401(k) Fee Suit Defendant Filing Bucks the Odds

By Nevin Adams • 1/23/2015 • 0 Comments

With a month to go before its Supreme Court hearing, the employer defendant in a 401(k) excessive fee litigation case has petitioned the nation’s high court to drop the case.

The filing by Edison International seeks to have the Supreme Court reverse its prior decision to review certain elements in the case of Tibble vs. Edison International, specifically how ERISA’s statute of limitations is to be applied.

Presenting the case for dismissal, the petition claims the high court “improvidently granted” certification of what many view as a landmark 401(k) fee case. Specifically, Edison says the plaintiffs “starkly mischaracterize(d)” the record in asking for the case to be reviewed.

Case History

Originally filed back in 2007 in the U.S. District Court for the Central District of California, the plaintiffs charged that the Edison plan fiduciaries breached their duty of prudence by offering retail-class shares of six mutual funds to 401(k) plan participants, even though lower-priced institutional-class shares of the same funds were available. The lower court backed plaintiffs regarding the decision on three of those funds, but barred claims regarding the other three, finding that those decisions — the funds were initially chosen in 1998 — had occurred beyond ERISA’s statute of limitations. The 9th U.S. Circuit Court of Appeals subsequently upheld that decision. 

Challenging those rulings, the plaintiffs argued in their brief to the Supreme Court that the barred claims should be considered timely because they ultimately derived from the imprudent management of the plan during the six-year statute of limitations.  

However, the plaintiffs “were allowed to pursue at trial exactly the claim they now say they should have been allowed to pursue at trial, i.e., whether respondents (Edison) acted imprudently in retaining the retail-class shares throughout the limitations period,” Edison attorneys wrote in their latest filing. 

Already Adjudicated?

In its new petition, Edison claims that the only relevant question should be whether the company breached its monitoring duties under ERISA, a question it says the district court resolved after a “full and fair trial.” 

The defendant’s petition notes that the 4th, 9th and 11th Circuits have all held that a claim challenging the selection of mutual funds for a 401(k) plan lineup is barred by the six-year limitations period, “…if the claim challenges funds that were selected more than six years before the claim was filed, and the claim does not allege that any materially new circumstances arose within the previous six years that required removal of the funds.”

The defendants’ petition concludes by noting that the three funds that remain at issue were removed from the plan years ago. Moreover, it noted that the “district court specifically found as a matter of fact that Edison fulfilled its duty of loyalty to all Plan participants, and that Edison’s selection of a few imprudent share classes among the numerous funds selected for the Plan was an unintentional ‘oversight’ that did not demonstrate any bad faith.”

Their final words: “There is nothing here warranting further review.”

The odds of success in persuading the Supreme Court to dismiss a case it has already agreed to hear? Not very good.

The case is currently set for oral arguments before the Supreme Court on February 25.

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