett Hawaii Fund (Nasdaq: LAHIX)
Lord Abbett High Yield Fund (Nasdaq: LHYAX, LAHYX, LHYBX, LHYCX, LHYPX)
Lord Abbett Insured Intermediate Fund (Nasdaq: LISAX, LISBX, LISCX, LISPX)
Lord Abbett Limited Duration USG & GSE Fund (Nasdaq: LDLAX, LALDX, LLTBX)
Lord Abbett Michigan Fund (Nasdaq: LAMIX)
Lord Abbett Minnesota Fund (Nasdaq: LAMNX)
Lord Abbett Missouri Fund (Nasdaq: LAMOX)
Lord Abbett National Tax-Free Fund (Nasdaq: LANSX, LTNSX, LANBX)
Lord Abbett New Jersey Fund (Nasdaq: LANJX)
Lord Abbett New York Fund (Nasdaq: LANYX, NYLAX)
Lord Abbett Pennsylvania Fund (Nasdaq: LAPAX)
Lord Abbett Texas Fund (Nasdaq: LATIX)
Lord Abbett Total Return Fund (Nasdaq: LTRPX, LTRAX, LTRBX, LTRCX)
Lord Abbett USG & GSE Fund (Nasdaq: LAGVX, LAUSX, LAVBX)
Lord Abbett USG & GSE Money Market Fund (Nasdaq: LGOPX)
Lord Abbett Washington Fund (Nasdaq: LAWAX)
Lord Abbett Cash Reserve Fund (Nasdaq: LACXX)
According to earlier proceedings outlined in the court docket, on May 24, 2004, the Court granted the motion to consolidate several cases and further granted the motion for appointment of Milberg Weiss Bershad Hynes & Lerach LLP as lead counsel. On August 16, 2004, the plaintiffs filed a Consolidated Amended Complaint, and the defendants responded by filing motions to dismiss the Consolidated Amended Complaint on November 16, 2004. According to the Opinion and Order entered on August 30, 2005, U.S. District Court Judge William J. Martini granted in part and denied in part the motions to dismiss. Specifically, Counts One, Two, Five, and Seven through Ten were dismissed. Counts Three and Four were dismissed without prejudice. The parties filed motions for reconsideration of the Opinion and Order, which were later denied by Orders issued on December 28, 2005. On September 29, 2005, the parties filed a Second Amended Derivative Complaint asserting claims pursuant to Section 36(b) of the Investment Company Act and Section 48(a) of the Investment Company Act. On February 21, 2006, the defendants filed motions to dismiss the Second Amended Derivative Complaint. On April 19, 2006, Judge Martini issued the Order granting the motion to clarify the Court’s earlier opinion and order entered December 28, 2005 granting in part and denying in part defendants’ motion for reconsideration. According to the clarification order, the Court declares that the December 28th Order held that defendants’ argument that Securities Litigation Uniform Standards Act or 1988 (SLUSA) preempts entire actions rather than claims was not sufficient to require reconsideration pursuant to L. Civ. R. 7.1(i) but did not rule on the merits of that argument and that, accordingly, defendants may present this argument for the Court’s de novo consideration. On May 3, 2006, the defendants filed a motion to dismiss the action in its entirety pursuant to SLUSA. On June 14, 2006, the Court issued the Order granting the partial voluntary dismissal of Count I of the Plaintiff's Second Amended Derivative Complaint as to the "Director Defendants.” On July 13, 2006, certain plaintiffs filed notice of voluntary dismissals.
On December 4, 2006, the Court issued the Order vacating the Court’s previous Opinion and Order allowing Plaintiffs leave to replead Counts Three and Four of their Consolidated Amended Class Action Complaint. Further, according to the Order, the defendants’ motions to dismiss this action pursuant to the Securities Litigation Uniform Standards Act of 1988, 15 U.S.C. § 78bb(f), was granted and the action was dismissed with prejudice. On January 3, 2007, the plaintiffs filed a notice of appeal to the Order dismissing the action. The appeal is pending in the U.S. Court of Appeals for the Third Circuit.
On January 20, 2009, the U.S. Court of Appeals for the Third Circuit issued the Opinion, vacating the January 3, 2007 Judgment of the District Court. The action is remanded to the District Court for further proceedings.
On May 11, 2009, the action was stayed pending the decision by the Supreme Court in the matter of Jones v. Harris Associates, L.P.
On August 9, 2010, the plaintiffs filed a Notice of Voluntary Dismissal. The civil case has been terminated.