A federal judge in New Jersey has dismissed a long-running lawsuit accusing Hartford Financial Services Group Inc's investment management unit of overcharging investors in six mutual funds, following a rare trial.
U.S. District Judge Renee Bumb in Camden said investors failed to show that Hartford and its subadvisers did not do enough work to justify the fees charged, thereby violating federal laws governing mutual funds.
"Plaintiffs have not carried the burden of showing that the nature of the services indicates the fees were so disproportionate that they could not have been negotiated at arm's-length," Bumb wrote in her 70-page decision.
Daniel Sweetser, a lawyer for investors who first brought the case in 2011, said in a phone interview: "We're obviously disappointed, and will be filing an appeal."
Hartford spokesman Tom Hambrick said the company is pleased with the decision, which followed a non-jury trial.
The lawsuit has been closely watched in the fund industry.
It is one of a handful accusing fund companies of delegating fund management to subadvisers, and charging excessive additional fees for providing minimal additional services.
Investors in Hartford's Balanced, Capital Appreciation, Floating Rate, Growth Opportunities, Healthcare and Inflation Plus funds said the company's fees were too high, including on funds with large asset bases.
In one example, they said Growth Opportunities, which typically had around $2 billion of assets between 2010 and 2013, charged a management fee two-and-a-half times larger than Vanguard's similar Morgan Growth Fund, court papers show.
Such fees caused Hartford funds to underperform more peers than they otherwise would have, the plaintiffs alleged.