AIG must face Pimco lawsuit over financial crisis losses
American International Group Inc (AIG.N) failed to persuade a California judge to dismiss a lawsuit by Pacific Investment Management Co that accuses AIG of lying about its subprime mortgage exposure prior to the 2008 financial crisis.
Judge Thierry Patrick Colaw of Orange County Superior Court, in a decision dated Tuesday, rejected AIG’s argument that Pimco, a unit of German insurer Allianz SE (ALVG.DE), waited too long to sue over the alleged deception.
But the judge said AIG can appeal immediately, noting that federal courts in comparable cases have reached differing conclusions over the proper time limit.
Pimco is seeking to recoup losses allegedly suffered by more than 60 funds, including its flagship Pimco Total Return (PTTRX.O), over securities purchased between 2006 and 2008.
Newport Beach, California-based Pimco sued AIG last year after opting out of a $970.5-million class-action settlement between the insurer and other investors.
AIG had been accused of misleading investors about its exposure to subprime mortgages and credit default swaps, culminating in $182.3 billion of federal bailouts.
Some plaintiffs opt out of class-action settlements when they hope to recover more by suing on their own. Pimco has about $1.5 trillion of assets under management.
AIG spokesman Jon Diat in a statement said the New York-based company disagreed with Colaw’s decision and will argue on appeal that “the more recent and better-reasoned decisions of the federal courts of appeal should be followed.”
Pimco declined to comment on Colaw’s decision.
AIG had brought related litigation in U.S. District Court in Manhattan seeking to thwart Pimco’s federal securities law claim. A judge there ruled on April 18 that letting the California court handle the case was better than “piecemeal” litigation.
The case is Pacific Investment Management Co et al v. American International Group Inc, California Superior Court, Orange County, No. 30-2015-00779738-CU-SL-CXC.