Judge throws out New York lawsuit against pension funds

July 4th, 2024

A New York judge has dismissed a lawsuit against three pension funds in the New York City Retirement System for violating fiduciary duties.

The lawsuit claimed that the pension funds had disregarded their fiduciary duty by supporting divestment from fossil fuels, which the plaintiffs argued would lead to the funds making investment decisions based on morality rather than focusing solely on the risk and returns on the investment.

They argued that the pension plans’ investment decisions had a detrimental impact on the financial health of their retirement plans and on their plans’ ability to pay the pension benefits they owe.

However, New York State Supreme Court Judge Andrea Masley ruled that the “plaintiffs have not, and will not, suffer any monetary losses based upon defendants’ investment decisions”, Pensions & Investments reports.

Masley referenced Thole v US Bank NA in her ruling, a 2020 case in which the plaintiffs argued that the defendants breached their “duties of loyalty and prudence” by poorly managing and investing the assets of the plan.

This established that plaintiffs must demonstrate that they have suffered an injury that is concrete, particularized, and actual or imminent as a result of the defendants’ investment decisions in order to be eligible for compensation.

Thole v US Bank NA also involved a defined benefit pension plan in which the beneficiaries are entitled to a fixed amount each month, and therefore the plaintiffs would receive the same amount regardless of whether they win or lose this action.

In January, a group of 26 US Republican attorneys general filed an appeal in their legal challenge to a rule over pension funds’ ability to consider ESG factors when selecting investments.

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