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RBS Wins Dismissal of Most Claims in U.S. Class Action Lawsuit

January 14, 2011

Royal Bank of Scotland Group Plc won
a U.S. court ruling dismissing class-action claims by pension
funds whose shares in Britain’s biggest government-owned bank
suffered “massive” losses during the financial crisis.

Claims arising from sales of the bank’s so-called ordinary
shares are invalid because the securities aren’t traded on U.S.
exchanges, U.S. District Judge Deborah Batts ruled on Jan. 11 in
Manhattan. The ruling left intact claims by an investor group
representing purchasers of RBS’s preferred shares.

“RBS welcomes Judge Batts’ decision to dismiss these
claims,” Michael Strachan, a spokesman for the Edinburgh-based
lender said today in an e-mailed statement. “We will continue
to defend the remaining claims vigorously.”

RBS, whose record losses in 2008 resulted in a government
bailout totaling 45.5 billion pounds ($72 billion), benefitted
in the case from a U.S. Supreme Court ruling last year that
limited the reach of U.S. securities laws and narrowed who can
sue foreign banks in the country, according to the ruling.

This week’s ruling dismissed claims by pension funds from
Massachusetts and Mississippi, whose 271-page complaint in July
2009 accused RBS of misleading investors about its risk from
subprime debt and losses from the acquisition of Dutch lender
ABN Amro NV, according to the ruling.

The surviving claims in the case were filed by The Freeman
Group, the lead plaintiff representing buyers of RBS’s preferred
shares. Sales of preferred debt raised more than $5.3 billion
for the bank in 2006 and 2007, according to the ruling.

‘Financial Disasters’

The lawsuit also names underwriters including Bank of
America Corp.’s Merrill Lynch unit and individuals, such as
former RBS Chief Executive Frederick Goodwin, whom the funds
blamed for “one of the largest financial disasters in
history.”

Other underwriters named include units of Goldman Sachs
Group Inc., Citigroup Inc., Royal Bank of Canada, Morgan
Stanley, Wells Fargo Co. and A.G. Edwards Sons Inc.

Batts dismissed from the case a group of international
underwriting banks, including a unit of UBS AG, because the
claims against them weren’t related to preferred shares.

In the decision behind this week’s ruling, the Supreme
Court unanimously decided in June 2010 to throw out a
shareholder suit against Melbourne-based National Australia Bank
Ltd. The justices voiced concern that applying U.S. securities
laws internationally would intrude on other countries’
sovereignty.

The U.K.’s Financial Services Authority cleared RBS and
former executives including Goodwin of wrongdoing and said it
won’t take any enforcement action over the bank’s near collapse.
The agency’s report on the matter has yet to be published.

The Massachusetts Pension Reserves Investment Management
Fund had $41.3 billion as of June 30, 2010, according to its
website. Michael Trotsky, the fund’s executive director, didn’t
immediately return a call for comment. A call to the Mississippi
Employees’ Retirement Fund and its law firm, Wolf Popper LLP in New York, weren’t immediately returned.

To contact the reporter on this story:
Erik Larson in London at
elarson4@bloomberg.net.

To contact the editor responsible for this story:
Anthony Aarons at aaarons@bloomberg.net.

Posted in Class Action Lawsuits | Tags: , , , , , , , , , , , , , , , , ,

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