Northern Trust's third-party complaint that the boards of trustees of four pension funds were responsible for losses incurred from the firm's securities lending program was dismissed by U.S. District Judge Robert W. Gettleman of the U.S. District Court for the Northern District of Illinois in Chicago.
In the complaint, filed in a class-action suit by four pension funds that alleged breach of fiduciary duties and breach of contract, Northern Trust claimed it was “the boards that chose to participate in the (securities lending program), selected their own investment guidelines, knew precisely how defendants were implementing the guidelines and made the affirmative decision to ‘stay the course.'”
The pension funds are the $1 billion Louisiana Firefighters' Retirement System, Baton Rouge, which originally brought the complaint in November 2009; the $8.9 billion Chicago Public School Teachers' Pension & Retirement Fund; the $499 million Pontiac (Mich.) General Employees' Retirement System; and the $259 million Pontiac (Mich.) Police & Firemen's Retirement System.
Mr. Gettleman dismissed the complaint on Feb. 23 on the grounds that Northern Trust cannot pass on liability to the plaintiffs.
The next status hearing for the ongoing case is March 7.
In a statement, Northern Trust said it "filed its third-party claims as part of its defense against a lawsuit brought by the FRS and its co-plaintiffs. The U.S. District Court ruling characterized Northern Trust’s allegations as defenses rather than third-party claims. By our reading, the ruling did not undermine Northern Trust’s defenses to plaintiffs’ claims."