The U.S. Supreme Court heard oral argument in Tibble v. Edison International this week. A link to the transcript published by the Court can be found here. For those who are interested, I highly recommend you read through it.
The mainstream media, in articles such as this one, interpreted the court's discussion as hinting at a victory for the plaintiffs. But let's be clear: that's not necessarily a clear-cut outcome. A reversal requires difficult decisions by the justices about what is required of fiduciaries.
I generally got the sense that not one of the justices (other than Justice Thomas, who hasn't asked questions in years) supported the 9th Circuit test that held where an investment is selected more than six years before a lawsuit is brought, there is no ongoing duty to monitor unless changed circumstances amounting to the investment almost being like a new investment would cause a fiduciary to re-evaluate the fund.
Recommended For You
Being like new could mean a defined style drift, new management, dramatic change in performance, etc.
On the other end of the spectrum, it also wasn't 100 percent clear that there is enough support for the plaintiffs' position to simply have a constantly moving six-year window with no test or limitations on what exactly a fiduciary should be doing to monitor investments.
There may be a handful of justices willing to do this, but one of them surely isn't Justice Scalia, who seemed more comfortable with the changed circumstances test than the others.
So given what we know, what is the likely outcome?
It's very unlikely the court affirms the 9th Circuit's test but almost as unlikely it simply reverses without providing guidance on what the duty to monitor looks like. So that leaves us somewhere in the middle, swimming in shades of gray.
Given that the last few ERISA opinions have been 9-0 votes, I wouldn't be surprised to see some compromises happening behind closed doors to get to another 9-0 vote here.
How do they get there? The justices will have three options:
1. they can reverse and remand back to the 9th Circuit to develop a nuanced test for the duty to monitor, something that Justice Sotomayor was uncomfortable with the Supreme Court doing itself … (and) if the parties are later unhappy with that test, they can file another cert petition to the Supreme Court;
2. they could do the same thing but provide "limited" guidance on what the test should look like;
3. they reverse and provide robust guidance on what the duty to monitor requires of ERISA fiduciaries, more or less cutting the 9th Circuit out of the process.
Of course, I don't pull these options blindly out of a hat.
Option No. 2, in which limited guidance is offered, is something the court has been comfortable doing in recent decisions, including in Dudenhoeffer v. Fifth Third Bancorp last year and in Cigna v. Amara a few years back.
If they go this route, questions we don't have answers to until we see a decision include what kinds of information is a fiduciary required to look at (performance, fees, etc.)? Will they keep calling it a changed circumstances test but change the criteria? Will they throw that test out and call it something different?
A decision is expected before the end of June, but possibly earlier.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
