American International Group (AIG)
scored a significant legal victory this week when the U.S. Court of Appeals for the 2nd Circuit upheld a lower court's dismissal of a derivatives lawsuit brought by shareholders who claimed the insurance giant hurt investors by failing to disclose the company's exposure to risky subprime mortgages.
The shareholders accused AIG of breaching its fiduciary duties, unjust enrichment and violations of securities laws.
The suit was launched in 2007 by a class of investors, including the Louisiana Municipal Police Employees Retirement System. A lower court previously dismissed the claims, leading to the appeal. The circuit court affirmed the lower court's dismissal this week, saying the lower court's opinion was "well-reasoned."
Albert Myers, an attorney for the plaintiffs, did not rule out another appeal, saying "anything is possible."
AIG received government funds during the 2008 economic crisis, with the Federal Reserve Bank of New York
pumping $85 billion into the firm. Recently, AIG offered to buy back
$15.7 billion in residential mortgage-backed securities as the firm distances itself from the federal government.
The New York-based insurer repaid a revolving line of credit in January
that it received from the Federal Reserve Bank of New York during the economic meltdown.
Write to Kerri Panchuk.