Class action against trustees for poor investment decisions

Little turns on the facts of the case - which are, in any case in dispute.

The important point is that the case is thought to be the first time that approval has been granted for a class action in such a case.

The pensioners allege gross negligence on the part of the trustees and also seeks redress in respect of fees paid to advisers and intermediaries, and a refund of what are alleged to be excessive expenses claims.

The defendants invited the Court to dismiss the action on the grounds of government immunity, but the Court rejected that application. The fund concerned is the Detroit General Retirement System and it is administered by trustees on behalf of the city.

It is the nature of the action that is most interesting. The plaintiffs claim in their filed documents that "based on even a cursory inspection of the proposed investments, a rational, prudent person would not have invested in the proposals, let alone with entrusted pension funds."

As the dust at least begins to settle on the global financial crisis, or as many consider likely on its first phase, the blame game is bound to begin. And those who were responsible for managing funds are increasingly likely to find that risky strategies are open to second-guessing.

The case, therefore, is unlikely to be isolated.