Tibble v. Edison Int'l
| Decision Date | 16 December 2016 |
| Docket Number | No. 10-56406, No. 10-56415,10-56406 |
| Citation | 843 F.3d 1187 |
| 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; The 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 (argued), Jason P. Kelly, Sean E. Soyars, Nelson G. Wolff, and Jerome J. Schlichter, Schlichter Bogard & Denton, Saint Louis, Missouri, for Plaintiffs-Appellants/Cross-Appellees.
Jonathan D. Hacker (argued), Meaghan VerGow, Robert N. Eccles, and Walter Dellinger, O'Melveny & Myers LLP, Washington, D.C.; Gabriel Markoff and Ward A. Penfold, O'Melveny & Myers LLP, San Francisco, California; Sergey Trakhtenberg, Southern California Edison Company, Rosemead, California; for Defendants-Appellees/Cross-Appellants.
Jay E. Sushelsky, AARP Foundation Litigation, and Melvin Radowitz, AARP, Washington, D.C., for Amicus Curiae AARP.
Stacey E. Elias, Trial Attorney; Elizabeth Hopkins, Counsel for Appellate and Special Litigation, Washington, D.C.; Timothy D. Hauser, Associate Solicitor for Plan Benefits Security Division, and M. Patricia Smith, Solicitor of Labor, United States Department of Labor, Washington, D.C.; for Amicus Curiae Secretary of Labor.
S. Michael Chittenden and Thomas L. Cubbage III, Covington & Burling LLP, Washington, D.C., for Amicus Curiae Investment Company Institute.
Abbey M. Glenn, Alison B. Willard, and Nicole A. Diller, Morgan Lewis Bockius LLP, San Francisco, California; for Amicus Curiae California Employment Law Council.
Before: SIDNEY R. THOMAS, Chief Judge, and STEPHEN REINHARDT, BARRY G. SILVERMAN, M. MARGARET MCKEOWN, RICHARD A. PAEZ, RICHARD R. CLIFTON, CARLOS T. BEA, MILAN D. SMITH, JR., JACQUELINE H. NGUYEN, PAUL J. WATFORD and MICHELLE T. FRIEDLAND, Circuit Judges.
FACTS AND PRIOR PROCEEDINGS
Edison sponsors a defined-contribution 401(k) Savings Plan (Plan), wherein "participants' retirement benefits are limited to the value of their own individual investment accounts, which is determined by the market performance of employee and employer contributions, less expenses." Tibble v. Edison Int'l , ––– U.S. ––––, 135 S.Ct. 1823, 1826, 191 L.Ed.2d 795 (2015) ( Tibble IV ). "Expenses, such as management or administrative fees, can sometimes significantly reduce the value of an account in a defined-contribution plan." Id.
In 2007, plaintiffs-appellants (beneficiaries) brought this action against Edison and the other defendants (collectively, Edison). The district court denied the beneficiaries' motion for partial summary judgment, and partially granted Edison's summary judgment motion. Tibble v. Edison Int'l , 639 F.Supp.2d 1074, 1080 (C.D. Cal. 2009) (Tibble I ). This appeal concerns a claim that survived summary judgment; namely, that Edison breached its fiduciary duties by offering "higher priced retail-class mutual funds as Plan investments when materially identical lower priced institutional-class mutual funds were available (the lower price reflects lower administrative costs)." Tibble IV , 135 S.Ct. at 1826.
The Plan is governed by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001 –1461. The relevant ERISA statute of limitations is six years, 29 U.S.C. § 1113(1), and at least three of the disputed funds were added more than six years before the complaint was filed. Tibble IV , 135 S.Ct. at 1826. The district court allowed the beneficiaries to present evidence that their claims concerning those funds were timely because Edison, within the six-year limitations period, "fail[ed] to convert the retail shares to institutional shares upon the occurrence of certain ‘triggering events' " that should have prompted a full due-diligence review. Tibble v. Edison Int'l , No. CV 07–5359 SVW (AGRx), 2010 WL 2757153, at *31, 2010 U.S. Dist. LEXIS 69119, at *99 (C.D. Cal. July 8, 2010) (Tibble II ).
After a bench trial, the district court ruled for the beneficiaries on the retail-class funds selected within the six-year period, because Edison did "not offer[ ] any credible explanation for why the retail share classes were selected instead of the institutional share classes," and "a prudent fiduciary acting in a like capacity would have invested in the institutional share classes." Id. at *30, 2010 U.S. Dist. LEXIS 69119, at *98. Indeed, the court held that there was "no evidence that [Edison] even considered or evaluated the different share classes" when the funds were added. Id. at *25, 2010 U.S. Dist. LEXIS 69119, at *81 (emphasis in original).
As to the funds initially selected before the statute of limitations, the district court held that the "triggering events" proffered by the beneficiaries for two of the funds—a name change because of a partial change in ownership of a sub-advisor, and a name change related to a years-old ownership change—were insufficient to trigger a full diligence review, and that a change in strategy in a third fund—from small-cap to mid-cap—triggered a review to which Edison responded adequately by adding another small-cap option. Id. at *31–33, 2010 U.S. Dist. LEXIS 69119, at 102–07.
On appeal to our court, the beneficiaries argued that the district court should have allowed them to prove their claims concerning funds selected before the relevant six-year period. Tibble v. Edison Int'l , 729 F.3d 1110, 1119 (9th Cir. 2013) (Tibble III ), vacated , ––– U.S. ––––, 135 S.Ct. 1823, 1829, 191 L.Ed.2d 795 (2015). In response, Edison acknowledged that it had a duty to monitor the funds for changed circumstances that would make the investment no longer prudent, but argued that the beneficiaries did not show sufficiently changed circumstances. Our vacated decision accepted Edison's contention, and noted that "the district court was entirely correct to have entertained" the possibility of changed circumstances, and correct to have found the circumstances insufficient to trigger a response by Edison. Id. at 1120. We thus concluded that any theory of a duty absent changed circumstances amounted to a continuing violation theory that we declined to read into the ERISA statute of limitations. Id. at 1119–20.
Plaintiffs successfully petitioned for certiorari, and the Supreme Court reversed our decision concerning the statute of limitations, holding that regardless of when an investment was initially selected, "a fiduciary's allegedly imprudent retention of an investment" is an event that triggers a new statute of limitations period. Tibble IV , 135 S.Ct. at 1826, 1828–29. The Court specifically rejected "the conclusion that only a significant change in circumstances could engender a new breach of a fiduciary duty." Id. at 1827. We were cautioned against "applying a statutory bar to a claim of a ‘breach or violation’ of a fiduciary duty without considering the nature of the fiduciary duty," and told to "recognize that under trust law a fiduciary is required to conduct a regular review of its investment with the nature and timing of the review contingent on the circumstances." Id. at 1827–28. The Court instructed us to decide "the scope of [Edison's] fiduciary duty" to monitor investments. Id. at 1829.
The Court also left to us on remand "any questions of forfeiture," acknowledging Edison's contention that the beneficiaries "did not raise the claim below that [Edison] committed new breaches of the duty of prudence by failing to monitor their investments and remove imprudent ones absent a significant change in circumstances." Id .
A panel of our court in Tibble v. Edison International , 820 F.3d 1041, 1048 (9th Cir. 2016) (Tibble V ), concluded that the issue was forfeited. We then ordered that the case be reheard en banc, so the panel's decision in Tibble V is vacated. Tibble v. Edison Int'l , 831 F.3d 1262 (9th Cir. 2016).
For the reasons discussed below, we vacate the district court's decisions concerning the funds added to the Plan before 2001, and remand for trial on an open record on the claim that, regardless of whether there was a significant change in circumstances, Edison should have switched from retail-class fund shares to institutional-class fund shares to fulfill its continuing duty to monitor the appropriateness of the trust investments. We also encourage the district court to reevaluate its fee determination in light of the Supreme Court's decision, and our decision en banc.
We have jurisdiction pursuant to 28 U.S.C. § 1291. We review summary judgment determinations de novo . Szajer v. City of Los Angeles , 632 F.3d 607, 610 (9th Cir. 2011).
The applicable statute of limitations in this case is the six-year limit of 29 U.S.C. § 1113(1)(A), which states that "[n]o action may be commenced ... with respect to a fiduciary's...
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