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United we sue.

More than a dozen plaintiff law firms have brought class-action lawsuits against major mutual fund companies since New York Attorney General Eliot Spitzer unearthed the industry scandal in September. From




, fund firms are finding themselves on court dockets nationwide.

It may be too early to tell how much the suits will cost the industry, but many legal experts agree that courts are unlikely to go easy on firms that engaged in abusive trading.

Donald Langevoort, a law professor at Georgetown University, says dismissals of class-action cases are highly unlikely, because of the amount of evidence against the funds. "It's not whether the cases can go forward; they should survive any motions trying to bat them away. The hard question is measuring damages," says Langevoort.

As for investors, how much they get back will depend in part on whether their firms settle with regulators -- and experts agree that many mutual funds are expected to settle. A settlement, however, doesn't necessarily prohibit class-action cases from going forward. If a judge feels the damages were above the public settlement, then he may allow the case to proceed.

Some settlements, such as the $1.4 billion Wall Street investment bank agreement, leave the door open for individuals to go ahead with their class-action cases. However, when it comes to the market-timing or frequent-trading charges, some legal experts see some wiggle room for mutual funds making their case.

"Breach of fiduciary duty works for

Spitzer and the


, but it is tougher to show fraud," says Langevoort. "You need to review the prospectuses, which discuss market-timing and get into the semantics. They might say they discourage market-timing but never give an exact definition."

Stephen Bainbridge, a securities law professor at UCLA, agrees that the mutual funds can try to move the court's opinion of their actions from misrepresentation to exaggeration. "Legal 'puffery' is one defense to securities fraud which says 'we weren't misrepresenting, we were exaggerating," he says. "Like a used-car salesman, nobody is supposed to wholeheartedly believe what they say, so you can't sue for fraud."

Langevoort adds that there have been stories written about market-timing trades in the press for the last few years and that mutual fund companies can point to this public knowledge in their defense.

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What to Expect

For long-term fund holders, there's no clear formula for calculating the amount of money they might expect to get back.

"The charges and parameters in each and every case are different," says Bruce Carton, executive director of securities class-action services at Institutional Shareholder Services, a provider of proxy voting and corporate-governance services. "I don't think anybody knows the magnitude of the numbers right now."

But some market watchers are optimistic. "There will be some shareholders who have substantial damages of 5% to 10% of their assets because of this," says Mercer Bullard, a former SEC lawyer turned mutual fund investor advocate. "Most notably in international funds."

When it comes to calculating damages, Bullard says that it can be done by going back over the last five years and figuring out where prices in the funds involved were stale or mispriced. Once the correct prices are established, a rough analysis can be employed to determine the levels of money that could be returned to wronged investors.

Bullard acknowledges that his plan to calculate damages has its practical limitations. Nevertheless, he says the class-action suits are the best way to maximize the dollar value of those damages, especially when "regulators often fail to follow up."

While politicians such as New York Attorney General Eliot Spitzer might have influence on settlements with mutual fund companies, when it comes to assessing damages, class-action lawyers rely on economics rather than politics.

"There are no political influences

in class-action judgments, just a desire to maximize money that was wrongfully procured by the defendants," says Sam Rudman, a partner at Cauley, Geller, Bowan & Rudman.

How to Join

So how can investors go about participating in a class-action suit against a mutual fund company?

For starters, they needn't feel pressed to latch onto a law firm immediately. Under federal guidelines, investors don't have to call a law firm at all -- the mutual fund company or broker-dealer is obligated to notify investors via the mail if they're holders of a fund involved in a class-action case. Also, class-action suits can take several years to settle.

Individual investors who don't trust their funds to send them the appropriate paperwork or who seek to actively follow the process might prefer to sign up with the law firm involved with the case. There is no charge for enrolling with a law firm, and it can be done online for free on Web sites such as or

A free index of class-action cases, along with the law firms involved in them, can be found at

Institutional investors looking to keep an eye on class-action cases can log onto, a pay site maintained by Institutional Shareholder Services that provides real-time updates on more than 3,000 securities class-action lawsuits.