ERISA Lawsuit to Be Heard by Supreme Court in February

Washington, DCAn ERISA lawsuit concerning the statute of limitations in ERISA plan claims will be heard by the Supreme Court this month. The lawsuit, Tibble, et al vs. Edison International, et al, originally involved claims about imprudent investments for a company ERISA plan, but the Supreme Court will hear arguments concerning the statute of limitations in the ERISA plans.

Lower courts had dismissed parts of the lawsuit because the statute of limitations under the Employee Retirement Income Security Act (ERISA) requires a lawsuit be brought within six years of the most recent violation. The violation in question in the Tibble lawsuit occurred in 1999, but the lawsuit was not filed until 2007, after the statute of limitations had run out.

Petitioners argue that the purchase of a class of funds was the imprudent investment, because there were lower cost versions of the funds available - but that the purchase of the funds was actually not the last violation of ERISA laws. Rather, they argue that as long as the plan held the shares as an investment the fiduciary was liable for financial harm to the plan. In other words, the statute of limitations should not begin when the funds are purchased but should continue while the shares are part of the investment, the petitioners argue.

According to documents filed in support of the case, plan participants filed the lawsuit alleging breach of fiduciary duties. Lower courts dismissed some claims in the lawsuit because the six-year statute of limitations had passed on three of the funds, barring the claims. But the district court did find that the respondents breached their duty of prudence by offering funds with higher fees when identical funds with lower fees were available, making the fees “wholly unnecessary,” and the claims involving three funds added in 2002 were allowed.

The lawsuit has received support from the Solicitor General, Donald B. Verrilli, Jr., who filed a brief with the US Supreme Court supporting the petitioners. Among arguments from the Solicitor General in the letter are that a plan trustee has a duty to review investments and remove those that are not prudent from the trust. “[A] trustee’s duties apply not only in making investments but also in monitoring and reviewing investments.”

Based on that argument, a fiduciary has an ongoing duty to reexamine the funds in a plan and ensure they are still prudent. Because the fiduciary’s duty was ongoing, the amicus brief argues, the most recent violation of the duty of prudence did not occur when the fund was purchased but throughout the period that the fiduciary should have been reviewing and evaluating plan investments.

The lawsuit is Glenn Tibble, et al, v. Edison International, et al, case number 13-550, in the Supreme Court of the United States. It is scheduled to be heard in the Supreme Court on February 24.