A petition submitted by Edison International asks the Supreme Court to reverse its decision to review key parts of Tibble vs. Edison International, a potential precedent-setting case related to ERISA’s limitations period and whether retirement plan fiduciaries have an ongoing duty to monitor plan investment options that is distinct from the initial duty to select.
The case is currently set for oral arguments before the Supreme Court on February 25, following a successful appeal by plaintiff Glenn Tibble and counsel. The case reached the Supreme Court following an initial bench trial in which a district court held that utility company Edison International had breached its duty of prudence by offering retail-class mutual funds as plan investments when identical lower-cost institutional funds were available. But the court subsequently limited that holding to three mutual funds that had first been offered to plan participants within the six-year limitations period expressly programmed into the Employee Retirement Income Security Act (ERISA)—meaning mutual funds placed on the plan menu more than six years before the date of the ERISA-based complaint were excluded from the decision.
Tibble and counsel appealed that ruling to the 9th Circuit, but the appeals court upheld the district court’s decision to limit the settlement to the three mutual funds adopted within the ERISA limitations period. This led to a final (and successful) appeal attempt from Tibble, endorsed by the U.S. Solicitor General, asking the Supreme Court to weigh in on whether such claims should be time-barred.
The new filing from Edison International claims Tibble’s central legal argument is that under ERISA, fiduciaries responsible for selecting investment options in a 401(k) plan lineup have an ongoing duty to monitor the options to ensure that they remain prudent choices for the plan. “Accordingly, petitioners contend, they should have been allowed a trial on their claim that respondents breached their duty of prudence within ERISA’s six-year period of repose by failing to adequately monitor and remove three mutual funds added before that period, because less expensive share classes were available in the same funds,” the petition reads.
Tibble’s position has a problem, the petition continues, in that the district court did not actually bar him from pursuing that claim.
“To the contrary, petitioners tried exactly that claim, after the court explicitly held that ERISA’s statute of repose did not bar claims that accrued during the repose period,” the petition claims. “Accordingly, petitioners at trial sought to prove that respondents breached their fiduciary duties by imprudently monitoring and retaining the challenged funds. Specifically, they argued that, while respondents monitored all investment options according to specific investment criteria with periodic (quarterly) reviews, there were ‘significant changes’ within the three challenged funds that should have triggered a much deeper, ‘full due diligence review’ of those funds, which would have identified the availability of less expensive share classes. The district court rejected that theory of imprudence, not on limitations grounds, but solely because petitioners’ evidence was insufficient to support their own changed circumstances theory.”
Edison goes on to cite the district court decision in the case, which determined plaintiffs could not “meet their burden of showing that a prudent fiduciary would have reviewed the available share classes and associated fees” for the three challenged funds.
“Petitioners have never raised any substantive challenge to that factual finding,” the petition concludes. “This case, in short, does not present the limitations issue on which the Court granted certiorari, as evidenced by the fact that petitioners and respondents agree on its answer: No, ERISA’s statute of repose does not bar a claim that a fiduciary breached its fiduciary duty by imprudently monitoring and retaining a given fund during the repose period, even if that fund was added before the repose period, so long as the plaintiff proves a new breach in the course of monitoring that fund. Put differently, no matter how the Court answers the Question Presented, the judgment … must be affirmed, because petitioners cannot establish—and do not even argue—clear error in the district court’s factual finding that petitioners proved no new breach during the repose period as to the three challenged funds here.”
The full text of Edison International’s most recent filing in the case is here.