Mellon wins an injunction against Shearson barring administration of competing funds.

In a victory for Mellon Bank Corp., a U.S. district judge in Pittsburgh on Wednesday granted an injunction against Smith Barney Shearson, preventing the firm from administering mutual funds that Mellon contends were set up to compete directly with funds administered by Boston Co., an affiliate.

The injunction upholds Mellon's claims that Smith Barney Shearson violated a noncompete agreement when it set up its own funds similar to funds that were administered by Boston Co.

"This is a major victory," said Frank V. Cahouet, chairman and chief executive. "We couldn't be more pleased that the court has recognized the contractual protection that Mellon obtained in purchasing the Boston Co."

The agreement, which Mellon says was part of its $1.45 billion acquisition of Boston Co. from American Express Co., stipulated that Boston Co. would continue to service Shearson mutual funds through 1999. The funds account for the majority of Boston Co.'s $170 million in servicing revenue.

Seven-year Wait

Smith Barney, a unit of Primerica Corp., is prevented for seven years from providing administrative services for any funds that are clones or substantially similar to funds that were being administered for Shearson by Boston Co., said Stephen Yoder, assistant general counsel at Mellon.

The court ordered Smith Barney to recommend Mellon and its affiliates for servicing contracts on any fund that Smith Barney created after March 12, when it acquired Shearson from American Express, or any funds that are similar to or were merged with old Shearson funds.

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