GLOBAL - Two UK local authority pension funds and the Dutch metalworkers fund have filed a motion to become lead plaintiffs in a US class action against Royal Bank of Scotland (RBS).

Merseyside Pension Fund, North Yorkshire Pension Fund and PME have retained the US law firm Coughlin Stoia t pursue the complaint, and the legal tean has, in turn, appointed Cherie Booth QC, wife of former Prime Minister Tony Blair, as a "special adviser" on the case.

The class action covers all investors that bought RBS securities between 26 June 2007 and 19 January 2009 and alleges that in this period RBS "sought and obtained billions of dollars from US investors and the funds were raised in order to finance a securities fraud that was perpetrated on investors worldwide".

It also claims "defendants falsely reassured investors that RBS was well-capitalised and risk management procedures firmly in place when, in fact, the bank was virtually insolvent as a result of huge exposure to the US securitisation operations created and overseen by RBS Greenwich Capital, RBS's US investment banking division".

Patrick Daniels, partner at Coughlin Stoia and one of the lead attorneys on the case, said: "The filing of the applications for the appointment of lead plaintiffs is the first step towards achieving justice for those hundreds of thousands of investors who have suffered huge financial losses as a result of this bank's massive failure of risk management at every level.

"We are proud to have formed a team comprising the best legal minds to represent our clients and we will be pursuing this claim relentlessly in order to bring the executives, especially Sir Fred Goodwin, and this bank to book," he added.

That said, while the three pension funds have applied to serve as co-lead plaintiffs, the application will be heard by the Southern District Court of New York and the process can take between two to three months.

Similarly, it is not guaranteed that Coughlin et al will take on the case as other law firms including Pomerantz Haudek Block Grossman & Gross LLP, Kahn Gauthier Suick LLC, Murray Frank & Sailer and Zard Nobel LLP have all filed cases.

This means investors who filed their applications within the court's deadline "may choose to team up together and present a leadership structure of the case to the court for approval", otherwise the court will decide which investor or group of investors will act as lead plaintiffs and approve the lead counsel to prosecute the action on behalf of plaintiffs and the class of RBS investors.

Although the two UK pension funds do not comment on active litigation, North Yorkshire confirmed it had invested £23m (€25m) in RBS, although "the resulting damage will be determined by the litigation process".

In addition, both North Yorkshire and Merseyside emphasised the legal process will not affect individual members' benefits and instead said the action had been taken to "safeguard the value of the fund in the long-term".

Merseyside added it had "been reluctant to take this step but believes that as a responsible investor it is important to hold RBS management to account".

Cherie Booth QC - who is known more for her expertise in human rights and employment law - claimed the action is a "significant case not only for the massive losses inflicted on local authority pension schemes and other UK institutions who were the largest investors in RBS, but also for the potential to protect investors in the future by significantly raising the standards for good governance in major UK companies".

"A huge number of pensioners depend upon investments made by their pension funds and our pension funds in turn rely upon vigorous, transparent and honest markets to meet their obligations," she added.

Peter Murphy, partner specialising in litigation at the law firm Sackers, said: "The historic caution of UK pension funds to become lead plaintiffs in US securities litigation suggests that those involved here are confident of the merits of the claim and have a significant amount at stake."
 
He pointed out the US legal system is an ideal forum for these types of claims as US lawyers act on a "no win, no fee" basis and plaintiffs do not have to pay for the other side's legal costs even if they lose.

But he admitted Booth's involvement in the case "is very surprising" as her profile is mainly UK and European human rights law, rather than US securities litigation.

However, he added: "That is not to say she doesn't have relevant expertise. It is simply that she is likely to be just one part of a large legal team bringing with it a variety of skills and knowledge. Her involvement in the case will certainly add greater public interest to an already high profile media event."

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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