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Tibble v. Edison International

United States Supreme Court

May 18, 2015

GLENN TIBBLE, ET AL., PETITIONERS
v.
EDISON INTERNATIONAL ET AL

Argued February 24, 2015

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

SYLLABUS

[191 L.Ed.2d 797] In 2007, petitioners, beneficiaries of the Edison 401(k) Savings Plan (Plan), sued Plan fiduciaries, respondents Edison International and others, to recover damages for alleged losses suffered by the Plan from alleged breaches of respondents' fiduciary duties. As relevant here, petitioners argued that respondents violated their fiduciary duties with respect to three mutual funds added to the Plan in 1999 and three mutual funds added to the Plan in 2002. Petitioners argued that respondents acted imprudently by offering six higher priced retail-class mutual funds as Plan investments when materially identical lower priced institutional-class mutual funds were available. Because ERISA requires a breach of fiduciary duty complaint to be filed no more than six years after " the date of the last action which constitutes a part of the breach or violation" or " in the case of an omission the latest date on which the fiduciary could have cured the breach or violation," 29 U.S.C. § 1113, the District Court held that petitioners' complaint as to the 1999 funds was untimely because they were included in the Plan more than six years before the complaint was filed, and the circumstances had not changed enough within the 6-year statutory period to place respondents under an obligation to review the mutual funds and to convert them to lower priced institutional-class funds. The Ninth Circuit affirmed, concluding that petitioners had not established a change in circumstances that might trigger an obligation [191 L.Ed.2d 798] to conduct a full due diligence review of the 1999 funds within the 6-year statutory period.

Held : The Ninth Circuit erred by applying § 1113's statutory bar to a breach of fiduciary duty claim based on the initial selection of the investments without considering the contours of the alleged breach of fiduciary duty. ERISA's fiduciary duty is " derived from the common law of trusts," Central States, Southeast & Southwest Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559, 570, 105 S.Ct. 2833, 86 L.Ed.2d 447, which provides that a trustee has a continuing duty--separate and apart from the duty to exercise prudence in selecting investments at the outset--to monitor, and remove imprudent, trust investments. So long as a plaintiff's claim alleging breach of the continuing duty of prudence occurred within six years of suit, the claim is timely. This Court expresses no view on the scope of respondents' fiduciary duty in this case, e.g., whether a review of the contested mutual funds is required, and, if so, just what kind of review. A fiduciary must discharge his responsibilities " with the care, skill, prudence, and diligence" that a prudent person " acting in a like capacity and familiar with such matters" would use. § 1104(a)(1). The case is remanded for the Ninth Circuit to consider petitioners' claims that respondents breached their duties within the relevant 6-year statutory period under § 1113, recognizing the importance of analogous trust law. Pp. 4-8.

729 F.3d 1110, vacated and remanded.

David C. Frederick argued the cause for petitioners.

Nicole A. Saharsky argued the cause for the United States, as amicus curiae, by special leave of the court.

Jonathan D. Hacker argued the cause for respondents.

OPINION

BREYER, JUSTICE

Under the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829 et seq, as amended, a breach of fiduciary duty complaint is timely if filed no more than six years after " the date of the last action which constituted a part of the breach or violation" or " in the case of an omission the latest date on which the fiduciary could have cured the breach or violation." 29 U.S.C. § 1113. The question before us concerns application of this provision to the timeliness of a fiduciary duty complaint. It requires us to consider whether a fiduciary's allegedly imprudent retention of an investment is an " action" or " omission" that triggers the running of the 6-year limitations period.

In 2007, several individual beneficiaries of the Edison 401(k) Savings Plan (Plan) filed a lawsuit on behalf of the Plan and all similarly situated beneficiaries (collectively, petitioners) against Edison International and others (collectively, respondents). Petitioners sought to recover damages for alleged losses suffered by the Plan, in addition to injunctive and other equitable relief based on alleged breaches of respondents' fiduciary duties.

The Plan is a defined-contribution plan, meaning that participants' retirement benefits are limited to the value of their own individual investment accounts, which is determined by the market performance of employee and employer contributions, less expenses. Expenses, such as management or administrative fees, [191 L.Ed.2d 799] can sometimes significantly reduce the value of an account in a defined-contribution plan.

As relevant here, petitioners argued that respondents violated their fiduciary duties with respect to three mutual funds added to the Plan in 1999 and three mutual funds added to the Plan in 2002. Petitioners argued that respondents acted imprudently by offering six higher priced retail-class mutual funds as Plan investments when materially identical lower priced institutional-class mutual funds were available (the lower price reflects lower administrative costs). Specifically, petitioners claimed that a large institutional investor with billions of dollars, like the Plan, can obtain materially identical lower priced institutional-class mutual funds that are not available to a retail investor. Petitioners asked, how could respondents have acted prudently in ...


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