RESPONDENT:Edison International, et al.
LOCATION: Edison International Headquarters
DOCKET NO.: 13-550
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT: United States Court of Appeals for the Ninth Circuit
CITATION: 575 US (2015)
GRANTED: Oct 02, 2014
ARGUED: Feb 24, 2015
DECIDED: May 18, 2015
Jonathan Hacker – for the respondent
Nicole A. Saharsky – Assistant to the Solicitor General, Department of Justice, for the United States as amicus curiae, for the petitioner
David Frederick – on behalf of the petitioners
Facts of the case
Edison International is a holding company for electric utilities and energy interests. Since 1999, Edison International and its related benefits and investment committees (collectively, Edison) have offered retail-class mutual funds as part of its 401(k) employee benefits plan, even though otherwise identical institutional-class funds that charged lower fees were available. Those mutual funds also give a portion of the fees collected back to plan service providers, including Edison’s, which thereby reduces Edison’s administrative costs.
In 2007, Glenn Tibble and other Edison employees (Employees) sued under the Employee Retirement Income Security Act of 1974 (ERISA), which requires fiduciaries of an employee benefit plan to administer the plan prudently for the exclusive benefit of the participants. The Employees argued that the continued inclusion of the higher-cost funds in the benefit plan was a “continuing violation” of ERISA. Edison argued that ERISA’s statute of repose, which bars claims filed more than six years after the date of the last action which constituted a part of the violation, prevented Employees’ claim. The district court granted summary judgment for Edison and held that there was no “continuing violation” theory under ERISA. The court stated that the act of designating an investment for inclusion started the six-year period, and since Edison had not made any misstatements or actively concealed any breach following the initial inclusion, the six-year period had passed. The U.S. Court of Appeals for the Ninth Circuit affirmed.
Does ERISA’s six-year statute of repose bar a claim that plan fiduciaries breached their duty of prudence by offering higher-cost mutual funds to plan participants, even though identical lower-cost mutual funds were available, when fiduciaries initially chose the higher-cost mutual funds more than six years before the claim was filed?
Media for Tibble v. Edison International
Audio Transcription for Opinion Announcement – May 18, 2015 in Tibble v. Edison International
John G. Roberts, Jr.:
Justice Breyer has the opinion of the Court in two cases this morning as well.
Stephen G. Breyer:
The first is Tibble v. Edison International.
It is an ERISA case, a pension fund case, somewhat more technical and mollusk.
It concerns the application of the ERISA statute of limitations to a claim that a fiduciary has breached his duty of prudence.
In 2007, the petitioners, who were employees of a company and beneficiaries of the plan, filed a lawsuit.
They said that the respondents, who were the trustees of the plan and others, violated their fiduciary duties with respect to six mutual funds by imprudently putting in the offers to the employees higher-priced retail class mutual fund shares when they were materially identical lower-priced institutional classed funds.
As to the three funds that were added in 2002, now the suit was brought in 2007 so that’s five years, the District Court agreed.
They found that the respondents, the trustees and so forth, had not offered any credible explanation of why they offered retail classed funds that cost the plan participants wholly unnecessary fees.
But in respect to the shares of the three funds that they got in the pension fund in 1999, the District Court said they are too late, they are too late.
They go back to 1999, that’s more than six years before.
There were no significant changes within the six-year statutory period that should have prompted a full diligence review and so we have to dismiss it.
The Ninth Circuit affirmed that dismissal.
Now in respect to the 1999 funds, the Ninth Circuit rejected the claims of the petitioner, they said they were untimely.
They were selected, the mutual shares, more than six years before and then it said, you can’t establish a new breach within six years, a new breach of your duty of prudence by “the mere continued offer of a plan option without more” and then it said the District Court was correct that maybe there was more, either could have been more, there could have been significant changes in that six-year period that would have required a full due diligence review.
But the petitioners hadn’t established that more, so it dismissed the case.
And we are looking at that statute of limitations point and we decide that the Ninth Circuit applied an improper statutory bar that is it didn’t interpret what the prudence rule is correctly.
We note that an ERISA fiduciary’s duty is normally and as here the same as a fiduciary under the common law of trust.
Now if you look to the common law of trust, you will see that a fiduciary must conduct a regular review of its investments and the nature and the timing of that review depend on the circumstances, the kind of fund it is, what the different circumstances are in that situation and so forth.
And as long as there is a duty to review and remove the imprudent investments and that review should have taken place within six years of suit then their claim was timely.
The parties all agree that the duty of prudence involves a continuing duty to monitor investments and to remove imprudent investments, at the trust law duty.
The parties do disagree however about the scope of that responsibility.
Does it require a review of the funds that issue here, and if so, what kind of review does it require.
Under ERISA we know that the fiduciary has to discharge his responsibilities with the care, skill, prudence, and diligence that a prudent person acting in a like capacity familiar with such matters would use.
So that’s what we have to decide of using the right standard.
Now we don’t express any view of the scope of the fiduciary duty in this case.
We set out the standard but we remanded for the Ninth Circuit to consider petitioner’s claims that respondents breached a duty within the relevant six-year period.
We have to look at analogous trust law which they really didn’t do.
The Circuit may also consider the respondent’s claim that the petitioner forfeited the right to make certain ones of these arguments but the upshot is we vacate the Ninth Circuit’s determination, we remand the case and our decision in unanimous.