Tibble v. Edison International

Under ERISA, a beneficiary’s claim alleging a breach of a fiduciary’s duty must be filed within 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 the fiduciary could have cured the breach or violation.” In this case, Tibble maintains that a fiduciary’s failure to conduct a periodic review and remove imprudent investments, arguably required by ERISA’s duty of prudence, commences a new six-year period. Edison, on the other hand, contends that the Court should either dismiss this case as improvidently granted because the record does not present the facts for the Court’s consideration, or affirm the lower courts’ judgment.

DOES ERISA'S DUTY OF PRUDENCE IMPOSE A FIDUCIARY OBLIGATION TO CONDUCT PERIODIC REVIEWS?

According to Tibble, “ERISA’s duty of prudence imposes an obligation on plan fiduciaries such as [Edison] to review the prudence of plan investments periodically and to remove imprudent investments.” In this case, Tibble contends that because lower-cost, institutional-class funds with equal investment performance were available but were not added to the 401(k) plan, Edison breached its duty of prudence by adding higher-cost, retail-class mutual funds. Additionally, Tibble argues that the requirement of monitoring and reviewing funds for a defined-contribution plan is not limited to circumstances where “significant changes” for the fund have occurred. Rather, Tibble asserts, periodic reviews of investment funds is required; thus although “market changes” may require that the trustee remove funds between review periods, the requirement to survey each fund for market changes does not eliminate the trustee’s obligation to periodically monitor each investment to satisfy his or her duty of prudence. Tibble suggests that background principles of trust law, while not necessarily dispositive, support this obligation (to conduct periodic reviews) within the duty of prudence.

On the other hand, Edison argues that requiring periodic review of all investments within a contribution plan is not required to meet the duty of prudence. Rather, according to Edison, the foundations of trust law dictate that a review of the investments is required only when adding an investment to the benefit plan or if the investment has significantly changed in character, which would typically manifest in a substantial drop in price. Furthermore, Edison notes that neither Department of Labor guidance documents nor case law supports the proposition that fiduciaries must engage in periodic, exhaustive reviews of all investments under ERISA. As a result, Edison urges the Court to reject an affirmative duty on fiduciaries to conduct periodic reviews.

DOES THE FAILURE OF A FIDUCIARY TO REVIEW AND UPDATE ITS PLAN INITIATE THE BEGINNING OF A NEW LIMITATIONS PERIOD?

According to Tibble, “[e]ach breach of a fiduciary’s obligation to review investments periodically and remove imprudent ones starts the running of a new limitations period for claims arising out of that breach.” Moreover, Tibble asserts that according to the text, it does not matter whether each breach is a separate breach or part of a breach. Therefore, Tibble argues, Edison’s failure to remove the higher-cost funds over six years of management of the retirement fund should constitute a “breach” giving “rise to [Tibble]’s claim.”

On the other hand, Edison maintains that contrary to Tibble’s assertions, the failure to remove imprudent investments does not always renew a limitations period. Edison argues that “the process for monitoring and removing 401(k) lineup options has never been understood as equivalent to the process for deciding which options should be included in the first place.” Once again, Edison maintains that neither trust law nor ERISA guidance materials or case law impose a duty on fiduciaries to periodically conduct in-depth reviews of investments. Consequently, Edison submits that since Edison used “a state-of-the-art monitoring process . . . no deeper, full diligence review was required.” It follows, Edison continues, that Edison’s failure to remove the allegedly imprudent investment did not initiate the beginning of a new limitations period under ERISA.

IMPROVIDENT GRANT OF CERT

Edison argues that the Supreme Court should dismiss the writ as improvidently granted because the facts of the case fail to give rise to the actual question presented to the Court. First, Edison contends that the statute of repose is not at issue here; instead only issues of fact are disputed between Tibble and Edison regarding “whether Edison in fact breached their monitoring duty.” Edison asserts that the district court resolved this factual issue in favor of Edison and, since Tibble failed to contest the district court’s findings of fact and the “Court did not grant certiorari to review them,” Edison asserts that the Court should dismiss the writ. Second, Edison argues that the Ninth Circuit correctly rejected Tibble’s continuing violation argument and that Tibble’s current theory now is equivalent to that theory. Thus, Edison maintains that the case does not merit review by the Supreme Court and should be dismissed as improvidently granted.

Nevertheless, Tibble generally disagrees with Edison. First, Tibble maintains that the district court’s and Ninth Circuit’s findings provide a basis for the inference that Edison did violate their duty of prudence. According to Tibble, in the lower court proceedings Tibble adequately presented evidence of Edison’s failure to remove an imprudent investment, which was a breach of Edison’s duty of prudence. This, Tibble argues, is enough “[t]o defeat summary judgment.”Additionally, unlike Edison, Tibble asserts that the Ninth Circuit incorrectly “held that the initial inclusion of the retail-class shares started the limitations period on all of [Tibble’s] claims.”