Alert September 29, 2014

Supreme Court Urged to Consider Excessive Fee Case


The Supreme Court will soon announce whether it will address the scope of ERISA’s six-year statute of repose when applied to a claim that investments selected more than six years before suit commenced were imprudent due to allegedly excessive fees. The federal government is urging the Court to take up the issue, and to move the law in a significantly more plaintiff-friendly direction. Every federal court of appeals to have addressed the issue has held that, absent materially changed circumstances, ERISA’s statute of repose bars challenges to the prudence of investments selected more than six years before suit was filed. The federal government has now asked the Supreme Court to reject that reading of the statute and to hold instead that regardless whether circumstances change after the initial selection of a plan investment, a plan fiduciary can be liable under ERISA for investments held to be imprudent that were selected more than six years before a suit is commenced. The Court is scheduled to consider on Monday, September 29, 2014 whether to take up the case. If it does so, which appears highly likely, the Court would announce the grant of certiorari later that week. The case would then be argued in the upcoming term, with a decision to be issued by June 2015.


The government staked out its position in a filing in Tibble v. Edison International, No. 13-550. In that case, previously described in our March 28, 2013 ERISA Litigation Update, the U.S. Court of Appeals for the Ninth Circuit held, in part, that ERISA’s six-year statute of repose barred plan participants from challenging the prudence of mutual funds selected for their plan if: (i) the challenged funds were selected more than six years before participants filed suit; and (ii) plaintiffs were unable to prove at trial that circumstances changed during those six years.

The participants asked the Supreme Court to decide whether the decision was correct in light of a fiduciary’s ongoing duty to monitor plan investments. Before ruling on the participants’ petition, on March 24, 2014, the Court asked the Solicitor General of the United States to submit the federal government’s views. On August 19, 2014, the Solicitor General, joined by the Solicitor of Labor, filed a brief urging the Supreme Court to grant review and to hold that the six-year statute of repose does not bar claims concerning the suitability of any investment, even those selected for a plan more than six years prior to commencement of suit. (Update: On October 2, 2014, the Supreme Court granted the petition for writ of certiorari, limited to the question presented by the U.S. Solicitor General and Solicitor of Labor.)

The Government’s View of the Statute of Repose

In its brief, the government asserts that “ERISA imposes a continuing duty of prudence on plan fiduciaries” which entails a continuing duty “to review plan investments and eliminate imprudent ones.” The government distinguishes its argument from a “continuing violation” theory, which was rejected by the court below; instead, it argues that a separate and distinct breach of the duty to monitor investments and remove imprudent ones existed after the investments were first selected. The government further asserts that the Ninth Circuit’s decision “effectively exempts plan fiduciaries from important ongoing fiduciary duties concerning investment options first offered more than six years earlier and fails to protect plan participants’ retirement savings.”

The government’s brief recognizes that the only two circuits that have addressed the same question in the last two years have agreed with the Ninth Circuit’s view. The government argues instead that the Supreme Court should follow two appellate decisions from 1977 and 1992, decisions which did not address the prudence of using mutual funds on a plan’s investment platform.

The government’s brief does not address the various arguments raised by defendants in their opposition to certiorari, including the arguments: (i) acknowledging that an ongoing duty to monitor does exist under ERISA, but such duty can only support a claim distinct from a claim based on the selection of the option if there are changed circumstances that did not exist at the time of selection; (ii) ERISA does not allow claims to exist in perpetuity, and allowing participants to sue for harm related to allegedly imprudent funds on a plan’s investment menu under a failure-to-monitor theory would effectively render the statute of repose meaningless and “would allow any artful plaintiff to avoid the operation” of the repose period; and (iii) the congressional aim of reducing costly litigation would be thwarted by denying plan sponsors and fiduciaries the benefits of the repose period Congress enacted.


The Supreme Court has distributed the certiorari briefing for its end-of-summer conference, to be held Monday, September 29, 2014. A decision to take up the case would ordinarily be released later that week; a denial of certiorari would not be released until Monday, October 6, 2014. The Court almost invariably accepts recommendations by the Solicitor General to grant certiorari, making this case a highly likely addition to the Court’s March 2015 argument calendar. A decision on the merits would come by June 2015.