The Supreme Court has once again emphasized the importance of ERISA’s origins in the common law of trusts, this time in interpreting its statute of limitations. On May 18, the Court reversed the Ninth Circuit’s decision in Tibble v. Edison1, which had held that a claim for breach of fiduciary duty based on the inclusion of certain mutual funds in a plan’s investment menu was time-barred.
The complaint alleged that the respondents (the plan administrator and others) violated their fiduciary duties with respect to three mutual funds added to the Plan in 1999 and three mutual funds added to the Plan in 2002. Petitioners argued that respondents acted imprudently by offering higher priced retail-class mutual funds as plan investments instead of institutional-class mutual funds. With respect to the mutual funds added in 1999, the Ninth Circuit held that the claims were untimely because the funds were added as plan investments outside the six-year statute of limitations and because petitioners had not established a change in circumstances that might trigger an obligation to review and to change investments within the limitations period. The Supreme Court vacated and remanded in a unanimous decision.
ERISA provides that an action for breach of fiduciary duty must be brought within six years after the date on which the last action which constituted the breach occurred, or in the case of an omission, that latest day on which the fiduciary could have cured the breach. The Court agreed with the Ninth Circuit that the appropriate analysis is whether the last action complained of occurred within the six-year period but disagreed that the “last action” in this case was necessarily the date the funds were added. The Ninth Circuit had failed to consider that the nature of the complaint arose under the common law of trusts, under which a fiduciary has a continuing duty to monitor plan investments.
In remanding the case, the Supreme Court was careful to explain that it was not ruling on the scope of any fiduciary duty in the case, and in particular, whether and to what extent a review of the mutual fund selections would be required. “Of course after the Ninth Circuit considers trust law principles, it is possible that it will conclude that respondents did conduct the sort of review that a prudent fiduciary would have conducted” under the circumstances. The Court also left to the Ninth Circuit to decide whether the plaintiffs forfeited any claim based on the breach of any duty to monitor, by failing to raise it in prior proceedings.
The decision may be most notable because the sole ground for reversal was the Ninth Circuit’s failure to invoke trust law in its analysis. Much of the opinion is spent describing the common law of trusts and specific instructions were given to the Ninth Circuit to consider this law on remand.