Kvek v. Cushman & Wakefield, US, Inc.

A former employee of Cushman & Wakefield, US, Inc. (Cushman), the commercial real estate services company, filed a civil enforcement action against Cushman and the Cushman & Wakefield Investment Committee alleging that the defendants breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) by selecting and retaining investment options in Cushman’s 401(k) plan “in spite of numerous glaring red flags, including chronic underperformance, dangerous aggregation of climate change-related financial risk, unreasonably high fees, and limited market acceptance.” The plaintiff brought the suit on behalf of participants and beneficiaries in the 401(k) plan whose individual accounts are or were invested in the Plan’s Westwood Quality SmallCap Fund (Westwood Fund) from January 1, 2021 through the date of judgment. The complaint alleged that Cushman, despite being “acutely aware” of climate-related financial risks and having a “long track record” of managing such risks to protect shareholder value and its clients’ portfolios, had “exposed employee retirement savings to significant, unreasonable climate-related financial risk—apparently failing to employ any climate risk management strategy at all.” The complaint alleged that the inclusion of the Westwood Fund as a fund option in the 401(k) plan was a “prime example of this failure.” The complaint alleged that the Westwood Fund “boasts an unsavory combination of financial underperformance and unreasonably high fees, while at the same time exposing investors to massive amounts of climate-related financial risk that threaten to wipe out years of savings under any number of highly plausible scenarios.” The complaint asserted claims that the defendants breached their fiduciary duty to monitor plan investments and remove imprudent investments as well as their duties of prudence and loyalty under ERISA. In addition, the complaint asserted claims that the Investment Committee engaged in prohibited transactions with Fidelity Investments, which provided services to the 401(k) plan, and Fidelity Management Trust Company, which was a trustee and provided services to the plan. The complaint also asserted that Cushman failed to monitor the Investment Committee. The plaintiff sought declaratory relief as well as an order requiring payment of an amount or surcharge necessary to make the 401(k) plan whole for losses resulting from the breaches. Other relief sought included appointment of a special master to oversee development and implementation of a revised investment policy statement (IPS) for the 401(k) plan that provides procedures specific to “standards for climate-competency and emergent risk management assessment” within the Investment Committee and specific climate-risk mitigation and monitoring requirements for plan menu options, as well as non-climate-related procedures. The complaint asked the court to require the defendants to assess investment options based on the IPS and remove investment options deemed imprudent.