Rothstein Donatelli LLP

Class Action

NEW MEXICO 529 COLLEGE SAVINGS PLANS CLASS ACTION

Ping Lu, et al., v. Education Trust Board of New Mexico, et al.,
No. D-0101-CV-2009-02051

Case Background

This class action lawsuit was filed June 25, 2009 in New Mexico state court by the law firms of Rothstein, Donatelli, Hughes, Dahlstrom, Schoenberg & Bienvenu, LLP, and Keller Rohrback L.L.P., seeking damages against the Education Trust Board of New Mexico for causing catastrophic losses to parents and grandparents who invested in the New Mexico 529 College Savings Plans.

As alleged in the lawsuit, parents were encouraged to invest in the plans to save for their children’s college education, and were required to choose investment portfolios based on the age of their children or the amount of risk they wished to assume. Parents investing in the “conservative” and “ultraconservative” portfolios were led to believe that their funds were invested in safe mutual funds that would protect their funds to pay college expenses. However, the Education Trust Board invested their funds in the OppenheimerFunds Core Bond Fund which followed an ultra-risky strategy of investing in mortgage-backed securities and other toxic derivatives, using borrowed funds, in effect turning the bond fund into a hedge fund. This fund suffered catastrophic losses in 2008, losing nearly 40% of its value, whereas comparable bond funds actually increased in value during 2008. As a consequence, parents who invested in what were marketed as the most conservative investments lost nearly half of their investments, just as their children were entering or about to enter college.

Plaintiffs allege that the Education Trust Board violated the terms of their college savings agreements, causing over $175 million in lost college savings. A copy of the First Amended Class Action Complaint may be found here.

Class Certification

On November 20, 2009, the Plaintiffs filed a motion for class certification. A copy of the Motion for Class Certification may be found here; a copy of the Memorandum in Support of Motion for Class Certification may be found here.

On August 9, 2010, New Mexico District Court Judge Steven Pfeffer granted Plaintiffs’ motion and entered an order certifying this action as a class action; appointing the law firms of Rothstein, Donatelli, Hughes, Dahlstrom & Schoenburg, LLP and Keller Rohrback, L.L.P. as Class Counsel; and appointing Ping Lu, Jill McKeon, Richard McKeon, Stephen Spencer, Spencer Stopa and Judy C. Winnegar as Class Representatives. A copy of the Court’s Order Granting Plaintiffs’ Motion for Class Certification may be found here.

Settlement between the Education Trust Board and OppenheimerFunds, Inc.

On June 8, 2010, the Education Trust Board announced that it had entered into a settlement agreement Program Manager OppenheimerFunds. Under the terms of the settlement agreement, account holders would recover less than one-third of the savings that they lost. In addition, account holders will be required to wait for two years to receive even that limited recovery, unless they agree to sign a complete release of all their claims against OppenheimerFunds.

Plaintiffs asked the court to review this settlement agreement and to oversee the implementation of the settlement to ensure that account holders are not unfairly treated. A copy of Plaintiffs’ Motion for Court Review of Settlement Agreement may be found here; a copy of the Memorandum in Support of Plaintiffs’ Motion for Court Review of Settlement Agreement may be found here.

On February 16, 2011, Plaintiffs withdrew their Motion, for reasons stated in Plaintiff’s Notice of Withdrawal of Motion for Court Review of Settlement; a copy may be found here.

             Appeal of Dismissal of Claims Against the State of New Mexico

On June 17, 2011, the Court entered an order granting the State of New Mexico’s motion to dismiss claims made against the State, but denying the motion to dismiss claims made against the Education Trust Board and the Education Trust of New Mexico. A copy of the Court’s order may be found here. Plaintiffs requested that the New Mexico Court of Appeals review the district court’s dismissal of claims against the State. A copy of Plaintiffs’ application for interlocutory appeal may be found here. On August 1, 2011, the Court of Appeals granted the Plaintiffs’ request and that matter is now on appeal. A copy of the order of the Court of Appeals may be found here.

Further Information

For further information, contact:

John C. Bienvenu
Rothstein, Donatelli, Hughes,
Dahlstrom, Schoenburg & Bienvenu, LLP
Tel.: 505-988-8004
Fax: 505-982-0307
Email: jbienvenu@rothsteinlaw.com
www.rothsteinlaw.com

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