Wong v. New York City Employees’ Retirement System

The New York Appellate Division affirmed the dismissal of a lawsuit alleging that three New York City public employee retirement systems breached fiduciary duties by divesting from companies involved in fossil fuel extraction. The appellate court found that the plaintiffs, who were recipients of a defined benefit retirement plan, failed to establish standing because they did not demonstrate an injury in fact since their benefits “are fixed and will not change, regardless of how well or poorly the plan is managed.” The court also said the legislature and courts could not encroach on the discretion vested in the “politically accountable trustees,” and characterized the plaintiffs’ arguments as speculative, “particularly based on the documentary evidence and the absence of any support for the allegation that the plans might be unable to cover their obligations to retirees.”

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A New York trial court dismissed for lack of standing a lawsuit alleging that three New York City public employee retirement systems breached fiduciary duties by divesting from companies involved in fossil fuel extraction. Because the pension plans at issue were “defined benefit” plans in which the plaintiffs were “entitled to a fixed benefit each month and will receive the same amount regardless of whether they win or lose this action,” the court found that they did not demonstrate injury in fact, as required for standing. The court also found that allegations that the defendants’ investment decisions would have detrimental impacts on the retirement plans’ financial health were speculative; the court also noted that the plaintiffs conceded that “underfunding ultimately puts New York City taxpayers on the hook.” In addition, the court rejected the plaintiffs’ argument that their claims should be analyzed under the common law of trusts. The court also was not persuaded by the argument that the defendants’ investment decisions would evade review if the plaintiffs were found to lack standing; the court noted the availability of proceedings by the Attorney General upon a finding by the Superintendent of Financial Services of wrongful conduct or breach of fiduciary responsibility for a public pension fund. The court also rejected the plaintiffs’ assertion that they had standing as citizen-taxpayers to bring their action under General Municipal Law § 51. The court noted that the plaintiffs’ complaint did not identify this cause of action and, moreover, that such a suit would not be available absent fraud or waste that was not alleged.

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