Trustees educated on class action involvement

Speaking at the National Association of Pension Funds (NAPF) Investment conference in Edinburgh this morning, Marc Gross, senior partner for US securities class action law firm Pomerantz Haudek Grossman and Gross, said schemes should only take an active position in a class action in the US if more than £50m was at stake.

“I would recommend not opting out (and taking an individual case, rather than joining a class action) unless your exposure is £50m or more,” he said.

Gross’ statement came after Peter Murray, currently a trustee for Bestrustees and a former trustee for the Railways Pension Fund (RailPen), explained his experience with opting out of a class action which wastaking on telecoms giant WorldCom, which collapsed in 2002.

“We had £3bn in overseas bonds and lost £8m when WorldCom went bust. We engaged a firm of US lawyers and were advised by them to opt out of the class action and file out own suit,” Murray said.

“We were subsequently bombarded with demands from the defendant; it was enormously time consuming, a huge amount of effort was needed.”

After 18 months, the trustees decided to withdraw their file and join the class, and ultimately won £2m in compensation.

“We did learn a lesson; if we were to become involved in a class action again, we would only enter into it in a passive basis. [Acting as an active individual claimant] took up too much effort and actually, you don’t get that much more [in compensation] as an active participant,” Murray concluded.