Generally speaking, a “fiduciary” relationship occurs where one person holds or manages assets for another’s benefit. Typical fiduciaries include trustees, managers and corporate officers, all of whom owe “fiduciary duties” to act in the best interests of their principals.
Under Illinois law, the beneficiary of a fiduciary duty has a limited time to sue a fiduciary for negligent and/or deliberate violations of his/her “fiduciary duties.” Illinois’ statute of limitations is five years. The Federal ERISA statute has a six-year statute of limitations.
A new U.S. Supreme Court case appears to challenge the premise of a statute of limitations for certain breaches of fiduciary duty. In Tibble v. Edison, a group of 401(k) plan participants wants to hold a fiduciary liable for mistakes made outside the six-year time limit. According to Robert Steyer, writing for Pensions & Investments, plan participants originally brought suit in U.S. district court, claiming that “Edison plan executives breached their fiduciary duty by choosing retail-price rather than institutional-price versions of three mutual funds.” The district court dismissed the suit as untimely, applying the six-year statute of limitations. The plan participants appealed and again lost in a 2013 federal appellate court decision upholding the statute of limitations. However, the participants have now appealed to the U.S. Supreme Court, arguing that the statute harms them and “weakens ERISA’s protections against imprudent investments.” The Supreme Court agreed to hear oral arguments on the case on February 24, 2015.
The participants have support from the Department of Labor; Solicitor General Donald B. Verrilli Jr. filed a brief arguing that the plan’s “ongoing duty of prudence” includes “a duty to revisit the plan investments and remove the imprudent ones.”
A Supreme Court ruling that a duty to monitor includes a duty to revisit past decisions would effectively eradicate the statute of limitations for breaches of fiduciary duty under ERISA and could open a floodgate of litigation. If that happens, we expect clever lawyers to try and expand this reasoning remain beyond ERISA, to shareholder and trust disputes. While it’s unlikely the Supreme Court would intentionally make an expansive ruling, we expect some nervous fiduciaries between now and the Supreme Court’s ruling this summer.
Fiduciary duty undergirds much of our economic and social structure. At Schwartz & Kanyock, LLC, our litigation attorneys understand how important it is for victims of negligent or dishonest fiduciaries to obtain swift and sure justice. Call us at 312-436-1442 or contact our Chicago office online.