The pension plan for Blue Cross Blue Shield of Minnesota, along with other pension funds, has lost a legal battle with Wells Fargo & Co. over tens of millions of dollars the funds lost in the bank’s former securities lending program.
The San Francisco-based bank did not breach its fiduciary duties to the pension funds, U.S. District Judge Donovan Frank said in an order filed Monday.
However, he explained in the 12-page order that he was “constrained” by law to adopt the decision a jury reached last August in the case, which had two parts. The jury last August focused on claims by just six of 13 institutional investors that sued Wells Fargo in 2011, those not covered by the federal Employee Retirement Income Security Act (ERISA). The jury decided that Wells Fargo did not breach its fiduciary duty to those six plaintiffs with its investment decisions.
Monday’s order covers the remaining seven pension funds, including Blue Cross Blue Shield’s, that fall under ERISA. Frank heard those claims separately, and determined he was legally bound to accept the jury verdict for them.
“Significantly, however, the court notes that if it were not so bound, the court would find, based on the evidence presented at trial, that defendant breached its fiduciary duties to the ERISA plaintiffs,” Frank wrote in a footnote.
The case focused on whether Wells Fargo played fast and loose in the mid-2000s with what was supposed to be a conservative lending program. The program involved investing money made from lending the securities of the pension funds, which was mostly stock, to third-party brokers. The bank has since sold the securities lending program.
Minneapolis attorney Mike Ciresi, who represented the pension funds, said he thinks the footnote shows the evidence established that Wells Fargo was in the wrong.
“It’s clear that Wells Fargo breached its fiduciary duty, as found by the previous jury and the court of appeals,” he said. “This jury simply ignored the evidence. It just went sideways.”
Ciresi won a very similar case against Wells Fargo in 2010 on behalf of four Twin Cities foundations that were awarded nearly $30 million in damages. The win was upheld in a court of appeals.
Ciresi wouldn’t say whether he planned to appeal the latest case.
Plaintiffs addressed in Monday’s order were the Blue Cross Blue Shield of Minnesota Pension Equity Plan, International Truck and Engine Corp. Retiree Supplemental Benefit Plan, Meijer Pension Trust, Jennie Edmundson Memorial Hospital Pension Plan, Tuckpointers Local 52, Twin City Hospitals-Minnesota Nurses Association Pension Plan and the Twin City Hospitals Licensed Practical Nurses Pension Plan.
At least three other lawsuits are pending in Minnesota on Wells Fargo’s former securities lending program.