711 F.3d 1061 (9th Cir. 2013), 10-56406, Tibble v. Edison Intern.

Docket Nº:10-56406, 10-56415.
Citation:711 F.3d 1061
Opinion Judge:O'SCANNLAIN, Circuit Judge:
Party Name:Glenn TIBBLE; William Bauer; William Izral; Henry Runowiecki; Frederick Suhadolc; Hugh Tinman, Jr., as representatives of a class of similarly situated persons, and on behalf of the Plan, Plaintiffs-Appellants, v. EDISON INTERNATIONAL; the Edison International Benefits Committee, fka The Southern California Edison Benefits Committee; Edison Interna
Attorney:Michael A. Wolff (argued), Jerome J. Schlichter, Nelson G. Wolff, and Jason P. Kelly, Schlichter, Bogard & Denton, LLP, St. Louis, MO, for Plaintiffs-Appellants. Jonathan D. Hacker (argued), Walter Dellinger, Robert N. Eccles, and Gary S. Tell, O'Melveny & Myers LLP, Washington, D.C.; Matthew Eas...
Judge Panel:Before: ALFRED T. GOODWIN, and DIARMUID F. O'SCANNLAIN, Circuit Judges, and JACK ZOUHARY, District Judge.[*]
Case Date:March 21, 2013
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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711 F.3d 1061 (9th Cir. 2013)

Glenn TIBBLE; William Bauer; William Izral; Henry Runowiecki; Frederick Suhadolc; Hugh Tinman, Jr., as representatives of a class of similarly situated persons, and on behalf of the Plan, Plaintiffs-Appellants,

v.

EDISON INTERNATIONAL; the Edison International Benefits Committee, fka The Southern California Edison Benefits Committee; Edison International Trust Investment Committee; Secretary of the Edison International Benefits Committee; Southern California Edison's Vice President of Human Resources; Manager of Southern California Edison's HR Service Center, Defendants-Appellees.

Glenn Tibble; William Bauer; William Izral; Henry Runowiecki; Frederick Suhadolc; Hugh Tinman, Jr., as representatives of a class of similarly situated persons, and on behalf of the Plan, Plaintiffs-Appellees,

v.

Edison International; The Southern California Edison Benefits Committee, incorrectly named The Edison International Benefits Committee; Edison International Trust Investment Committee; Secretary of the Southern California Edison CompanyBenefits Committee, incorrectly named Secretary of the Edison International Benefits Committee; Southern California Edison's Vice President of Human Resources; Manager of Southern California Edison's HR Service Center, Defendants-Appellants.

Nos. 10-56406, 10-56415.

United States Court of Appeals, Ninth Circuit.

March 21, 2013

Argued and Submitted Nov. 6, 2012.

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Michael A. Wolff (argued), Jerome J. Schlichter, Nelson G. Wolff, and Jason P. Kelly, Schlichter, Bogard & Denton, LLP, St. Louis, MO, for Plaintiffs-Appellants.

Jonathan D. Hacker (argued), Walter Dellinger, Robert N. Eccles, and Gary S. Tell, O'Melveny & Myers LLP, Washington, D.C.; Matthew Eastus and China Rosas, O'Melveny & Myers LLP, Los Angeles, CA, for Defendants-Appellees/Cross-Appellants.

Elizabeth Hopkins (argued), Stacey E. Elias, M. Patricia Smith, and Timothy D. Hauser, United States Department of Labor, Washington, D.C., for amicus curiae Secretary of Labor.

Jay E. Sushelsky and Melvin Radowitz, AARP Foundation Litigation, Washington, D.C., for amicus curiae AARP.

Nicole A. Diller, Alison B. Willard, and Abbey M. Glenn, Morgan, Lewis & Bockius LLP, San Francisco, CA, for amicus curiae California Employment Law Council.

Thomas L. Cubbage III, and S. Michael Chittenden, Covington & Burling LLP, Washington, D.C., for amicus curiae Investment Company Institute.

Appeal from the United States District Court for the Central District of California, Stephen V. Wilson, District Judge, Presiding. D.C. No. 2:07-cv-05359-SVW-AGR.

Before: ALFRED T. GOODWIN, and DIARMUID F. O'SCANNLAIN, Circuit Judges, and JACK ZOUHARY, District Judge.[*]

OPINION

O'SCANNLAIN, Circuit Judge:

Current and former beneficiaries sued their employer's benefit plan administrator under the Employee Retirement Income Security Act charging that their pension plan had been managed imprudently and in a self-interested fashion. We must decide, among other issues, whether the Act's limitations period or its safe harbor provision are obstacles to their suit.

I

A

Edison International is a holding company for various electric utilities and other energy interests including Southern California Edison Company and the Edison Mission Group (collectively " Edison" ), which itself consists of the Chicago-based Midwest Generation. Like most employer-organizations offering pensions today, Edison sponsors a 401(k) retirement plan for its workforce. During litigation, the total valuation of the " Edison 401(k) Savings Plan" was $3.8 billion, and it served approximately 20,000 employee-beneficiaries across the entire Edison International workforce. Unlike the guaranteed benefit pension plans of yesteryear, this kind of defined-contribution plan entitles retirees only to the value of their own individual investment accounts. See 29 U.S.C. § 1002(34). That value is a function of the inputs, here a portion of the employee's salary and a partial match by Edison, as

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well as of the market performance of the investments selected.

To assist their decision making, Edison employees are provided a menu of possible investment options. Originally they had six choices. In response to a study and union negotiations, in 1999 the Plan grew to contain ten institutional or commingled pools, forty mutual fund-type investments, and an indirect investment in Edison stock known as a unitized fund. The mutual funds were similar to those offered to the general investing public, so-called retail-class mutual funds, which had higher administrative fees than alternatives available only to institutional investors. The addition of a wider array of mutual funds also introduced a practice known as revenue sharing into the mix. Under this, certain mutual funds collected fees out of fund assets and disbursed them to the Plan's service provider. Edison, in turn, received a credit on its invoices from that provider.

Past and present Midwest Generation employees Glenn Tibble, William Bauer, William Izral, Henry Runowiecki, Frederick Suhadolc, and Hugh Tinman, Jr. (" beneficiaries" ) sued under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq., which governs the 401(k) Plan, and obtained certification as a class action representing the whole of Edison's eligible workforce.1 Beneficiaries objected to the inclusion of the retail-class mutual funds, specifically claiming that their inclusion had been imprudent, and that the practice of revenue sharing had violated both the Plan document and a conflict-of-interest provision. Beneficiaries also claimed that offering a unitized stock fund, money market-style investments, and mutual funds, had been imprudent.

B

The district court granted summary judgment to Edison on virtually all these claims. See Tibble v. Edison Int'l, 639 F.Supp.2d 1074 (C.D.Cal.2009). The court also determined that ERISA's limitations period barred recovery for claims arising out of investments included in the Plan more than six years before beneficiaries had initiated suit. Id. at 1086; see 29 U.S.C. § 1113(1)(A).

Remaining for trial after these rulings was beneficiaries' claim that the inclusion of specific retail-class mutual funds had been imprudent. Without retreating from an earlier decision— at summary judgment— that retail mutual funds were not categorically imprudent, the court agreed with beneficiaries that Edison had been imprudent in failing to investigate the possibility of institutional-class alternatives. See Tibble v. Edison Int'l, No. CV 07-5359, 2010 WL 2757153, at *30 (CD.Cal. July 8, 2010). It awarded damages of $370,000.

Beneficiaries timely appeal the district court's partial grant of summary judgment to Edison.2 Edison timely cross appeals, chiefly contesting the post-trial judgment.

II

Beneficiaries' first contention on appeal is that the district court incorrectly applied ERISA's six-year limitations period to bar certain of its claims. Edison argues for application of the shorter three-year period.

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We reject both parties' approaches to timeliness.

A

For claims of fiduciary breach, ERISA § 413 provides that no action may be commenced " after the earlier of" :

(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or

(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation;

except that in the case of fraud or concealment, such action maybe commenced not later than six years after the date of discovery of such breach or violation.

29 U.S.C. § 1113.

B

1

Beneficiaries argue that the court erred by measuring the timeliness under ERISA § 413(1) for claims alleging imprudence in plan design from when the decision to include those investments in the Plan was initially made. They are joined in this contention by the United States Department of Labor (" DOL" ). Because fiduciary duties are ongoing, and because section 413(1)(A) speaks of the " last action" that constitutes the breach, these claims are said to be timely for as long as the underlying investments remain in the plan. Essentially, they argue that we should either equitably engraft onto, or discern from the text of section 413 a " continuing violation theory."

Beneficiaries' argument, though, would make hash out of ERISA's limitation period and lead to an unworkable result. We have previously declined to read the section 413(2) actual-knowledge provision as permitting the maintenance of the status-quo, absent a new breach, to restart the limitations period under the banner of a " continuing violation." Phillips v. Alaska Hotel & Rest. Emps. Pension Fund, 944 F.2d 509, 520 (9th Cir.1991). In Phillips, the controlling opinion did not reach whether the same was true for section 413(1)(A). 944 F.2d at 520-21. Today we hold that the act of designating an investment for inclusion starts the six-year period under section 413(1)(A) for claims asserting imprudence in the design of the plan menu.

Preliminarily, we observe that in the case of omissions the statute already embodies what the beneficiaries urge for the last action. Section 413(1)(B) ties the limitations period to " the latest date on which the fiduciary could have cured the breach or violation." Importing the concept into (1)(A)...

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