US judge rules against shareholder in mutual fund fee bench trial

A shareholder failed to prove Metropolitan West Asset Management charged excessive mutual fund fees, a U.S. judge ruled Monday after a week-long bench trial.

U.S. District Judge George Wu ruled plaintiff Thomas J. Kennis failed to compare advisory and sub-advisory fees associated with mutual funds. Wu noted Kennis' comparison of the fund's advisory fee to lower sub-advisory fees MetWest charged to external funds was "inapt." MetWest "provides substantially different services and takes on substantially different risks" as advisor and sponsor of a proprietary fund," the judge wrote.

MetWest was represented by Robert A. Skinner and Amy D. Roy of Ropes & Gray LLP along with David Siegel and Glenn K. Vanzura of Irell & Manella LLP. Plaintiff was represented by Robert W. Mockler, former principal of McKool Smith Hennigan PC. None of plaintiffs' counsel could be reached for comment.

Kennis sued MetWest in 2015, alleging a breach of fiduciary duty to MetWest's flagship fund, the MetWest Total Return Bond Fund, which was the largest actively managed bond fund in the world. MetWest charges the fund a higher advisory fee than what it charges to sub-advised funds, despite providing substantially the same services to both, according to the suit. Thomas J. Kennis v. Metropolitan West Asset Management LLC, 2:15-CV-08162, (C. D. Cal., filed Oct. 16, 2015).

"We're very pleased by the court's thorough analysis and complete dismantling of the plaintiffs' theory and see this as an action the industry has been waiting for," Skinner said.

-- Gina Kim