Tibble v. Edison International

Summarized by:

  • Court: 9th Circuit Court of Appeals Archives
  • Area(s) of Law: Administrative Law
  • Date Filed: 03-21-2013
  • Case #: 10-56406
  • Judge(s)/Court Below: Circuit Judge O'Scannlain for the Court; Circuit Judge Goodwin; District Judge Zouhary
  • Full Text Opinion

Under the Employee Retirement Income Security Act (“ERISA”), the six-year statute of limitations is measured from the time the decision to include the investment plan is initially made; a safe harbor under ERISA § 404(c) applies only to a pension plan that “provides for individual accounts and permits a participant or beneficiary to exercise control over the assets in his account.”

Beneficiaries of an employer’s retirement benefit plan, certified as a class, sued Edison International (“Edison”) for imprudent and self-interested management of the Edison 401(k) Savings Plan. The district court granted summary judgment to Edison, determining that the Plan had been created more than six years before the beneficiaries initiated suit and the statute of limitations had run. The beneficiaries argued that ERISA § 413(1)(A) speaks of the “‘last action’ that constitutes a breach,” and therefore the fiduciary duty is ongoing. Instead, the panel held that the proper measurement is “the act of designating an investment for inclusion” in a plan. The beneficiaries also claimed that the practice of revenue sharing that paid the fund management company from proceeds of the mutual funds violated the Plan document and gave rise to a conflict of interest. Edison’s Plan document and ERISA rules state that the employer is responsible for the fees that arise from the management of the funds. Edison’s Plan manager received fees from the mutual funds themselves, resulting in an invoice credit to Edison from the Plan manager. The panel concluded that the costs that Edison was responsible for paying were those invoiced by the Plan manager, and those invoices reflected credits that were the result of revenue sharing agreements made between the Plan manager and the individual Mutual Funds outside of Edison’s decision to choose the Plan manager. Finally, the panel held that three specific mutual funds chosen by Edison were imprudent because Edison “failed to investigate the possibility of institutional-share class alternatives,” but the remainder of the Plan menu was deemed to be prudent. Ultimately, the panel agreed with the district court that Edison did not exercise the “care, skill, prudence, and diligence under the circumstances” that ERISA demands when selecting retail mutual funds. AFFIRMED.

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