ERIC on January 23 filed an amicus brief with the U.S. Supreme Court in the Tibble v. Edison International case, together with the National Association of Manufacturers, the U.S. Chamber of Commerce, the American Benefits Council, and the Business Roundtable.
We would like to thank Scott Macey for his leadership and efforts on the brief even after his retirement as President and CEO of ERIC. His comments were insightful and critical to the arguments made to the Court. We would also like to thank the member companies that supported the filing of this brief as this effort would not be possible without them.
The brief was prepared by Gibson, Dunn & Crutcher LLP.
The Court will hear the issue of whether a claim that fiduciaries breached their duty of prudence by offering higher-cost retail-class mutual funds to participants instead of institution-class mutual funds is barred by ERISA’s statute of limitations when fiduciaries initially chose the funds more than six years before the claim was filed.
The petitioners argue that, even in the absence of any material change in circumstances, the plan fiduciaries’ failure to remove three retail-class options from the plan and replace them with institutional-class shares in the same mutual funds was a breach of fiduciary duty that is not time-barred because it occurred continuously during the six years prior to the filing of the complaint.
Our brief argues that this type of “continuing violation” theory would subject fiduciaries to perpetual exposure to litigation and potential liability for investment selection and other acts completed long before suit was actually filed. In addition, the brief contends that the petitioners conflate two different aspects of fiduciary decision-making in an effort to endow plan fiduciaries with a constant duty to reevaluate the entirety of a portfolio on some unstated periodic basis. As we are sure you agree, the adoption of these theories would be disruptive to plan operations and participant interests by potentially requiring constant re-evaluations and changes to investment choices selected and relied upon by participants.
This could potentially be a landmark case regarding the application of the statute of limitations to fiduciary breach cases. Oral arguments are scheduled for February 24, 2015. A decision on the case is not expected until late spring or early summer. We will keep you informed of developments in the case.