Construction Laborers Pension Trust for Southern California v. Meketa Investment Group, Inc.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘O’

Case No. 2:23-cv-07726-CAS (PVCx) Date April 15, 2024

Title CONSTRUCTION LABORERS PENSION TRUST FOR SOUTHERN

CALIFORNIA ET AL V. MEKETA INVESTMENT GROUP, INC. ET AL

Present: The Honorable CHRISTINA A. SNYDER

Catherine Jeang Laura Elias N/A

Deputy Clerk Court Reporter / Recorder Tape No.

Attorneys Present for Plaintiffs: Attorneys Present for Defendants:

Andrew Lowy Eric Serron

Ronald Richman Alexander Bevans

Paul Fine Diana Lloyd

Caroline Trusty

Proceedings: ZOOM HEARING RE: DEFENDANTS’ MOTION TO DISMISS

PLAINTIFFS’ AMENDED COMPLAINT (Dkt. 53, filed on

JANUARY 12, 2024)

DEFENDANTS’ MOTION TO STAY DISCOVERY PENDING

RESOLUTION OF DEFENDANTS’ MOTION TO DISMISS

PLAINTIFFS’ AMENDED COMPLAINT (Dkt. 55, filed on

JANUARY 12, 2024)

I. INTRODUCTION

On September 15, 2023, plaintiffs Construction Laborers Pension Trust for

Southern California (the “Pension Fund”) and the Board of Trustees for the Construction

Laborers Pension Trust for Southern California (the “Board”), each on behalf of the

Construction Laborers Pension Plan for Southern California (the “Plan’”), filed this action

against defendants Meketa Investment Group, Inc. (“Meketa”) and Judy Chambers. Dkt.

1. Plaintiffs asserted four claims for relief: (1) breach of fiduciary duty under the

Employee Retirement Income Security Act of 1974 (“ERISA”), as against all defendants;

(2) breach of contract, as against Meketa; (3) breach of common law fiduciary duty, as

against all defendants; and (4) negligence/gross negligence, as against all defendants. Id.

On November 17, 2023, defendants filed a motion to dismiss plaintiffs’ complaint,

a request for judicial notice in support of their motion to dismiss, and a motion to stay

discovery pending the resolution of their motion to dismiss. Dkts. 31, 32, 33.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘O’

Case No. 2:23-cv-07726-CAS (PVCx) Date April 15, 2024

Title CONSTRUCTION LABORERS PENSION TRUST FOR SOUTHERN

CALIFORNIA ET AL V. MEKETA INVESTMENT GROUP, INC. ET AL

On December 8, 2023, the Pension Fund, along with Jon Preciado, Sergio Rascon,

Adrian Esparza, Alex Artiaga, Michael Dea, Hertz Ramirez, Peter Santillan, Jerome Di

Padova, Catherine Moncada, Alan Ludwig, Jeff Stewart, Lance Boyer, Bill Boyd, and

John Cooper, as Trustees of the Construction Laborers Pension Trust for Southern

California, each on behalf of the Plan, filed an amended complaint (the “FAC”) against

defendants. Dkt. 48. Plaintiffs assert the same four claims for relief in the FAC, which

mooted defendants’ motion to dismiss and motion to stay. Id.; dkt. 49.

On January 12, 2024, defendants filed a motion to dismiss the FAC, a motion to

stay discovery pending the resolution of their motion to dismiss, and a corrected request

for judicial notice in support of their motion to dismiss.! Dkts. 53 (“MTD”), 55, 56. On

February 13, 2024, plaintiffs filed an opposition to defendants’ motion to dismiss, a

request for judicial notice in support of their opposition, and an opposition to defendants’

motion to stay discovery.” Dkts. 61 (“Opp.”), 62, 63. On March 5, 2024, defendants

filed a reply in support of their motion to dismiss and a reply in support of their motion to

stay discovery. Dkts. 64 (“Reply”), 65.

On April 15, 2024, the Court held a hearing on defendants’ motion to dismiss the

FAC and motion to stay discovery pending the resolution of their motion to dismiss the

FAC. Having carefully considered the parties’ arguments and submissions, the Court

finds and concludes as follows.

1 Defendants request that the Court take judicial notice of one exhibit: a copy of the

Pension Fund’s complaint and accompanying exhibits filed in a closely related matter,

Cal. Infrastructure Fund I Inc. LLC, v. Onset Gen. Partner, 23SM-cv-00483 (Cal. Sup.

Ct. Feb. 1, 2023). Dkt. 56. The Court finds that judicial notice of this court filing 1s

appropriate pursuant to Federal Rule of Evidence 201.

? Plaintiffs request that the Court consider two exhibits: (1) a copy of the Agreement and

Declaration of Trust Establishing the Construction Laborers Pension Trust for Southern

California, as amended to March 1, 1991 (the “Trust Agreement’), which 1s incorporated

by reference into the FAC, and (2) tolling agreements between the Pension Fund and

defendants dated July 25, 2023 (the “Tolling Agreements”). Dkt. 62. The Court finds it

would be appropriate to consider the first exhibit because it is incorporated by reference.

It is also appropriate to consider the second exhibit under the doctrine of judicial notice.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘O’

Case No. 2:23-cv-07726-CAS (PVCx) Date April 15, 2024

Title CONSTRUCTION LABORERS PENSION TRUST FOR SOUTHERN

CALIFORNIA ET AL V. MEKETA INVESTMENT GROUP, INC. ET AL

II. BACKGROUND

The Pension Fund is a Taft-Harley pension fund that was established pursuant to

Section 302(c)(5) of the Labor Management Relations Act, 29 U.S.C. § 186(c)(5). FAC

Defendant Chambers is a Private Markets Consultant and Managing Principal at

defendant Meketa. Id. Plaintiffs bring this action to enforce defendants’ ERISA

liability for breaching their fiduciary duties. Id. § 19.

On November 14, 2014, the Pension Fund retained Pension Consulting Alliance,

Inc., which merged with Meketa in January 2019, to provide investment consulting

services. Id. 2, 31, 85. In the written retainer agreement (the “PCA Agreement’),

defendants agreed to provide its services to the Pension Fund as an ERISA fiduciary. Id.

The Pension Fund engaged defendant to, in addition to several other services,

“identify, interview, conduct due diligence on, and recommend potential Program

Managers for the Infrastructure Fund who would implement the Infrastructure Investment

Policy on its behalf and on behalf of the Plan.” Id. § 3. Regarding the Infrastructure

Investment Program Development, defendant agree to:

(1) “assist in developing a unique investment platform that captures objectives

of the [Pension Fund]”; (11) “review/develop investment strategy, policies,

procedures, goals and objectives”; (i11) “oversee the Program Manager’s

strategy, investment selection process, deal pipeline and investment process”;

(iv) “implement responsible contracting policies and procedures”; (v) “assess

risk profiles of various sub-asset types”; (vi) “propose benchmark and risk

measures”; (vil) “assist with portfolio target allocation and ranges”; (vii)

“advise on investment structuring and commitment pacing”; and (ix) “advise

on portfolio construction.”

Id. § 35. Pursuant to the PCA Agreement, defendant would be paid $75,000 per year □□□□

ongoing program manager due diligence, program monitoring and reporting” and would

oversee the strategy and investment selection process of the Program Manager. Id. § 4.

On December 9, 2014, the Board adopted defendants’ Infrastructure Investment Policy

for the Pension Fund at Chambers’ recommendation. Id. 38-39. The Infrastructure

Investment Policy set forth several objectives and obligations, including Meketa’s

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘O’

Case No. 2:23-cv-07726-CAS (PVCx) Date April 15, 2024

Title CONSTRUCTION LABORERS PENSION TRUST FOR SOUTHERN

CALIFORNIA ET AL V. MEKETA INVESTMENT GROUP, INC. ET AL

“responsibility to ‘monitor the investment process for compliance with this policy’” and

“an obligation to monitor and evaluate Infrastructure Fund managers.” Id. {| 40-48.

This case arises out of the recommendation by defendants Meketa and Chambers

of Onset Capital Partners, LLC (“Onset”) as the Program Manager of the Infrastructure

Fund. According to plaintiffs, defendants failed to adequately vet potential Program

Managers and recommended Onset. Id. 5. On March 10, 2015, defendants attended a

Board meeting and presented their preliminary assessment of eight potential managers,

including Onset. Id. 49-50. Although defendants represented that Onset had three

partners, Onset was wholly owned by Wendell McCain and its “three purported

principals—McCain, Eric Perreca, and Charles Snyder, had never worked together before

and, in fact, had been introduced to each other by Chambers[,]” who went to business

school with McCain, for the “exclusive and express purpose of managing the Pension

Fund’s investment.” Id. 9 5,51, 53 (emphasis in original). Plaintiffs allege that

defendants were also aware that McCain had been cited on numerous occasions for

driving without a license, which had been revoked or suspended, and both experienced

financial difficulties and engaged in “time-consuming commercial activities” during

Onset’s tenure. Id. 9] 54-55. However, defendants concealed this relevant information,

including Onset’s lack of experience, and knew or should have known that their March

2015 Presentation was misleading. Id. {§] 52-55.

Based on defendants’ recommendation, Onset was chosen by the Pension Fund to

be the Program Manager and became the general partner of the Infrastructure Fund in

January 2016. Id. {] 60, 62. After the Pension Fund committed to invest $30 million of

Plan assets in the Infrastructure Fund for Onset to manage, Onset repeatedly failed to

follow the Infrastructure Investment Policy guidelines, including by making “a series of

ill-advised investment decisions, putting the Pension Fund’s capital in nine early stage

infrastructure start-up companies (the “Portfolio Companies’’) with little or no

appropriate diligence.” Id. □□ 6-8, 10. According to plaintiffs, defendants breached their

ERISA fiduciary duties by either “fail[ing| to adequately fulfill their duties to monitor

Onset and ensure compliance with the Infrastructure Investment Policy, or [] fail[ing] to

disclose Onset’s repeated violations of the Infrastructure Investment Policy to the Board.”

Id. § 64. Instead of monitoring Onset’s management of the Infrastructure Fund,

defendants accepted Onset’s “baseless methods for valuing different Portfolio

Companies” and material misrepresentations regarding the performance and valuation of

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘O’

Case No. 2:23-cv-07726-CAS (PVCx) Date April 15, 2024

Title CONSTRUCTION LABORERS PENSION TRUST FOR SOUTHERN

CALIFORNIA ET AL V. MEKETA INVESTMENT GROUP, INC. ET AL

its investments, and then repeated these valuations in periodic reports to the Pension

Fund. Id. □□□ 76-77. When Onset requested significant additional capital from the

Pension Fund to support the Portfolio Companies, defendants “reflexively recommended”

that the Pension Fund fulfill the request instead of investigating any potential problems at

Onset. Id. 4 14. After the alleged discovery of problems with the claimed valuation of a

Portfolio Company, the Pension Fund notified Chambers in August 2020, of its intent to

terminate Meketa’s services, effective September 2020. Id. 4] 87-88. The Pension Fund

hired third-party advisors to review the Infrastructure Fund’s condition, and they found

that at least three of the Portfolio Companies were worthless, which defendants “either

knew or would have uncovered had they been diligent in the exercise of their fiduciary

duties.” Id. | 15, 91-92. This review ultimately led the Pension Fund to replace Onset

as general partner. Id. Because defendants did not act prudently by recommending

Onset and by failing to review and monitor the Infrastructure Fund’s performance,

plaintiffs allege that they suffered large, avoidable losses. Id. § 17-18.

Il. LEGAL STANDARD

A motion pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal

sufficiency of the claims asserted in a complaint. Under this Rule, a district court

properly dismisses a claim if “there 1s a ‘lack of a cognizable legal theory or the absence

of sufficient facts alleged under a cognizable legal theory.”” Conservation Force v.

Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (quoting Balisteri v. Pacifica Police Dep’t,

901 F.2d 696, 699 (9th Cir. 1988)). “While a complaint attacked by a Rule 12(b)(6)

motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to

provide the ‘grounds’ of his “entitlement to relief’ requires more than labels and

conclusions, and a formulaic recitation of the elements of a cause of action will not do.”

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “[F]actual allegations must

be enough to raise a right to relief above the speculative level.” Id.

In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all

material allegations in the complaint, as well as all reasonable inferences to be drawn

from them. Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be

read in the light most favorable to the nonmoving party. Sprewell v. Golden State

Warriors, 266 F.3d 979, 988 (9th Cir. 2001). However, “a court considering a motion to

dismiss can choose to begin by identifying pleadings that, because they are no more than

conclusions, are not entitled to the assumption of truth. While legal conclusions can

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘O’

Case No. 2:23-cv-07726-CAS (PVCx) Date April 15, 2024

Title CONSTRUCTION LABORERS PENSION TRUST FOR SOUTHERN

CALIFORNIA ET AL V. MEKETA INVESTMENT GROUP, INC. ET AL

provide the framework of a complaint, they must be supported by factual allegations.”

Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); see Moss v. United States Secret Service,

572 F.3d 962, 969 (9th Cir. 2009) (“[F]or a complaint to survive a motion to dismiss, the

non-conclusory ‘factual content,’ and reasonable inferences from that content, must be

plausibly suggestive of a claim entitling the plaintiff to relief.”). Ultimately,

determining whether a complaint states a plausible claim for relief will . . . be a

context-specific task that requires the reviewing court to draw on its judicial experience

and common sense.” Iqbal, 556 U.S. at 679.

Unless a court converts a Rule 12(b)(6) motion into a motion for summary

judgment, a court cannot consider material outside of the complaint (e.¢., facts presented

in briefs, affidavits, or discovery materials). In re American Cont’l Corp./Lincoln Sav. &

Loan Sec. Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev’d on other grounds sub nom

Lexecon. Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998). A court

may, however, consider exhibits submitted with or alleged in the complaint and matters

that may be judicially noticed pursuant to Federal Rule of Evidence 201. Inre Silicon

Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999): see Lee v. City of Los

Angeles, 250 F.3d 668, 689 (9th Cir. 2001).

As a general rule, leave to amend a complaint which has been dismissed should be

freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when “the

court determines that the allegation of other facts consistent with the challenged pleading

could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture

Co., 806 F.2d 1393, 1401 (9th Cir. 1986).

IV. DISCUSSION

A. Motion to Dismiss the FAC*

1. Plaintiffs’ Claim for Breach of Fiduciary Duty Under ERISA

Defendants argue that plaintiffs’ imprudent vetting and recommendation claims are

time-barred by ERISA’s six-year statute of repose because defendants’ alleged actions

3 Defendants argue that the Court should dismiss the FAC with prejudice because

plaintiffs cannot cure the time-barred allegations, preempted state law claims, or the fact

that their quarrel is not with defendants but with Onset. MTD at 23; Reply at 16-17. In

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘O’

Case No. 2:23-cv-07726-CAS (PVCx) Date April 15, 2024

Title CONSTRUCTION LABORERS PENSION TRUST FOR SOUTHERN

CALIFORNIA ET AL V. MEKETA INVESTMENT GROUP, INC. ET AL

necessarily occurred before January 2016, when plaintiffs and Onset executed a limited

partnership agreement (the “LPA’”). MTD at 10; see also 29 U.S.C. § 1113. They further

argue that plaintiffs do not allege “affirmative steps “beyond the breach itself [with] the

effect of concealing the breach from its victims’” to allege the type of concealment or

fraud that would toll the six-year period. MTD at 11; see also Guenther v. Lockheed

Martin Corp., 972 F.3d 1043, 1057 n.10 (9th Cir. 2020) (citation omitted).

According to defendants, this claim also fails because their process leading to their

recommendation of Onset was not imprudent. MTD at 11. Defendants dispute plaintiffs’

allegations and contend that they “disclosed the relevant facts related to Onset’s ability to

manage the Infrastructure Fund” and were not required by the LPA to affirmatively

disclose that “Chambers attended business school with Onset’s founder; that Chambers

introduced Onset’s principals; and that Onset’s founder had tax liens and a suspended

drivers’ license.” Id. at 12. Further, defendants argue they were not required to ensure

Onset’s compliance with the Policy because Onset was not an ERISA fiduciary and had

no duty to comply with the Policy under either the LPA or ERISA. Id. at 15-16. Thus,

defendants contend that “common sense requires the conclusion that [d]efendants had no

responsibility for ensuring Onset’s compliance with standards to which Onset had no

obligation to adhere and that [d]efendants had no power to enforce.” Id. at 16. In

addition, defendants argue that plaintiffs fail to provide either “direct allegations”

regarding how defendants’ supervision of Onset and advice to plaintiffs were imprudent

or “circumstantial factual allegations” that do not improperly rely on hindsight analysis.

Id. at 16-18 (citations omitted). Finally, defendants argue that as an ERISA-covered

plan, rather than a participant, fiduciary, or beneficiary of an ERISA plan, the Pension

Fund lacks ERISA standing. Id. at 20.

In opposition, plaintiffs assert that the parties entered into agreements that tolled

the statute of repose from December 13, 2021, through January 15, 2023, and again from

April 5, 2023, through September 15, 2023, when plaintiffs filed this action. Opp. at 7.

Plaintiffs contend that their imprudent vetting and recommendation claims are not time-

barred because “(1i) [d]efendants breached a continuing duty to advise the Pension Fund

to remove Onset as the general partner and (11) [d]efendants fraudulently concealed their

opposition, plaintiffs argue that if the Court finds the FAC to be deficient, it should grant

plaintiffs leave to amend. Opp. at 22.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘Oo’

Case No. 2:23-cv-07726-CAS (PVCx) Date April 15, 2024

Title CONSTRUCTION LABORERS PENSION TRUST FOR SOUTHERN

CALIFORNIA ET AL V. MEKETA INVESTMENT GROUP, INC. ET AL

breach.” Id. at 7-8: see also Tibble v. Edison Int’l, 575 U.S. 523, 530 (2015) (‘[S]o long

as the alleged breach of the continuing duty occurred within six years of suit, the claim 1s

timely.”). Plaintiffs assert that defendants imprudently continued to recommended Onset

as the general partner and even recommended that the Pension Fund invest additional

funds with Onset in 2020, despite the information they knew or should have known about

Onset. Opp. at 8-10. Moreover, plaintiffs argue that the six-year period should be tolled

because they have sufficiently alleged defendants’ deliberate concealment of several

material facts, such as that:

(1) Onset’s three “partners” had never worked together before, (11) Chambers

had a direct role in Onset’s creation, (111) Onset was an entity wholly owned

by McCain that did not focus on infrastructure investments, and (iv) McCain’s

driver’s license had been suspended or revoked for unknown reasons and he

had had been cited in North Carolina on numerous occasions over a ten-year-

period for driving without a license.

Id. at 10-11. Further, plaintiffs assert that defendants expressly agreed to act as

fiduciaries of the Pension Fund, had a fiduciary duty to monitor the infrastructure

investment program and Onset, and were paid an annual fee of $75,000 to do so.* Id. at

12-13. While defendants claim that they lacked authority to monitor Onset due to the

Infrastructure Fund’s structure, plaintiffs argue that defendants were “actively involved in

overseeing Onset’s investment activities and regularly reported to the Board on the status

of the Infrastructure Fund’s investments.” Id. at 13-14. According to plaintiffs, the

4 Plaintiffs contend that because defendants do not challenge plaintiffs’ allegation that

defendants “breached their duty to act in accordance with the plan documents under

ERISA Section 404(a)(1)(D),” defendants are not entitled to dismissal of the claim in its

entirety. Opp. at 11-12. In reply, defendants argue that they seek dismissal of plaintiffs’

entire claim, including “[p|laintiffs’ conclusory assertion that |d]efendants violated a plan

document under Section 404(a)(1)(D).” Reply at 12.

> According to plaintiffs, “if [d]efendants believed that the structure of the Infrastructure

Fund hampered or prevented them from exercising oversight over Onset, they had a duty

to inform the Pension Fund of that fact—especially given that they were being paid

$75,000 per year to do just that—and propose alternative structures that would have

allowed them to exercise oversight over Onset.” Opp. at 14.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘Oo’

Case No. 2:23-cv-07726-CAS (PVCx) Date April 15, 2024

Title CONSTRUCTION LABORERS PENSION TRUST FOR SOUTHERN

CALIFORNIA ET AL V. MEKETA INVESTMENT GROUP, INC. ET AL

Court may infer that defendants breached their duty of prudence from their allegations

that defendants failed both “to identify investments that were inconsistent with the

Policy” and “to notify the Pension Fund that Onset was making investments that were

inconsistent with the Policy despite knowing that Onset was doing so.” Id. at 15-16.

Plaintiffs assert that defendants ignored numerous red flags regarding Onset’s fraudulent

conduct, accepted Onset’s fraudulently inflated valuations uncritically, and “repeated

them in periodic reports to the Pension Fund.” Id. at 16-17. Finally, plaintiffs argue that

the Pension Fund has standing pursuant to Section 502(a)(2) of ERISA because it is a

fiduciary as the administrator of the Plan and is separate from the Plan under the Trust

Agreement and as alleged in the FAC.° Id. at 18-19 (citing Loc. 159, 342, 343 & 444 v.

Nor-Cal Plumbing, Inc., 185 F.3d 978, 982 (9th Cir. 1999) (“[A] trust fund could qualify

as a fiduciary of a separate ERISA plan so long as it exercises discretionary authority

over the management or administration of the plan or its assets.”).

In reply, defendants contend than “any alleged breaches before March 6, 2016

remain time-barred” by ERISA’s statute of limitations, even if defendants continuously

violated their fiduciary duties. Reply at 7-8 (emphasis in original). Moreover,

defendants argue that the Ninth Circuit has not found the failure to disclose material

information to constitute the type of fraud or concealment that would toll the ERISA

statute of limitations. Id. at 9. Further, defendants assert that the undisputed terms of the

LPA—that Onset had no obligation to follow the Policy or submit to defendants’

monitoring or oversight—defeat plaintiffs’ ERISA claim. Id. at 9-11. According to

defendants, plaintiffs concede they do not directly allege imprudence by defendants and

fail to allege facts to support that defendants knew or should have known of the alleged

misconduct by Onset, particularly at the relevant time. Id. at 12-13. Thus, defendants

argue that plaintiffs fail to allege that defendants “breached any continuing duty of

prudence after March 6, 2016.” Id. at 14.

As an initial matter, the Court finds that the Pension Fund has ERISA standing.

Even if the Pension Fund does not have ERISA standing, plaintiffs argue that their

claims would not be subject to dismissal because (1) the Trustees are also plaintiffs in

their capacity as fiduciaries of the Plan and (2) the Pension Fund is a proper plaintiff with

respect to the non-ERISA claims. Opp. at 20.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘O’

Case No. 2:23-cv-07726-CAS (PVCx) Date April 15, 2024

Title CONSTRUCTION LABORERS PENSION TRUST FOR SOUTHERN

CALIFORNIA ET AL V. MEKETA INVESTMENT GROUP, INC. ET AL

Plaintiffs allege that because defendants failed to disclose material information

about Onset, plaintiffs retained Onset in January 2016. With regard to ERISA’s statute of

limitations, the Court agrees with defendants that ERISA’s six-year statute of repose bars

certain of plaintiffs’ allegations. See 29 U.S.C.A. § 1113 (“No action may be

commenced . . . with respect to a fiduciary’s breach of any .. . duty .. . (1) six years after

(A) the date of the last action which constituted a part of the breach or violation, or (B) in

the case of an omission the latest date on which the fiduciary could have cured the breach

or violation|.|””). Based on the parties’ agreement that March 2, 2016, is the last date on

which claims could accrue that fall within both the statute of limitations and the confines

of the 2023 Tolling Agreements, the Court concludes that statements made and conduct

by defendants earlier than March 2, 2016, are barred by the statute of limitations, unless

tolling applies.

To toll the six-year period through the fraud or concealment exception, plaintiffs

must allege that defendants took “steps to hide [their] breach of fiduciary duty.”

Guenther, 972 F.3d at 1057. The Ninth Circuit has explained that “the facts constituting

the claim for breach of fiduciary duty alone cannot also serve as the basis for fraud or

concealment—otherwise, the exception would swallow the rule.” Id. at 1057 n.10. Here,

plaintiffs have not alleged facts beyond those relating to defendants’ breaches of their

fiduciary duties to toll the six-year period. Therefore, the Court GRANTS defendants’

motion to dismiss plaintiffs’ claim for breach of fiduciary duty, as to defendants’ conduct

before March 2, 2016, with leave to amend.

However, the Court finds that plaintiffs have sufficiently pled the remainder of

their breach of fiduciary duty claim to survive a motion to dismiss. Plaintiffs have

alleged that defendants are ERISA fiduciaries of the Pension Fund and breached their

fiduciary duties through several actions and inactions, such as by failing to supervise

Onset, to follow the relevant governing documents, and to generally act prudently in their

work. Accordingly, the Court DENIES defendants’ motion to dismiss, as to the

remainder of plaintiffs’ claim for breach of fiduciary duty under ERISA.

2. Plaintiffs’ Remaining State Law Claims

Defendants argue that ERISA preempts all of plaintiffs’ remaining state law

claims, which are connected to the ERISA-regulated relationship at issue between the

Pension Fund and its ERISA fiduciaries—defendants. MTD at 20-21. Defendants

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘Oo’

Case No. 2:23-cv-07726-CAS (PVCx) Date April 15, 2024

Title CONSTRUCTION LABORERS PENSION TRUST FOR SOUTHERN

CALIFORNIA ET AL V. MEKETA INVESTMENT GROUP, INC. ET AL

further argue that applying state law fiduciary standards to ERISA fiduciaries “‘risk[s]

the imposition of inconsistent standards and remedies’ on the administration of ERISA

plans.” Id. at 21-22 (citing Cox v. Eichler, 765 F. Supp. 601, 606 (N_D. Cal. 1990)).

Finally, defendants contend that because ERISA preempts state law claims that require

the Court to interpret ERISA plan documents, ERISA preempts plaintiffs’ breach of

contract claim, which would require the Court to interpret the Policy. MTD at 22.

In opposition, plaintiffs assert that they are entitled to plead state law claims in the

alternative to their ERISA claim in the event defendants do not concede they are ERISA

fiduciaries. Opp. at 21-22.

In reply, defendants argue that ERISA preempts plaintiffs’ state law claims,

regardless of whether or not they are pled in the alternative. Reply at 15 (citing Cox, 765

F. Supp. at 605). Defendants distinguish this case from the cases cited by plaintiffs

because here, plaintiffs allege that defendants were ERISA fiduciaries, and “|d]|efendants

do not dispute the applicability of ERISA in their Motion to Dismiss.” Reply at 15-16.

ERISA preempts any state law claims that “relate to” and thus have “a connection

with” an employee benefit plan. See Bafford v. Northrop Grumman Corp., 994 F.3d

1020, 1030-31 (9th Cir. 2021) (citation omitted). The Ninth Circuit has “employed a

‘relationship test’ in analyzing ‘connection with’ preemption, under which a state law

claim is preempted when the claim bears on an ERISA-regulated relationship, e.g., the

relationship between plan and plan member, between plan and employer, between

employer and employee.” Paulsen v. CNF Inc., 559 F.3d 1061, 1082 (9th Cir. 2009)

(citation omitted). Here, all three of plaintiffs’ state law claims—breach of contract,

breach of common law fiduciary duty, and negligence/gross negligence—concern the

relationship between the Pension Fund and defendants in their capacity as ERISA

fiduciaries of the Pension Fund. Therefore, regardless of whether plaintiffs plead their

claims in the alternative, ERISA preempts plaintiffs’ state law claims because they bear

on an ERISA-regulated relationship. See Cox, 765 F. Supp. at 605 (“[P]laintiffs may not

assert preempted state law claims, even in the alternative; if ERISA operates to preempt

plaintiffs’ state law claims, preemption is mandatory.”). Accordingly, the Court

GRANTS defendants’ motion to dismiss plaintiffs’ state law claims without prejudice.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES —- GENERAL ‘O’

Case No. 2:23-cv-07726-CAS (PVCx) Date April 15, 2024

Title CONSTRUCTION LABORERS PENSION TRUST FOR SOUTHERN

CALIFORNIA ET AL V. MEKETA INVESTMENT GROUP, INC. ET AL

B. Motion to Stay Discovery Pending the Resolution of the Motion to

Dismiss the FAC

In light of the fact that the Court has resolved defendants’ motion to dismiss, the

Court assumes that defendants’ motion to stay discovery is now moot.

V. CONCLUSION

In accordance with the foregoing, the Court GRANTS IN PART and DENIES IN

PART defendants’ motion to dismiss. The Court GRANTS defendants’ motion as to

plaintiffs’ allegations that are barred by ERISA’s statute of limitations and as to

plaintiffs’ state law claims with leave to amend, and DENIES defendants’ motion as to

the remainder of plaintiffs’ claim for breach of fiduciary duty under ERISA. Plaintiffs

shall file an amended complaint within fourteen days of this order. Thirty days

thereafter, defendants shall file a response to the amended complaint.

Because the Court has ruled on defendants’ motion to dismiss, defendants’ motion

to stay discovery is MOOT.

IT IS SO ORDERED.

00 40

Initials of Preparer COMMS