The U.S. Supreme Court granted certiorari on October 2, 2014 in the case of Tibble v. Edison International,1 for the narrow purpose of reviewing the holding by the Ninth Circuit Court of Appeals that the statute of limitations under the Employee Retirement Income Security Act of 1974 (“ERISA”) barred the plaintiffs’ claims. Tibble is one of a number of cases in which plaintiffs have alleged that fiduciaries of 401(k) and similar plans imprudently or otherwise improperly permitted excessive fees or fee structures to be imposed under mutual funds offered as investment alternatives under plans.
In Tibble, the plaintiffs argued in the district court that, among other things, the responsible plan fiduciaries violated ERISA by imprudently choosing and continuing to offer investment alternatives under the plan with excessively high investment fees.2 As to claims regarding certain aspects of the fiduciaries’ fund-selection process, the district court held that the fiduciaries indeed breached their fiduciary duties, but limited recovery so as to be with respect only to funds selected for inclusion under the plan during the six years immediately preceding the lawsuit. The court held that claims with respect to funds selected before that time were barred by ERISA’s six-year statute of limitations.3 The district court also reached a number of other procedural and substantive issues.
The Ninth Circuit agreed with the district court regarding its holding that, as to certain aspects of the fiduciaries’ fund-selection process, the plan fiduciaries breached their fiduciary duties, and agreed as well that claims regarding funds selected outside of the six-year statute of limitations were time-barred. In particular, the Ninth Circuit, agreeing with the Fourth Circuit,4 held that the continuing maintenance of an imprudent investment option is not the act that triggers liability, and that, therefore, the plaintiffs could allege a fiduciary breach only with respect to the initial selection of investment alternatives occurring within the applicable six-year period. Like the district court, the Ninth Circuit also reached a number of other procedural and substantive issues.
The claims in Tibble are not unlike the claims made in numerous cases involving 401(k) plans in which plaintiffs have alleged fiduciary breaches in connection with purportedly excessive or otherwise improper fees. In addition, plan sponsors may indirectly be liable for any such breaches by virtue of contractual indemnification and other arrangements to which they could be subject. Thus, even the possibility thatTibble might be heard by the Supreme Court got significant coverage in the press.5 As recently as last term, in Fifth Third Bancorp v. Dudenhoeffer,6 the Court waded into a major controversy involving ERISA fiduciary matters involving so-called “stock-drop” matters, and now, with Tibble, the Court yet again would have the opportunity to navigate the murky waters of ERISA’s fiduciary rules.
In its amicus curiae brief urging the Court to hear Tibble, the U.S. Solicitor General expressed its view thatTibble for various reasons was not a good setting for the Court to address several of the issues raised in the case.7 The Solicitor General did urge the Court to take the case specifically with respect to ERISA’s statute of limitations.
Ultimately, the Court agreed to hear Tibble regarding the statute-of-limitations issue, and only as to that issue, as the Solicitor General suggested. Even with the Court’s apparently narrow scope of review, however, Tibble could have a substantial impact in terms of clarifying the time frame during which fiduciaries and plan sponsors have liability for fiduciary breaches generally. It also remains to be seen whether the Court, either during the pendency of Tibble8 or in some other case that may come in the future, will eventually take the opportunity to consider the other important procedural and substantive issues presented by fee litigation involving 401(k) plans.