San Francisco, CAAn ERISA lawsuit nine years in the making has been dismissed, after making its way from the California courts up to the Supreme Court and being sent back to the lower courts. The lawsuit, which alleged violations of the Employee Retirement Income Security Act (ERISA), claimed breach of fiduciary duty. Now, the Ninth Circuit has dismissed the lawsuit, finding that the plaintiffs should have raised the claim of improper plan monitoring before the case went to the Supreme Court.
The Tibble lawsuit was filed against Edison International, and alleged plan fiduciaries made imprudent investments within the company’s ERISA plan. Plaintiffs claimed there were lower-cost versions of the investments available, but higher-cost versions were purchased. The problem, however, was the statute of limitations. Three of the six funds were initially purchased in 1999 but the lawsuit was not filed until 2007, beyond the six-year statute of limitations. Under the statute of limitations, lawsuits must be filed within six years of the most recent violation.
After three of the funds were dropped from the lawsuit, the plaintiffs appealed to the Supreme Court. The plaintiffs argued that the statute of limitations should not have begun running at the time the funds were purchased. Rather, violations should be counted for as long as the offending fund is part of the investment. In other words, it is not just the purchase of the investment but continually allowing it to remain in the plan that constitutes the most recent violation, the plaintiffs argued.
The Supreme Court agreed with the plaintiffs, finding the plan sponsors had an ongoing duty to monitor investments. The Supreme Court further ruled that the duty to monitor is separate from the duty of exercising prudence in choosing investments for an ERISA plan.
But, according to court documents, when the Supreme Court sent the lawsuit back to the Ninth Circuit, it instructed the lower court to determine whether the plaintiffs erred in not raising the “ongoing-duty-to-monitor” claim when the lawsuit was initially heard by the lower court.
The lower court found that it could not hear an argument on appeal that was not initially raised before the District Court or brought forward in the initial appeal. As a result, the Tibble claim was dismissed.
Although the lawsuit was dismissed, it still holds important implications for ERISA plan fiduciaries. The Supreme Court found that even where there is no change in an ERISA plan’s circumstances, fiduciaries have an ongoing duty to monitor investments and insure they are still in participants’ best interests. This means a fiduciary’s duties do not end with the purchase of the investment.
The lawsuit is Tibble et al. v. Edison International, et al, case number 10-56406, US Court of Appeals for the Ninth Circuit Court.