On May 18, 2015 the Supreme Court of the United States ruled in favor of petitioners in Tibble Et. Al. v. Edison International Et. Al. Petitioners alleged that respondents violated their fiduciary duty by imprudently offering higher priced retail-class mutual funds as plan investments when materially identical lower priced institutional-class mutual funds were available
Central to this issue is when was ERISA’s six-year statute of limitations (to file a claim for a breach of fiduciary duty) triggered? Did the clock start running at the time the funds at issue were originally selected, or was the passive retention of allegedly imprudent investments an “action” or “omission” that triggered the running of the six-year limitations period?
The Court held that the Ninth Circuit Court of Appeals was incorrect in finding that the limitations period starts at the initial selection of the investments. Citing The Restatement (Third) of Trusts, The Uniform Prudent Investor Act, as well as other treatise and case law, the Court found that a fiduciary trustee has a continuing duty, separate from prudence when initially selecting investments, to monitor and remove imprudent investments.
This case clarified the timing of when a claim may be brought for breach of fiduciary duty. However, it leaves open the question of what actually constitutes a diligent review. The question of whether respondents met the scope of performing a “diligent” review or breached their fiduciary duty, has been remanded back to the Ninth Circuit for consideration.