SWACCA joined the Associated General Contractors (AGC) in an amicus brief in Terrance Johnson v. Carpenters of Western Washington Board of Trustees. The case relates to allegations made by the plaintiffs that the trustees of the Northwest Carpenters Trust Fund—to which SWACCA’s Seattle and Portland chapters appoint trustees—breached their fiduciary duty by investing in two funds marketed and managed by Allianz Global Investors U.S. LLC (AGI) that subsequently collapsed and caused substantial losses to the fund. Subsequent federal investigations found that the funds were not implemented as advertised and that AGI substantially understated the risks. Plaintiffs in the case, however, are faulting the Carpenters of Western Washington Board of Trustees for selecting and retaining funds they contend are categorically inappropriate for a retirement plan.
In May 2023, the U.S. District Court for the Western District of Washington granted motions from the defendants in the case, finding that the plaintiffs failed to establish standing and that, even if the plaintiffs were harmed, the Court would have concluded they failed to state a claim. On appeal, the U.S. Court of Appeals for the Ninth Circuit on July 30, 2024, reversed the District Court entirely, concluding that plaintiffs possessed standing and stated a claim under the Employee Retirement Income Security Act’s (ERISA) for breach of the duty of prudence.
In the amicus brief, SWACCA and the Associated General Contractors (AGC) seek to support the defendants’ request for a rehearing en banc before the Ninth Circuit. Specifically, SWACCA and AGC explain that the Ninth Circuit’s opinion in the case implicitly accepts that a plaintiff may state a claim for breach of the duty of prudence by alleging that an investment was imprudent per se, which, SWACCA and AGC argue, would directly conflict with ERISA’s mandate for portfolio diversification and run contrary to longstanding regulations and guidance from the Department of Labor regarding how ERISA fiduciaries may fulfill their duty of prudence. SWACCA and AGC add that a standard that allows lawsuits to challenge a plan’s investments without meaningful comparisons or evidence of flawed decision-making would open the floodgates to meritless litigation against plans and trustees. Moreover, such a standard would constrain trustees’ ability to address plan funding issues over time and result in reduced investment returns and discourage members of the construction industry from acting as trustees.
The full amicus brief is available here.