The suit alleges that BNY Mellon breached its fiduciary duty to the pension system by encouraging it to join its securities lending program, under which the bank would lend securities owned by the funds to creditworthy borrowers.
The funds viewed the program as “akin to a conservative money market account,” according to the complaint filed Monday in U.S. District Court in New York.
The bank invested in Lehman notes in 2006 on behalf of the pension funds and continued to maintain the investments as uncertainty surrounding Lehman grew, the system said.
The system seeks to represent a group of investors that together lost more than $1 billion in the notes.
Kevin Heine, a BNY Mellon spokesman, had no immediate comment.