By: Mark Casciari and Gina Merrill
In 2006, a number of large companies that sponsored ERISA 401(k) plans were sued by clients of the Schlichter, Bogard & Denton law firm for, among other things, excessive 401(k) plan provider fees. The fee litigation placed at issue ERISA Section 413’s limitations rule, which requires the filing of a complaint within the earlier of a six year repose period after the claim accrued or a three year period after the claim accrued with actual knowledge of the violation. Section 413 also provided a special rule if fraud or concealment of the violation is adequately alleged and shown — the complaint then must be filed within six years after the date of discovery of the violation.
Most of the Schlichter firm cases, but not all, have been resolved though settlement or decisions on the merits of the complaints. One ongoing Schlichter firm case is Tibble v. Edison International, 729 F.3d 1110 (9th Cir. 2013). In Tibble, the Court of Appeals for the Ninth Circuit held, in part, that “the act of designating [401(k) plan investment options] starts the six-year period under section 413(1)(A) for claims asserting imprudence in the design of the plan menu.” Id. at 1119. The Ninth Circuit explained that a contrary result would “make hash out of ERISA’s limitation period and lead to an unworkable result.” Id. The Ninth Circuit roundly rejected the plaintiff “continuing violation” theory endorsed by the Department of Labor as out of step with the language and purpose of the statute. The limitations concerns animating the Tibble decision reflect the quintessential concerns that have led to the imposition of statutes of limitation — loss of hard evidence, faded witness memories, and the possibility of being hauled into court for events that occurred 15 or 30 years prior to the commencement of the litigation. The courts have also been concerned that lax or no enforcements of limitations periods will lead to more litigation and uncertainty in the administration of the law.
On October 2, the Supreme Court announced that it will decide if the Ninth Circuit got it right when it applied a limitations bar in Tibble.
If the Court reverses the Ninth Circuit’s limitations decision, Section 413’s six-year limitations periods may provide little repose and less comfort for plan fiduciaries defending cases to which Section 413 applies.