A California company may have to pay more than $7.5 million in damages as a decades-long fiduciary lawsuit finally winds down.
In deciding Tibble v. Edison International, the U.S. District Court for the Central District of California sided with the employees, the plaintiffs in the case, on Wednesday by ruling that the firm failed in its fiduciary duty by not moving participants to lower-fee institutional mutual fund share classes.
The plaintiffs alleged that Edison’s executives failed to uphold obligations of prudence and monitoring in relation to the selection and maintenance of 17 funds on the company’s 401(k) menu.
Rather than select institutional share classes, which typically carry low fees, Edison’s employees were offered more costly retail share classes of the 17 mutual funds. By selecting the more expensive shares, and failing to switch to the less expensive share classes as they became available, the court ruled that Edison failed in its fiduciary duty.
The parties in the case also disputed the amount of damages that should be paid to the plaintiffs in the case. The court ruled on Wednesday that damages were to be calculated from 2011 to present day based on the Edison International 401(k) plan’s overall returns, meaning that the company would owe plaintiffs the difference in returns that the plan would have accrued had they been able to access institutional share classes.
According to the decision, Edison would have to pay $7,524,424 to cover the plaintiff’s lost investment opportunity.
The court's ruling came 10 years to the day after the suit was originally filed.
Tibble v. Edison is remarkable because the case was heard by the U.S. Supreme Court in 2015. To this point, the case is the only excessive fee case taken by the nation’s highest court. Both the U.S. Supreme Court and the U.S. Court of Appeals for the Ninth Circuit ruled that the case should be decided in favor of the plaintiffs in U.S. District Court.