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Slack v. Burns

United States District Court, N.D. California

July 20, 2016

DAVID SLACK, et al., Plaintiffs,
RUSSELL E. BURNS, et al., Defendants.



         Plaintiffs in this case are individuals who are members of a local union, more specifically, Local 3 in the International Union of Operating Engineers (“IUOE”). Plaintiffs are participants in a Pension Fund established by the union. At present, there are only two claims remaining in this case. The claims are for violations of ERISA and have been asserted against current or former members of the Board of Trustees for the Pension Fund, based on their decision, as Trustees, [1] to invest $100 million in an investment fund known as the Longview or Ultra Fund. Ultimately, only $90 million was actually invested. Plaintiffs contend that Defendants breached their fiduciary duties (e.g., the duty of prudence and the duty of loyalty) by investing in the Longview Fund.

         Currently pending before the Court are two motions for summary adjudication and/or judgment. In their pending motion for summary adjudication, Plaintiffs have moved against 7 out of the 10 defendants - i.e., all Defendants except Mr. Figueiredo, Mr. Ingersoll, and Mr. Albanese. Plaintiffs ask the Court to adjudicate in their favor that these 7 defendants violated their duty of prudence by investing in the Longview Fund. See generally 29 U.S.C. § 1104(a)(1)(B) (“[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries . . . with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.”). As for the other pending motion, it is brought by all Defendants except Mr. Figueiredo and Mr. Ingersoll, and is one for summary judgment or adjudication based on, inter alia, standing, the statute of limitations, and the duty of prudence.

         Having considered the parties’ briefs and accompanying submissions, the Court hereby GRANTS Defendants’ motion for summary judgment. More specifically, the Court concludes that there is no genuine dispute of material fact that Plaintiffs’ ERISA claims (whether based on the duty of prudence or the duty of loyalty) are time barred. Because the claims are time barred, the Court need not address the remaining arguments made in Defendants’ motion. Furthermore, Plaintiffs’ motion for summary adjudication is DENIED as moot.


         The following facts are undisputed.

         Amalgamated Bank (“AB”) is the investment manager for an investment fund known as the Longview or Ultra Fund.

The objective of the [Longview] Fund [was] to provide construction loans, generally requiring a term of one to two years and mini-permanent loans generally not exceeding two years from the completion of construction for all types of new construction and substantial remodeling of buildings to be built with 100% union labor. [The] Fund Strategy [was] to provide a high yielding investment alternative while minimizing interest rate risk by lending to short-term construction projects.

Docket No. 272 (Wasnock Decl., Ex. 2) (comparative analysis) (VI000024).

         In mid-2007, Patty Wagoner, a vice-president of AB, spoke to Mr. Burns, a defendant and one of the union-side Trustees for the Pension Fund, about the Fund investing in Longview. Apparently, Ms. Waggoner’s son was, during this time, dating the daughter of Mr. Goff, another defendant and union-side Trustee for the Pension Fund. Mr. Burns directed Ms. Waggoner to the Pension Fund’s investment consultant at the time, Scott Whalen of Wurts & Associates, Inc. (“Wurts”).

         In or about June 2007, Mr. Whalen met with Debbie Nisson, an AB employee and co-manager of the Longview Fund, to talk about Longview. At about this time, Mr. Whalen also talked to another Wurts employee, John Wasnock, about an investigation that Mr. Wasnock previously did on the Longview Fund for a different Wurts client (also a pension fund).

         On July 13, 2007, the Pension Fund’s Investment Oversight Committee (“IOC”) held a meeting during which, inter alia, AB gave a presentation on the Longview Fund. The role of the IOC is to advise the Board of Trustees in investments.[2] During the IOC meeting, Mr. Whalen also presented his analysis and recommendation of the Longview Fund. The IOC voted unanimously to recommend a $100 million investment with AB in the Longview Fund.

         On August 16, 2007, the IOC met again. For this meeting, the Pension Fund’s attorney, Dick Johnson, circulated a memo which addressed documents concerning the Longview Fund and which identified risks with the investment.

         On August 20, 2007, the full Board held a meeting during which, inter alia, it approved the Longview investment, contingent on a follow-up by Mr. Whalen. All moving defendants, except for Mr. Holsman and Mr. Albanese, were present at this Board meeting. Mr. Whalen (of Wurts) and Mr. Johnson (legal counsel) were also present at the meeting.

         On September 4, 2007, Mr. Whalen communicated the results of his follow-up to Mr. Johnson and to the IOC co-chairs at the time (one of which was Mr. Piombo, a defendant).

         On October 22, 2007, the Pension Fund entered into an Investment Management Agreement (“IMA”) with AB, with respect to the Longview Fund.

         Beginning in October 2007, AB made capital calls on the Pension Fund for the Longview investment. Altogether, AB made six capital calls. The Pension Fund provided capital on all calls except the last.[3]

         The last capital call was made in or about February 2009. At that time, IPS - the Pension Fund’s investment consultant, hired after Wurts was terminated, see note 3 - recommended that the capital call not be met. IPS made this recommendation because the Longview Fund “fell within the Pension Fund’s fixed income asset class, and because the Pension Fund was overweighted in fixed income investments.” Docket No. 274 (Sichel Decl. ¶ 15). The question of whether the Pension Fund could refuse to make the capital call was referred to the Pension Fund’s legal counsel, Mr. Johnson. Apparently, Mr. Johnson opined that the Pension Fund did not have to meet the last capital call, but his reasoning as to why is not entirely clear.[4] An e-mail written by Mr. Johnson during the relevant time period states as follows:


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