The Baton Rouge pension fund said the revelation of Prism and related disclosures by former NSA contractor Edward Snowden caused Chinese businesses and China's government to abruptly cut ties with the world's largest technology services provider.
It said this led IBM on Oct. 16 to post disappointing third-quarter results, including drops in China of 22 percent in sales and 40 percent in hardware sales.
While quarterly profit rose 6 percent, revenue dropped 4 percent and fell well below analyst forecasts.
IBM shares fell 6.4 percent on Oct. 17, wiping out $12.9 billion of the Armonk, N.Y-based company's market value.
(Read more: UBS analyst Steve Milunovich sees IBM as 'dead money')
The lawsuit names IBM, Chief Executive Virginia Rometty and Chief Financial Officer Mark Loughridge as defendants, and says they should be held liable for the company's failure to reveal sooner the risks of its lobbying and its NSA ties.
"These allegations are ludicrous and irresponsible and IBM will vigorously defend itself in court," IBM spokesman Doug Shelton said in an e-mail.
The Louisiana fund is represented by Bernstein, Litowitz, Berger & Grossmann, a prominent class-action specialist law firm. It seeks class-action status on behalf of shareholders from June 25 to Oct. 16, 2013, and damages for shareholder losses.
Loughridge is retiring as CFO this month at age 60, which IBM calls its traditional retirement age. Martin Schroeter, who has been IBM's head of global finance, is replacing him.
The case is Louisiana Sheriffs' Pension & Relief Fund v. International Business Machines Corp et al, U.S. District Court, Southern District of New York, No. 13-08818.