SAN FRANCISCO (CN) – On remand from the Supreme Court, the Ninth Circuit on Friday gave employees and former employees another shot at seeking millions of dollars from Edison International for failing to monitor their retirement investments.
Lead plaintiff Glenn Tibble filed the federal class action in 2007, claiming that Edison recklessly managed their retirement plans by including expensive retail-class mutual funds as well as other risky investments since 1999, though there were institutional-class mutual funds available that were materially identical and cost less.
The trial court ruled that the complaint was barred by the ERISA’s six-year statute of limitations. The Ninth Circuit upheld that ruling in 2013.
But in 2015 the Supreme Court unanimously overturned the Ninth Circuit, holding that imposing a strict deadline on the claim was inappropriate without determining what sort of fiduciary duty the company owed its employees.
“The [Ninth] Circuit did not recognize that under trust law a fiduciary is required to conduct a regular review of its investment with the nature and timing of the review contingent on the circumstances,” Justice Stephen Breyer wrote for the Supreme Court.
The case went back to the Ninth Circuit, whose panel once again ruled for Edison, finding that the employees forfeited their “failure-to-monitor claim.”
But after a rehearing en banc, the Ninth Circuit on Friday ruled for the employees.
“(R)egardless of whether there was a significant change in circumstances, Edison should have switched from retail-class fund shares to institutional-class fund shares to fulfill its continuing duty to monitor the appropriateness of the trust investments,” Ninth Circuit Judge Milan Smith Jr. wrote for the court.
Rather than the employees forfeiting their failure-to-monitor claim, Smith wrote, Edison forfeited its forfeiture argument.
“Edison argues that it did not raise forfeiture because the beneficiaries did not articulate their continuing duty theory before they submitted their Supreme Court briefing. However… the beneficiaries raised the continuing duty argument in their opening brief on appeal. Edison therefore forfeited any potential forfeiture response to that argument. And, even at the Supreme Court, where the beneficiaries clearly presented their continuing duty argument in their petition for certiorari, Edison responded not that the beneficiaries had forfeited that claim, but instead, that a fiduciary only has a ‘duty to monitor for material changes in circumstances.’”
Because the employees never had the opportunity to present evidence for a failure-to-monitor claim to the district court, the case will be remanded for a trial on an open record. The district court also must recalculate the attorney fees and costs it awarded the employees.
Class attorney Michael Wolff said in an email that his clients were “very pleased with the en banc court’s decision and welcome the opportunity to recover our plan’s damages from Edison’s wrongful use of retail mutual funds.”
Wolff, with Schlichter Bogard & Denton in St. Louis, added: “The decision corrects a serious misinterpretation of ERISA’s statute of limitations and enforces the principle recognized by the Supreme Court that a fiduciary must remove imprudent investments no matter how long they have been in a plan. That will benefit all retirement plan participants.”
Edison’s attorney Jonathan D. Hacker, with O’Melveny & Myers in Washington, D.C., could not be reached for comment.