U.S. District Judge Patti B. Saris agreed with State Street that plaintiff Fishman Haygood Phelps Walmsley Willis & Swanson, LLP did not have ERISA standing because it did not suffer an injury from State Street’s actions.
Saris cited expert witnesses who showed that even though the mark-to-market value of cash collateral pool units was below par, Fishman Haygood and the trust it was invested in had continued to transact cash collateral pool units at par. In addition, the firm did not face any restriction on redemptions, there was sufficient liquidity in cash collateral pools, and none of the securities held by the cash collateral pools had defaulted or was impaired. As such, Saris determined the plaintiff’s unrealized losses, which she said represented the bulk of its damages, did not establish injury for the purposes of Article III of ERISA.
Saris also pointed out that the record “show(ed) that the allegedly imprudent investments made by State Street outperformed hypothetical investments in ‘short-term Treasuries’ and money market funds at all times …”
Fishman Haygood filed the proposed class action against State Street Corporation, State Street Bank &Trust Company, State Street Bank & Trust Company of New Hampshire, and State Street Global Advisors, claiming the defendants’ reinvestment of collateral, obtained through the securities lending program, in long-term, high-risk instruments violated their duties under ERISA.The opinion is here.