CalPERS lost a big case at the U.S. Supreme Court this week. The decision will cost California government retirees a shot at recovering tens of millions of dollars.
The court voted 5-4 to dismiss a lawsuit CalPERS filed against a slew of investment banks over the notorious collapse of Lehman Brothers, whose 2008 bankruptcy triggered the stock market crash.
CalPERS blamed the banks for duping the big pension fund into buying more than $700 million worth of Lehman stock, bonds and other securities in 2007 and 2008. However, a spokesman for CalPERS later estimated the pension fund’s actual losses at around $300 million.
The case was decided on something of a technicality. CalPERS could have shared in a $400 million class action settlement with other creditors. Instead, the California Public Employees’ Retirement System chose to file its own lawsuit against the investment banks in 2011, claiming they hid Lehman’s exposure to toxic mortgage securities and other risky assets.
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A lower court ruled that CalPERS’ lawsuit was invalid because it was filed more than three years after the pension fund made its initial investment. Federal securities laws set a three-year statute of limitations.
The Supreme Court agreed. CalPERS’ “untimely filing of its individual action is ground for dismissal,” Justice Anthony Kennedy wrote in the majority opinion.
CalPERS said it was disappointed but it will continuing efforts “to hold accountable” those who hurt the fund in the financial crisis.
CalPERS has recovered some of its Lehman losses. It collected $90 million from the Lehman bankruptcy case and accepted settlements totaling more than $25 million from Lehman’s accountant and former officers and directors.