729 F.3d 1110 (9th Cir. 2013), 10-56406, Tibble v. Edison International
| Docket Nº: | 10-56406, 10-56415 |
| Citation: | 729 F.3d 1110 |
| 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, Schlichter, Bogard & Denton, LLP, St. Louis, MO, argued the cause and filed the briefs for the plaintiffs-appellants. With him on the briefs were Jerome J. Schlichter, Nelson G. Wolff, and Jason P. Kelly, Schlichter, Bogard & Denton, LLP, St. Louis, MO. Jonathan D. Hacker, O'Mel... |
| Judge Panel: | Before: Alfred T. Goodwin, and Diarmuid F. O'Scannlain, Circuit Judges, and Jack Zouhary, District Judge.[*] Opinion by Judge O'Scannlain. |
| Case Date: | August 01, 2013 |
| Court: | United States Courts of Appeals, Court of Appeals for the Ninth Circuit |
Page 1110
Argued and Submitted, Pasadena, California November 6, 2012
Appeal from the United States District Court for the Central District of California. D.C. No. 2:07-cv-05359-SVW-AGR, D.C. No. 2:07-cv-05359-SVW-AGR. Stephen V. Wilson, District Judge, Presiding.
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OPINION
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SUMMARY[**]
ERISA
The panel affirmed the district court's judgment in a class action brought under the Employee Retirement Income Security Act by beneficiaries who alleged that their pension plan was managed imprudently and in a self-interested fashion.
Rejecting a continuing violation theory, the panel held that under ERISA's six-year statute of limitations, the district court correctly measured the timeliness of claims alleging imprudence in plan design from when the decision to include those investments in the plan was initially made. The panel held that the beneficiaries did not have actual knowledge of conduct concerning retail-class mutual funds, and so the three-year statute of limitations set forth in ERISA § 413(2) did not apply.
The panel held that ERISA § 404(c), a safe harbor that can apply to a pension plan that " provides for individual accounts and permits a participant or beneficiary to exercise control over the assets in his account," did not apply. Disagreeing with the Fifth Circuit, the panel applied Chevron deference to the Department of Labor's final rule interpreting § 404(c).
The panel declined to consider for the first time on appeal defendants' arguments concerning class certification.
The panel affirmed the district court's grant of summary judgment to defendants on the beneficiaries' claim that revenue sharing between mutual funds and the administrative service provider violated the pension plan's governing document and was a conflict of interest. Agreeing with the Third and Sixth Circuits, and disagreeing with the Second Circuit, the panel held that, as in cases challenging denials of benefits, an abuse of discretion standard of review applied in this fiduciary duty and conflict-of-interest suit because the plan granted interpretive authority to the administrator.
The panel held that the defendants did not violate their duty of prudence under ERISA by including in the plan menu mutual funds, a short-term investment fund akin to a money market, and a unitized fund for employees' investment in the company's stock.
The panel affirmed the district court's holding, after a bench trial, that the defendants were imprudent in deciding to include retail-class shares of three specific mutual funds in the plan menu because they failed to investigate the possibility of institutional-share class alternatives.
OPINION
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
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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 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...
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