The landmark case is Tibble v. Edison International. Tibble and his coworkers were enrolled in a 401(k) retirement plan. In 1999 and 2002, the retirement plan invested in some mutual funds.
But there was a problem. There were basically identical but cheaper mutual funds available at the time. The plan could have (and should have) saved a lot of money by investing in those cheaper mutual funds. This appeared to be a breach of fiduciary duty.
So the plaintiffs sued in 2007. But the timing created a problem for the plaintiffs. It had been more than six years since the 1999 mutual fund purchases. And the Employee Retirement & Income Security Act (“ERISA”), in section 1113, requires lawsuits for a breach of fiduciary duty to be brought within six years of “the date of the last action which constituted a part of the breach or violation” or “in the case of an omission the latest date on which the fiduciary could have cured the breach or violation.”
The District Court and the Ninth Circuit Court of Appeals agreed that the claims for the 1999 purchases were barred by section 1113, since the purchases had not been made within six years.
The Supreme Court unanimously reversed. Writing for the Court, Justice Breyer held there is a continuing duty to monitor assets and remove imprudent ones. So even though the purchases were in 1999, the plan still had a duty to monitor and remove them, if imprudent, in later years.
The plaintiffs had a right to sue, not for the 1999 purchase, for the the failure to monitor and remove in subsequent years. And now, a lot of other employees who might have thought the time to make a claim had passed will still be able to sue.
The Supreme Court’s decision can be found here.