On January 22, 2004, the first in a series of putative federal securities class action complaints was filed against Deutsche Investment Management Americas, Inc. and related entities in the United States District Court for the Southern District of New York, alleging market-timing and late trading in the Deutsche/Scudder 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 post-4:00 p.m. information. On February 2, 2004, a 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.
Numerous additional suits were filed in District Courts throughout the country. Various other mutual fund families identified as being involved in the regulatory market-timing and late trading investigations likewise were named in numerous complaints filed in courts throughout the United States. 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” or “Actions”). By letters to counsel in the MDL Actions dated April 9, 2004 and April 12, 2004, the Court assigned four Judges a separate track of the MDL Actions, with multiple mutual fund families assigned to sub-tracks within each track. The Scudder Sub-track was assigned to the Honorable Catherine C. Blake.
On May 24, 2004, the Court issued a case management order consolidating all class actions and other direct cases involving Excelsior, Federated, Scudder, and AMCAP 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 Excelsior, Federated, Scudder, AMCAP, Civil No. 04-md-15861. By this same case management order, the Court appointed Post-Retirement Health Insurance Plan and Trust as lead plaintiff for the consolidated class claims and its selection of Berger & Montague, P.C. as lead class counsel for the MDL Scudder Sub-track (“Class Counsel”) and Wolf Haldenstein Adler Freeman & Herz, LLP as lead fund derivative counsel for the MDL Scudder Sub-track (“Derivative Counsel”).
On September 30, 2004, amended complaints were filed in the class and derivative actions (the “Complaints”). Claims were asserted in the Actions against persons affiliated with the Funds, including the investment advisor to the 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 Deutsche/Scudder Funds. Specifically, Plaintiffs in the 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, 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. On February 25, 2005, certain defendants moved to dismiss the Complaints.
On August 25, 2005, Judge Motz issued two opinions addressing common issues presented in the class action and derivative lawsuits, respectively, in the MDL Actions. Through a memorandum dated November 3, 2005, which was memorialized in a February 2006 order, United States District Court Judge Catherine C. Blake adopted the reasoning of Judge Motz’s August 25, 2005, Order and granted, in part, and denied, in part, the motions to dismiss by the Deutsche/Scudder Defendants and the UBS Defendants. On April 4, 2006, Judge Blake granted Class Plaintiffs leave to amend their complaint and to file a Second Consolidated Amended Class Action Complaint (the “Second Amended Complaint” or “SAC”) through which Class Plaintiffs, among other things, added the Aurum Defendants as defendants in the action. In August 2006, certain Defendants made motions to dismiss the SAC and these motions were granted, in part, and denied, in part, by Judge Blake through a February 9, 2007 order.
Thereafter, certain of the parties conducted extensive discovery, including exchanging hundreds of thousands of pages of documents, taking the depositions of three dozen fact witnesses, and conducting expert discovery on damages and liability issues. On July 2, 2008, Class Plaintiffs moved to have the case certified as a class action and, on that same date, the Deutsche/Scudder Defendants moved for summary judgment. After these motions were fully briefed these motions and argued the motions at a hearing before the Court, but before the Court ruled on these motions, Plaintiffs and Deutsche Scudder Defendants reached a tentative agreement to settle the Actions.