Public Pension Beneficiaries Lack Standing to Bring Claims Against Investment Managers
The Kentucky Supreme Court holds that plaintiffs lack standing to bring claims for alleged fiduciary misconduct, but there are potential limits to the court's opinion.
As we discussed in our previous Alerts, "Novel Suit by Kentucky Pension Beneficiaries Continues" and "Kentucky Court Holds That Public Pension Plan Beneficiaries Lack Standing to Sue," beneficiaries of Kentucky's public pension system ("KRS") sued various KRS trustees, officers, advisors, and investment managers in state court. Mayberry et al. v. KKR & Co., L.P. et al., No. 17-CI-1348. In November 2018, the trial court denied defendants' joint motion to dismiss for lack of standing. In April 2019, however, the Court of Appeals vacated the lower court's order, holding the plaintiffs-beneficiaries lacked standing to sue under Kentucky law. The plaintiffs appealed the decision to the Kentucky Supreme Court.
Recently, the Kentucky Supreme Court agreed with the Court of Appeals and held that the plaintiffs lack standing under Commonwealth v. Sexton, 566 S.W.3d 185 (Ky. 2018), because they "do not have an injury in fact that is concrete or particularized." The Court rejected four different standing theories advanced by plaintiffs. The plaintiffs argued that they had standing (i) because they suffered a direct injury; (ii) in a derivative capacity; (iii) as trust beneficiaries; and (iv) as Kentucky taxpayers. Key to the court's opinion was the fact that plaintiffs, members of the KRS defined-benefit plan, received and will continue to receive their monthly pension benefits.
The decision marks a victory for the defendants in this case, but other courts may still find that other plaintiffs have standing in similar cases. For example, the Kentucky Supreme Court strongly suggested in its opinion that the Kentucky Attorney General could have represented the Commonwealth of Kentucky in this action. Additionally, different states use different legal standards for standing, and plaintiffs may be successful in other states that employ less stringent standing tests. Given these risks, we will continue to monitor further developments in this area.