On October 2, 2003, the first in a series of putative securities class action complaints was filed against Alliance Capital Management L.P. (n/k/a AllianceBernstein L.P.) and related entities in the United States District Court for the Southern District of New York, alleging market-timing and late trading in the AllianceBernstein family of mutual funds in violation of the federal securities laws. Market-timing is an investment technique involving short-term, “in and out” trading of mutual fund shares, designed to exploit inefficiencies in the way mutual fund companies price their shares. Late trading is an investment practice whereby investors are permitted to place orders to buy, sell or exchange mutual fund shares using the day’s net asset value (“NAV”) after the 4:00 p.m. eastern time cut-off, capitalizing on information obtained after the close of the market. On October 8, 2003, the first derivative action resulting from the same alleged market-timing and late trading practices was filed in the United States District Court for the Eastern District of New York, and subsequently, the first ERISA class action complaint was filed in the United States District Court for the Southern District of New York on October 20, 2003.
In the weeks that followed, numerous additional suits were filed in courts throughout the country against the Alliance Settling Defendants as well as various other mutual fund families identified as being involved in regulatory market-timing and late trading investigations. On February 20, 2004, the Judicial Panel on Multi-District Litigation issued an order centralizing all of these actions in one multi-district docket in the United States District Court for the District of Maryland under the caption MDL-1586 - In re Mutual Funds Investment Litigation (the “MDL Actions”). By letters to counsel in the MDL Actions dated April 9, 2004 and April 12, 2004, the Court assigned four Judges to separate tracks of the MDL Actions, with multiple mutual fund families assigned to sub-tracks within each track.
On May 25, 2004, the Court issued a case management order coordinating all class actions and other direct cases involving Alliance, Franklin/Templeton, Bank of America/Nation Funds and Pilgrim Baxter mutual funds, as well as all cases filed on behalf of purchasers or holders of shares of the corporate parents of any of these entities or their investment advisors (including all cases brought nominally on behalf of the funds or corporate parents of the funds or their investment advisors and styled as derivative actions), for pretrial purposes under the caption In re Alliance, Franklin/Templeton, Bank of America/Nations Funds, and Pilgrim Baxter, Civil No. 04-md-15862. By this same case management order, the Court appointed Philip Erickson as lead plaintiff for the consolidated class claims and Schiffrin & Barroway, LLP (n/k/a Barroway Topaz Kessler, Meltzer & Check, LLP) as lead class counsel for the MDL Alliance Sub-track (“Investor Lead Counsel”), and Pomerantz Haudek Block Grossman & Gross LLP (n/k/a Pomgrantz Haudek Grossman & Gross, LLP) as lead fund derivative counsel for the MDL Alliance Sub-track (“Fund Derivative Counsel”). Additionally, Harwood Feffer LLP serves as counsel for the ERISA class plaintiff in the MDL Alliance Sub-track (“ERISA Class Counsel”).
On September 29, 2004, consolidated amended complaints were filed in the Actions (the “Complaints”). Claims were asserted in the Actions against persons and entities affiliated with the AllianceBernstein Funds, including the investment advisor to the AllianceBernstein Funds and its affiliates, as well as unaffiliated entities, including alleged market-timers and other parties that were alleged to have participated in or facilitated the market timers’ trading of the AllianceBernstein Funds. Specifically, plaintiffs in the securities class action asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, Sections 34(b), 36(a), 36(b) and 48(a) of the Investment Company Act of 1940 ("ICA"), and state law. Likewise, the plaintiffs in the derivative action asserted claims under Sections 36(a), 36(b), 47 and 48 of the (ICA), Sections 206 and 215 of the Investment Advisors Act of 1940, and state law, and the plaintiff in the ERISA class action asserted claims under Sections 404, 405 and 406 of the Employee Retirement Income Security Act ("ERISA"). On February 25, 2005, defendants moved to dismiss the Complaints.
On August 25, 2005, the Honorable J. Frederick Motz issued an order addressing common issues presented in motions to dismiss filed by various defendants in the MDL Actions. When the parties reached a tentative agreement to settle the Actions, executing their Memorandum of Understanding on April 21, 2006, the Court had not specifically ruled on the motions to dismiss filed by the Alliance Settling Defendants. On May 12, 2006, the parties in the Alliance Sub-track submitted a proposed order to the Court, which deferred ruling on the motions filed by the Alliance Sub-track Defendants due to a motion to stay filed on May 5, 2006.
Discussions of possible settlements of the Actions proceeded with various groups of defendants at various times throughout the litigation. The Canary Defendants reached the first agreement in principle to settle and provided cooperation to Plaintiffs in pursuing their claims against the other defendants. Subsequently, agreements in principle to settle were reached with the other Settling Entities.