Trust Updates Archive
(Oct. 3, 2006--Chicago, IL)--JPMorganChase has joined the growing list of banks which are targets of conversion lawsuits. In addition to alleging breach of trust for converting their collective investment funds to proprietary mutual funds, plaintiffs allege that the continued use of "underperforming" proprietary mutual funds is self-serving and not in the beneficiaries' best interest. The Chase lawsuit was filed October 6.
† † † † In September, a second conversion case was filed against LaSalle Bank, Chicago.
† † † † The common thread among the current conversion class actions against Bank of America, Wachovia, LaSalle, and now JPMorganChase is the law firm of Greenfield & Goodman. The firm's lead partner, Richard Greenfield, speaking at a recent American Bar Association fiduciary conference, drove home his view that banks have, and continue to, unjustly enrich themselves with service fees from proprietary mutual funds.
† † † † For most class action attorneys, conversion lawsuits do not represent easy money because of the complexity of the underlying transactions and questions surrounding the computation of damages. Though settlements in conversion cases have ranged from $12 million to nearly $30 million, they fell far short of the hundreds of millions initially predicted--a figure that assumed disgorgement of bank profits.
† † † † The holy grail, say class action attorneys not associated with the lawsuits, is to follow the securities class action model: "perfect the [legal] arguments so that any court can understand them" and have a clear definition of damages. Greenfield & Goodman appears to be in search of that. As co-counsel, the firm has filed some five cases against BofA, two against LaSalle, one against Wachovia, and now one against Chase. Whether plaintiffs' counsel is intending to test variations of arguments in multiple jurisdictions or is merely a magnet for angry beneficiaries, they will be obtaining valuable court feedback which will allow them to refine their allegations.
† † † † Based on Greenfield's recent ABA speech, at least one more bank is expected to be sued.
† † † † The lead plaintiff in the Chase lawsuit alleges damages related to the First National Bank of Chicago's conversion. This conversion was the focus of Schaffer v. Bank One which settled in 2003. Chase subsequently acquired Bank One; it is expected that the bank will seek to have the case dismissed.
For more information, see the October issue of Trust Regulatory News.
No statement in this issue is offered as or should be
construed as legal opinion or advice.
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