Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

KRANTZ v. PRUDENTIAL INVESTMENTS FUND MANAGEMENT

July 30, 1999

SHELDON KRANTZ, PLAINTIFF
v.
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC AND PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC, DEFENDANTS.



The opinion of the court was delivered by: Hayden, District Judge.

ORDER

This Court having referred defendants' motion to dismiss the plaintiffs complaint to the Honorable Ronald J. Hedges, United States Magistrate Judge, pursuant to 28 U.S.C. § 636(b)(1)(B); the Court having reviewed de novo the Report and Recommendation of June 10, 1999; the Court having considered plaintiffs' objections to the Report as well as defendants' response to plaintiffs objections; and the Court concluding that plaintiff should not be granted a second leave to amend the complaint when plaintiff was on notice of the complaint's deficiencies and failed to rectify them with his first amendment;

It is this 30th day of July, 1999

ORDERED that the defendants' motion to dismiss the complaint is granted; and it is further

ORDERED that the Report and Recommendation of the United States Magistrate Judge is adopted and incorporated as the Opinion of this Court.

REPORT AND RECOMMENDATION

HEDGES, United States Magistrate Judge.

INTRODUCTION

This matter comes before me on defendants' motion to dismiss the Amended Complaint pursuant to Rule 12(b)(6) for failure to state a claim upon which relief may be granted. The motion was referred to me by Judge Hayden. I have considered the papers submitted in support of and in opposition to the motion. There was no oral argument. Rule 78.

STATEMENT OF FACTS

Plaintiff, a shareholder of the Prudential Jennison Growth Fund (the "Fund"), brought this action pursuant to Section 36(b) of the Investment Company Act of 1940, as amended (the "ICA"), 15 U.S.C. § 80a-35(b). The Fund is a registered "investment company" within the meaning of the ICA. The defendants are Prudential Investments Fund Management LLC, the investment adviser to the Fund (the "Adviser"), and Prudential Investment Management Services LLC, the Fund's principal underwriter (the "Distributor"). The Distributor is a Delaware limited liability company and an affiliate of the Adviser. The Adviser's principal offices are located in Newark, New Jersey.

The original Complaint was filed on August 7, 1998. Defendants moved to dismiss on October 23, 1998. In response, plaintiff filed an Amended Complaint on December 10, 1998. The Amended Complaint contains a single claim for relief under Section 36(b) of the ICA, 15 U.S.C. § 80a-35(b). ICA Section 36(b) provides that an investment adviser has "a fiduciary duty with respect of the receipt of compensation. . . ." 15 U.S.C. § 80a-35(b). Section 36(b) also provides for a private cause of action by a shareholder against the investment adviser and principal underwriter "for breach of fiduciary duty in respect of . . . compensation" paid by a fund. 15 U.S.C. § 80a-35(b). The Amended Complaint seeks to recover all of the fees paid by the Fund to its investment Adviser and Distributor pursuant to management and distribution agreements (the "Agreements"), which were allegedly entered into in violation of Section 15(c), of the ICA, 15 U.S.C. § 80a-15(c).

Section 10(a) of the ICA, 15 U.S.C. § 80a-10(a), mandates that at least 40% of the members of the governing board of every registered investment company not be "interested persons," i.e., they must be independent to the investment adviser. Such directors are generally referred to as independent directors. Section 15(c), 15 U.S.C. § 80a-15(c), further mandates that every agreement with an investment adviser or distributor be approved by a majority of the independent directors.

The Amended Complaint alleges that none of the members of the Fund board are independent, as required by ICA Section 10(a), 15 U.S.C. § 80a-10(a). As a result, plaintiff contends, the Agreements could not be properly approved as required by ICA Section 15(c), 15 U.S.C. § 80a-15(c). Consequently, by reason of their receipt of funds from invalid Agreements, defendants have breached their fiduciary duty to negotiate at arm's-length. 15 U.S.C. § 80a-35(b). Accordingly, plaintiff seeks judgement: (1) declaring that defendant violated Sections 10(a), 15(c), and 36(b) of the ICA and that the Agreements are void; (2) awarding damages ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.