The Second Circuit decided two cases today, one involving a securities fraud action alleging inadequate disclosure of transfer agent fees, and the other concerning an attorney's fee award in a civil rights class action.
In Operating Local 649 Annuity Trust Fund v. Smith Barney Fund Mgmt. LLC, No. 07-5125, the complaint alleged that defendant investment bank negotiated a contract for transfer agent services that saddled plaintiffs with excessive, misleadingly disclosed fees.
The Second Circuit affirmed the dismissal of plaintiffs' claims under the Investment Company Act on the ground that the claims could only be brought derivatively on behalf of the mutual funds in which plaintiffs had purchased shares. However, the court reversed the dismissal of plaintiffs' Securities Exchange Act claims, agreeing with plaintiffs that defendant made inadequate disclosures concerning the transfer fee arrangements.
McDaniel v. Schenectady, No. 07-5580, concerned an attorney's fee award pursuant to the settlement of a class action challenging a county's strip-search policy in its jails. Plaintiffs appealed the fee award, which was lower than the amount they requested.
The Second Circuit affirmed the award, holding that the district court did not abuse its discretion by declining to award attorneys' fees using a percentage-of-fund approach, and instead opting for a lodestar method, relying on the Second Circuit's previous decision in Arbor Hill Concerned Citizens Neighborhood Ass'n. v. County of Albany.