Tibble v. Edison Int'l
| Decision Date | 13 April 2016 |
| Docket Number | 10–56415.,Nos. 10–56406,s. 10–56406 |
| Citation | 820 F.3d 1041 |
| Parties | 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; Southern California Edison Benefits Committee, incorrectly named The Edison International Benefits Committee; Edison International Trust Investment Committee; Secretary of the Southern California Edison Company Benefits 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. |
| Court | U.S. Court of Appeals — Ninth Circuit |
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 Sean E. Soyars, Schlichter Bogard & Denton LLP, St. Louis, MO.
Johnathan D. Hacker argued the cause and filed the brief for the defendants-appellees. With him on the brief were Meaghan VerGow, O'Melveny & Myers LLP, Washington, D.C.; Ward A. Penfold and Gabriel Markoff, O'Melveny & Myers LLP, San Francisco, CA; and Sergey Trakhtenberg, Southern California Edison Company, Rosemead, CA.
On Remand from the United States Supreme Court. 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.*
O'SCANNLAIN
, Circuit Judge:
Glenn Tibble and other beneficiaries sued their employer Edison International and its benefit plan administrator under the Employee Retirement Income Security Act of 1974, asserting a violation of the duty of prudence in the selection and retention of certain mutual funds. The district court held that the beneficiaries' claims were time-barred, and, on appeal, we agreed. The Supreme Court subsequently vacated our decision, observing that federal law imposes on fiduciaries an ongoing duty to monitor investments even absent a change in circumstances, and remanded to us. Consistent with the Supreme Court's instructions, we must decide whether the beneficiaries forfeited such ongoing-duty-to-monitor argument by failing to raise it before the district court or our Court.
Edison International is a holding company which includes Southern California Edison Company and other energy interests (collectively “Edison”). As an employer-organization, Edison offers a 401(k) Savings Plan (“Plan”) to its workforce. That Plan is a defined-contribution fund, meaning that the value of any employee's retirement benefits is limited to his or her own individual investment account. Participants invest a part of their wages combined with a company contribution in the investment options they choose from the Plan menu. Ultimately, the value of those individual investments is determined by the market performance of employee and employer contributions, less expenses such as management or administrative fees. As of 2007, the plan held roughly $3.8 billion in assets for the benefit of approximately 20,000 participants.
The Plan's investment menu originally contained six options. In response to a study and negotiations with unions representing some of the workforce, Edison expanded the Plan dramatically in 1999. Particularly relevant here, Edison added three retail-class mutual funds. These funds were generally available to the public and had higher administrative fees than other institutional-class alternatives available only to institutional investors. Edison added three more retail-class mutual funds to the Plan after 2002.
On August 16, 2007, Glenn Tibble and other current and former beneficiaries sued Edison pursuant to § 502(a) of the Employee Retirement Income Security Act of 1974 (“ERISA”), which allows “a participant, beneficiary or fiduciary” to bring an action for breach of fiduciary duty. 29 U.S.C. § 1132(a)(2)
. Among other claims, beneficiaries asserted that Edison violated its fiduciary duties under ERISA by selecting retail-class mutual funds when cheaper, institutional-class funds were available. Edison moved for summary judgment, asserting that the beneficiaries' claims regarding the three mutual funds added to the Plan in 1999 were barred by Section 413 of ERISA, which states that no action for fiduciary breach can be commenced six years after “the last action which constituted a part of the breach or violation.” 29 U.S.C. § 1113. The district court agreed, granting partial summary judgment and observing that these mutual funds were added to the plan more than six years before beneficiaries' lawsuit. Tibble v. Edison Int'l, 639 F.Supp.2d 1074 (C.D.Cal.2009). In so holding, the district court reasoned that “[t]here is no ‘continuing violation’ theory to claims subject to ERISA's statute of limitations.” Id. at 1086 ).
Following partial summary judgment, beneficiaries proceeded to trial on whether Edison violated its fiduciary duty by selecting the retail-class mutual funds added to the Plan in 2002. During trial, however, the district court also allowed beneficiaries to allege a violation of the duty of prudence relating to the 1999–added mutual funds on the theory that “significant events within the limitations period” should have triggered a review of these funds. To support this theory, beneficiaries offered testimony from their expert, Dr. Steven Pomerantz. Pomerantz pointed out that two of the funds added in 1999 had undergone a name change and another had changed from a small-cap growth fund to a small-mid-cap growth fund. Pomerantz asserted that these changes were “significant enough” that Edison should have conducted a full due diligence review.
During trial, beneficiaries also asserted that Edison violated its duty of prudence by keeping a certain Money Market Fund in the Plan that allegedly charged excessive management fees. Although Edison initially added the Money Market Fund more than six years before litigation commenced, the beneficiaries claimed that Edison violated its fiduciary duty within the relevant time period by failing to monitor the Fund's fees and switch to one with lower fees. The district court allowed beneficiaries to proceed on this claim, notwithstanding its ruling related to the 1999–added mutual funds.
Ultimately, the district court ruled in favor of Edison on almost all of beneficiaries' claims. With respect to the retail-class mutual funds added in 1999, the district court concluded that the changes identified by beneficiaries within the limitations period were insufficient to justify a full due diligence review. The district court also ruled in favor of Edison with respect to the Money Market Fund, concluding that Edison did in fact monitor this Fund within the relevant time period and that its decision to maintain the Money Market Fund was not imprudent.
Following judgment in the district court, beneficiaries appealed to this Court of Appeals. They argued that the district court erred in concluding that ERISA's six-year limitation barred their claim that Edison breached its fiduciary duty by adding retail-class mutual funds to the Plan in 1999. They did not contest the district court's conclusion that no “significant events” occurred within the relevant period that would have triggered a due diligence review. Rather, they contended that under Section 413 of ERISA, the six-year limitation incorporates the continuing violation doctrine. In response, Edison acknowledged that it had an ongoing duty to ensure that each of the Plan's investment options remained prudent. But Edison pointed out that the beneficiaries were not alleging acts that constituted a violation within the six-year period, but instead arguing their lawsuit should be deemed timely because of the “continuing effects” of decisions made previously, in 1999.
We sided with Edison, holding that “the act of designating an investment for inclusion starts the six-year period ... for claims asserting imprudence in the design of the plan menu.” Tibble v. Edison Int'l, 729 F.3d 1110, 1119 (9th Cir.2013)
. We declined beneficiaries' invitation to “equitably engraft onto, or discern from the text of section 413 a ‘continuing violation theory.’ ” Id. We reasoned that “[c]haracterizing the mere continued offering of a plan option, without more, as a subsequent breach” would render ERISA's time limitation meaningless and could make fiduciaries liable for decades-old decisions. Id. at 1120. We also concluded that the district court was correct in allowing beneficiaries to assert evidence of “changed circumstances engendering a new breach,” but noted that it found that no such circumstances were present. Id.
Following our decision, beneficiaries successfully petitioned for certiorari to the Supreme Court. There, they asserted that their case was “unlike those in which the plaintiff bases a claim on an unlawful act that occurred prior to the [limitations] period but that has continuing effects during that period.” Instead, they argued that the alleged breach underlying their claims was Edison's “failures prudently to review and remove retail-class shares within the...
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