BIAW Held Accountable for Fiduciary Misuse, RE Sources, A1 Builders & Other Small Businesses Handed a VictoryBy Crina Hoyer & Rick Dubrow
Thursday, July 11th
Yesterday, the Washington Supreme Court handed a victory to RE Sources, A-1 Builders and other small businesses challenging the Building Industry Association of Washington ("BIAW") for breach of trust in connection with its retrospective rating program.
The Court of Appeals previously ruled that the BIAW had breached its fiduciary duties by skimming interest off trust funds belonging to thousands of small businesses. It also held that BIAW was restricted in how it uses millions of dollars it has removed from the trust over the years. The Court of Appeals required the BIAW to return certain funds to the businesses and pay the plaintiff attorneys’ fees.
The BIAW appealed the Supreme Court, which refused to hear the challenge. Therefore, the Court of Appeals decision stands firm. “We are thankful to the Supreme Court for upholding this decision,” said Crina Hoyer, Executive Director of RE Sources, “The BIAW misused funds, and violated the trust of its members and they needed to be held accountable.”
The Court of Appeals held that the BIAW, its for-profit affiliate, and its trust were responsible for improperly commingling trust funds and skimming interest from the trust. It ordered the BIAW to return the funds.
Most significant was the Court of Appeals decision that the BIAW was only allowed to use the multi-million dollar “Marketing Assistance Fee” it took from the trust for legitimate marketing purposes. During the period at issue, BIAW paid itself over $20 million in “marketing fees” from the trust. By all accounts only a fraction was used for marketing. The BIAW has admitted that it treated these trust funds as profit and used them to fund its political program, including its notorious, multi-million dollar effort to elect Dino Rossi as governor in 2008.
The Court of Appeals remanded the case back to the trial court to determine the amount of improper expenditures. Finally, the Court of Appeals granted Plaintiffs their attorneys’ fees and costs incurred at trial on successful issues and on appeal.
Eight small companies have filed lawsuits seeking to hold BIAW accountable for breach of trust and to require the BIAW to return wrongful profit back to over 10,000 BIAW members who participated in the BIAW’s retrospective rating (“retro”) program. Under retro, BIAW members earned hundreds of millions of dollars in tax refunds and the State of Washington paid all these refunds to the BIAW. The BIAW agreed to hold these refunds “in trust” for its member participants, but instead commingled the trust funds with its own moneys and skimmed interest and principal from the trust for its own use.
The Court of Appeals’ decision was on the first lawsuit, In re Washington Builders Benefit Trust, which has been ongoing since approximately 2008 and went to trial in 2010. “Our state’s Supreme Court has now solidified the Court of Appeals decision imposing an across-the-board victory for the members of the BIAW. We trusted the BIAW and the Court agreed that the BIAW abused this trust. Now the BIAW will have to return the funds it took from thousands of small businesses across the State,” said Rick Dubrow, owner of A-1 Builders, one of the small-businesses that served as a plaintiff in the lawsuit.
The plaintiffs in the case are represented by Seattle attorneys Knoll Lowney and Mike Withey, and the Arizona law firm of Bonnett, Fairbourne, Friedman & Balint, PC. The appeal is being handled by the Seattle law firm of Smith Goodfriend, PS.
Click here to read Smith & Lowney's Press Release.
Rick Dubrow is the CEO of A-1 BUILDERS, INC. and ADAPTATIONS, our design division, recognized as Bellingham and Whatcom County's premier design/build contractor working towards sustainable business and construction practices! We are a full-service remodeling and custom home builder, addressing both residential and light commercial projects. Our team is committed to outstanding workmanship, impeccable aesthetics, and green, sustainable designs that will last many lifetimes.