By Karen Freifeld
NEW YORK, Jan 28 (Reuters) - A judge refused to throw out a
lawsuit accusing Bank of New York Mellon of mismanaging The
Salvation Army assets by investing nearly $22 million of the
charity's funds in mortgage-backed securities and other risky
The Salvation Army, one of the largest U.S. charities,
claims in its lawsuit that the bank didn't abide by its
obligation to invest in conservative assets and failed to take
steps to protect the charity as market conditions deteriorated.
The charity, which filed the lawsuit in 2011 in New York
State Supreme Court, is seeking damages for breach of fiduciary
duty and other claims.
The Salvation Army must only "state a claim at this
juncture, not prove it," Justice Barbara Kapnick wrote in her
Jan. 25 decision denying the bank's motion to dismiss the breach
of fiduciary duty claim.
Kapnick also let stand breach of contract and gross
negligence claims. She dismissed a claim for negligent
The judge noted the Salvation Army's claim that the bank
invested the charities' funds in high-risk securities despite
reducing its own exposure to such investments.
The bank said it abided by its securities lending agreement
with The Salvation Army, according to the judge's ruling. It
urged the court to consider the entire investment portfolio
which, the bank said, did well.
It said only six of 25 mortgage-backed securities purchased
encountered difficulty, according to the judge.
"We're pleased that the court's procedural decision narrowed
the case, dismissing one of the claims against BNY Mellon," said
Jeep Bryant, a spokesman for the bank. "As the litigation
proceeds, we're confident the facts will demonstrate that the
remaining claims are also without merit."
The case is The Salvation Army v. The Bank of New York
Mellon, New York State Supreme Court, New York County, No.
For The Salvation Army: Lisa Cohen of Schindler Cohen and
For BNY Mellon: Vincent Liu of Boies Schiller and Flexner.
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