A judge ruled Thursday that the Building Industry Association of Washington violated its trust duties when it kept more than $400,000 in interest earnings from an industrial insurance trust it managed for members since 1994.
BIAW hailed the ruling as a victory, although Judge Carol Murphy found at least three other violations of trust rules in her decision, which she read aloud in Thurston County Superior Court.
But Murphy found no harm to plaintiffs in the contentious, threeyear-old case that is likely to drag on – in further arguments over lawyer fees and in a possible appeal. She declined to order BIAW to pay back any of the wrongfully held interest to any of the five contractors that sued – including Re Sources of Whatcom County – or other members.
“To the extent that plaintiffs seek payment of interest retained by BIAW-MSC, that requested relief is denied. This court finds that the damages to each of the petitioners are not in significant amounts and that the trustees primarily exercised sound discretion and maintained the trust on behalf of beneficiaries,” Murphy said in an oral ruling in Thurston County Superior Court.
“This court is also aware that petitioners represent only five of the thousands of employer participants, and that at least 12 other employer participants have implored this court to deny relief,” Murphy added. BIAW lawyers contended any damages would not exceed $350.
Parties on the two sides of the case disagreed sharply on the meaning of Murphy’s ruling, which was not made available yet for public review.
“It was a HUGE victory for BIAW,” BIAW spokeswoman Erin Shannon said in an e-mail, taking at jab at plaintiff lawyer Knoll Lowney of Seattle. “Lowney got nothing. Given BIAW turned over 70,000 documents and spent millions defending ourselves over the three years Lowney has pursued this lawsuit, we couldn’t ask for a better outcome.”
But Lowney – one of three lawyers with Michael Withey and Andrew Friedman who prepared the case – said the case is forcing BIAW to change its practices to protect the trust. He also said the suing parties might appeal and that a violation of trust duties is a serious offense .
Among the violations Murphy found was that BIAW-MSC co-mingled its own accounts with money meant for the Washington Builders Benefit Trust, which Lowney described as a serious violation of the trust rules. Murphy ordered builders to keep the funds separate in the future and to provide yearly accounting to members, which it had not done in another violation of its duties to the trust.
“The question of what the proper remedy is ultimately is a decision for the court of appeals. We’re confused by how she found they breached the trust, took a half-million dollars and can keep it,” Lowney said, suggesting an appeals court might rule differently.
But first, Lowney said, the parties need a written ruling from the judge and then must battle over the award of attorney fees, which he believes the plaintiffs should receive. After that, a decision would be made on an appeal.
Shannon said the amount of interest in dispute was closer to $430,000. BIAW has contended it was entitled to keep that money for valuable services the MSC provided to the trust.
Under the ruling, BIAW is being ordered to create separate accounts. MSC also is ordered to bill for services it provides to the trust and it must stop retaining interest earnings on trust funds.
Shannon acknowledged the judge put new paperwork requirements on the builders, but she emphasized that Murphy “found that no damage had been done to participants/beneficiaries. All of the money handled by the trust ($200 million) was accounted for.”
Shannon characterized the findings against the builders as minor and technical. “While the judge found that there were some technical, accounting procedure and paperwork trust violations, she denied all of the ‘remedies’ sought by Lowney (significant changes to how we operate the program, having an independent party oversee the trust, and more) and awarded them no money because the minor violations resulted in no damages to beneficiaries,” Shannon wrote.
Fuse, a liberal activist and political critic of the BIAW, interpreted the ruling differently. It put out statements that said the BIAW was proven to have “mishandled tens of millions of dollars” in trust funds and improperly skimmed $500,000 of trust earnings.
BIAW received the funds on behalf of 6,000 BIAW members from the state Department of Labor and Industries’ retrospective rating program, or “Retro.” Retro is an industrial insurance program that rewards companies with better safety records by sending them insurance premium rebates.
BIAW manages a “Retro” program for some 6,000 of its members and takes a 20 percent “marketing fee” that is split in half and shared with local home-builder associations. Members are free to join or not – and BIAW says members are advised of a signup fee and marketing fees when they join.
Critics, including Fuse and attorney Lowney, have criticized the use of BIAW’s “Retro” proceeds for political purposes.
But the judge previously found nothing improper about the rate of BIAW’s fees or its political use of the funds.
BIAW typically spends its political funds on conservative causes that included millions of dollars in 2008 to assist Dino Rossi’s run for governor against Gov. Chris Gregoire.
Brad Shannon: 360-753-1688 email@example.com, www.theolympian.com/politicsblog
Reporter Jordan Schrader contributed to this report.