Class-action lawsuits, an important tool for public pension funds and other investors to address perceived wrongs, could become less viable options following a Supreme Court ruling and new positions from the departments of Labor and Justice.
One of the biggest game changers came June 26, when the Supreme Court ruled 5-4 against the $323.6 billion California Public Employees' Retirement System, Sacramento, in a case challenging the amount of time investors have to decide whether to opt out of securities class-action lawsuits and pursue their cases alone.
Instead of having a class complaint serve to "toll," or suspend, the statute of limitations for opting out to file individual claims, as CalPERS had argued, the Supreme Court opinion said the law "in clear terms" bars any action more than three years after the securities offering.
The CalPERS decision "did change things," said attorney David Wertheimer, a New York-based partner at Hogan Lovells LLP, who represents public company defendants in securities class actions. "It likely changed the mindset of institutional investors, who are now evaluating their claims."
The issue was pivotal enough to prompt an amicus brief from an international group of 75 pension funds and other institutional investors with a collective $4 trillion in assets, including the National Conference on Public Employee Retirement Systems, state and municipal U.S. pension funds, and large overseas investors such as the $468 billion APG Asset Management, $351 billion Aegon Asset Management and $210 billion PGGM Investments in the Netherlands.
Blair A. Nicholas, San Diego-based managing partner at Bernstein Litowitz Berger & Grossmann LLP, who filed the group's brief, said the tolling issue "is extremely important for efficiency and resource purposes."