Ameriprise 2010 Annual Report Download - page 53

and non-exchange traded (or ‘‘private placement’’) securities; information security; the delivery of financial plans and the
suitability of investments and product selection processes. The number of reviews and investigations has increased in
recent years with regard to many firms in the financial services industry, including Ameriprise Financial. The Company has
cooperated and will continue to cooperate with the applicable regulators regarding their inquiries.
These legal and regulatory proceedings and disputes are subject to uncertainties and, as such, the Company is unable to
predict the ultimate resolution or range of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief, in addition to further claims, examinations
or adverse publicity that could have a material adverse effect on the Company’s consolidated financial condition or results
of operations.
Certain legal and regulatory proceedings are described below.
In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express
Financial Advisors Inc., was filed in the United States District Court for the District of Arizona, and was later transferred to
the United States District Court for the District of Minnesota. The plaintiffs alleged that they were investors in several of the
Company’s mutual funds and they purported to bring the action derivatively on behalf of those funds under the Investment
Company Act. The plaintiffs alleged that fees allegedly paid to the defendants by the funds for investment advisory and
administrative services were excessive. Plaintiffs seek an order declaring that defendants have violated the ‘40 Act and
awarding unspecified damages including excessive fees allegedly paid plus interest and other costs. On July 6, 2007, the
district court granted the Company’s motion for summary judgment, dismissing all claims with prejudice. Plaintiffs appealed
the district court’s decision, and on April 8, 2009, the U.S. Court of Appeals for the Eighth Circuit reversed the district
court’s decision, and remanded the case for further proceedings. The Company filed with the United States Supreme Court
a Petition for Writ of Certiorari to review the judgment of the Court of Appeals in this case in light of the Supreme Courts
anticipated review of a similar excessive fee case captioned Jones v. Harris Associates. On March 30, 2010, the Supreme
Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit’s
decision in this case and remanded it to the Eighth Circuit for further consideration in light of the Supreme Court’s decision
in Jones v. Harris Associates. Without any further briefing or argument, on June 4, 2010, the Eighth Circuit remanded the
case to the district court for further consideration in light of the Supreme Court’s decision in Jones v. Harris Associates.
The district court ordered briefing and heard oral argument on September 22, 2010 on the impact of the Jones v. Harris
Associates decision. On December 8, 2010, the district court re-entered its July 2007 order granting summary judgment in
favor of the Company. On January 10, 2011, plaintiffs filed a notice of appeal with the Eighth Circuit.
In July 2009, two issuers of private placement interests (Medical Capital Holdings, Inc./Medical Capital Corporation and
affiliated corporations and Provident Shale Royalties, LLC and affiliated corporations) sold by the Company’s subsidiary
Securities America, Inc. (‘‘SAI’’) were the subject of SEC actions (brought against those entities and individuals associated
with them), which has resulted in the filing of several putative class action lawsuits naming both SAI and Ameriprise
Financial, as well as related regulatory inquiries. Approximately $400 million of Medical Capital and Provident Shale
investments made by SAI clients are outstanding and currently in default. On January 26, 2010, the Commonwealth of
Massachusetts filed an Administrative Complaint against SAI, which is being adjudicated in an administrative hearing that
is expected to conclude during the second quarter of 2011. A significant volume of FINRA arbitrations have been brought
against SAI. Several of them have been settled, and there has been one adverse ruling, but most are scheduled
throughout the course of 2011 and 2012. The putative class actions and arbitrations generally allege violations of state
and/or federal securities laws in connection with SAI’s sales of these private placement interests. These actions were
commenced in September 2009 and thereafter. The Medical Capital-related class actions were centralized and moved to
the Central District of California by order of the United States Judicial Panel on Multidistrict Litigation under the caption ‘‘In
re: Medical Capital Securities Litigation.’’ The Provident Shale-related class actions remain pending in Texas federal court.
On June 22, 2010, the Liquidating Trustee of the Provident Liquidating Trust filed an adversary action (‘‘Liquidating Trustee
Action’’) in the Provident bankruptcy proceeding naming SAI on behalf of both the Provident Liquidating Trust and a number
of individual Provident investors who are alleged to have assigned their claims. The Liquidating Trustee Action generally
alleges the same types of claims as are alleged in the Provident class actions as well as a claim under the Bankruptcy
Code. The Liquidating Trustee Action has been moved from bankruptcy court to the Texas federal court with the other
Provident class actions. Motions to dismiss are pending in both the Provident Shale and Medical Capital class actions, but
on January 24, 2011 the Medical Capital Class Action was temporarily transferred to the Northern District of Texas, where
the Provident class action is pending, so that coordinated settlement negotiations can be conducted under that single
Court’s supervision. On February 17, 2011, the named plaintiffs to the class actions filed with the Court a Settlement
Agreement and Motion for Preliminary Approval of Class Action Settlement, seeking the court’s approval of agreed-upon
settlement terms. A preliminary approval hearing has been set for March 18, 2011, and the judge has issued a temporary
restraining order which stays pending arbitration matters scheduled through this date.
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