United States: California Decision Expands Actuary's Potential Liability Based On Aiding And Abetting Theory

Last Updated: October 2 2015
Article by Susan Allison

The recently published California decision in Nasrawi v. Buck Consultants LLC, issued by the Court of Appeal, Sixth District, has the potential to expand an actuarial firm's liability well beyond its current limits under California law.1

In Nasrawi, the appellate court reversed a trial court order which sustained a demurrer filed by defendants Buck Consultants and one of its actuaries, which sought the dismissal of an "aiding and abetting breach of fiduciary duty" claim against them. The plaintiffs in the case were beneficiaries of the Stanislaus County Employees Retirement Association, the administrator of the County's public employee retirement system (the "Association"). The Court of Appeal ruled that the plaintiffs' fifth amended complaint adequately alleged a claim against Buck for "aiding and abetting" various breaches of fiduciary duty allegedly owed to plaintiffs by the Association itself.

The Nasrawi plaintiffs alleged in their lawsuit that the Association breached its fiduciary duties to plaintiffs by failing to sue Buck for actuarial malpractice in connection with an actuarial valuation prepared for the Association. The Court of Appeal affirmed the dismissal of the plaintiffs' claim against the Association. However, it ruled that the Nasrawi plaintiffs' aiding and abetting allegations against Buck could nonetheless proceed, because they were based on different fiduciary duty breaches alleged against the Association in a separate lawsuit. The fiduciary duty breaches asserted against the Association in that separate lawsuit included: (1) using an imprudent rate of return assumption of 8.16%; (2) adopting a schedule of negative amortization of the pension plan's unfunded liability for earned benefits; (3) intentionally managing the pension fund so that it was always less than 90% funded in order to avoid employer contributions; (4) using pension fund assets to substitute for the County's employer contributions; and (5) transferring assets from non-valuation reserves to valuation reserves. Plaintiffs alleged that Buck knew about the Association's conduct and concealed it by way of omissions and by affirmative misrepresentations that the Association's practices were actuarially sound.

The appellate court identified the following California requirements for pleading an aiding and abetting claim under these circumstances. Specifically, it held that the plaintiffs were required to allege that: (1) the Association's alleged schemes to underfund the pension plan breached fiduciary duties the Association owed to the plaintiffs; (2) Buck knew about the Association's conduct and resulting breaches; (3) Buck's conduct provided substantial assistance to the Association in committing its alleged breaches; and (4) Buck's conduct was a substantial factor in harming plaintiffs.

The Court of Appeal found that the plaintiffs' complaint adequately pleaded all of those facts. In particular, the Court relied on plaintiffs' allegations that Buck knew about the Association's conduct and that Buck knew the Association was breaching its duty to plaintiffs. The Court also relied on plaintiffs' allegation that Buck gave "substantial encouragement and assistance" to the Association's alleged breaches by (1) failing to disclose or warn of the consequences of the Association's practices, (2) verifying the actuarial soundness of the Association's practices, and (3) falsely representing to trust fund beneficiaries at public meetings that the Association's practices were actuarially sound, allegedly causing injury to the pension trust fund itself.

The Court of Appeal acknowledged at least two California aiding and abetting cases that required as an additional element that the defendant specifically intended to facilitate the underlying tort. The appellate court side-stepped the determination of whether specific intent was a required element of the aiding and abetting claim, however, based on its view that plaintiffs' allegations sufficiently alleged Buck's intent to "participate in tortious activity.2

Of perhaps greatest concern is the appellate court's finding that Buck could be liable for aiding and abetting the Association's breach of fiduciary even though Buck itself admittedly owed no duty to the plaintiffs. This is particularly troubling since, according to plaintiffs' own allegations, the misconduct asserted against Buck was in substance actuarial negligence. Under California law, as established in the Bily3 and Paulsen4 cases, an actuary owes a duty sufficient to support a professional negligence claim only to its client, not to third parties like the Nasrawi plaintiffs.5

By allowing the plaintiffs' claims against Buck to proceed on this aiding and abetting theory, the Court of Appeal has increased the risk of an actuary's potential liability to non-clients. The decision also highlights how important it is for an actuary to maintain its independence from its client's conduct and to decline to endorse or participate in conduct by a pension plan client which could be perceived to be acting in its own self-interest to the potential detriment of the plan's beneficiaries.


1 231 Cal.App.4th 328 (November 6, 2014). In February 2015, the California Supreme Court denied both the plaintiffs' and Buck's petitions for review of the appellate court's decision despite submissions by various county employee retirement associations and others urging review.

2 231 Cal.App.4th at 345.

3 Bily v. Arthur Young &Co., 3 Cal.4th 370 (1992) (auditor conducting audit owes no general duty of care to persons other than its client).

4 Paulsen v. CNF, Inc., 559 F.3d 1061 (2009) (actuarial consultant owed no general duty to non-client plan participants to support negligence claim).

5 Both Bily and Paulsen noted as a possible exception that non-client plaintiffs might be able to establish the required duty to support a negligence claim if they were determined to be intended third party beneficiaries under the terms of the services agreement between the accountant or actuary and its client.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions