Bank of New York Mellon Corp. lost a bid to dismiss a lawsuit alleging it mishandled pension funds’ investments in Lehman Brothers Holdings Inc. while persuading a judge to narrow the claims in the case.
U.S. District Judge Richard Sullivan in Manhattan today 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 court finds that plaintiffs have sufficiently pled a claim for breach of contract,” Sullivan said in his order.
The plaintiffs, including the General Retirement System of the City of Detroit and the Police & Fire Retirement System of the City of Detroit, filed class-action, or group, 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.
The case is General Retirement System of the City of Detroit v. BNY Mellon N.A., 11-06345, U.S. District Court, Southern District of New York (Manhattan).