Court Opinion

ID: 4568555
Source: CourtListenerOpinion
Date Created: 2020-09-22 23:05:59.887602+00
Date Added: 2024-06-11T09:27:53.175997
License: Public Domain

RENDERED: JULY 9, 2020
                                               TO BE PUBLISHED

           Supreme Court of Kentucky
                      2019-SC-000041-TG

RANDY OVERSTREET; BOBBY D. HENSON;                   APPELLANTS
WILLIAM S. COOK; TIMOTHY
LONGMEYER; THOMAS ELLIOTT;
JENNIFER ELLIOTT; AND, VINCE LANG

             ON TRANSFER FROM COURT OF APPEALS
V.                 CASE NO. 2019-CA-000012
            FRANKLIN CIRCUIT COURT NO. 17-CI-01348
               HONORABLE PHILLIP J. SHEPHERD

JEFFREY C. MAYBERRY, AS MEMBER AND                    APPELLEES
BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
HONORABLE BRANDY O. BROWN, AS
MEMBER AND BENEFICIARY OF TRUST
FUNDS ON BEHALF OF THE KENTUCKY
RETIREMENT SYSTEMS, AND AS
TAXPAYER ON BEHALF OF THE
COMMONWEALTH OF KENTUCKY;
MARTHA MICHELLE MILLER, AS
MEMBER AND BENEFICIARY OF TRUST
FUNDS ON BEHALF OF THE KENTUCKY
RETIREMENT SYSTEMS, AND AS
TAXPAYER ON BEHALF OF THE
COMMONWEALTH OF KENTUCKY; STEVE
ROBERTS, AS MEMBER AND
BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
TERESA STEWART, AS MEMBER AND
BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
JASON LAINHART, AS MEMBER AND
BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
DON. D. COOMER, AS MEMBER AND
BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
BEN WYMAN, AS MEMBER AND
BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
KKR & CO. L.P.; HENRY R. KRAVIS;
GEORGE R. ROBERTS; PRISMA CAPITAL
PARTNERS LP; PACIFIC ALTERNATIVE
ASSET MANAGEMENT COMPANY, LLC;
GIRISH REDDY; JANE BUCHAN;
BLACKSTONE GROUP, L.P.; BLACKSTONE
ALTERNATIVE ASSET MANAGEMENT
COMPANY, L.P.; STEVEN A. SCHARZMAN;
J. TOMILSON HILL; R.V. KUHNS &
ASSOCIATES, INC.; REBECCA A.
GRATSINGER; JIM VOYTKO; ICE MILLER,
LLP; CAVANAUGH MACDONALD
CONSULTING, LLC; THOMAS J.
CAVANAUGH; TODD B. GREEN; ALISA
BENNETT; GOVERNMENT FINANCE
OFFICERS ASSOCIATION; KENTUCKY
RETIREMENT SYSTEMS; DAVID PEDEN;
BRENT ALDRIDGE; T. J. CARLSON; AND,
WILLIAM A. THIELEN

AND

                        2019-SC-00042-TG

BRENT ALDRIDGE; T.J. CARLSON; DAVID                   APPELLANTS
PEDEN; AND, WILLIAM THIELEN

              ON TRANSFER FROM COURT OF APPEALS
V.                  CASE NO. 2019-CA-000016
             FRANKLIN CIRCUIT COURT NO. 17-CI-01348
                HONORABLE PHILLIP J. SHEPHERD
JEFFREY C. MAYBERRY AS MEMBER AND      APPELLEES
BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
HONORABLE BRANDY O. BROWN, AS
MEMBER AND BENEFICIARY OF TRUST
FUNDS ON BEHALF OF THE KENTUCKY
RETIREMENT SYSTEMS, AND AS
TAXPAYER ON BEHALF OF THE
COMMONWEALTH OF KENTUCKY;
MARTHA MICHELLE MILLER, AS MEMBER
AND BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
STEVE ROBERTS, AS MEMBER AND
BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
TERESA STEWART, AS MEMBER AND
BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
JASON LAINHART, AS MEMBER AND
BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
DON. D. COOMER, AS MEMBER AND
BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
BEN WYMAN, AS MEMBER AND
BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT
SYSTEMS, AND AS TAXPAYER ON BEHALF
OF THE COMMONWEALTH OF KENTUCKY;
KKR & CO. L.P.; HENRY KRAVIS; GEORGE
ROBERTS; PRISMA CAPITAL PARTNERS
LP; PACIFIC ALTERNATIVE ASSET
MANAGEMENT COMPANY, LLC; GIRISH
REDDY; JANE BUCHAN; BLACKSTONE
GROUP, L.P.; BLACKSTONE ALTERNATIVE
ASSET MANAGEMENT COMPANY, L.P.;
STEVEN A. SCHARZMAN; J. TOMILSON
HILL; R.V. KUHNS & ASSOCIATES, INC.;
REBECCA A. GRATSINGER; JIM VOYTKO;
ICE MILLER, LLP; CAVANAUGH
MACDONALD CONSULTING, LLC; THOMAS
CAVANAUGH; TODD GREEN; ALISA
BENNETT; GOVERNMENT FINANCE
OFFICERS ASSOCIATION; KENTUCKY
RETIREMENT SYSTEMS; WILLIAM S.
COOK; RANDY OVERSTREET; TIMOTHY
LONGMEYER; BOBBY D. HENSON;
THOMAS ELLIOTT; JENNIFER ELLIOTT,
AND, VINCE LANG

           OPINION OF THE COURT BY CHIEF JUSTICE MINTON

                        REVERSING AND REMANDING

      To establish constitutional standing under Kentucky law, a plaintiff must

demonstrate (1) an injury in fact that is concrete, particularized, and actual or

imminent, (2) that the injury was caused by the defendant, and (3) that the

injury is redressable by a ruling favorable to the plaintiff.1 We are asked in

these consolidated appeals to determine whether eight members of the

Kentucky Retirement System’s (KRS’s) defined-benefit retirement plan have

standing to bring claims for alleged funding losses sustained by the KRS plan

against certain former KRS trustees and officers as well as private-investment

advisors and hedge funds and their principals. Because we conclude that

Plaintiffs do not have an injury in fact that is concrete or particularized, they

      1 Commonwealth Cabinet for Health & Family Servs., Dep't for Medicaid
Servs. v. Sexton by & through Appalachian Reg'l Healthcare, Inc., 566 S.W.3d
185, 196 (Ky. 2018).

                                         4
do not have the requisite standing to bring their claims. Accordingly, we

reverse the circuit court’s order and remand to the circuit court with direction

to dismiss the complaint.

                                    I. BACKGROUND.

      Plaintiffs are eight public employees—current and retired—who are

members of KRS. Because Plaintiffs began participation in KRS before January

1, 2014, their retirement plan is a defined-benefit plan under which retirees

receive a fixed payment each month. Plaintiffs do not claim to have had their

vested or expected retirement benefits reduced or otherwise made unavailable

to them, and they are legally and contractually entitled to receive those

payments, once vested, for the rest of their lives.

      Plaintiffs brought this action in circuit court against eleven KRS trustees

and officers in their individual capacity and against third parties who did

business with KRS, including actuarial and investment advisors, hedge-fund

sellers, and their executives.2

      Plaintiffs allege that between 2011 and 2016 Defendants knew that KRS

faced an appreciable risk of running out of plan assets but concealed the true

state of affairs from KRS members and the public. Instead, Plaintiffs allege, the

KRS trustees and officers attempted to “recklessly gamble” their way out of the

actuarial shortfall by investing $1.5 billion of KRS plan assets in high-risk

“fund-of-hedge-fund” products offered by the defendant hedge-fund sellers.3

      2   We refer to these parties collectively as Defendants.
      3   Plaintiffs refer to these investment vehicles as “Black Boxes.”

                                             5
According to Plaintiffs, these investments ultimately lost over $100 million by

2018 and further accumulated fees “expected to measure in the hundreds of

millions of dollars.” These losses, according to Plaintiffs, contributed to what is

now a $25 billion funding shortfall in the KRS general pool of assets.

      As a result, Plaintiffs brought claims against the trustees and officers for

breach of certain common-law and statutory duties owed to KRS and its

members. Plaintiffs also asserted claims for breach of fiduciary duties against

the advisors and hedge-fund sellers and their principals as well as claims for

aiding and abetting the breaches of the trustees and officers. And Plaintiffs

brought a claim against all Defendants for engaging in a joint enterprise or civil

conspiracy to breach fiduciary duties. Plaintiffs sought monetary damages for

the shortfall suffered by KRS because of the allegedly risky investments and

consequent use of taxpayer funds to cover that shortfall as well as

disgorgement of allegedly excessive and unjustified fees from the hedge-fund

sellers. They also sought declaratory relief and injunctive relief to remove one of

the trustee defendants from the KRS Board, to prohibit him from serving on the

Investment Committee, and directing that any hedge-fund sellers working

inside KRS be removed. Plaintiffs assert that any monetary recovery is to go to

the KRS plan. But, not to be missed, Plaintiffs also seek attorneys’ fees and an

“incentive fee” for each of the named KRS members.

      After Plaintiffs filed this action, KRS formed an “independent special

litigation committee of the Board of Trustees” to investigate Plaintiffs’ claims

and consider whether to join the action. In a Joint Notice filed with Plaintiffs in

                                         6
the circuit court, KRS explained that it ultimately declined to join the action or

itself pursue the claims but nevertheless endorsed the Plaintiffs’ “pursuit of

these claims on a derivative basis on KRS’s behalf.” And if the Plaintiffs’ claims

are dismissed on standing grounds, KRS explained, it reserved the right later to

pursue the claims itself. In addition, Plaintiffs also provided the Attorney

General an advance copy of their complaint before filing, but he declined to join

the suit.

      In February of 2018, Defendants moved to dismiss Plaintiffs’ claims for

lack of constitutional standing and, for some defendants, on immunity

grounds. The circuit court denied the motion, finding, among other things, that

Plaintiffs had standing to bring their claims.

      From the circuit court’s order, the KRS trustee and officer defendants

each filed notices of interlocutory appeal in which they challenge the circuit

court’s rulings on sovereign immunity and constitutional standing. This court

accepted transfer of those appeals and consolidated them. Those consolidated

appeals make up the present case before this Court.

      Meanwhile, in January of 2019, a subset of Defendants also filed an

original action in the Court of Appeals seeking a writ of prohibition claiming

the circuit court was acting outside of its subject-matter jurisdiction. In April

2019, the Court of Appeals granted the writ of prohibition, finding that

Plaintiffs lacked standing, and the Plaintiffs appealed that decision to this

                                         7
Court.4 We heard oral argument in all three cases on the same day, and now

render this opinion and orders adjudicating those cases simultaneously.

                                     II. ANALYSIS.

      The only issues before this Court are whether the Plaintiffs have an

injury in fact sufficient to support constitutional standing as required by our

recent case, Commonwealth Cabinet for Health & Family Servs., Dep't for

Medicaid Servs. v. Sexton by & through Appalachian Reg'l Healthcare, Inc., 5

(Sexton), and whether the trustee and officer defendants are entitled to

immunity. Because we find that the Plaintiffs lack an injury in fact sufficient to

support constitutional standing, we dismiss this case and do not reach the

immunity issue.6

   A. This Court may address constitutional standing in an interlocutory
      appeal that is properly before us on independent grounds.

      We first clarify this Court’s authority to address the issue of

constitutional standing in a procedurally proper interlocutory appeal. These

cases are before us at this juncture as interlocutory appeals from the same

circuit court order denying Defendants’ motion to dismiss on standing and

immunity grounds.

      While “a trial court’s ruling on the issue of constitutional standing, in

and of itself, does not give rise to an immediate right to an appeal, i.e. an

      4We refer to that case herein as the “Writ Case.” In an Order of the Court
rendered today, we dismiss the Writ Case as moot.
      5   566 S.W.3d 185, 195 (Ky. 2018).
      6   Our dismissal of this case renders the Writ Case moot.

                                            8
interlocutory appeal[,]” this Court has the authority to address constitutional

standing whenever a facially valid and procedurally proper interlocutory appeal

is before it.7 In this case, the facially valid and procedurally proper

interlocutory-appeal issue before us is whether the doctrine of qualified official

immunity bars Plaintiffs’ claims.8 As such, we address Defendants’

constitutional standing arguments,9 which we review de novo.10

   B. Plaintiffs lack an injury in fact sufficient to support constitutional
      standing.

   To sue in a Kentucky court the plaintiff must have the requisite

constitutional standing, which is defined by three requirements: (1) injury, (2)

      7 Sexton, 566 S.W.3d at 191–92 (holding that this Court has authority to
address constitutional standing on a facially valid and procedurally proper
interlocutory appeal of a lower court’s ruling on sovereign immunity).
      8 See Baker v. Fields, 543 S.W.3d 575 (Ky. 2018) (a ruling on an immunity
defense is an appealable issue by interlocutory appeal); see also Sexton, 566 S.W.3d at
191–92 (recognizing the same).
      9  The KRS defendants argue both that Plaintiffs lack constitutional standing
and that they are immune from suit in their Appellant Briefs. Curiously, however,
Plaintiffs’ Appellee Brief makes no substantive argument on the constitutional-
standing issue but rather dedicates all 50 pages to the immunity issue. Instead,
Plaintiffs “rely on their briefs in the [corresponding] writ appeal for a complete
discussion regarding standing . . .” and provide a conclusory summary of the
arguments contained therein. Because incorporating by reference additional pages of
argument would presumably violate the 50-page brief requirement contained in CR
76.12(4)(b)(ii), we would normally be apt to strike those arguments. But because of the
unique nature of this appeal—and, ultimately, because we find the Plaintiffs lack
standing—we address each of the constitutional-standing arguments contained in the
Plaintiffs’ Writ Appeal brief.
       10 Nash v. Campbell Cty. Fiscal Ct., 345 S.W.3d 811, 816 (Ky. 2011) (“Issues of

law are reviewed de novo by a reviewing court.”)

                                           9
causation, and (3) redressability.11

       To establish the first requirement, “an injury must be ‘concrete,

particularized, and actual or imminent; fairly traceable to the challenged

action; and redressable by a favorable ruling.’”12 “For an injury to be

‘particularized,’ it must affect the plaintiff in a personal and individual way.’”13

This means the plaintiff “personally has suffered some actual or threatened

injury.”14 For an injury to be concrete, it must “actually exist.”15 And while an

injury may be threatened or imminent, the concept of imminence “cannot be

stretched beyond its purpose, which is to ensure that the alleged injury is not

too speculative for [constitutional standing] purposes—that the injury is

certainly impending.”16 Thus, the United States Supreme Court has “repeatedly

reiterated that ‘threatened injury must be certainly impending to constitute

injury in fact’ and that ‘[a]llegations of possible future injury’ are not

sufficient.”17

       11   Sexton, 566 S.W.3d at 196.
       12Clapper v. Amnesty Intern. USA, 568 U.S. 398, 409 (2010) (quoting Monsanto
Co. v. Geertson Seed Farms, 561 U.S. 139, ––––, 130 S. Ct. 2743, 2752, 177 L. Ed. 2d
461 (2010)).
       13Spokeo, Inc. v. Robins, 136 S. Ct 1540, 1548 (2016) (quoting Lujan, 504 U.S.
at 560 n. 1).
       14   United States v. Richardson, 418 U.S. 166, 177 (1974).
       15   Spokeo, 136 S. Ct. at 1548 (quoting Lujan, 504 U.S. at 560 n. 1).
       Clapper, 568 U.S. at 409 (quoting Lujan, at 565, n. 2) (internal quotations
       16

marks omitted and emphasis in original).
       17 Id. (quoting Whitmore v. Arkansas, 495 U.S. 149, 158 (1990)) (emphasis in
original). The Clapper court also noted by footnote that “[o]ur cases do not uniformly
require plaintiffs to demonstrate that it is literally certain that the harms they identify
will come about. In some instances, we have found standing based on a “substantial
risk” that the harm will occur, which may prompt plaintiffs to reasonably incur costs
                                             10
       If Plaintiffs here had not received their vested monthly pension benefits,

they would certainly have the requisite injury in fact to support standing.18 But

Plaintiffs at this point have received and will continue to receive all their

monthly pension benefits. To demonstrate standing to bring their claims,

Plaintiffs assert three alternative arguments: (1) they have standing as

representatives of the KRS plan, (2) they have standing as common-law

beneficiaries of a trust, and (3) they have standing as taxpayers of the

Commonwealth.

       And although not briefed to this Court, Plaintiffs advanced at oral

argument and in a subsequent motion filed before this Court that they

themselves have a direct injury because the Defendants’ collective actions

substantially increased the risk that their benefits will be denied in the future.

We start with Plaintiff’s direct-injury argument and address each in turn.

       i. Direct Injury to Plaintiffs.

       We note first that any loss to KRS plan assets does not directly confer an

injury to the Plaintiffs because they are members of a defined-benefit plan

rather than a defined-contribution plan. “In a defined-benefit plan, retirees

receive a fixed payment each month, and the payments do not fluctuate with

the value of the plan or because of the plan fiduciaries’ good or bad investment

to mitigate or avoid that harm.” Id. at 414 n. 5. There is no allegation that Plaintiffs
are required to reasonably incur costs to mitigate the risk that their benefits will be
reduced or made unavailable to them in the future.
       18See Thole v. U.S. Bank, 140 S. Ct. 1615, 1619 (2020) (“If Thole and Smith had
not received their vested pension benefits, they would of course have Article III
standing to sue . . . .”).

                                            11
decisions.”19 In a defined-contribution plan, by contrast, “the retirees’ benefits

are typically tied to the value of their accounts, and the benefits can turn on

the plan fiduciaries’ particular investment decisions.”20 So, any alleged

mismanagement of the KRS plan has no direct bearing on whether the KRS-

member Plaintiffs in this case will receive their vested monthly retirement

payments.21

      Plaintiffs instead assert that the collective mismanagement of the KRS

plan confers an injury in fact personal to themselves because the resulting

decrease in plan assets substantially increased the risk that their retirement

benefits will be denied in the future. Specifically, Plaintiffs assert that the

imprudent investment decisions in question resulted in hundreds of millions of

dollars in losses to the plan assets thereby placing at significant risk the

solvency of the KRS fund.

      But relying on any increased risk of not receiving pension benefits in the

future poses a problem in this case: as KRS beneficiaries, Plaintiffs’ retirement

      19  Thole, 140 S. Ct. at 1618. See also Evans v. Akers, 534 F.3d 65, 71 n. 5 (1st
Cir. 2008) (citing LaRue v. DeWolff, Boberg, & Assocs., Inc., 552 U.S. 248, 255–56
(2008)) (“In contrast with a defined contribution plan, where the amount of benefits is
directly related to the investment income earned in an individual account, the
investment performance of the portfolio held by a defined benefit plan has no effect on
the level of benefits to which a participant is entitled, provided that the plan remains
solvent.”).
      20 Id. (citing Beck v. PACE Int’l Union, 551 U.S. 96, 98 (2007); Hughes Aircraft
Co. v. Jacobson, 525 U.S. 432, 439–40 (1999)).
      21 Plaintiffs’ counsel conceded at oral argument that none of the Plaintiffs are
members of the KRS “Hybrid Cash Balance Plan,” which has characteristics of both a
defined-benefit plan and a defined-contribution plan. That plan became available to
members who began participation with KRS on or after January 1, 2014.

                                           12
benefits are part of a statutorily declared “inviolable contract” between KRS

members and the Commonwealth.22 Should KRS become so severely

underfunded that it runs out of assets and terminates, the Plaintiffs are still

entitled to their pension benefits under their inviolable contract with the

Commonwealth. And even before the risk of plan termination is realized, the

Commonwealth has the authority to increase its own contribution to the KRS

plan to make up any actuarial shortfall in its assets. In essence, then, the full

faith and credit of the Commonwealth serves as a backstop for Plaintiffs’

pension benefits even in the event that severe plan mismanagement renders

KRS insolvent.

      In the context of private ERISA defined-benefit pension plans, similar

increased-risk standing arguments have been rejected as too speculative

largely because even mismanagement that results in severe underfunding still

      22 See Jones v. Bd. of Trs. of Ky. Ret. Sys., 910 S.W.2d 710, 713 (Ky. 1995)
(recognizing that “the retirement savings system has created an inviolable contract
between KERS members and the Commonwealth . . . ”); See also KRS 61.692(1), which
provides the following:
   (1) For members who begin participating in the Kentucky Employees Retirement
       System prior to January 1, 2014, it is hereby declared that in consideration of
       the contributions by the members and in further consideration of benefits
       received by the state from the member's employment, KRS 61.510 to 61.705
       shall constitute an inviolable contract of the Commonwealth, and the benefits
       provided therein shall not be subject to reduction or impairment by alteration,
       amendment, or repeal, except:

      (a) As provided in KRS 6.696; and

      (b) The General Assembly reserves the right to amend, reduce, or suspend any
          legislative changes to the provisions of KRS 61.510 to 61.705 that become
          effective on or after July 1, 2018.

                                          13
requires the realization of several additional risks beyond plan termination

before beneficiaries are denied their benefits. For example, in Lee v. Verizon

Communications, Inc.,23 the Fifth Circuit found plan participants in a private-

employer defined-benefit plan lacked an injury in fact to bring a claim against

plan administrators for fiduciary misconduct.24 The plan participants had

argued, in part, that they were directly harmed from the alleged plan

mismanagement because the transactions in question had left the plan “in a

far less stable financial condition and underfunded by almost $2 billion or only

about 66% actuarially funded.”25

      But the court found this risk-based theory too speculative to support

standing largely because “prior to default [in a private-employer defined-benefit

plan] ‘the employer typically bears the entire investment risk and—short of the

consequences of plan termination—must cover any underfunding as the result

of the shortfall that may occur from the plan’s investments.’”26 And even in the

event the employer is unable to cover the underfunding, “the impact on

participants is not certain since the PBGC27 provides statutorily-defined

protection of participants’ benefits.”[28] Instead, the court explained, other

      23   837 F.3d 523 (5th Cir. 2016)
      24 Id. at 545–48.
      25 Id. at 546.
      26  Id. at 545 (quoting Hughes Aircraft Co., 525 U.S. at 439).
      27 The Pension Benefit Guaranty Corporation serves as an insurance for plan

termination, into which private defined-benefit plans are required to pay premiums
each year. See LaRue, 552 U.S. at 256.
      28   Lee, 837 F.3d at 545.

                                            14
federal circuit courts considering the degree to which the impact of fiduciary

misconduct must be realized in order to establish standing had concluded that

“constitutional standing for defined-benefit plan participants requires

imminent risk of default by the plan, such that participant’s benefits are

adversely affected.”29 As such, it was irrelevant whether the plan was under- or

overfunded because the risk to the participants’ benefits depended on the

realization of several additional risks—that the employer would be unable to

cover the shortfall or that the PBGC would be unable to provide the benefits—

which “collectively render the injury too speculative to support standing.”30

Without credibly alleging impending plan termination and an inability of the

employer to cover the shortfall, the participants’ “allegations that the plan was

underfunded, and less financially stable, merely increases the relative

likelihood that [the employer] will have to cover a shortfall”—not the likelihood

that the participants will not receive their benefits.31

       A number of federal circuits have reached similar conclusions,32 which

we note is consistent with the United States Supreme Court’s view that

       29Id. at 546 (citing David v. Alphin, 704 F.3d 327, 338 (4th Cir. 2013); Harley v.
Minn. Mining & Mfg. Co., 284 F.3d 901, 906 (8th Cir. 2002), Perelman v. Perelman, 919
F. Supp. 2d 512, 517–520 (E.D. Pa. 2013), aff’d, 793 F.3d 368 (3d Cir. 2015))
(emphasis added).
       30 Id. at 546.
       31 Id.
       32 See, e.g., Alphin, 704 F.3d at 338 (finding “the alleged risk to be insufficiently

‘concrete and particularized’ to constitute an injury-in-fact for [constitutional
standing] standing purposes. If the Plan becomes underfunded, the [employer] will be
required to make additional contributions. If the [employer] is unable to do so because
of insolvency, participants’ vested benefits are guaranteed by the PBGC up to a
statutory minimum[]”).

                                            15
“threatened injury must be certainly impending to constitute injury in fact.”33

But Plaintiffs assert in a motion before this Court that the Supreme Court’s

recent decision in Thole v. U.S. Bank34 “explicitly left undisturbed the rule

expressed in LaRue v. DeWolff, Boberg & Associates, Inc.[35] that standing does

exist where ‘misconduct by the administrators of a defined benefit plan . . .

creates or enhances the risk of default by the entire plan.’”36 But neither Thole

nor LaRue stands for that proposition.

       Thole expressly left unaddressed this issue because “the plaintiffs’

complaint did not plausibly and clearly claim that the alleged mismanagement

of the plan substantially increased the risk that the plan and the employer

would fail and be unable to pay the plaintiffs’ future pension obligations.”37 The

Court stated that “a bare allegation of plan underfunding does not itself

demonstrate a substantially increased risk that the plan and the employer

       33 Clapper, 568 U.S. at 409 (quoting Whitmore v. Arkansas, 495 U.S. 149, 158
(1990)) (emphasis in original and internal quotations marks omitted).
       34   140 S. Ct. 1615.
       35 552 U.S. at 254–56.
       36 Plaintiffs cite to City of Louisville v. Stock Yards Bank & Trust Co., 843 S.W.2d
327 (Ky. 1992), as consistent with this proposition. But that case dealt with the ability
of the City of Louisville, not beneficiaries, to sue for mismanagement of the
Policeman’s Retirement Fund of the City of Louisville. Id. at 328. The Court held that
the City had the requisite interest to sue because not only had the City “made direct
payments to the fund to maintain its fiscal soundness, it also has the additional duty,
in the interest of sound public policy, to guarantee that active police officers have a
dependable pension plan, one free of waste and mismanagement.” Id. at 329. By
contrast, the Court stated that “while appellees concede that fund beneficiaries may
have standing, these individuals would have little motivation to bring suit secure in
the knowledge that their pension benefits are guaranteed by the taxpayers of the City
of Louisville.” Id. This case deals with the standing of the latter—beneficiaries of a
defined-benefit plan, not its member employers.
       37   Thole, 140 S. Ct. at 1622 (emphasis added).

                                            16
would both fail.”38 The Court did, however, suggest in a footnote that the

plaintiffs might not even have standing in the event both the plan and

employer were to fail because, in that scenario, “the PGBC would be required to

pay these two plaintiffs all of their vested pension benefits in full.”39

      While LaRue stated that “misconduct by the administrators of a defined

benefit plan will not affect entitlement to a defined benefit unless it creates or

enhances the risk of default by the entire plan,” it did so in passing, only to

illustrate that the plaintiffs in that case—members of a defined-contribution

plan—did not need to show that the solvency of the entire plan was threatened

in order for their benefits to be reduced.40 But even still, the LaRue court’s

statement is consistent with the Lee court’s rule that an injury in fact will not

result unless it can be shown, at least, that plan termination is imminent, and

the employer will not be able to cover the shortfall in the event of plan default.

And even further, the LaRue court noted immediately after this statement that

the risk of plan default is what “prompted Congress to require defined benefit

plans (but not defined contribution plans) to satisfy complex minimum funding

requirements, and to make premium payments to the Pension Benefit

Guaranty Corporation for plan termination insurance.”41 So it is not clear that

even the LaRue court thought an injury in fact existed for defined-benefit

      38 Id. (emphasis added).
      39 Id. at n. 2.
      40 552 U.S. at 255.
      41 Id.

                                         17
beneficiaries in the event of plan and employer default because of the effect of

the PBGC.42

      But in any case, even assuming the Supreme Court would have found an

injury in fact had the plaintiffs in Thole alleged that the employer was unable to

cover any shortfall in the plan, that holding would not apply here. Plaintiffs

have alleged that KRS is severely underfunded and that, at least in part, plan

mismanagement is to blame. But, similar to the plaintiffs in Lee, Plaintiffs in

this case have not alleged that the Commonwealth will be unable to cover the

shortfall by increasing its contribution to the system or that, in the event of

plan termination, the Commonwealth would be unable to pick up the tab

directly. In sum, Plaintiffs have only alleged that the plan mismanagement

increases the relative likelihood that the Commonwealth—an entity with taxing

authority and the inability to avoid its obligations through bankruptcy43—will

eventually have to fund the KRS plan’s actuarial shortfall or pay Plaintiffs their

benefits directly. Such an allegation is too speculative and hypothetical to

confer standing for defined-benefit beneficiaries.

      Relatedly, Plaintiffs also argue in passing that the statutory scheme

grants to KRS participants a statutory right to prudent plan management and

that they suffer a cognizable injury through invasion of that right by the alleged

fiduciary misconduct. But this theory of standing has also repeatedly been

      42 It is also worth noting that Thole cites the standing discussion in Lee, 837
F.3d at 545–46, as analogous authority to the risk-based standing theory.
      43 Under the Bankruptcy Act, states are not persons eligible to file for

bankruptcy protection. 11 U.S.C. § 109.

                                           18
rejected by federal circuits in the context of ERISA as conflating the concepts of

statutory and constitutional standing.44 That is, even if the KRS scheme grants

to Plaintiffs a statutory right to have their plan managed in accordance with

certain fiduciary standards, Plaintiffs must still themselves show a

constitutional injury in fact to bring their claims. The Plaintiffs themselves do

not have such an injury, so they may not bring their claims under this theory.

       ii. Representative Standing.

       While the alleged fiduciary misconduct is not sufficient to support a

direct injury in fact on the part of Plaintiffs, they alternatively assert standing

in a representational or derivative capacity on behalf of KRS and the

Commonwealth.45 While the plan may have suffered a loss of assets as a result

of alleged mismanagement, such an injury is insufficient to confer standing on

the part of the Plaintiffs here.

       Importantly, the requirement of an injury in fact is a hard floor of our

courts’ jurisdiction that cannot be set aside by courts or legislatures.46 So in

       44See Lee, 837 F.3d at 546 (rejecting argument that plan beneficiaries’
statutory right to proper plan management sufficed for Article III standing where
participants did not themselves have a concrete stake in the suit and reiterating that
the Lujan Court “clarified that a legislative creating of rights does not eliminate the
injury requirement for a party seeking review” (citing Lujan, 504 U.S. at 578)); see also
Alphin, 704 F.3d at 338 (rejecting same argument as a “non-starter” for conflating
statutory and constitutional standing).
        In fact, Plaintiffs First Amended Complaint conceded that they did not,
       45

themselves, have an injury in fact but were instead bringing their claims on behalf of
KRS and the Commonwealth.
        See Summers v. Earth Island Inst., 555 U.S. 488, 497 (2009) (“[T]he
       46

requirement of injury in fact is a hard floor of Article III jurisdiction that cannot be
removed by statute.”). “Article III jurisdiction” refers to jurisdiction of federal courts
under Article of the United States Constitution. Because we have interpreted the
Kentucky Constitution to have the same justiciability requirements as the federal
                                             19
order to claim ‘the interests of others, the litigants themselves still must have

suffered an injury in fact, thus giving’ them ‘a sufficiently concrete interest in

the outcome of the issue in dispute.’”47 As such, the Supreme Court in Thole

recently rejected this exact argument in the context of participants in an ERISA

defined-benefit plan, who did not themselves have an injury in fact, asserting

claims on behalf of the plan.48 Similarly, as we concluded above, the Plaintiffs

do not themselves have an injury in fact, so they cannot also assert their

claims on behalf of the plan.

        Plaintiffs analogize their representative claim to corporate derivative suits

in which, they argue, shareholders need not show an injury personal to

themselves. But that argument ignores the fact that plaintiffs in a shareholder

suit have a continuing personal interest in the litigation because of their status

as shareholders. The requirement that derivative plaintiffs maintain ownership

of their shares in the corporation throughout the pendency of litigation is

codified in both Federal Rule of Civil Procedure 23.1 and, in Kentucky, KRS

271B.7–400(1). While Plaintiffs assert this requirement serves only a prudential

standing purpose, we believe it has constitutional-standing implications as

well.

constitution, see Sexton, 566 S.W.3d at 196–97 (interpreting Ky. Const. § 112 and
adopting the federal test for constitutional standing), this rule applies to courts of the
Commonwealth as well.
        47   Thole, 140 S. Ct. at 1620 (quoting Hollingsworth v. Perry, 570 U.S. 693, 708
(2013)).
         See id. (holding plaintiff-beneficiaries of a defined-benefit plan who
        48

themselves lack a cognizable injury do not have standing to sue “as representatives of
the plan itself”).

                                              20
      In Gollust v. Mendell,49 the Supreme Court considered whether a

shareholder plaintiff bringing a derivative claim under § 16(b) of the Securities

Exchange Act of 1934 had standing even after losing ownership of his shares in

the defendant company during the litigation.50 Section 16(b) imposes strict

liability on “insider” owners of more than ten percent of a corporation’s listed

stock for any profits realized from the purchase and sale of stock occurring

within a six-month period.51 The statute authorizes both issuers and “owner[s]

of any security of the issuer” to bring suit on behalf of the issuer against the

“insider” to recover short-swing profits—with any recovery going back to the

corporation.52

      The plaintiff in Gollust, a shareholder in the defendant corporation,

brought suit on behalf of the corporation against an “insider” for short-swing

trade profits but lost ownership of his shares in the corporation during the

suit.53 In determining whether the plaintiff had standing to continue, the Court

first concluded that neither the text of the statute nor its legislative history

required a shareholder plaintiff to maintain ownership of the stock throughout

the entire litigation.54 But the Court construed the statute to require the

shareholder plaintiff to maintain ownership of the shares throughout the entire

      49   501 U.S. 115 (1991).
      50 Id. at 117–19.
      51 Id. at 117.
      52 Id.
      53 Id. at 118–19.
      54 Id. at 124.

                                         21
case because such a construction would both further the purpose of the

statute by ensuring plaintiffs have an incentive to litigate vigorously on behalf

of the corporation and would avoid the “serious constitutional question that

would arise” from allowing a non-shareholder plaintiff to continue prosecution

of the case.55 Explaining its justification for construing the statute to have a

continuous ownership requirement, the Gollust Court stated the following:

      Congress must, indeed, have assumed any plaintiff would
      maintain some continuing financial stake in the litigation for a
      further reason as well. For if a security holder were allowed to
      maintain a § 16(b) action after he had lost any financial interest in
      its outcome, there would be serious constitutional doubt whether
      that plaintiff could demonstrate the standing required by Article
      III's case-or-controversy limitation on federal court jurisdiction.56
      Although “Congress may grant an express right of action to
      persons who otherwise would be barred by prudential standing
      rules,”[57] . . . “Art. III's requirement remains: the plaintiff still must
      allege a distinct and palpable injury to himself.”58 Moreover, the
      plaintiff must maintain a “personal stake” in the outcome of the
      litigation throughout its course.[59]

      Hence, we have no difficulty concluding that, in the enactment of §
      16(b), Congress understood and intended that, throughout the
      period of his participation, a plaintiff authorized to sue insiders on
      behalf of an issuer would have some continuing financial interest
      in the outcome of the litigation, both for the sake of furthering the
      statute's remedial purposes by ensuring that enforcing parties

      55 Id. at 152–26.
      56  See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 804 (1985) (Article III
requires “the party requesting standing [to allege] ‘such a personal stake in the
outcome of the controversy as to assure that concrete adverseness which sharpens the
presentation of issues' ”) (quoting Baker v. Carr, 369 U.S. 186, 204 (1962)); see also
Valley Forge Christian College v. Americans United for Separation of Church and State,
Inc., 454 U.S. 464, 472 (1982).
      57   Warth v. Seldin, 422 U.S. 490, 501, 95 S. Ct. 2197, 2206, 45 L. Ed. 2d 343
(1975).
      58 Id.
      59   See United States Parole Comm'n v. Geraghty, 445 U.S. 388, 395–397 (1980).

                                           22
       maintain the incentive to litigate vigorously, and to avoid the
       serious constitutional question that would arise from a plaintiff's
       loss of all financial interest in the outcome of the litigation he had
       begun.[60]61

       As such, even though the Court recognized ownership of an issuer’s

security is only a “modest financial stake” in the outcome of a derivative suit,

the Court nonetheless views it as necessary to satisfy constitutional standing.

We take from this that while the requirement that a shareholder maintain

ownership of the shares throughout the course of litigation may serve some

“prudential standing” purpose in that it ensures the plaintiff has an incentive

to litigate the case vigorously and compatibly with the corporation’s interests, it

also serves the purpose of satisfying the injury-in-fact requirement of

constitutional standing. And perhaps more importantly, the Court in Thole

cited to Gollust as authority “suggesting that shareholder must ‘maintain some

continuing financial stake in the litigation’ in order to have Article III standing

to bring an insider trading suit on behalf of the corporation.”62

       Further, Plaintiffs argue that our recent decision in Sexton63 allows

representative suits as long as an injury can be shown on behalf of the entity

or person being represented. But Sexton did not so fundamentally change the

       60See Crowell v. Benson, 285 U.S. 22, 62, 52 S. Ct. 285, 296, 76 L. Ed. 598
(1932) (“When the validity of an act of Congress is drawn in question, and even if a
serious doubt of constitutionality is raised, . . . this Court will first ascertain whether
a construction of the statute is fairly possible by which the question may be avoided”);
see also Public Citizen v. Department of Justice, 491 U.S. 440, 465–466 (1989); id., at
481, 109 S. Ct. at 2580 (Kenndy, J., concurring in judgment).
       61   Gollust, 501 U.S. at 124–25.
       62   Thole, 140 S. Ct. at 1620.
       63 566 S.W.3d at 195.

                                            23
bedrock standing requirement that litigants themselves still must have suffered

an injury in fact in order to claim the interests of others.

      In Sexton, the plaintiff, Lettie Sexton, received medical care from a non-

party hospital, Appalachian Regional Healthcare (ARH).64 Because Sexton was

a Medicaid beneficiary, ARH received reimbursement for part, but not all, of the

cost of Sexton’s care from Coventry Health and Life Insurance, a managed-care

provider.65 Specifically, Coventry had reimbursed ARH for the first 24 hours of

Sexton’s stay but not an extended 15-hour stay for a cardiology consultation.66

      ARH, purporting to act as Sexton’s representative, sought review of

Coventry’s denial of reimbursement, first administratively and then in a circuit

court appeal of the administrative denial.67 Importantly, Sexton was the named

plaintiff in the lawsuit, even though ARH was seeking reimbursement for its

claims associated with Sexton’s 15-hour cardiology consult.68

      After formally adopting the federal Lujan test, we held that Sexton lacked

constitutional standing to bring the claim because she had not suffered an

injury in fact.69 And because Sexton—not ARH—was the named plaintiff in the

case, we explained that it was Sexton’s injury that mattered for purposes of

constitutional standing:

      64 Id. at 188.
      65  Id.
      66 Id.
      67 Id. at 188–89.
      68 Id. at 189.
      69  Id. at 196–99.

                                        24
      Simply stated, Sexton, by and through her authorized
      representative, ARH, lacks the requisite standing to sue in this
      case. We emphasize the crucial determinative fact—because
      Sexton, not ARH, is the true plaintiff in this case, we must examine
      the standing requirement through the lens of Sexton’s, not ARH’s,
      purported satisfaction.70

      Plaintiffs now attempt to distort our holding in Sexton by asserting that

the injury of the named plaintiff is irrelevant when that party is asserting the

injury of another. Plaintiffs argue that because we analyzed standing through

the lens of the “true plaintiff,” Sexton, even though ARH was the entity

asserting her claim, we must similarly analyze standing in this case from the

perspective of KRS.

      This misses the point. We identified Sexton as the “true plaintiff” and

analyzed standing from her perspective not because ARH was attempting to

assert her rights, but because she was the plaintiff. In this way, Sexton did not

in any way change the Lujan constitutional analysis—we still require the actual

plaintiff named in the lawsuit to show his or her own, particularized injury.

Analogizing to this case, we must also analyze standing through the lens of the

named plaintiffs’ purported satisfaction. And the named plaintiffs are pension

beneficiaries who cannot themselves show an injury in fact. As such, our

decision in Sexton provides no support to Plaintiffs here.

      70 Id. at 197.

                                        25
       Relatedly, Plaintiffs argue they are statutorily authorized to bring their

claims on behalf of KRS and the Commonwealth under KRS 61.645.71 But,

again, even if that statute provides the authorization Plaintiffs claim, they must

still show a concrete stake in the suit sufficient to constitute an injury in fact.

This argument again conflates the concepts of constitutional and statutory

standing, “and we decline to undermine this distinction by recognizing the

latter as conferring the former.”72 This point is buttressed by the fact that

ERISA participants are unquestionably authorized to bring suits on behalf of

the plan for fiduciary misconduct under the ERISA enforcement provision, §

502(a)(2),73 but courts repeatedly dismiss suits brought under that provision

because the participants failed to show an injury particular to themselves.74

And, for the same reason, Plaintiff’s contention that their ability to sue on

behalf of KRS was “both conceded and endorsed” by KRS in the Joint Notice

       71Because Plaintiffs lack an injury in fact sufficient to confer constitutional
standing, we express no opinion on whether KRS 61.645 provides to KRS beneficiaries
a statutory right—expressly or implicitly—to bring claims on behalf of the plan.
       72   Lee, 837 F.3d at 546.
       73§ 502(a)(2) authorizes ERISA pension beneficiaries to bring suit on behalf of
the plan, but all relief must go to the plan itself. Alphin, 704 F.3d at 332 (citing Loren
v. Blue Cross & Blue Shield of Mich., 505 F.3d 598, 608 (6th Cir. 2007)).
       74 See Thole, 140 S. Ct. at 1620 (“[Participants] stress that ERISA affords the
Secretary of Labor, fiduciaries, beneficiaries, and participants—including participants
in a defined-benefit plan—a general cause of action to sure for restoration of plan
losses and other equitable relief. See ERISA §§ 502(a)(2), (3), . . . . But the cause of
action does not affect the Article III analysis.”); see also Lee, 837 F.3d at 544 (“This
dispute centers not on whether [plaintiff has] statutory standing under § 502, but
instead whether he has constitutional standing under Article III.”); David, 704 F.3d at
343 (“It is undisputed that Appellants have statutory standing to assert claims against
Appellees on behalf of the Pension Plan under ERISA § 502(a)(2), 29 U.S.C. §
1132(a)(2). However, appellants asserting ERISA claims must also have constitutional
standing under Article III, U.S. Const. art. III, § 2.”).

                                            26
has no effect on Plaintiffs’ ability to show an injury in fact sufficient to support

constitutional standing.75

      iii. Standing as Trust Beneficiaries.

      Plaintiffs also argue that they have standing to pursue their claims as

beneficiaries of a trust based on common-law trust principles. Specifically,

Plaintiffs assert that the Restatement (Third) of Trusts provides that a

beneficiary of a trust can sue a third party when the trustees cannot or will not

do so, to the detriment of the beneficiary’s interest. And they point to language

in the KRS statutory scheme as recognizing that funds administered by KRS

are “trust funds” and that the participants should similarly be treated as trust

beneficiaries.76

      75  Also, while not argued by the Plaintiffs, we note that KRS 61.645 does not
effect an assignment or partial assignment of claims. Nowhere in that statute is a
beneficiary given the right to collect proceeds from a lawsuit on behalf of KRS, and the
Joint Notice from Kentucky lawmakers makes no such claim. This fact alone
distinguishes this case from both Sprint Communications Co., L.P. v. APCC Services,
Inc., 554 U.S. 269 (2008), and Vermont Agency of Natural Res. v. U.S. ex rel Stevens,
529 U.S. 765 (2000); two cases often cited by plaintiffs bringing representative claims
under ERISA but relied on a statutory assignment of claims to satisfy the injury-in-
fact requirement on the part of the representative plaintiff. See Vermont Agency, 529
U.S. at 773; Sprint, 554 U.S. at 286.
      76  See KRS 61.515(2) (“A fund, called the “Kentucky Employees Retirement
Fund,” which shall consist of all the assets of the system as set forth in KRS 61.570 to
61.585. All assets received in the fund shall be deemed trust funds to be held and
applied solely as provided in KRS 61.510 to 61.705.” (emphasis added)). We note that
ERISA contains similar trust language: “all assets of an employee benefit plan shall be
held in trust by one or more trustees” and “the assets of a plan shall never inure to the
benefit of any employer and shall be held for the exclusive purposes of providing
benefits to participants in the plan and their beneficiaries and defraying reasonable
expenses of administering the plan.” 29 U.S.C. §§ 1103(a), (c)(1); see also § 1104(a)(1).

                                           27
      But this argument also has squarely been rejected in the context of

ERISA plans by federal circuits77 and, recently, the Supreme Court, because

participants in a defined-benefit plan possess no equitable or property interest

in the plan assets:

      The basic flaw in the plaintiffs’ trust-based theory of standing is
      that the participants in a defined-benefit plan are not similarly
      situated to the beneficiaries of a private trust or to the participants
      in a defined-contribution plan. See Varity Corp. v. Howe, 516 U.S.
489, 497, 116 S. Ct. 1065, 134 L. Ed. 2d 130 (1996) (trust law
      informs but does not control interpretation of ERISA). In the
      private trust context, the value of the trust property and the
      ultimate amount of money received by the beneficiaries will
      typically depend on how well the trust is managed, so every penny
      of gain or loss is at the beneficiaries’ risk. By contrast, a defined-
      benefit plan is more in the nature of a contract. The plan
      participants’ benefits are fixed and will not change, regardless of
      how well or poorly the plan is managed. The benefits paid to the
      participants in a defined-benefit plan are not tied to the value of
      the plan. Moreover, the employer, not plan participants, receives
      any surplus left over after all of the benefits are paid; the employer,
      not plan participants, is on the hook for plan shortfalls. See Beck,
551 U.S. at 98–99, 127 S. Ct. 2310. As this Court has stated
      before, plan participants possess no equitable or property interest
      in the plan. See Hughes Aircraft Co., 525 U.S. at 439–441, 119
S. Ct. 755; see also LaRue v. DeWolff, Boberg & Associates, Inc., 552
U.S. 248, 254–256, 128 S. Ct. 1020, 169 L. Ed. 2d 847 (2008). The
      trust-law analogy therefore does not fit this case and does not
      support Article III standing for plaintiffs who allege
      mismanagement of a defined-benefit plan.78

      77  See, e.g., Duncan v. Muzyn, 885 F.3d 422, 429 (6th Cir. 2018) (“A
discretionary [trust] beneficiary has an equitable interest in the trust corpus, . . . but
Plaintiffs identify nothing in the Plan’s rules that gives members any interest in the
savings account. Rather, Plaintiffs have an interest solely in their defined benefits, not
in the ‘general pool’ of Plan assets.” (citing Hughes Aircraft Co., 525 U.S. at 439–40,
119 S. Ct. 755).
      78   Thole, 140 S. Ct. at 1619–20.

                                           28
      Similarly, Plaintiffs’ benefits in this case are fixed and will not fluctuate

based on the value of the KRS assets. And, moreover, Plaintiffs are not entitled

to any surplus left over in the KRS fund, and the Commonwealth, not the

Plaintiffs, is on the hook for plan shortfalls. Plaintiffs have identified nothing

giving them an interest in the general pool of KRS assets, and we have

previously stated that KRS beneficiaries’ rights are, in essence, only “the

receipt of promised funds.”79 As such, common-law trust principles also do not

provide a viable theory of standing to Plaintiffs in this case.

      But Plaintiffs also argue that we should adopt Section 107(2)(b) of the

Restatement (Third) of Trusts, which allows a trust beneficiary to “maintain a

proceeding against a third party on behalf of the trust and its beneficiaries only

if . . . the trustee is unable, unavailable, unsuitable, or improperly failing to

protect the beneficiary's interest.” But that provision would not be applicable in

this case, as beneficiaries of a defined-benefit pension plan, unlike beneficiaries

of a private trust, possess no equitable interest in the plan assets, as the value

      79  See Jones, 910 S.W.2d at 715 (“At the simplest level, appellees have the right
to the pension benefits they were promised as a result of their employment, at the level
promised by the Commonwealth. This right does not include oversight of every aspect
of the process; its essence is the receipt of promised funds.”). The circuit court,
instead, stated that KRS beneficiaries have a protected property interest in the funds
held by KRS, citing Commonwealth ex rel. Armstrong v. Collins, 709 S.W.2d 437 (Ky.
1986). There, this Court held, “[b]ecause the General Assembly has no authority to
transfer private funds to the general fund, the transfer of money from agencies in
which public funds and private employee contributions are commingled and cannot be
differentiated [such as KRS], is unconstitutional.” Id. at 446. We do not view Collins as
conflicting with the Jones court’s conclusion that the essence of KRS beneficiaries’
right is the receipt of promised pension benefits, not the oversight of the system.

                                           29
of those assets has no impact on their right to be paid benefits.80 Accordingly,

we are constrained to reject this argument as well.81

      Our decision today borrows heavily from the analysis of Thole82 and other

federal circuit cases discussing the constitutional standing of beneficiaries in

defined-benefit plans governed by ERISA to sue for alleged fiduciary

misconduct that results in losses to the plan’s assets. We recognize that ERISA

does not apply to government plans,83 including KRS. And we express no intent

to construe statutory provisions governing KRS as consistent with any part of

ERISA. We express no opinion on KRS beneficiaries’ claims, if any, under Ky.

Const. § 19. By contrast, this case concerns only the ability of beneficiaries of

KRS defined-benefit plans to sue for alleged shortfalls in the KRS plan assets

because of alleged administrative misconduct.

      iv. Standing as Taxpayers.

      Plaintiffs alternatively assert that they have standing as taxpayers suing

on behalf of the Commonwealth to recover misspent, misused or wasted tax

      80  See Thole, 140 S. Ct. at 1619 (explaining that plan participants in a defined-
benefit retirement plan, unlike beneficiaries of a private trust, possess no equitable or
property interest in the plan).
      81  In a recent case, Kentucky Emp. Ret. Sys. v. Seven Counties Services, Inc., 580
S.W.3d 530 (Ky. 2019), this Court acknowledged that KRS is a trust created by
statute. Id. at 544. Our opinion today does not depart from that observation, but
instead concludes that Plaintiffs, as beneficiaries of a defined-benefit plan, possess no
equitable or property interest in the KRS plan assets and therefore have no standing
under trust law to bring a mismanagement claim. See Thole, 140 S. Ct. at 1619–20.
      82   140 S. Ct. 1620.
      83 See 29 USC § 1003(b)(2) (“The provisions of this subchapter shall not apply to
any employee benefit plan if . . . such plan is a governmental plan (as defined in
section 1002(32) of this title)[.]”).

                                           30
dollars from those responsible. Specifically, Plaintiffs point to the allegedly

wasted tax dollars that were paid into KRS based on false financial and

actuarial information, roughly $1.5 to $1.8 billion spent on questionable

investments for KRS, and future costs to the Commonwealth in otherwise

avoidable taxpayer-funded payments to KRS to make up for the alleged

misconduct. But this theory of standing fails too.

      Plaintiffs appear to argue both that they have standing as taxpayers

harmed by the misuse of taxpayer funds and as taxpayers bringing claims on

behalf of the Commonwealth.84 While Kentucky courts have historically

permitted taxpayer claims in certain circumstances as a matter of equity,85 we

have never allowed a suit like this.

      First, taxpayers in Kentucky, on behalf of themselves, have been

permitted to sue government bodies or their agents to challenge the propriety of

city, county, or state tax or expenditure of public funds. Indeed, Plaintiffs cite

only to cases against government entities in which taxpayers seek to enjoin the

imposition of an illegal tax or expenditure of public funds or to compel

compliance with certain statutory or constitutional requirements attached

      84  Plaintiffs’ Amended Complaint and Appellant’s Brief in the Writ Case both
state that they are suing as taxpayers on behalf of the Commonwealth—thus invoking
the derivative theory of taxpayer standing. But the arguments made in their brief and
Amended Complaint enter the territory of traditional taxpayer claims brought by and
on behalf of citizen taxpayers. See MUNICORP § 52:13, Citizens’ and Taxpayers Suit,
Standing in General (noting the two different types of taxpayer suits: “Taxpayers may
have standing to sue either in their personal capacity as taxpayers or derivatively on
behalf of a local governmental unit (taxpayer derivative)”).
     85 Rosenbalm v. Commercial Bank, 838 S.W.2d 423, 427 (Ky. 1992) (citing 74

Am.Jur.2d Taxpayers' Actions § 2 (1974) at 185).

                                          31
thereto.86 Only in two cases cited by Plaintiffs do taxpayers seek any form of

monetary relief; and in both cases, county taxpayers were permitted to sue

local government officials to recover salaries illegally paid to them in excess of a

county fiscal court order.87

      By contrast, under this direct-taxpayer theory of standing, Plaintiffs seek

damages from private third parties and KRS officials in their individual

capacities for tort damages allegedly sustained to all Kentucky taxpayers.

Plaintiffs do not cite, and we cannot find, any Kentucky cases permitting such

a novel theory of standing. Plaintiff’s reference this Court’s statement in

      86   See id at 423 (allowing six Bell County taxpayers to intervene, on behalf of
themselves, in a suit to challenge the imposition of a county tax to pay the debts of the
Bell County Garbage and Refuse Disposal District); Gay v. Haggard, 118 S.W. 299 (Ky.
1909) (taxpayer of Clark County bringing suit on his own behalf and the behalf of all
other taxpayers of Clark County against the supervisor of Clark County roads to
compel compliance with statutory competitive bidding requirements for work on public
roads in the county). Price v. Commonwealth, 945 S.W.2d 429 (Ky. App. 1996)
(taxpayers bringing suit on behalf of themselves seeking injunctive and declaratory
relief to bar payment of any funds under a legislative enactment against the
Commonwealth of Kentucky, Transportation Cabinet and the Secretary of
Transportation in his official capacity); Elam v. Salisbury, 202 S.W. 56 (Ky. 1918)
(taxpayer of city of Ashland seeking writ of mandamus on behalf of himself and other
taxpayers against the mayor and members of the city council to compel the proper tax
assessment of certain properties); Yeoman v. Comm. of Kentucky, Health Policy Board,
983 S.W.2d 459, 473 (Ky. 1998) (physician and patient had standing to challenge
constitutionality of healthcare reform bill which allowed collection and use of certain
medical data as violation of privacy rights, but not as taxpayers); and Russman v.
Luckett, 391 S.W.2d 694 (Ky. 1965) (taxpayers bringing suit on behalf of themselves
against Kentucky Department of Revenue and its Commissioner to challenge the
constitutionality of Kentucky’s tax assessment statutes and procedures).

      87 See Williams v. Stallard, 213 S.W. 197 (Ky. 1919) (taxpayers of county suing
“on behalf of himself and all other taxpayers, for the use and benefit of the county” to
recover money paid to the county judge of Pike County in excess of his salary as
defined by a fiscal court order); Fox v. Lantrip, 185 S.W. 136, 139 (Ky. 1916) (taxpayer
of Hopkins County brought suit on behalf of himself against county superintendent to
recover money illegally appropriated and paid to the him by the fiscal court).
                                           32
Yeoman v. Comm. of Kentucky, Health Policy Bd.88: “The misuse of the

taxpayers' funds is one form of an alleged injury that can take place.

Accordingly, any taxpayer of the Commonwealth is permitted to sue on this

basis.” But, for that proposition Yeoman cites to Gillis v. Yount89 in which

taxpayers challenged a statute taxing unmined coal as unconstitutional90 and

Second Street Properties v. Fiscal Court of Jefferson Cnty, Ky.91 in which it was

held that taxpayers of Jefferson County could not maintain an action

challenging as unconstitutional statutes affecting taxes in certain counties but

not others because the statute imposed no burden on taxpayers of Jefferson

County.92 And Yeoman did not itself deal with taxpayer standing because the

plaintiffs’ privacy interest in medical information, which was not related to the

generation or expenditure of state funds, was sufficient.93 As such, the Yeoman

court was referring to the ability of taxpayers to challenge the constitutionality

of statutes affecting taxes and public expenditures and therefore provides no

support to Plaintiffs.

      Second, Plaintiffs also purport to bring their claims on behalf of the

Commonwealth as a matter of equity because they have made a demand to the

Attorney General to assert their claims, but he declined. But Plaintiffs likewise

      88 983 S.W.2d at 473.
      89   748 S.W.2d 357 (Ky. 1988)
      90 Id. at 357.
      91   445 S.W.2d 709, 716 (1969)
      92 Id.
      93   Yeoman, 983 S.W.2d at 473.

                                        33
provide no authority in support of their ability to bring claims in a derivative

capacity on behalf of the Commonwealth.

      Under Kentucky law, the Attorney General, as a constitutionally elected

official, is empowered to represent the Commonwealth in cases in which the

Commonwealth is the real party in interest. KRS 15.02094 provides that in the

role of “chief law officer of the Commonwealth of Kentucky[.]” the Attorney

General “shall exercise all common law duties and authorities pertaining to the

office of the Attorney General under the common law, except when modified by

statutory enactment.”95 “It is unquestioned that ‘[a]t common law, [the Attorney

General] had the power to institute, conduct[,] and maintain suits and

proceedings for the enforcement of the laws of the state, the preservation of

order, and the protection of public rights.’”96 This authority necessarily

includes the “broad powers to initiate and defend actions on behalf of the

people of the Commonwealth.”97

        94 Under Ky. Const. § 91, the Attorney General is an elected constitutional

officer whose “duties . . . shall be prescribed by law.” And “[t]he General Assembly has
prescribed the Attorney General’s duties and responsibilities in KRS § 15.020 . . . .”
Commonwealth ex rel. Beshear v. Commonwealth Office of the Governor ex rel. Bevin,
498 S.W.3d 355, 361 (Ky. 2016).
      95See also Commonwealth ex rel. Hancock v. Paxton, 516 S.W.2d 865, 867
(Ky.1974) (stating that the Attorney General “is possessed of all common law powers
and duties of the office except as modified by the Constitution or statutes.”).
      96  Commonwealth ex rel. Conway v. Thompson, 300 S.W.3d 152, 173 (Ky. 2009)
(citing Paxton, 516 S.W.2d at 867).

      97 Id. See also, id. (“It is the Attorney General's responsibility to file suit to
vindicate public rights, as attorney for the people of the State of Kentucky.” (quoting
Commonwealth ex rel. Cowan v. Wilkinson, 828 S.W.2d 610, 618 (Ky. 1992), overruled
by Thompson, 300 S.W.3d 152 (internal quotation marks omitted)). Other states have
similarly concluded that their Attorneys General have the exclusive authority to sue on
behalf of the state when the state is the only real party in interest. See e.g., Lyons v.
                                           34
      As a constitutionally elected officer, the Attorney General is entrusted

with broad discretion in the performance of his duties, which includes

evaluating the evidence and other facts to determine whether a particular claim

should be brought.98 And, importantly, when the Attorney General turns to

outside counsel to assert claims belonging to the Commonwealth, their

relationship is governed by strict statutory procurement and oversight

requirements.99

      But in this case, not only has the Attorney General presumably exercised

his discretion in declining to bring the Plaintiffs’ claims, but he is also wholly

uninvolved with the litigation. Plaintiffs do not assert that the Attorney General

has authorized this suit, assigned a portion of the claims’ recovery to the

parties involved, or even that he has tacitly approved of their litigation. Instead,

Ryan, 780 N.E.2d 1098, 1103 (Ill. 2002) (recognizing “that the Attorney General is the
sole officer authorized to represent the People of this State in any litigation in which
the People of the State are the real party in interest” (citing People ex rel. Scott v.
Briceland, 359 N.E.2d 149 (1976)).
        98 See 7A C.J.S. Attorney General § 30 (“Ordinarily, the state attorney general

exercises the functions incident to the office with discretion, including particularly
large discretion in matters of public concern or compelling public interest, and
prosecutorial discretion.”) (citations omitted). See also Lyons v. Ryan, 780 N.E.2d
1098, 1104–05 (Ill. 2002) (“The Attorney General, as an elected representative of the
citizens of this state, is responsible for evaluating the evidence and other pertinent
factors to determine what action, if any, can and should properly be taken and what
penalties should be sought.”) (citations omitted).

      99 See Landrum v. Commonwealth ex rel. Beshear, No. 2018-SC-000122-TG,
2019 WL 4072505, at *4–6 (Ky. Aug. 29, 2019) (holding that any possible recovery
from lawsuit in which the Office of Attorney General had hired outside counsel to
pursue tort claims against opioid manufacturers on behalf of Kentucky constituted
“public funds” and the contract was therefore subject to contracting-oversight
requirements of the Model Procurement Code).
                                           35
Plaintiffs lawsuit proceeds entirely independent of the Office of the Attorney

General, and no oversight requirements governing the litigation apply.

      Given that taxpayer claims are governed to a large extent by equity

principles,100 and taking into consideration the stringent oversight

requirements otherwise imposed on outside counsel hired by the Attorney

General, we conclude Plaintiffs also lack standing under this theory.

                                 III. CONCLUSION.

      Ultimately, this Court recognizes that Plaintiffs allege significant

misconduct, but, as a matter of law, these eight Plaintiffs, as beneficiaries of a

defined-benefit plan who have received all of their vested benefits so far and are

legally entitled to receive their benefits for the rest of their lives, do not have a

concrete stake in this case. And without a concrete stake in the case, the

Plaintiffs lack constitutional standing to bring their claims in our courts. We

remand this case to the circuit court with direction to dismiss the complaint.

      All sitting. All concur.

COUNSEL FOR APPELLANTS RANDY OVERSTREET AND BOBBY D. HENSON:

Richard M. Guarnieri
Philip Coleman Lawson
True Guarnieri Ayer, LLP

COUNSEL FOR APPELLANT WILLIAM S. COOK:

Glen Alan Cohen
Lynn M. Watson
Seiller Waterman, LLC

       100 Rosenbalm, 838 S.W.2d at 427 (citing 74 Am.Jur.2d Taxpayers' Actions § 2

(1974) at 185).

                                          36
COUNSEL FOR APPELLANT TIMOTHY LONGMEYER:

Laurence John Zielke
John H. Dwyer Jr.
Karen Campion Jaracz
Zielke Law Firm, PLLC

COUNSEL FOR APPELLANT THOMAS ELLIOTT:

Mark David Guilfoyle
J. Kent Wicker
Patrick Raymond Hughes
Andrew Douglas Pellino
Dressman, Benzinger & Lavelle, PSC

COUNSEL FOR APPELLANT JENNIFER ELLIOTT:

John Witt Phillips
Susan Daunhauer Phillips
David Sean Ragland
Phillips Parker Orberson & Arnett, PLC

COUNSEL FOR APPELLANT VINCE LANG:

Brent L. Caldwell
Caldwell Law Firm, PLLC

Noel Embry Caldwell
Noel Caldwell, Attorney at Law

COUNSEL FOR BRENT ALDRIDGE:

Michael L. Hawkins
Michael L. Hawkins & Associates, PLLC

COUNSEL FOR T.J. CARLSON:

Albert F. Grasch Jr.
John Melvin Camenisch Jr.
James Wesley Harned
Rose Grasch Camenisch Mains, PLLC

                                     37
COUNSEL FOR DAVID PEDEN:

David J. Guarnieri
Jason Hollon
McBrayer McGinnis Leslie & Kirkland, PLLC

Kenton Knickmeyer
Thompson Coburn LLP

COUNSEL FOR WILLIAM A. THIELEN:

Stewart Christopher Burch
Kevin Patrick Fox
Logan Burch & Fox

COUNSEL FOR APPELLEES JEFFREY C. MAYBERRY AS MEMBER AND
BENEFICIARY OF TRUST FUNDS ON BEHALF OF THE KENTUCKY
RETIREMENT SYSTEMS, AND AS TAXPAYER ON BEHALF OF THE
COMMONWEALTH OF KENTUCKY; HONORABLE BRANDY O. BROWN, AS
MEMBER AND BENEFICIARY OF TRUST FUNDS ON BEHALF OF THE
KENTUCKY RETIREMENT SYSTEMS, AND AS TAXPAYER ON BEHALF OF THE
COMMONWEALTH OF KENTUCKY; MARTHA MICHELLE MILLER, AS
MEMBER AND BENEFICIARY OF TRUST FUNDS ON BEHALF OF THE
KENTUCKY RETIREMENT SYSTEMS, AND AS TAXPAYER ON BEHALF OF THE
COMMONWEALTH OF KENTUCKY; STEVE ROBERTS, AS MEMBER AND
BENEFICIARY OF TRUST FUNDS ON BEHALF OF THE KENTUCKY
RETIREMENT SYSTEMS, AND AS TAXPAYER ON BEHALF OF THE
COMMONWEALTH OF KENTUCKY; AND, TERESA STEWART, AS MEMBER
AND BENEFICIARY OF TRUST FUNDS ON BEHALF OF THE KENTUCKY
RETIREMENT SYSTEMS, AND AS TAXPAYER ON BEHALF OF THE
COMMONWEALTH OF KENTUCKY:

Jeffrey M. Walson
Walson Law-Consultancy-Mediation

Francis A. Bottini Jr
Michelle Ciccarelli Lerach
Albert Y. Chang
Bottini & Bottini, Inc.

Jonathan W. Cuneo
Monica Miller
Cuneo Gilbert & Laduca, LLP

                                   38
James Baskin III
Casey Dobson
Scott Douglass McConnico LLP

David Black

COUNSEL FOR JASON LAINHART, AS MEMBER AND BENEFICIARY OF
TRUST FUNDS ON BEHALF OF THE KENTUCKY RETIREMENT SYSTEMS,
AND AS TAXPAYER ON BEHALF OF THE COMMONWEALTH OF KENTUCKY;
DON. D. COOMER, AS MEMBER AND BENEFICIARY OF TRUST FUNDS ON
BEHALF OF THE KENTUCKY RETIREMENT SYSTEMS, AND AS TAXPAYER ON
BEHALF OF THE COMMONWEALTH OF KENTUCKY; AND, BEN WYMAN, AS
MEMBER AND BENEFICIARY OF TRUST FUNDS ON BEHALF OF THE
KENTUCKY RETIREMENT SYSTEMS, AND AS TAXPAYER ON BEHALF OF THE
COMMONWEALTH OF KENTUCKY:

Ann B. Oldfather
Oldfather Law Firm

Michelle Ciccarelli Lerach
Bottini & Bottini, Inc.

Vanessa B. Cantley
Patrick E. Markey
Bahe Cook Cantley & Nefzger, PLC

Johnathan W. Cuneo
Monica Miller
Cuneo Gilbert & LaDuca, LLP

David Black

James Baskin III
Stanley Kuczaj
Sameer Hashmi
David Shank
Paige Amstutz
Jane Webre
Casey Dobson
Scott Douglass McConnico, LLP

COUNSEL FOR APPELLEES KKR & CO., L. P., HENRY R. KRAVIS; AND,
GEORGE R. ROBERTS;

Barbara B. Edelman
Grahmn New Morgan
                                   39
John Moose Spires
Dinsmore & Shohl, LLP

Barry Barnett
Abigail Noebels
Ryan Weiss
Steven Shepard
Susman Godfrey, LLP

COUNSEL FOR APPELLEES PRISMA CAPITAL PARTNERS, LP, PACIFIC
ALTERNATIVE ASSET MANAGEMENT COMPANY, LLC; GIRISH REDDY, AND,
JANE BUCHAN:

Barbara B. Edelman
Grahmn New Morgan
John Moose Spires
Dinsmore & Shohl, LLP

Peter E. Kazanoff
Paul C. Curnin
David Elbaum
Michael J. Garvey
Sara A. Ricciardi
Michael S. Carnevale
Simpson Thacher & Barlett, LLP

COUNSEL FOR APPELLEES BLACKSTONE GROUP, L.P., BLACKSTONE
ALTERNATIVE ASSET MANAGEMENT COMPANY, L.P., STEVEN A.
SCHARZMAN; AND, J. TOMILSON HILL:

Virginia Hamilton Snell
Donald Joseph Kelly
Jordan White
Wyatt, Tarrant & Combs, LLP

Brad S. Karp
Lorin L. Reisner
Andrew J. Ehrlich
Brette Tannenbaum
Paul, Weiss, Rifkind, Wharton & Garrison LLP

COUNSEL FOR APPELLEES R.V. KUHNS & ASSOCIATES, INC., REBECCA A.
GRATSINGER; AND, JIM VOYTKO:

Philip Wallace Collier
Thad Montgomery Barnes
                                    40
Jeffrey Moad
Stites & Harbison PLLC

COUNSEL FOR APPELLEE ICE MILLER, LLP:
Susan J. Pope
Cory Jay Skolnick
Frost Brown Todd LLC

COUNSEL FOR APPELLEES CAVANAUGH MACDONALD CONSULTING, LLC,
THOMAS J. CAVANAUGH; TODD B. GREEN; AND, ALISA BENNETT

Charles E. English Jr.
Elizabeth Kenly Ames
English, Lucas, Priest & Owsley

Robert G. Brazier
Steven G. Hall
Baker Donelson Bearman Caldwell & Berkowitz, PC

COUNSEL FOR APPELLEE GOVERNMENT FINANCE OFFICERS
ASSOCIATION:

Dustin Elizabeth Meek
Melissa Mahurin Whitehead
Tachau Meek PLC

COUNSEL FOR APPELLEE KENTUCKY RETIREMENT SYSTEMS:

Perry Mack Bentley
Paul C. Harnice
Sarah Jackson Bishop
Christopher E. Schaefer
Chadler Hardin
Connor Bailey Egan
Andrew Thomas Hagerman
Stoll, Keenon & Ogden, PLLC

Matthew Dawson Wingate

                                   41