It was only a matter of time before the litigation portfolios of U.S. public pension funds started catching up with their investment portfolios and spending more time overseas.
Thanks to a game-changing Supreme Court decision in 2010, that time is now beginning in earnest, say lawyers who serve or advise large pension funds.
“The larger funds have absolutely jumped on this issue,” said Eric Belfi, a partner with Labaton Sucharow LLP in New York, whose firm tracks potential or developing cases abroad, and helps public pension funds decide whether to get involved.
One indicator that this trend is taking off is the number of large pension funds — like the $43.3 billion Los Angeles County Employees' Retirement Association, Pasadena, Calif., and the $130 billion Texas Teacher Retirement System, Austin, — that are in the process of soliciting foreign litigation monitoring or advising services. The Oregon State Treasurer's Office, which oversees the $66.5 billion Oregon Public Employees Retirement Fund, Salem, solicited outside counsel in 2013 “to address the complicated nature of overseas litigation,” said spokesman Michael Cox. “We are looking forward to launching the program.” Still others, like the $189.1 billion California State Teachers' Retirement System, West Sacramento, recently updated their litigation policies to address overseas activity.
Overseas shareholder litigation is also a main topic of conversation during the National Association of Public Pension Attorneys' monthly litigation calls, said Chris Supple, deputy executive director and general counsel of the $60 billion Massachusetts Pension Reserves Investment Management Board, Boston, who co-chairs NAPPA's securities litigation committee. “Our committee is trying to enable all of our fellow pension fund GCs to combine our resources and help each other learn together how best to navigate this new world of foreign litigation, instead of each of us trying to learn it separately on our own.”
Until 2010, it didn't matter where securities were purchased. U.S. institutional investors pursued investment litigation cases in U.S. courts. Everything changed in June 2010, when the U.S. Supreme Court ruled in Morrison vs. National Australia Bank that suits against companies involving foreign-bought securities could not be brought in federal U.S. courts.
That gave large institutional investor plaintiffs little choice but to shift their focus overseas to the defendant's home base or the point of purchase when considering litigating over losses. Now, a trend of securities class actions that started in courts in Canada and Australia is spreading to Europe and Japan.