While class actions lawyers are willing to reach for the dollar, they may also know a hopeless case when they see one. On Monday, class action lawyers representing retail shareholders in the American Century funds dropped a lawsuit brought over the fees charged by the funds. The suit alleged that American Century harmed retail shareholders by levying higher fees on retail funds than on institutional products.

That suit, if it had gone forward, would have been a longshot at best. However, if the plaintiffs have won they would have threatened standard pricing practices in the industry for retail and institutional products. Retail products carry higher sales, marketing and services costs than retail products, leading to higher pricing in the marketplace. Many academics and regulators have failed to grasp the differences in the two markets, opening the door to potential litigation.

According to a Bloomberg report American Century's defense was bolstered by a July 17 ruling in which the federal judge hearing the case ruled that the plaintiffs could not present evidence on pricing in American Century's non-mutual fund accounts.

In explaining the decision to drop the case, plaintiff's lawyer Guy Burns told Bloomberg that "We believe the fees are now reasonable." He also noted that the fund firm has cut fees twice since the suit was filed.

A spokesperson for American Century said that the fee cuts were unrelated to the suit and that they are annually negotiated with the funds' boards.  

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE