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Home > Blog > Blog > Fiduciaries > Ninth Circuit Revives ERISA Breach of Fiduciary Duty Claim in Putative Class Action Challenging Decision to Invest in Volatile Hedge Funds

Ninth Circuit Revives ERISA Breach of Fiduciary Duty Claim in Putative Class Action Challenging Decision to Invest in Volatile Hedge Funds

In Johnson, et al. v. Carpenters of Western Washington Board of Trustees, et al., No. 23-35370, 2024 WL 3579492 (9th Cir. July 30, 2024) (Before: Friedland, Mendoza, and Desai, Circuit Judges), the Ninth Circuit reversed the district court’s dismissal of a putative class action against Carpenters of Western Washington Board of Trustees (the “Board”) and Callan, LLC (collectively, “Defendants”), alleging that Defendants violated their duties of prudence under ERISA related to their imprudent decision to invest in two volatility hedge funds managed by Allianz Global Investors. In a short unpublished opinion, the court found the following:

  • Plaintiffs have standing, where they allege that their retirement accounts would have more money in them if Defendants had not made the challenged investments. Plaintiffs’ comparator investments—the Vanguard Total Bond Market Index Fund and the Vanguard Russell 1000 Index Fund—were appropriate comparators.
  • Plaintiffs have sufficiently alleged that their injury is fairly traceable to Defendants’ alleged misconduct. Though Allianz committed misconduct, it was not the cause of Defendants’ investments, nor did it induce Defendants’ choice to keep the money in the challenged investments. Plaintiffs allege that the Board was aware of the significant risks and decided to invest anyway.
  • Plaintiffs have stated a claim under ERISA, where they allege that Defendants imprudently decided to invest about one fifth of the retirement plans’ funds into risky investments contrary to the plan’s conservative aims.
  • Plaintiffs have sufficiently alleged that Defendants violated their duties of prudence by failing to adequately monitor the challenged investments’ performance. Had they done so, they would have withdrawn the investments.

For these reasons, the court reversed and remanded the matter to the district court.

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*Please note that this blog is a summary of a reported legal decision and does not constitute legal advice. This blog has not been updated to note any subsequent change in status, including whether a decision is reconsidered or vacated. The case above was handled by other law firms, but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Roberts Disability Law, P.C. may be able to advise you so please contact us.

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