Plaintiffs File Dueling Motion in NYC Pension Funds ESG Lawsuit

Plaintiffs suing New York City Public Pension Funds for allegedly jeopardizing the retirement security of participants by permitting environmental, social and governance factors to be considered in the fund are seeking rejection of a motion to dismiss the case, according to their filing Thursday in New York State Supreme Court.

The plaintiffs argued against the defense’s request that the case be dismissed and said the litigation should proceed.

The initial lawsuit, filed in May, alleged fiduciary breaches by five New York City public-employee pension funds for failing to administer the pension funds solely in the interests of the plans’ participants and beneficiaries and for the exclusive purpose of providing retirement benefits.

“The complaint amply alleges how defendants failed in those duties by openly, serially, and egregiously dividing their loyalties between plaintiffs’ interests and a social and political climate change agenda that defendants allowed to dictate how they administered the plans,” the attorneys for the plaintiffs wrote.

The city funds’ attorneys cited fatal failings they claim require the dismissal of the complaint, Wayne Wong et al. v. New York City Employees’ Retirement System et al.

“Plaintiffs’ brief changes nothing—this lawsuit is totally meritless,” New York City Law Department spokesman Nick Paolucci, says by email. ” [The pension funds] NYCERS, BERS, and TRS put their participants and beneficiaries first when they each decided to stop investing in fossil fuel companies, following years of financial analysis. The funds will respond in the litigation.”

The plaintiffs argued—in opposing the defendants’ motion to dismiss—that the defendants committed breaches of fiduciary duties regardless of the monetary losses suffered by plaintiffs and therefore demonstrated that a legally recognizable, tangible and redressable harm has occurred.

The defendants’ dual arguments for dismissal—lack of standing and failure to adequately allege fiduciary breaches—“are without merit,” plaintiffs’ counsel argued.

The plaintiffs’ attorneys wrote that there is precedent in “the common law and repeatedly affirmed by the New York Court of Appeals” that provides grounds for the case to proceed based on “defendants’ breaches of fiduciary duties, regardless of the pecuniary losses suffered by plaintiffs.”

Additionally, the plaintiffs argued that the pension funds breached the duty of loyalty by acting in their roles as plan fiduciaries to advance their own political and policy objectives ahead of the plaintiffs’ retirement interests, the attorneys wrote.

Plaintiffs’ counsel also requested the court admit former U.S. Secretary of Labor Eugene Scalia, a partner in Gibson, Dunn & Crutcher LLP in Washington, D.C., to participate in the lawsuit. Akiva Shapiro, a litigation partner in Gibson Dunn, is the lead attorney, the filing shows.  

In 2018, the New York City pension funds’ trustees set a goal to prepare a five-year strategy to sell assets in fossil fuel reserve holdings.

Four individuals that are members of the NYC pension funds—a subway train operator, a public school teacher, a school secretary and an occupational therapist in an elementary school—are the plaintiffs in the case. The conservative nonprofit Americans for Fair Treatment is also named as a plaintiff in the case, according to the complaint.

Request for comment to plaintiffs’ lawyers were not returned. 

The city pension funds are represented by Corporation Counsel of the City of New York, senior counsels at the New York City Law Department and attorneys with the Groom Law Group.