Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Edison International Inc. workers convinced an appeals court to revive their claim accusing the company of breaching its ERISA fiduciary duties by failing to monitor allegedly high fees charged in the company’s 401(k) plan ( Tibble v. Edison Int’l , 2016 BL 418555, 9th Cir., No. 10-56406, 12/16/16 .
The participants in Edison’s 401(k) plan didn’t forfeit their failure-to-monitor claims in relation to funds added to the plan outside the six-year limitations period under the Employee Retirement Income Security Act, a full panel of appellate court judges of the U.S. Court of Appeals for the Ninth Circuit held Dec. 16. Instead, Edison forfeited its argument that the participants had waived their claims by failing to raise it in the initial appeal, the court said.
The decision is a win for the Edison workers, who have litigated their lawsuit for almost 10 years. The case is significant because of the worker-friendly decision by U.S. Supreme Court in 2015 that made it harder for plan fiduciaries to have lawsuits over mutual fund fees dismissed on statute-of-limitations grounds. With the Ninth Circuit’s latest decision, the workers will have another chance to hold Edison plan fiduciaries liable for allegedly excessive fees.
A district court had ruled in favor of Edison, holding that the triggering events alleged by the participants in relation to certain funds added before the six-year limitations period, or 2001, were insufficient to trigger a full diligence review under ERISA. The appeals court in April seemed to put an end to the case by holding that the participants had waived that claim by failing to raise it before their petition for Supreme Court review.
In a 180-degree turn, the appeals court reversed its previous opinion and vacated the district court decision related to the funds added to the plan before 2001. It remanded for trial on the participants’ claim that, regardless of any significant change in circumstances, Edison should have switched from higher-priced retail-class fund shares to less-expensive institutional-class fund shares.
The duty of prudence required Edison to re-evaluate investments periodically and to take into account its power to obtain favorable investment products, particularly when those products that are substantially identical—other than their lower cost—to products it had already selected, the court said.
Because the case has far “greater importance than the district court believed it did at the time of its earlier fee determination,” the appeals court judges instructed that court to re-evaluate its fee determination in light of the “significant amount of work that has been required to vindicate an important ERISA principle.” The district court had awarded $407,277 in fees and $3,732 in costs to the workers.
The opinion was issued by Judge Milan D. Smith Jr.
Schlichter Bogard & Denton represents the workers. O’Melveny & Myers LLP represents Edison.
To contact the reporter on this story: Carmen Castro-Pagan in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)