A 401(k) revenue-sharing lawsuit finally got its day before the U.S. Supreme Court.
While the nation’s high court was ostensibly focused on how ERISA’s statute of limitations was to be applied in challenging fiduciary actions, there was also a brisk discussion among the justices about the what, how often, and whys of fiduciary review.
And, at least in the hour-long exchange with the justices, there appeared to be little difference in stance on the basic standards of fiduciary behavior — except, of course, as to what circumstances would require a reevaluation of a fiduciary decision, specifically the selection of an investment fund.
In 2013, the U.S. Court of Appeals for the 9th Circuit agreed that Edison 401(k) plan fiduciaries breached their duties by including retail shares of three mutual funds without first investigating the possibility of including lower-cost institutional-share class alternatives. However, the plaintiffs lost on their statute-of-limitations “continuing violation theory,” concluding that ERISA's 6-year statute of limitations began to run when the original decision to include the investment in the plan was made.
In the presentations before the Supreme Court, both parties agreed that there was a fiduciary duty to review plan investments, and both parties were willing to concede that the initial review and selection of an investment fund should be more extensive than that of considering the retention/replacement of a fund that was already on the investment menu.
However, the frequency and nature of that review was something the justices seemed quite reluctant to do, preferring to leave such determinations to a lower court trier of fact.
The Department of Labor explained to the court that the fiduciary’s ongoing monitoring duty is “…not limited to circumstances in which the fund changed so much that it's like a new fund is being put in place,” noting that, “You have a duty to look on a periodic basis and, really, how are you going to know if there have been changes unless you looked.”
Plaintiffs’ attorneys expressed frustration that some of their arguments before the lower court were blunted by the court’s summary judgment, and encouraged the justices to remand the case to give them an opportunity to prove otherwise.
Will plaintiffs get a chance to make their case before a lower court? The exchanges with the justices certainly seemed to suggest that. But whether that will lead to a new wave of 401(k) litigation is something else altogether.
A decision in the Tibble case is expected before the end of June. The transcript of the Supreme Court arguments and discussion is online here.