October 21, 2013

Bayou State Fund is a Voracious Frequent Filer

One of the most litigious pension funds in the country, the Louisiana Municipal Police Employees’ Retirement System (LMPERS), has filed at least 133 suits in a five-year period, including a 10-day stretch in February when they sued five companies, reports Fortune Magazine ($). In fact, a firm that previously represented LMPERS called them “the most prolific filer of shareholder litigation in U.S. history.”

Erika Fry explains:

[Attorney Randy] Roche and his trustees may see themselves as vigilant shareholders, holding corporate fat cats accountable, but a Fortune review of the fund’s lawsuits — and extensive interviews with dozens of pension fund managers, corporate-governance experts, and Roche himself — suggests that LMPERS is something altogether different: a go-to institution for plaintiffs attorneys looking to sue scores of giant companies. Firms such as Bernstein Litowitz Berger & Grossmann and smaller firms such as Saxena White, among others, monitor (for free) LMPERS’s investment portfolios, and when there’s a whiff of impropriety involving one of its holdings, the firms will file the suit, foot the bill — and take their share of any settlement.

Back in September, ILR released a paper looking at the problem with “Frequent Filers” such as LMPERS. The lawyers in these suits often collect substantial contingency fees, reducing the recovery that would otherwise go to shareholders. Additionally, the lawyers are given free rein to bring extortionate suits, which corporations feel compelled to settle for nuisance value.

On Wednesday, repeat plaintiffs in shareholder litigation will be discussed at the 14th Annual Legal Reform Summit. The summit features a number of other panels on legal reform, as well as a keynote address by Wall Street Journal columnist and best-selling author Peggy Noonan. Click here to view the agenda and register.

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