Tibble v. Edison International



On August 16, 2007, a group of employees of Edison International filed a lawsuit in U.S. District Court for the Central District of California, alleging that the company's 401(k) plan engaged in a variety of activities that breached their fiduciary duties to plan participants under the Employee Retirement Income Security Act (ERISA).

 

The plaintiffs claim that the defendants chose unreasonably expensive investment options and improperly used the participants' money to offset the administrative expenses of the 401(k) plan.

 

On October 22, 2007, Edison filed a motion to dismiss the case and, on November 5, 2007, the plaintiffs filed a memorandum in opposition.  A reply brief was filed by the defendants on November 13, 2007.

 

The Court ruled in July 2008 that the plaintiffs sufficiently alleged a potential breach of fiduciary duties and rejected, in part, the motion to dismiss the case.  The plaintiffs filed an amended complaint on August 5, 2008, and discovery in the case followed.

 

The trial was held in October 2009 and a decision was issued on July 8, 2010.  In his decision, the district court judge evaluated the plaintiffs' argument that the defendants violated their fiduciary duties under ERISA by investing in the retail share classes of six mutual funds, instead of the less expensive institutional share classes of the same funds.  The retail share classes of the six mutual funds offered more favorable revenue-sharing payments to Edison, which reduced their expenses in administering the 401(k) plan.

 

The judge held that the defendants did breach their fiduciary duties by choosing to invest in the retail share classes of three of the six mutual funds rather than the institutional share classes of the same funds.  The defendants did not violate their fiduciary duties regarding the other three mutual funds because the initial selection of these funds occurred outside of the six-year statutute of limitations for ERISA claims. 

 

Appeals were filed with the Ninth Circuit Court of Appeals.  After briefing and an oral argument, the Court of Appeals affirmed the District Court's decision on March 21, 2013.  In its decision, the Court stated that the District Court correctly measured the timeliness of ERISA claims outside of the six-year statute of limitations.  The Court also affirmed the lower court's holding that the defendants were imprudent to include retail share classes of three mutual funds in the plan after failing to investigate institutional share class alternatives.

 

This Court of Appeals decision was amended on August 1, 2013, and a petition for rehearing was denied.

 

The plaintiffs then filed a petition for a writ of certiorari with the U.S. Supreme Court on October 30, 2013.  After requesting a brief from the Solicitor General, the Supreme Court decided to grant the petition on October 2, 2014.

 

The issue before the Supreme Court is whether a claim that ERISA plan fiduciaries breached their duty of prudence by offering higher cost retail mutual funds over less expensive institutional class funds, when the higher cost funds were initially selected outside of the six-year statute of limitations for ERISA claims.

 

In a unanimous decision on May 18, 2015, the Supreme Court reversed the 9th Circuit and ruled that the six-year statute of limitations was not a bar to this type of fiduciary duty claim.  The Court stated that the ERISA fiduciary duty is derived from the common law of trusts, 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. 

 

The case has been remanded back to the lower courts.

 

 

 

  • Supreme Court Decision Reverses the 9th Circuit Opinion
    On May 18, 2015, a unanimous Supreme Court reversed the 9th Circuit and held that the ERISA six-year statute of limitations was not a bar to this case moving forward. The Court ruled that the ERISA fiduciary duty is derived from the common law of trusts, which provides that a trustee has a continuing duty to monitor and remove imprudent trust investments.
  • Solicitor General Files Brief in Favor of Plaintiffs
    On December 9, 2014, the Solicitor General filed a brief in support of the plaintiffs, stating that the duty of prudence under ERISA requires plan fiduciaries to examine periodically the prudence of existing investments and to remove imprudent investments within a reasonable period of time. The defendants breached their duty of prudence within the ERISA statute of limitations period by failing to monitor fund fees and to switch to the lower-cost funds.
  • Plaintiffs File Supreme Court Brief
    On December 2, 2014, the plaintiffs filed their merits brief with the U.S. Supreme Court. The brief argues that ERISA's fiduciary duty of prudence requires plan fiduciaries to examine periodically the prudence of existing investments and to remove imprudent investments within a reasonable period of time. Congress did not intend to leave ERISA plan participants powerless to remedy imprudent investments that have been in place longer than than the six-year statute of limitations. Therefore, the plaintiffs should be able to bring ERISA claims for investments that were selected more than six years ago, when ERISA fiduciaries breach their obligations to review the prudence of investments on a periodic basis and to remove imprudent investments.
  • Court of Appeals Amends Its Decision
    On August 1, 2013, the Ninth Circuit Court of Appeals amended its earlier decision affirming the lower court's holdings in this case. The Court also denied a petition for rehearing.
  • Ninth Circuit Court of Appeals Affirms District Court Decision
    On March 21, 2013, the Ninth Circuit Court of Appeals affirmed the earlier decision by the District Court in this case. In its decision, the Court stated that the District Court correctly measured the timeliness of ERISA claims outside of the six-year statute of limitations. The Court also affirmed the lower court's holding that the defendants were imprudent to favor more expensive retail mutual funds over less costly institutional share classes.
  • District Court Ruling in Favor of Plaintiffs
    On July 8, 2010, the District Court ruled that the defendants breached their fiduciary duties by choosing to invest in the retail share classes of three of the six mutual funds, rather than the less expensive institutional share classes of the same funds. The defendants did not violate their fiduciary duties regarding the other three mutual funds because the selection of these funds occurred outside of the six-year statute of limitations for ERISA claims.
  • Plaintiffs File Amended Complaint
    On August 5, 2008, the plaintiffs in this case filed their amended complaint.
  • District Court Rejects Motion to Dismiss
    On July 16, 2008, the District Court ruled that the plaintiffs have sufficiently alleged a potential breach of fiduciary duties and rejected, in part, the defendants' motion to dismiss. The case may now proceed to discovery and trial.

On August 16, 2007, a group of employees of Edison International filed a lawsuit in U.S. District Court for the Central District of California, alleging that the company's 401(k) plan engaged in a variety of activities that breached their fiduciary duties to plan participants under the Employee Retirement Income Security Act (ERISA).

 

The plaintiffs claim that the defendants chose unreasonably expensive investment options and improperly used the participants' money to offset the administrative expenses of the 401(k) plan.

 

On October 22, 2007, Edison filed a motion to dismiss the case and, on November 5, 2007, the plaintiffs filed a memorandum in opposition.  A reply brief was filed by the defendants on November 13, 2007.

 

The Court ruled in July 2008 that the plaintiffs sufficiently alleged a potential breach of fiduciary duties and rejected, in part, the motion to dismiss the case.  The plaintiffs filed an amended complaint on August 5, 2008, and discovery in the case followed.

 

The trial was held in October 2009 and a decision was issued on July 8, 2010.  In his decision, the district court judge evaluated the plaintiffs' argument that the defendants violated their fiduciary duties under ERISA by investing in the retail share classes of six mutual funds, instead of the less expensive institutional share classes of the same funds.  The retail share classes of the six mutual funds offered more favorable revenue-sharing payments to Edison, which reduced their expenses in administering the 401(k) plan.

 

The judge held that the defendants did breach their fiduciary duties by choosing to invest in the retail share classes of three of the six mutual funds rather than the institutional share classes of the same funds.  The defendants did not violate their fiduciary duties regarding the other three mutual funds because the initial selection of these funds occurred outside of the six-year statutute of limitations for ERISA claims. 

 

Appeals were filed with the Ninth Circuit Court of Appeals.  After briefing and an oral argument, the Court of Appeals affirmed the District Court's decision on March 21, 2013.  In its decision, the Court stated that the District Court correctly measured the timeliness of ERISA claims outside of the six-year statute of limitations.  The Court also affirmed the lower court's holding that the defendants were imprudent to include retail share classes of three mutual funds in the plan after failing to investigate institutional share class alternatives.

 

This Court of Appeals decision was amended on August 1, 2013, and a petition for rehearing was denied.

 

The plaintiffs then filed a petition for a writ of certiorari with the U.S. Supreme Court on October 30, 2013.  After requesting a brief from the Solicitor General, the Supreme Court decided to grant the petition on October 2, 2014.

 

The issue before the Supreme Court is whether a claim that ERISA plan fiduciaries breached their duty of prudence by offering higher cost retail mutual funds over less expensive institutional class funds, when the higher cost funds were initially selected outside of the six-year statute of limitations for ERISA claims.

 

In a unanimous decision on May 18, 2015, the Supreme Court reversed the 9th Circuit and ruled that the six-year statute of limitations was not a bar to this type of fiduciary duty claim.  The Court stated that the ERISA fiduciary duty is derived from the common law of trusts, 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. 

 

The case has been remanded back to the lower courts.

 

 

 

Document Title: 
Supreme Court Decision Reverses the 9th Circuit Opinion
Document Desc: 
On May 18, 2015, a unanimous Supreme Court reversed the 9th Circuit and held that the ERISA six-year statute of limitations was not a bar to this case moving forward. The Court ruled that the ERISA fiduciary duty is derived from the common law of trusts, which provides that a trustee has a continuing duty to monitor and remove imprudent trust investments.
Document Title: 
Solicitor General Files Brief in Favor of Plaintiffs
Document Desc: 
On December 9, 2014, the Solicitor General filed a brief in support of the plaintiffs, stating that the duty of prudence under ERISA requires plan fiduciaries to examine periodically the prudence of existing investments and to remove imprudent investments within a reasonable period of time. The defendants breached their duty of prudence within the ERISA statute of limitations period by failing to monitor fund fees and to switch to the lower-cost funds.
Document Title: 
Plaintiffs File Supreme Court Brief
Document Desc: 
On December 2, 2014, the plaintiffs filed their merits brief with the U.S. Supreme Court. The brief argues that ERISA's fiduciary duty of prudence requires plan fiduciaries to examine periodically the prudence of existing investments and to remove imprudent investments within a reasonable period of time. Congress did not intend to leave ERISA plan participants powerless to remedy imprudent investments that have been in place longer than than the six-year statute of limitations. Therefore, the plaintiffs should be able to bring ERISA claims for investments that were selected more than six years ago, when ERISA fiduciaries breach their obligations to review the prudence of investments on a periodic basis and to remove imprudent investments.
Upload Document: 
Document Title: 
Court of Appeals Amends Its Decision
Document Desc: 
On August 1, 2013, the Ninth Circuit Court of Appeals amended its earlier decision affirming the lower court's holdings in this case. The Court also denied a petition for rehearing.
Document Title: 
Ninth Circuit Court of Appeals Affirms District Court Decision
Document Desc: 
On March 21, 2013, the Ninth Circuit Court of Appeals affirmed the earlier decision by the District Court in this case. In its decision, the Court stated that the District Court correctly measured the timeliness of ERISA claims outside of the six-year statute of limitations. The Court also affirmed the lower court's holding that the defendants were imprudent to favor more expensive retail mutual funds over less costly institutional share classes.
Document Title: 
District Court Ruling in Favor of Plaintiffs
Document Desc: 
On July 8, 2010, the District Court ruled that the defendants breached their fiduciary duties by choosing to invest in the retail share classes of three of the six mutual funds, rather than the less expensive institutional share classes of the same funds. The defendants did not violate their fiduciary duties regarding the other three mutual funds because the selection of these funds occurred outside of the six-year statute of limitations for ERISA claims.
Document Title: 
Plaintiffs File Amended Complaint
Document Desc: 
On August 5, 2008, the plaintiffs in this case filed their amended complaint.
Document Title: 
District Court Rejects Motion to Dismiss
Document Desc: 
On July 16, 2008, the District Court ruled that the plaintiffs have sufficiently alleged a potential breach of fiduciary duties and rejected, in part, the defendants' motion to dismiss. The case may now proceed to discovery and trial.