* Robert N. Shamansky v. Massachusetts Financial Services Co., et al., Case No. 96CVH12-9373.
[9138]
August 7, 1997
TO: COMPLIANCE ADVISORY COMMITTEE No. 22-97
SEC RULES MEMBERS No. 57-97
ABANDONED PROPERTY TASK FORCE
RE: COURT DISMISSES CLAIM AGAINST FUND REGARDING A LOST
DIVIDEND CHECK
______________________________________________________________________________
An Ohio Common Pleas Court recently dismissed a class action suit against a fund, its
adviser and affiliated service center alleging that they had breached their duty regarding a lost
dividend check.* A copy of the courts order is attached.
According to the order, in October 1989, the fund sent the plaintiff a dividend check in
the amount of $65.58. The check was mailed, but apparently never received by the plaintiff. In
March 1995, the funds service center sent a letter to the shareholder regarding the dividend
check, prior to escheating the unclaimed funds to the state. The plaintiff then requested that
the defendants issue him a new check and pay him interest for the period between 1989 and
1995. The defendants issued him a new check but did not pay interest. The shareholder
alleged in his complaint that the defendants breached a duty they owed him by not following
up when the check was not timely delivered, and that by not doing so the defendants kept and
used moneys that belonged to the plaintiff and other similarly situated shareholders.
In granting the defendants motion to dismiss, the court found that the defendants only
had a duty to exercise reasonable care in getting the payment to the plaintiff, and that the
plaintiff did not allege that the defendants failed to exercise ordinary care in mailing the check.
In addition, the court found that the funds prospectus included disclosure stating that the fund
assumes no responsibility for tracking down uncashed checks and determining if they are
uncashed because of an unreported address change or because of some other reason.
Specifically, the funds prospectus stated:
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable to deliver
checks to the shareholders address of record, such shareholders distribution
option will automatically be converted to having all dividend and other
distributions reinvested in additional shares...No interest will accrue on
amounts represented by uncashed distribution or redemption checks
(emphasis added).
Amy B.R. Lancellotta
Associate Counsel
Attachment (in .pdf format)
Note: Not all recipients of this memo will receive an attachment. If you wish to obtain a copy
of the attachment referred to in this memo, please call the Institute’s Information Resource
Center at (202)326-8304, and ask for this memo’s attachment number: 9138.