Royal Bank of Scotland Group won a U.S. court ruling dismissing class-action claims by pension funds whose shares in Britain's biggest government-owned bank suffered “massive” losses during the financial crisis.
Claims arising from sales of the bank's so-called ordinary shares are invalid because the securities aren't traded on U.S. exchanges, U.S. District Court Judge Deborah Batts ruled on Tuesday in New York. The ruling left intact claims by an investor group representing purchasers of RBS' preferred shares.
The ruling dismissed claims by the $46.8 billion Massachusetts Pension Reserves Investment Management Board, Boston, and the $20 billion Mississippi Public Employees' Retirement System, Jackson, that RBS misled investors about its risk from subprime debt and losses from the acquisition of ABN AMRO, according to the ruling. The two funds filed suit against RBS in July 2009.
“RBS welcomes Judge Batts' decision to dismiss these claims,” Michael Strachan, a spokesman for the bank said in an e-mailed statement. “We will continue to defend the remaining claims vigorously.”
RBS, whose record losses in 2008 resulted in a government bailout totaling £45.5 billion ($72 billion), benefited in the case from a U.S. Supreme Court ruling last year that limited the reach of U.S. securities laws and narrowed who can sue foreign banks in the country, according to the ruling.
The surviving claims in the case were filed by the Freeman Group, the lead plaintiff representing buyers of RBS' preferred shares. Sales of preferred debt raised more than $5.3 billion for the bank in 2006 and 2007, according to the ruling.
In the decision behind this week's ruling, the Supreme Court unanimously decided in June 2010 to throw out a shareholder suit against Melbourne-based National Australia Bank Ltd. The justices voiced concern that applying U.S. securities laws internationally would intrude on other countries' sovereignty.
The U.K.'s Financial Services Authority cleared RBS and former executives of wrongdoing and said it won't take any enforcement action over the bank's near collapse. The agency's report on the matter has yet to be published.
Michael Trotsky, MassPRIM's executive director, didn't immediately return a call for comment. Calls to the Mississippi fund and its law firm, Wolf Popper, weren't immediately returned.