Avon f-cubes In re GSK

It is well reported that Avon Pension Fund, administered by the Bath & North East Somerset Council, is to lead the In re GSK securities class action (Financial Times, Legal Week, Pensions & Investments, The Times) and less well that this is the latest addition to the list of ‘f-cubed’ cases. For the previous post by yours truly announcing the actual filing of that case four months ago and a copy of the complaint, see here and with thanks to the D&O Diary (which has its own take on the case and appointment), the opinion appointing Avon. (See also this previous, background article in The Times.) For more on ‘f-cubed’ cases, see this previous post.

Plaintiffs’ Lead Counsel: Coughlin Stoia Geller Rudman & Robbins LLP

What is still of interest here then is the reference made in some reports to the National Association of Pension Funds. The source it seems is the press release Coughlin Stoia put out following the appointment, in which it says the following, in part:

The decision by Avon Pension Fund, which as a shareholder in GSK claims it lost US$2.7m, to seek lead plaintiff in the case was taken in light of its fiduciary responsibilities to its members and is in line with guidance issued by the National Association of Pension Funds (NAPF). The NAPF policy sheet for trustees was published this year at its conference in Edinburgh and advises UK trustees that their fiduciary duties to their beneficiaries extends to monitoring fund investments and making informed decisions about when and how to make the best recoveries.

As explored in this previous post in March, the NAPF’s ‘policy sheet’ Securities Litigation – Questions For Trustees is actually not to be taken as ‘guidance’ but is a neutral document, posing and answering questions relevant to pension fund trustees that seek more information on securities actions and their responsibilities. Coughlin Stoia’s reference however does not seem to be neutral but interpreting the answers differently. The press release continues:

NAPF states that in relation to securities class actions it is “self-evident that trustees have a duty to protect the assets in their scheme” and that they should “not neglect opportunities to recoup losses”.

Actually the NAPF’s press release accompanying the paper gives the following complete quote by David Paterson, its Head of Governance:

“It seems self-evident that pension trustees have a duty to protect the assets in their scheme. At the very least, they should not neglect opportunities to recoup losses, especially where the cost and effort of doing so are commensurate with the expected return.”

Asked to comment on the use of the NAPF in publicity for the case, Paterson has submitted the following statement to WV&Z:

As you are aware, the so-called “guidance” was in fact structured as a series of “Questions for Trustees”. Our main concern is that trustees be aware of their right to join in a settlement and that they should therefore monitor class actions carefully. We also highlighted the risks of acting as a lead plaintiff and suggested that trustees give consideration to them before deciding to lead a suit. It is clearly not for the NAPF to opine as to whether an individual case has merit.

Given the quite different legal regimes in the US and UK I would be concerned if it became common practice to sue UK companies in the US courts. Shareholders have more rights in the UK which they have used effectively to hold boards to account. The more confrontational approach which is the norm in the US does not sit well alongside our “comply or explain” regime which depends crucially on dialogue between shareholders and companies for its success - and it has been successful, so far.

That doesn’t seem like the guidance Avon was following, not from the NAPF. (Subscribe)

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