Glenn Tibble v. Edison International , 820 F.3d 1041 ( 2016 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GLENN TIBBLE; WILLIAM BAUER; No. 10-56406
WILLIAM IZRAL; HENRY
RUNOWIECKI; FREDERICK D.C. No.
SUHADOLC; HUGH TINMAN, JR., as 2:07-cv-05359-
representatives of a class of similarly SVW-AGR
situated persons, and on behalf of the
Plan,
Plaintiffs-Appellants,
v.
EDISON INTERNATIONAL; THE
EDISON INTERNATIONAL BENEFITS
COMMITTEE, FKA The Southern
California Edison Benefits
Committee; EDISON INTERNATIONAL
TRUST INVESTMENT COMMITTEE;
SECRETARY OF THE EDISON
INTERNATIONAL BENEFITS
COMMITTEE; SOUTHERN CALIFORNIA
EDISON’S VICE PRESIDENT OF
HUMAN RESOURCES; MANAGER OF
SOUTHERN CALIFORNIA EDISON’S
HR SERVICE CENTER,
Defendants-Appellees.
2 TIBBLE V. EDISON INT’L
GLENN TIBBLE; WILLIAM BAUER; No. 10-56415
WILLIAM IZRAL; HENRY
RUNOWIECKI; FREDERICK D.C. No.
SUHADOLC; HUGH TINMAN, JR., as 2:07-cv-05359-
representatives of a class of similarly SVW-AGR
situated persons, and on behalf of the
Plan,
Plaintiffs-Appellees, OPINION
v.
EDISON INTERNATIONAL; SOUTHERN
CALIFORNIA EDISON BENEFITS
COMMITTEE, incorrectly named The
Edison International Benefits
Committee; EDISON INTERNATIONAL
TRUST INVESTMENT COMMITTEE;
SECRETARY OF THE SOUTHERN
CALIFORNIA EDISON COMPANY
BENEFITS COMMITTEE, incorrectly
named Secretary of the Edison
International Benefits Committee;
SOUTHERN CALIFORNIA EDISON’S
VICE PRESIDENT OF HUMAN
RESOURCES; MANAGER OF
SOUTHERN CALIFORNIA EDISON’S
HR SERVICE CENTER,
Defendants-Appellants.
TIBBLE V. EDISON INT’L 3
On Remand From The United States Supreme Court
Argued and Submitted
December 7, 2015—San Francisco, California
Filed April 13, 2016
Before: Alfred T. Goodwin and Diarmuid F. O’Scannlain,
Circuit Judges, and Jack Zouhary, District Judge.*
Opinion by Judge O’Scannlain
SUMMARY**
Employee Retirement Income Security Act
On remand from the United States Supreme Court, the
panel affirmed the district court’s judgment, after a bench
trial, in favor of an employer and its benefits plan
administrator on claims of breach of fiduciary duty in the
selection and retention of certain mutual funds for a benefit
plan governed by ERISA.
The court of appeals had previously affirmed the district
court’s holding that the plan beneficiaries’ claims regarding
the selection of mutual funds in 1999 were time-barred. The
*
The Honorable Jack Zouhary, United States District Judge for the
Northern District of Ohio, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4 TIBBLE V. EDISON INT’L
Supreme Court vacated the court of appeals’ decision,
observing that federal law imposes on fiduciaries an ongoing
duty to monitor investments even absent a change in
circumstances.
On remand, the panel held that the beneficiaries forfeited
such ongoing-duty-to-monitor argument by failing to raise it
either before the district court or in their initial appeal.
COUNSEL
Michael A. Wolff, Schlichter Bogard & Denton LLP, St.
Louis, Missouri, argued the cause and filed the briefs for the
plaintiffs-appellants. With him on the briefs were Jerome J.
Schlichter, Nelson G. Wolff, and Sean E. Soyars, Schlichter
Bogard & Denton LLP, St. Louis, Missouri.
Johnathan D. Hacker argued the cause and filed the brief for
for the defendants-appellees. With him on the brief were
Meaghan VerGow, O’Melveny & Myers LLP, Washington,
D.C.; Ward A. Penfold and Gabriel Markoff, O’Melveny &
Myers LLP, San Francisco, California; and Sergey
Trakhtenberg, Southern California Edison Company,
Rosemead, California.
TIBBLE V. EDISON INT’L 5
OPINION
O’SCANNLAIN, Circuit Judge:
Glenn Tibble and other beneficiaries sued their employer
Edison International and its benefit plan administrator under
the Employee Retirement Income Security Act of 1974,
asserting a violation of the duty of prudence in the selection
and retention of certain mutual funds. The district court held
that the beneficiaries’ claims were time-barred, and, on
appeal, we agreed. The Supreme Court subsequently vacated
our decision, observing that federal law imposes on
fiduciaries an ongoing duty to monitor investments even
absent a change in circumstances, and remanded to us.
Consistent with the Supreme Court’s instructions, we must
decide whether the beneficiaries forfeited such ongoing-duty-
to-monitor argument by failing to raise it before the district
court or our Court.
I
Edison International is a holding company which includes
Southern California Edison Company and other energy
interests (collectively “Edison”). As an employer-
organization, Edison offers a 401(k) Savings Plan (“Plan”) to
its workforce. That Plan is a defined-contribution fund,
meaning that the value of any employee’s retirement benefits
is limited to his or her own individual investment account.
Participants invest a part of their wages combined with a
company contribution in the investment options they choose
from the Plan menu. Ultimately, the value of those individual
investments is determined by the market performance of
employee and employer contributions, less expenses such as
management or administrative fees. As of 2007, the plan held
6 TIBBLE V. EDISON INT’L
roughly $3.8 billion in assets for the benefit of approximately
20,000 participants.
The Plan’s investment menu originally contained six
options. In response to a study and negotiations with unions
representing some of the workforce, Edison expanded the
Plan dramatically in 1999. Particularly relevant here, Edison
added three retail-class mutual funds. These funds were
generally available to the public and had higher
administrative fees than other institutional-class alternatives
available only to institutional investors. Edison added three
more retail-class mutual funds to the Plan after 2002.
A
On August 16, 2007, Glenn Tibble and other current and
former beneficiaries sued Edison pursuant to § 502(a) of the
Employee Retirement Income Security Act of 1974
(“ERISA”), which allows “a participant, beneficiary or
fiduciary” to bring an action for breach of fiduciary duty.
29 U.S.C. § 1132(a)(2). Among other claims, beneficiaries
asserted that Edison violated its fiduciary duties under ERISA
by selecting retail-class mutual funds when cheaper,
institutional-class funds were available. Edison moved for
summary judgment, asserting that the beneficiaries’ claims
regarding the three mutual funds added to the Plan in 1999
were barred by Section 413 of ERISA, which states that no
action for fiduciary breach can be commenced six years after
“the last action which constituted a part of the breach or
violation.” 29 U.S.C. § 1113. The district court agreed,
granting partial summary judgment and observing that these
mutual funds were added to the plan more than six years
before beneficiaries’ lawsuit. Tibble v. Edison Int’l, 639 F.
Supp. 2d 1074 (C.D. Cal. 2009). In so holding, the district
TIBBLE V. EDISON INT’L 7
court reasoned that “[t]here is no ‘continuing violation’
theory to claims subject to ERISA’s statute of limitations.”
Id. at 1086 (quoting Phillips v. Alaska Hotel & Rest. Emps.
Pension Fund, 944 F.2d 509, 520 (9th Cir. 1991)).
Following partial summary judgment, beneficiaries
proceeded to trial on whether Edison violated its fiduciary
duty by selecting the retail-class mutual funds added to the
Plan in 2002. During trial, however, the district court also
allowed beneficiaries to allege a violation of the duty of
prudence relating to the 1999-added mutual funds on the
theory that “significant events within the limitations period”
should have triggered a review of these funds. To support
this theory, beneficiaries offered testimony from their expert,
Dr. Steven Pomerantz. Pomerantz pointed out that two of the
funds added in 1999 had undergone a name change and
another had changed from a small-cap growth fund to a
small-mid-cap growth fund. Pomerantz asserted that these
changes were “significant enough” that Edison should have
conducted a full due diligence review.
During trial, beneficiaries also asserted that Edison
violated its duty of prudence by keeping a certain Money
Market Fund in the Plan that allegedly charged excessive
management fees. Although Edison initially added the
Money Market Fund more than six years before litigation
commenced, the beneficiaries claimed that Edison violated its
fiduciary duty within the relevant time period by failing to
monitor the Fund’s fees and switch to one with lower fees.
The district court allowed beneficiaries to proceed on this
claim, notwithstanding its ruling related to the 1999-added
mutual funds.
8 TIBBLE V. EDISON INT’L
Ultimately, the district court ruled in favor of Edison on
almost all of beneficiaries’ claims. With respect to the retail-
class mutual funds added in 1999, the district court concluded
that the changes identified by beneficiaries within the
limitations period were insufficient to justify a full due
diligence review. The district court also ruled in favor of
Edison with respect to the Money Market Fund, concluding
that Edison did in fact monitor this Fund within the relevant
time period and that its decision to maintain the Money
Market Fund was not imprudent.
B
Following judgment in the district court, beneficiaries
appealed to this Court of Appeals. They argued that the
district court erred in concluding that ERISA’s six-year
limitation barred their claim that Edison breached its
fiduciary duty by adding retail-class mutual funds to the Plan
in 1999. They did not contest the district court’s conclusion
that no “significant events” occurred within the relevant
period that would have triggered a due diligence review.
Rather, they contended that under Section 413 of ERISA, the
six-year limitation incorporates the continuing violation
doctrine. In response, Edison acknowledged that it had an
ongoing duty to ensure that each of the Plan’s investment
options remained prudent. But Edison pointed out that the
beneficiaries were not alleging acts that constituted a
violation within the six-year period, but instead arguing their
lawsuit should be deemed timely because of the “continuing
effects” of decisions made previously, in 1999.
We sided with Edison, holding that “the act of designating
an investment for inclusion starts the six-year period . . . for
claims asserting imprudence in the design of the plan menu.”
TIBBLE V. EDISON INT’L 9
Tibble v. Edison Int’l, 729 F.3d 1110, 1119 (9th Cir. 2013).
We declined beneficiaries’ invitation to “equitably engraft
onto, or discern from the text of section 413 a ‘continuing
violation theory.’” Id. We reasoned that “[c]haracterizing
the mere continued offering of a plan option, without more,
as a subsequent breach” would render ERISA’s time
limitation meaningless and could make fiduciaries liable for
decades-old decisions. Id. at 1120. We also concluded that
the district court was correct in allowing beneficiaries to
assert evidence of “changed circumstances engendering a
new breach,” but noted that it found that no such
circumstances were present. Id.
C
Following our decision, beneficiaries successfully
petitioned for certiorari to the Supreme Court. There, they
asserted that their case was “unlike those in which the
plaintiff bases a claim on an unlawful act that occurred prior
to the [limitations] period but that has continuing effects
during that period.” Instead, they argued that the alleged
breach underlying their claims was Edison’s “failures
prudently to review and remove retail-class shares within the
limitations period” (incidentally, an argument which was not
raised before us). Edison responded by arguing that
beneficiaries had asserted no such claim before the trial court
even though they were perfectly free to do so. Accordingly,
Edison argued the petition should be dismissed as
improvidently granted.
The Supreme Court disagreed with our simple conclusion
that ERISA’s six-year time limitation applied and vacated our
decision. See Tibble v. Edison Int’l, 135 S. Ct. 1823 (2015).
According to the Court, we erred by “applying a statutory bar
10 TIBBLE V. EDISON INT’L
to a claim of a ‘breach or violation’ of a fiduciary duty
without considering the nature of the fiduciary duty.” Id. at
1827. The Court emphasized that “under trust law, a
fiduciary normally has a continuing duty of some kind to
monitor investments and remove imprudent ones.” Id. at
1828–29. Correspondingly, the Court reasoned that a claim
for breaching such duty is timely under ERISA “so long as
the alleged breach of the continuing duty [to monitor]
occurred within six years of suit.” Id. at 1829. The Court
acknowledged that beneficiaries may have forfeited their
claim that Edison “committed new breaches of the duty of
prudence by failing to monitor their investments.” Id. at
1829. The Court instructed us to consider this issue on
remand. Id.
II
Section 413 of ERISA provides that no action for
fiduciary breach may be commenced “after the earlier of”:
(1) six years after (A) the date of the last
action which constituted a part of the breach
or violation, or (B) in the case of an omission
the latest date on which the fiduciary could
have cured the breach or violation, or
(2) three years after the earliest date on which
the plaintiff had actual knowledge of the
breach or violation;
except that in the case of fraud or
concealment, such action may be commenced
not later than six years after the date of
discovery of such breach or violation.
TIBBLE V. EDISON INT’L 11
29 U.S.C. § 1113. There is no dispute that the addition of
retail-class mutual funds to the Plan in 1999 occurred more
than six years before beneficiaries brought suit. The question
is whether beneficiaries waived any argument that Edison
breached its ongoing duty to monitor these funds within the
statutory period.
A
We recognize “a ‘general rule’ against entertaining
arguments on appeal that were not presented or developed
before the district court.” Visendi v. Bank of Am., 733 F.3d
863, 869 (9th Cir. 2013) (quoting In re Mercury Interactive
Corp. Sec. Litig., 618 F.3d 988, 992 (9th Cir. 2010)).
“Although ‘no bright line rule exists to determine whether a
matter has been properly raised below,’ an issue will
generally be deemed waived on appeal if the argument was
not ‘raised sufficiently for the trial court to rule on it.’” In re
Mercury, 618 F.3d at 992 (quoting Whittaker Corp. v.
Execuair Corp., 953 F.3d 510, 515 (9th Cir. 1992)).
1
Beneficiaries admit that during trial they did not argue
that Edison violated its duty of prudence by failing to monitor
retail-class mutual funds added to the Plan in 1999. Instead,
they pursued a theory that “significant changes” in these
funds ought to have triggered a due diligence review. They
now argue their failure to present a continuing-duty-to-
monitor argument ought to be excused since the district
court’s summary judgment order precluded “any claim” of
this type. We are not persuaded.
12 TIBBLE V. EDISON INT’L
The district court began its discussion of Section 413(1)’s
six-year time limitation by observing that “[t]here is no
‘continuing violation’ theory to claims subject to ERISA’s
statute of limitations.” Tibble v. Edison Int’l, 639 F. Supp. 2d
1074, 1086 (C.D. Cal. 2009) (quoting Phillips v. Alaska Hotel
& Rest. Emps. Pension Fund, 944 F.2d 509, 520 (9th Cir.
1991)). In Phillips, we held that Section 413(2) of ERISA,
the companion time limitation to the six-year limit at issue in
this case, bars actions where a plaintiff has actual knowledge
of a breach but does not sue within the required period.
Phillips, 944 F.2d at 520. In so holding, we concluded that a
plaintiff may not subvert the actual-knowledge time
limitation by pointing to some later breach, where that breach
is “of the same kind and nature” as the one known to the
plaintiff. Id. at 521. Applying this insight to ERISA’s six-
year limitation in Section 413(1), the district court declared
that a party may not assert that “any failure to rectify the
breach constituted another discrete breach.” Tibble, 639 F.
Supp. 2d at 1086. Said another way, the court read Phillips
to stand for the proposition that a party may not disguise a
time-barred claim by styling the injury as a “failure to
rectify” a breach that occurred outside ERISA’s statutory
time-limitation.
Beneficiaries argue that the court forbade them from
raising a duty-to-monitor argument by barring claims that
were “of the same character” as those involving Edison’s
inclusion of the retail mutual funds in 1999. But the district
court’s order said nothing of the kind. Instead, the court held
only that a disguised time-barred claim could not be
transmuted into a timely claim by styling a past breach as a
“continuing violation.” The court’s order certainly precluded
beneficiaries from arguing that Edison breached its duty by
selecting retail-class mutual funds in 1999. But nothing in
TIBBLE V. EDISON INT’L 13
the court’s order foreclosed beneficiaries from arguing that
Edison breached its duty within the statutory period by failing
to monitor these funds. The court’s summation of its holding
makes this point clear. The district court noted that: “the
initial decision to add retail mutual funds . . . as an option in
the Plan was made in 1999 and 2000,” along with other
decisions outside the relevant six-year period. Id. at 1120.
“Thus,” the court concluded, “the prudence claims arising out
of these decisions are barred by the statute of limitations.” Id.
When the court said prudence claims arising out of “these
decisions” are barred, it was obviously referring to “the initial
decision to add retail mutual funds” along with other
decisions occurring outside the statutory period.
Beneficiaries were barred from arguing about the initial
decision to include the retail-class mutual funds, not from
making a separate duty-to-monitor argument about those
funds.
2
The district court’s interaction with beneficiaries’ expert
Dr. Steven Pomerantz also confirms that their decision to
forego a duty-to-monitor argument was their own, not one the
court forced upon them. The court reiterated several times
during Pomerantz’s testimony that it “d[idn’t] understand the
connection between the name change [of two of the 1999
mutual funds] and the whole issue of why or why not
institutional shares should have been bought,” nor did it see
why it was “relevant as to whether . . . it was a name change
or the fund remained the same.” In fact, the court went so far
as to ask Pomerantz specifically whether Edison should have
removed the three funds even without any significant
changes: “Let’s say that these plans didn’t have a name
change . . . [w]ould you contend that . . . during the relevant
14 TIBBLE V. EDISON INT’L
time period due diligence would have required the plan to
nevertheless buy an institutional share class, all things being
equal, assuming the institutional share class had a lower fee?”
Pomerantz declined the invitation. We think this exchange
clearly demonstrates that the court did not forbid
beneficiaries from arguing that Edison failed to monitor the
funds, nor did it force a “significant changes” theory upon
them. On the contrary, the district judge was showing
concern about why beneficiaries elected to pursue their
chosen theory. Beneficiaries’ trial strategy was their own
choice, not one mandated by the court.
3
Finally, beneficiaries’ own claims presented at trial
establish beyond any doubt that beneficiaries were not
forbidden from arguing that Edison possessed an ongoing
duty to monitor. Indeed, it is undisputed that the court
allowed beneficiaries to make just this kind of failure-to-
monitor argument in relation to the Money Market Fund.
Like the retail-class mutual funds, the Money Market Fund
was added to the Plan more than six years before
beneficiaries commenced their suit. Moreover, like their
claim related to the retail-class mutual funds, beneficiaries
claimed that the selection of the Money Market Fund was
imprudent because it “requir[ed] Plan participants to pay
excessive . . . fees” from the first date it was added.
However, unlike their claim relating to the retail-class mutual
funds, their challenge regarding the Money Market Fund
specifically alleged that Edison failed to monitor the fees of
such Fund during the relevant time period. The district court
did not forbid such a claim as violating ERISA’s six-year
limitation. On the contrary, the court considered this
argument on the merits and rejected it. Beneficiaries’ failure
TIBBLE V. EDISON INT’L 15
to make a duty-to-monitor argument in relation to the retail-
class mutual funds can hardly be attributed to the court,
where the court allowed that same argument to proceed in
relation to another supposedly imprudent investment that
originated outside the statutory period.
4
The foregoing demonstrates that beneficiaries did not
present their duty-to-monitor argument “sufficiently for the
trial court to rule on it”—indeed, they failed to present this
argument in relation to the contested mutual funds at all,
despite the clear opportunity to do so. See In re Mercury
Interactive, 618 F.3d at 992.
Moreover, no exception saves their forfeited argument.
There has been no “change in the law” that could justify
beneficiaries’ failure to raise a duty-to-monitor argument
about the mutual funds, since no law actually forbade them
from bringing it. Nor is the issue here “purely one of law” or
one in which the pertinent record has been fully developed.
Id. (quoting Bolker v. Comm’r, 760 F.2d 1039, 1042 (9th Cir.
1985)). Indeed, the whole point of beneficiaries’ briefing on
remand is that this case must be sent back to the district court
because the factual record as it currently stands is inadequate
to decide the now-raised duty-to-monitor claim.
Finally, the record demonstrates that this is not “the
exceptional case” in which the Court should excuse a failure
to raise an argument “to prevent a miscarriage of justice or to
preserve the integrity of the judicial process.” Ruiz v. Affinity
Logistics Corp., 667 F.3d 1318, 1322 (9th Cir. 2012) (citation
and internal quotation marks omitted). Because the
beneficiaries were not precluded from making their duty-to-
16 TIBBLE V. EDISON INT’L
monitor argument in the first place, there is no injustice in
forbidding them from doing so now. See Armstrong v.
Brown, 768 F.3d 975, 982 (9th Cir. 2014) (refusing to
consider an argument where a party had “ample opportunity”
to raise it below). The argument is forfeit.
B
Even setting aside beneficiaries’ failure to raise their
continuing-duty-to-monitor argument to the trial court, there
is little doubt they forfeited the argument by failing to present
it to us in their initial appeal. Thus, the claim is doubly
forfeit.
“We review only issues which are argued specifically and
distinctly in a party’s opening brief.” Cruz v. Int’l Collection
Corp., 673 F.3d 991, 998 (9th Cir. 2012). A party’s failure to
comply with this standard is “sufficient ground to justify
dismissal of an appeal,” including one taken on remand from
the Supreme Court. Christian Legal Soc’y v. Wu, 626 F.3d
483, 485 (9th Cir. 2010) (quoting In re O’Brien, 312 F.3d
1135, 1136 (9th Cir. 2002)).
In their opening brief submitted to us in their initial
appeal, beneficiaries contended that the district court erred in
ruling that their claims related to retail-class mutual funds
were time-barred under 29 U.S.C. § 1113. They sensibly
chose not to repeat the “changed circumstances” argument
that they offered to the district court, since the district court’s
factual determinations on that theory would have been subject
to a deferential standard of review. See Navajo Nation v. U.S.
Forest Serv., 535 F.3d 1058, 1067 (9th Cir. 2008) (en banc).
Rather, they argued that the district court erred because
“ERISA’s six-year limitation incorporates the continuing
TIBBLE V. EDISON INT’L 17
violation doctrine.” According to beneficiaries, their claim
was timely because Edison’s failure to “switch[] from retail
to institutional class shares” continued the breach that
occurred when the funds were added to the Plan, not because
Edison failed to adequately monitor the mutual funds
thereafter.
Beneficiaries now attempt to argue that they raised the
continuing-duty-to-monitor argument in their brief, insofar as
they asserted that “[d]efendants had a continuing duty to
ensure that each of the Plans’ [sic] investment options was
and remained prudent and had reasonable expenses.”
However, as Edison pointed out during the original appeal,
that broad contention was not actually in dispute. What was
in dispute was beneficiaries’ assertion that Edison could be
held liable for “their breach of duty in keeping these funds in
the Plan in the six years before commencement of this
action.” Responding to that argument, we concluded that
“the act of designating an investment for inclusion starts the
six-year period under section 413(1)(A) for claims asserting
imprudence in the design of the plan menu.” Tibble, 729 F.3d
at 1119 (emphasis added). We correspondingly concluded
that “[c]haracterizing the mere continued offering of a plan
option, without more,” would render ERISA’s time limitation
meaningless. Id. at 1120 (emphasis added).
In short, beneficiaries never asserted Edison violated its
duty by failing to monitor the retail-class mutual funds; they
asserted only that we ought to read ERISA as excusing an
otherwise time-barred lawsuit where the effects of a past
breach continue into the future. Because beneficiaries never
presented to us an argument about an ongoing duty-to-
monitor, it is “elementary” that beneficiaries should not be
18 TIBBLE V. EDISON INT’L
allowed a second bite at the apple on remand. See Nw. Ind.
Tel. Co. v. FCC, 872 F.2d 465, 470 (D.C. Cir. 1989).
III
As the record amply demonstrates, beneficiaries did not
raise an ongoing-duty-to-monitor argument at any point in
this litigation before their petition to the Supreme Court.
Fittingly, the district court’s judgment is
AFFIRMED.