The New Mexico Court of Appeals has ruled that the State of New Mexico may be held liable for most of an alleged $175 million in losses suffered by investors in the state's college savings plans. A unanimous court issued the ruling yesterday. It provides added momentum to a class action lawsuit brought on behalf of families who saw college savings suffer enormous losses due to mismanagement by the investment firm selected by the New Mexico Department of Higher Education.
The Court of Appeals overruled a district court that found the state enjoyed sovereign immunity and could not be held liable for the losses. The class action asserts a breach of contract claim, arguing the state violated its obligations to investors by wrongfully investing in high-risk ventures instead of the conservative fixed-income funds the plaintiffs had contracted for. The Court of Appeals ruling permits that claim to be litigated against the state.