NEW YORK, March 25 - A federal judge in Manhattan on Wednesday dismissed litigation that alleged Fidelity Management & Research Co. and the board of the Fidelity Government Money Market Fund deprived investors by not automatically converting certain accounts into lower-cost share classes.
U.S. District Judge Margaret Garnett rejected claims that Fidelity unjustly enriched itself and that the fund's directors and investment managers breached their fiduciary duties by failing to implement an automatic conversion from "retail class" shares to "premium class" shares once account balances reached specified thresholds. The thresholds at issue were $100,000 for non-retirement accounts and $10,000 for retirement accounts, according to the complaint.
Plaintiffs had contended that by leaving investors in retail shares, the fund charged higher fees and expenses - up to 0.42% for retail shares versus up to 0.32% for premium class shares - and thereby shortchanged retail investors by millions of dollars. The pooled fund at the center of the dispute held $439.1 billion in assets, of which $406.4 billion as of February 28 were in the retail share class.
In her opinion, Garnett said Fidelity had fully disclosed the economic consequences of converting shares or of choosing not to convert, and that investors had not demonstrated that those disclosures were misleading. The judge also noted that investors were able to convert their shares voluntarily, and did not dispute that fact.
Quoting a legal standard used to evaluate gross negligence, Garnett wrote that "it was not 'outside the bounds of reason' for defendants to design the fund without an automatic conversion feature." That reasoning underpinned her rejection of the plaintiffs' claims of unjust enrichment and breaches of fiduciary duty.
Lawyers representing the investors did not immediately respond to requests for comment. Fidelity and its attorneys likewise did not immediately respond to similar requests.
Garnett distinguished this case from earlier litigation involving another asset manager, in which retail investors alleged they bore large tax consequences after that manager shifted institutional investors into lower-cost shares without prior notice or an option for retail holders. The judge referred to that prior switch as "unexpected," adding that retail investors in that instance had no say or notice. Those cases involving that other manager were settled last year for an estimated $158 million, according to lawyers for the investors in those suits.
The opinion leaves intact the fund's current structure and its disclosure framework. Fidelity reported that it had $7.1 trillion of assets under management at the end of 2025.
Context and implications - the ruling centers on whether a management company and fund board are required to include an automatic conversion mechanism in a money market fund’s share-class design, or whether robust disclosure and the availability of voluntary conversion satisfy fiduciary obligations. In this case, the court found the latter sufficient.