Bank of New York Mellon is trustee for a trust established by the grandmother and great-grandmother of the plaintiffs in this case. BNY Mellon made poor investments, favoring an affiliate’s mutual funds, the complaint says, when better choices would have earned the trust another $100,000 in income or appreciation in the last five years alone.
The class for this action is all beneficiaries of funds for which BNY Mellon is or was a trustee, has or had discretion to invest assets, and invested them in mutual funds managed by the Dreyfus Corporation.
The trust was established in 1954 with the Bank of New York as trustee. BNY Mellon is the corporate successor to BNY and has “sole discretion to invest the assets of the trust,” the complaint says. It therefore has a fiduciary to the trust.
The complaint quotes the New York Prudent Investor Act as saying, “A trustee shall exercise reasonable care, skill and caution to make and implement investment and management decisions as a prudent investor would for the entire portfolio, taking into account the purposes and terms and provisions of the governing instrument.” As the complaint adds, “Implicit in the duties of a trustee under this statute is the duty to administer the trust solely in the interest of the beneficiaries.”
However, the complaint claims that BNY Mellon didn’t simply make an objective judgment about which mutual funds in which to invest trust assets. Instead, the trustee invested 95% of those assets in mutual funds managed by the Dreyfus Corporation, which is an affiliate of BNY Mellon.
But, according to the complaint, Dreyfus is a bad manager: “In recent years, it has ranked consistently in the bottom quartile, and sometimes in the bottom decile, of asset managers.” The complaint reproduces graphs that compare Dreyfus’s funds with those of other large managers over the last fifteen years and the performance of its funds relative to certain index funds. The Dreyfus line on the graphs have a consistent and telling downward slant.
The complaint claims that the Dreyfus funds that BNY Mellon invested the trust assets in were not among the well-performing funds available but were overall among the worst-performing funds in their categories. A partial explanation for the funds’ poor performance, the complaint claims, may be that Dreyfus portfolio managers have less of their own money invested in those funds.
The complaint’s sole claim is the BNY has breached its fiduciary duty.