On May 18, 2015, the United States Supreme Court decided Tibble v. Edison International, No. 13-550, holding that under the Employment Retirement Income Securities Act (ERISA), a plaintiff may timely commence a claim for breach of fiduciary duty within six years of the breach of a continuing duty of prudence in selecting investments.
In 2007, several beneficiaries of the Edison 401(k) Savings Plan (Plan) filed a lawsuit against Edison International (and others) seeking damages for losses and equitable relief. The beneficiaries claimed that Edison had violated its fiduciary duties with respect to three mutual funds added to the Plan in 1999 and three mutual funds added to the Plan in 2002, arguing that Edison acted imprudently by offering six higher priced mutual funds when materially identical lower prices mutual funds were available.
Under ERISA, a breach of fiduciary duty complaint is timely 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 district court held that under this provision, the claims related to the three funds added in 1999 were untimely because Edison selected the mutual funds for the plan more than six years before the complaint was filed. The Ninth Circuit affirmed, concluding that the beneficiaries’ claims were untimely because the beneficiaries had not established a change in circumstances that might trigger an obligation to review and to change in investments within the 6-year statutory period.
The Supreme Court vacated and remanded, holding that both clauses of Section 1113 “require only a ‘breach or violation’ to start the 6-year period.” The Court held that the Ninth Circuit erred “by applying a statutory bar to a claim of a ‘breach or violation’ of a fiduciary duty without considering the nature of the fiduciary duty.” The Court noted that courts often look to the law of trusts when determining ERISA fiduciary duties. Under trust law, a trustee has “a continuing duty to monitor trust investments and remove imprudent ones,” which is separate and apart from duty to exercise prudence in selecting investments. The Court therefore concluded that because a plaintiff may claim that a fiduciary breached its duty by failing to properly monitor investments and remove imprudent ones, such a claim is timely so long as the alleged breach of the continuing duty occurred within six years of the suit. The Court remanded to the Ninth Circuit to consider the beneficiaries’ claims that Edison breached its duties within the relevant six-year statutory period under Section 1113.
Justice Breyer delivered the opinion of the unanimous Court.