A Kentucky court decided in favor of the beneficiaries of Kentucky's Public Retirement System by striking down a motion to dismiss their suit, which alleges that administrators and their advisors breached their fiduciary responsibilities.
In December 2017, Kentucky public pension system ("KRS") beneficiaries sued various KRS trustees, officers, advisers and investment managers in state court; Mayberry, et al. v. KKR & Co., L.P., et al., No. 17-CI-1348 ("Mayberry"). Recently, the Court denied the defendants' motion to dismiss, rejecting arguments that plaintiffs lacked standing. We have previously discussed the heightened scrutiny of active management of public pension assets in our Alert "PA Commission Scrutinizes Active Management of Public Pension Assets."
Mayberry is a novel case where plan beneficiaries directly sued to hold public pension officials, as well as their advisors and investment managers, responsible for KRS's liabilities. Plaintiffs—members of KRS—have asserted various claims, including breaches of fiduciary duties, aiding and abetting those breaches, joint enterprise and civil conspiracy.
Defendants moved to dismiss, challenging plaintiffs' standing to sue derivatively on behalf of KRS or as taxpayers, among other arguments. Notably, both KRS and Kentucky's Attorney General declined the opportunity to pursue the claims now being brought by plaintiffs. The court, however, found plaintiffs had standing both "derivatively as members and beneficiaries of KRS" and as taxpayers. As against the third-party advisors, the Court held the "complaint . . . alleges facts sufficient to imply a common law fiduciary relationship between the [advisors] and KRS's members," specifically noting allegations of "superior skill, experience and expertise . . . ."
With one exception, the court ruled that all claims may proceed against all defendants.
We will continue to monitor future developments.
