Bank of New York Mellon lost a bid to dismiss a lawsuit by two Detroit public pension plans alleging it mishandled the pension funds’ investments in Lehman Brothers Holdings while persuading a judge to narrow the claims in the case.
U.S. District Judge Richard Sullivan in New York on Monday ruled that a breach of contract claim can proceed, while dismissing other claims he said are duplicative as well as an allegation of breach of fiduciary duty.
The plaintiffs, including the $3.4 billion Detroit Police and Fire Retirement System and the $2.4 billion Detroit General Retirement System, filed class-action complaints last year. They allege that BNY Mellon encouraged them to join its securities lending program, under which the bank would lend securities owned by the funds to creditworthy borrowers.
The funds and other members of the class said the bank invested in Lehman notes in 2006 on behalf of the funds and continued to maintain the investments as uncertainty surrounding Lehman grew. The plaintiffs said they lost more than $1 billion in the notes.
“We’re pleased that the court dismissed three of the four claims, and we will vigorously defend against the lone remaining claim,” Kevin Heine, a BNY Mellon spokesman, said in an e-mail.