A regional UK pension fund has been appointed to spearhead a US class-action lawsuit against GlaxoSmithKline (GSK), accusing the pharmaceutical giant of misleading the market over its controversial diabetes pill Avandia.
Avon Pension Fund, which manages about £1 billion on behalf of public sector workers, was appointed “lead plaintiff” — a US term for the institution fronting a group lawsuit on behalf of other investors — over the weekend.
Although both private and public pension funds in the UK are showing an increasing interest in US class-action lawsuits, it is rare for them to take such a prominent role.
In the GSK lawsuit — which accuses the group of “fraud” and “deceit” by withholding information about the risks of Avandia — Avon was competing with the North Yorkshire Pension Fund for the role of lead plaintiff.
A US public pension fund and a group of German investors, including a subsidiary of Barclays Bank, also applied to be lead plaintiff, according to court papers seen by Times Online.
A judge in the United States District Court for the Southern District of New York appointed Avon because it had the second-largest financial interest in the case.
The German shareholder group had the largest exposure to GSK shares but was passed over for the role of lead plaintiff because of continuing uncertainty over whether German courts can enforce a US class-action ruling.
Avon says that it lost $2.6 million (£1.3 million) after a study published in a US science journal linking Avandia to increased risks of heart attacks sent GSK shares sliding 42 per cent.
The lawsuit, filed on June 11, claims that GSK “engaged in a scheme to deceive the market and a course of conduct that artificially inflated GSK’s stock price”.
GSK denies the claims and says that it will defend itself against the lawsuit.
Coughlin Stoia Geller Rudman & Robbins, the US law firm that is representing Avon, has been appointed lead counsel in the case.
The class action is open to all GSK investors who held shares in the run-up to the May price collapse.
The lawsuit is seeking financial compensation for investors who lost money when GSK’s shares fell and also to push through corporate governance changes at the company to reduce the risk of a repeat occurence.
US law firms including Coughlin Stoia and Cohen Milstein Hausfeld & Toll regularly approach UK pension funds to join US lawsuits.
So far they have met with limited interest despite the National Association of Pension Funds, a prominent UK shareholder group, encouraging its members to consider becoming involved in US-led litigation.
Source: The Times