Citizens’ RBS wins on most claims in U.S. class action lawsuit

LONDON – Royal Bank of Scotland Group Plc, the parent company of Citizens Financial Group Inc., won a U.S. court ruling dismissing class-action claims by pension funds whose shares in Britain’s biggest government-owned bank suffered “massive” losses during the financial crisis.

Claims arising from sales of the bank’s so-called ordinary shares are invalid because the securities aren’t traded on U.S. exchanges, U.S. District Judge Deborah Batts ruled on Jan. 11 in Manhattan. The ruling left intact claims by an investor group representing purchasers of RBS’s preferred shares.

“RBS welcomes Judge Batts’ decision to dismiss these claims,” Michael Strachan, a spokesman for the Edinburgh-based lender said on Thursday in an e-mailed statement. “We will continue to defend the remaining claims vigorously.”

RBS, whose record losses in 2008 resulted in a government bailout totaling 45.5 billion pounds, benefited in the case from a U.S. Supreme Court ruling last year that limited the reach of U.S. securities laws and narrowed who can sue foreign banks in the country, according to the ruling.

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This week’s ruling dismissed claims by pension funds from Massachusetts and Mississippi, whose 271-page complaint in July 2009 accused RBS of misleading investors about its risk from subprime debt and losses from the acquisition of Dutch lender ABN Amro NV, according to the ruling.

The surviving claims in the case were filed by The Freeman Group, the lead plaintiff representing buyers of RBS’s preferred shares. Sales of preferred debt raised more than $5.3 billion in 2006 and 2007, according to the ruling.

‘Financial Disasters’

The lawsuit also names underwriters including Bank of America Corp.’s Merrill Lynch unit and individuals, including former RBS CEO Frederick Goodwin, whom the funds blamed for “one of the largest financial disasters in history.”

Other underwriters named include units of Goldman Sachs Group Inc., Citigroup Inc., Royal Bank of Canada, Morgan Stanley, Wells Fargo & Co. and A.G. Edwards & Sons Inc.

Batts dismissed from the case a group of banks identified as international underwriters, including a unit of UBS AG, because the claims against them weren’t related to preferred shares.

In the decision behind this week’s ruling, the Supreme Court unanimously decided in June 2010 to throw out a shareholder lawsuit against Melbourne-based National Australia Bank Ltd. The justices earlier voiced concern that applying American securities laws internationally would intrude on the sovereignty of other countries.

The U.K.’s Financial Services Authority cleared RBS and former executives including Goodwin of wrongdoing and said it won’t take any enforcement action over the bank’s near collapse. The agency’s report on the matter has yet to be published.

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