Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-10-56415/USCOURTS-ca9-10-56415-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

GLENN TIBBLE; WILLIAM BAUER;

WILLIAM IZRAL; HENRY

RUNOWIECKI; FREDERICK

SUHADOLC; HUGH TINMAN, JR., as

representatives of a class of similarly

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.

No. 10-56406

D.C. No.

2:07-cv-05359-

SVW-AGR

OPINION

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2 TIBBLE V. EDISON INTERNATIONAL

GLENN TIBBLE; WILLIAM BAUER;

WILLIAM IZRAL; HENRY

RUNOWIECKI; FREDERICK

SUHADOLC; HUGH TINMAN, JR., as

representatives of a class of similarly

situated persons, and on behalf of the

Plan,

Plaintiffs-Appellees,

v.

EDISON INTERNATIONAL; THE

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.

No. 10-56415

D.C. No.

2:07-cv-05359-

SVW-AGR

Appeal from the United States District Court

for the Central District of California

Stephen V. Wilson, District Judge, Presiding

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TIBBLE V. EDISON INTERNATIONAL 3

 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.

Argued and Submitted

November 6, 2012—Pasadena, California

Filed March 21, 2013

Before: Alfred T. Goodwin, and Diarmuid F. O’Scannlain,

Circuit Judges, and Jack Zouhary, District Judge.*

Opinion by Judge O’Scannlain

SUMMARY

**

ERISA

The panel affirmed the district court’sjudgment in a class

action brought under the Employee Retirement Income

Security Act by beneficiaries who alleged that their pension

plan was managed imprudently and in a self-interested

fashion.

Rejecting a continuing violation theory, the panel held

that under ERISA’s six-yearstatute of limitations, the district

court correctly measured the timeliness of claims alleging

imprudence in plan design from when the decision to include

those investments in the plan was initially made. The panel

held that the beneficiaries did not have actual knowledge of

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4 TIBBLE V. EDISON INTERNATIONAL

conduct concerning retail-class mutual funds, and so the

three-year statute of limitations set forth in ERISA § 413(2)

did not apply.

The panel held that ERISA § 404(c), a safe harbor that

can apply to a pension plan that “provides for individual

accounts and permits a participant or beneficiary to exercise

control over the assets in his account,” did not apply.

Disagreeing with the Fifth Circuit, the panel applied Chevron

deference to the Department of Labor’s final rule interpreting

§ 404(c).

The panel declined to consider for the first time on appeal

defendants’ arguments concerning class certification.

The panel affirmed the district court’s grant of summary

judgment to defendants on the beneficiaries’ claim that

revenue sharing between mutual funds and the administrative

service provider violated the pension plan’s governing

document and was a conflict of interest. Agreeing with the

Third and Sixth Circuits, and disagreeing with the Second

Circuit, the panel held that, as in cases challenging denials of

benefits, an abuse of discretion standard of review applied in

this fiduciary duty and conflict-of-interest suit because the

plan granted interpretive authority to the administrator.

The panel held that the defendants did not violate their

duty of prudence under ERISA by including in the plan menu

mutual funds, a short-term investment fund akin to a money

market, and a unitized fund for employees’ investment in the

company’s stock.

The panel affirmed the district court’s holding, after a

bench trial, that the defendants were imprudent in deciding to

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TIBBLE V. EDISON INTERNATIONAL 5

include retail-class shares of three specific mutual funds in

the plan menu because they failed to investigate the

possibility of institutional-share class alternatives.

COUNSEL

Michael A. Wolff (argued), Jerome J. Schlichter, Nelson G.

Wolff, and Jason P. Kelly, Schlichter, Bogard & Denton,

LLP, St. Louis, Missouri, for Plaintiffs-Appellants.

Jonathan D. Hacker (argued), Walter Dellinger, Robert N.

Eccles, and Gary S. Tell, O’Melveny & Myers LLP,

Washington, D.C.; Matthew Eastus and China Rosas,

O’Melveny & Myers LLP, Los Angeles, California, for

Defendants-Appellees/Cross-Appellants.

Elizabeth Hopkins (argued), Stacey E. Elias, M. Patricia

Smith, and Timothy D. Hauser, United States Department of

Labor, Washington, D.C., for amicus curiae Secretary of

Labor.

Jay E. Sushelsky and Melvin Radowitz, AARP Foundation

Litigation, Washington, D.C., for amicus curiae AARP.

Nicole A. Diller, Alison B. Willard, and Abbey M. Glenn,

Morgan, Lewis & Bockius LLP, San Francisco, California,

for amicus curiae California Employment Law Council.

Thomas L. Cubbage III, and S. Michael Chittenden,

Covington & Burling LLP, Washington, D.C., for amicus

curiae Investment Company Institute.

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6 TIBBLE V. EDISON INTERNATIONAL

OPINION

O’SCANNLAIN, Circuit Judge:

Current and former beneficiaries sued their employer’s

benefit plan administrator under the Employee Retirement

Income Security Act charging that their pension plan had

been managed imprudently and in a self-interested fashion.

We must decide, among other issues, whether the Act’s

limitations period or itssafe harbor provision are obstacles to

their suit.

I

A

Edison International is a holding company for various

electric utilities and other energy interests including Southern

California Edison Company and the Edison Mission Group

(collectively “Edison”), which itself consists of the Chicagobased Midwest Generation. Like most employerorganizations offering pensions today, Edison sponsors a

401(k) retirement plan for its workforce. During litigation,

the total valuation of the “Edison 401(k) Savings Plan” was

$3.8 billion, and it served approximately 20,000 employeebeneficiaries across the entire Edison International workforce.

Unlike the guaranteed benefit pension plans of yesteryear,

this kind of defined-contribution plan entitles retirees only to

the value of their own individual investment accounts. See 29

U.S.C. § 1002(34). That value is a function of the inputs,

here a portion of the employee’s salary and a partial match by

Edison, as well as of the market performance of the

investments selected.

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TIBBLE V. EDISON INTERNATIONAL 7

 As discussed infra Part IV, we express no opinion in this case on 1

whether beneficiaries’ suit was properly cognizable as a class action.

To assist their decision making, Edison employees are

provided a menu of possible investment options. Originally

they had six choices. In response to a study and union

negotiations, in 1999 the Plan grew to contain ten institutional

or commingled pools, forty mutual fund-type investments,

and an indirect investment in Edison stock known as a

unitized fund. The mutual funds were similar to those offered

to the general investing public, so-called retail-class mutual

funds, which had higher administrative fees than alternatives

available only to institutional investors. The addition of a

wider array of mutual funds also introduced a practice known

as revenue sharing into the mix. Under this, certain mutual

funds collected fees out of fund assets and disbursed them to

the Plan’s service provider. Edison, in turn, received a credit

on its invoices from that provider.

Past and present Midwest Generation employees Glenn

Tibble, William Bauer, William Izral, Henry Runowiecki,

Frederick Suhadolc, and Hugh Tinman, Jr. (“beneficiaries”)

sued under the Employee Retirement Income Security Act of

1974 (ERISA), 29 U.S.C. § 1001, et seq., which governs the

401(k) Plan, and obtained certification as a class action

representing the whole of Edison’s eligible workforce.1

Beneficiaries objected to the inclusion of the retail-class

mutual funds, specifically claiming that their inclusion had

been imprudent, and that the practice of revenue sharing had

violated both the Plan document and a conflict-of-interest

provision. Beneficiaries also claimed that offering a unitized

stock fund, money market-style investments, and mutual

funds, had been imprudent.

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8 TIBBLE V. EDISON INTERNATIONAL

 In a memorandum disposition filed concurrently with this opinion, we 2

address beneficiaries’ appeal from the district court’s decision not to

award fees or costs to either party. See Tibble, et al. v. Edison Int’l, No.

11-56628.

B

The district court granted summary judgment to Edison

on virtually all these claims. See Tibble v. Edison Int’l, 639

F. Supp. 2d 1074 (C.D. Cal. 2009). The court also

determined that ERISA’s limitations period barred recovery

for claims arising out of investments included in the Plan

more than six years before beneficiaries had initiated suit. Id.

at 1086; see 29 U.S.C. § 1113(1)(A).

Remaining for trial after these rulings was beneficiaries’

claim that the inclusion of specific retail-class mutual funds

had been imprudent. Without retreating from an earlier

decision—at summary judgment—that retail mutual funds

were not categorically imprudent, the court agreed with

beneficiaries that Edison had been imprudent in failing to

investigate the possibility of institutional-class alternatives.

See Tibble v. Edison Int’l, No. CV 07-5359, 2010 WL

2757153, at *30 (C.D. Cal. July 8, 2010). It awarded

damages of $370,000.

Beneficiaries timely appeal the district court’s partial

grant of summary judgment to Edison. Edison timely cross 2

appeals, chiefly contesting the post-trial judgment.

II

Beneficiaries’ first contention on appeal is that the district

court incorrectly applied ERISA’s six-year limitations period

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TIBBLE V. EDISON INTERNATIONAL 9

to bar certain of its claims. Edison argues for application of

the shorter three-year period. We reject both parties’

approaches to timeliness.

A

For claims of fiduciary breach, ERISA § 413 provides

that no action 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.

29 U.S.C. § 1113.

B

1

Beneficiaries argue that the court erred by measuring the

timeliness under ERISA § 413(1) for claims alleging

imprudence in plan design from when the decision to include

those investments in the Plan was initially made. They are

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10 TIBBLE V. EDISON INTERNATIONAL

joined in this contention by the United States Department of

Labor (“DOL”). Because fiduciary duties are ongoing, and

because section 413(1)(A) speaks of the “last action” that

constitutes the breach, these claims are said to be timely for

as long as the underlying investments remain in the plan.

Essentially, they argue that we should either equitably engraft

onto, or discern from the text of section 413 a “continuing

violation theory.”

Beneficiaries’ argument, though, would make hash out of

ERISA’s limitation period and lead to an unworkable result.

We have previously declined to read the section 413(2)

actual-knowledge provision as permitting the maintenance of

the status-quo, absent a new breach, to restart the limitations

period under the banner of a “continuing violation.” Phillips

v. Alaska Hotel & Rest. Emps. Pension Fund, 944 F.2d 509,

520 (9th Cir. 1991). In Phillips, the controlling opinion did

not reach whether the same was true for section 413(1)(A).

944 F.2d at 520–21. Today we hold 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.

Preliminarily, we observe that in the case of omissions the

statute already embodies what the beneficiaries urge for the

last action. Section 413(1)(B) ties the limitations period to

“the latest date on which the fiduciary could have cured the

breach or violation.” Importing the concept into (1)(A), then,

would render (1)(B) surplusage. This must be avoided when,

as here, distinct meanings can be discerned from statutory

parts. See Freeman v. Quicken Loans, Inc., 132 S. Ct. 2034,

2043 (2012).

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TIBBLE V. EDISON INTERNATIONAL 11

Second, beneficiaries’ logic “confuse[s] the failure to

remedy the alleged breach of an obligation, with the

commission of an alleged second breach, which, as an overt

act of its own recommences the limitations period.” Phillips,

944 F.2d at 523 (O’Scannlain, J., concurring). Characterizing

the mere continued offering of a plan option, without more,

as a subsequent breach would render section 413(1)(A)

“meaningless and [could even] expose present Plan

fiduciaries to liability for decisions made by their

predecessors—decisions which may have been made decades

before and as to which institutional memory may no longer

exist.” David v. Alphin, 817 F. Supp. 2d 764, 777 (W.D.N.C.

2011), aff’d, 704 F.3d 327, 342–43 (4th Cir. 2013). We

decline to proceed down that path. As with the application of

any statute of limitations, we recognize that injustices can be

imagined, but section 413(1) “suggests a judgment by

Congress that when six years has passed after a breach or

violation, and no fraud or concealment occurs, the value of

repose will trump other interests, such as a plaintiff’s right to

seek a remedy.” Larson v. Northrop Corp., 21 F.3d 1164,

1172 (D.C. Cir. 1994).

Finally, we are unpersuaded by DOL’s suggestion that

our holding will give ERISA fiduciaries carte blanche to

leave imprudent plan menus in place. The district court

allowed beneficiaries to put on evidence that significant

changes in conditions occurred within the limitations period

that should have prompted “a full due diligence review of the

funds, equivalent to the diligence review Defendants conduct

when adding new funds to the Plan.” These particular

beneficiaries could not establish changed circumstances

engendering a new breach, but the district court was entirely

correct to have entertained that possibility. See, e.g., Quan v.

Computer Scis. Corp., 623 F.3d 870, 878–79 (9th Cir. 2010)

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12 TIBBLE V. EDISON INTERNATIONAL

 We consider this argument only as it affects the post-trial verdict. This 3

is so because, as Edison clarified in its reply brief, this is the extent of its

contention, and because our decision to affirm the grant of summary

judgment on beneficiaries’ other claims makes a broader ruling

unnecessary.

 See infra Part VII.

4

(explaining that “fiduciaries are required to act ‘prudently’

when determining whether or not to invest, or continue to

invest”). The potential for future beneficiaries to succeed in

making that showing illustrates why our interpretation of

section 413(1)(A) will not alter the duty of fiduciaries to

exercise prudence on an ongoing basis.

2

For its part, Edison contends that beneficiaries had actual

knowledge of conduct concerning retail-class mutual funds,

triggering ERISA § 413(2), more than three years before

August 16, 2007, when the complaint was filed.3

In order to apply ERISA’s limitation periods, the court

“must first isolate and define the underlying violation.”

Ziegler v. Conn. Gen. Life Ins. Co., 916 F.2d 548, 550–51

(9th Cir. 1990). Here, as we explore in greater detail below,4

the crux of beneficiaries’ successful theory of liability at trial

was that alternatives to retail shares had not been

investigated—not simply that their inclusion had been

imprudent. Second, specific to section 413(2), the court must

inquire as to when the plaintiffs had actual knowledge of that

violation or breach. Id. at 552. Edison points to Summary

Plan Descriptions provided to all participants, as well as to

mutual fund prospectuses furnished to investors, claiming

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TIBBLE V. EDISON INTERNATIONAL 13

that these materials made the inclusion of retail shares

known. Similar information was also furnished to the unions

during negotiations.

But as the nature of the breach makes apparent, Edison is

citing evidence of the wrong type of knowledge. When

beneficiaries claim “the fiduciary made an imprudent

investment, actual knowledge of the breach [will] usually

require some knowledge of how the fiduciary selected the

investment.” Brown v. Am. Life Holdings, Inc., 190 F.3d 856,

859 (8th Cir. 1999). For example, in Waller v. Blue Cross of

California, we explained that the three-year ERISA

limitations period did not run from the time when the

plaintiffs had purchased the subject annuities because their

theory of breach was that the fiduciaries had “unlawfully

employ[ed] an infirm bidding process” to acquire such

annuities. 32 F.3d 1337, 1339, 1341 (9th Cir. 1994); see also

Frommert v. Conkright, 433 F.3d 254, 272 (2d Cir. 2006)

(“The flaw with the district court’s conclusion [under section

413(2)] is that the plaintiffs’ claim for breach of fiduciary

duty is not premised solely on the defendants’ adoption of the

phantom account; rather, it is based on allegations that the

defendants made ongoing misrepresentations about the

origins of the phantom account in an effort to justify its

usage.”).

Therefore, because these beneficiaries’ trial claims hinged

on infirmities in the selection process for investments, we

hold that mere notification that retail funds were in the Plan

menu falls short of providing “actual knowledge of the breach

or violation.” § 413(2).

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14 TIBBLE V. EDISON INTERNATIONAL

III

On its cross appeal, Edison claims that beneficiaries’

entire case is proscribed by ERISA § 404(c), a safe harbor

that can apply to a pension plan that “provides for individual

accounts and permits a participant or beneficiary to exercise

control over the assets in his account.” 29 U.S.C.

§ 1104(c)(1)(A).

As the Edison 401(k) is clearly such a plan we consider

the terms of section 404(c). It provides that:

[N]o person who is otherwise a fiduciary shall

be liable under this part for any loss, or by

reason of any breach, which results from such

participant’s or beneficiary’s exercise of

control.

Id. § 1104(c)(1)(A)(ii).

Edison reads this statutory language as insulating it from

all of beneficiaries’ claims because each challenged

investment was a product of a “participant’s or beneficiary’s

exercise of control,” by virtue of his selection of it from the

Plan menu. Disagreeing, the DOL directs usto its previously

announced interpretations. In a 1992 regulation it stated that

in order to fall within section 404’s ambit, the breach or loss

would need to be the “direct and necessary result” of the

action by the beneficiary. 29 C.F.R. § 2550.404c-1(d)(2). A

preamble that went through the notice-and-comment process

and appeared in the agency’s final rule, stated that “the act of

limiting or designating investment options which are intended

to constitute all or part of the investment universe of an

ERISA section 404(c) plan is a fiduciary function which . . .

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TIBBLE V. EDISON INTERNATIONAL 15

 Final rules are published in their entirety in the Federal Register but, 5

by convention, their preambles are left out of the Code of Federal

Regulations. See Langbecker v. Elec. Data Sys. Corp., 476 F.3d 299, 310

n.22 (5th Cir. 2007).

 See id. at 64,910 (“Notwithstanding the effective date, the final rule 6

and amendments will apply to individual account plans for plan years

beginning on or after November 1, 2011.”).

is not a direct or necessary result of any participant

direction.” 57 Fed. Reg. 46,922, 46,924 n.27 (Oct. 13, 1992).

To “reiterate its long held position,” 73 Fed. Reg. 43,014,

43,018 (July 23, 2008), DOL recently codified this guidance

in the body of a new regulation so that it now appears in the

Code of Federal Regulations, rather than in the preamble to

a rule. See 75 Fed. Reg. 64,910, 64,946 (Oct. 20, 2010) 5

(codified at 29 C.F.R. pt. 2550) (Section 404(c) “does not

serve to relieve a fiduciary from its duty to prudently select

and monitor any service provider or designated investment

alternative offered under the plan”). This amended

regulation, however, was not in effect during the time period

at issue in this case. Our inquiry therefore centers on what 6

appeared in the 1992 final rule.

As to these earlier materials, the parties and amici join

issue on the status this court should accord them.

Beneficiaries and DOL argue that they are entitled to the

robust sort of administrative-law deference dictated by

Chevron, U.S.A., Inc. v. Natural Resource Defense Council,

Inc., 467 U.S. 837, 842–43 (1984). Edison claims that a

preamble is not the type of material to which courts properly

defer. In any event, the California Employment Law Council,

as amicus for Edison, argues that DOL’s interpretation is an

impermissible construction of the statute. See id. (“If the

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16 TIBBLE V. EDISON INTERNATIONAL

intent of Congress is clear, that is the end of the matter; for

the court, as well as the agency, must give effect to the

unambiguously expressed intent of Congress.”). Both Edison

and the Employment Council rely on a divided opinion from

the Fifth Circuit, and on an older case from the Third Circuit

in which the alleged violations preceded the effective date of

even the 1992 rule. See Langbecker v. Elec. Data Sys. Corp.,

476 F.3d 299, 310–12 (5th Cir. 2007); In re Unisys Sav. Plan

Litig., 74 F.3d 420, 444–48 & n.21 (3d Cir. 1996).

Several other circuits, by contrast, have accepted the

position advocated by DOL. See, e.g., Pfeil v. State St. Bank

&Trust Co., 671 F.3d 585, 599–600 (6th Cir. 2012) (favoring

DOL’s position in its “amicus curiae brief in this appeal and

with the preamble to the regulations implementing the safe

harbor”), cert. denied, 133 S. Ct. 758 (2012); Howell v.

Motorola, Inc., 633 F.3d 552, 567 (7th Cir. 2011) (similar);

DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 418 n.3 (4th Cir.

2007) (implicitly deferring to the 1992 rulemaking).

A

The Chevron framework can apply only if two initial

conditions are met: (1) Congress has delegated the power to

that agency to pronounce rules that carry the force of law and

(2) the interpretation for which deference is sought was

rendered pursuant to that authority. Price v. Stevedoring

Servs. of Am., Inc., 697 F.3d 820, 833 (9th Cir. 2012) (en

banc). That was the teaching of United States v. Mead Corp.,

533 U.S. 218, 226–27 (2001).

Congress gave the Secretary of Labor authority to

promulgate binding regulations interpretingTitle I of ERISA,

which includes section 404(c). 29 U.S.C. § 1135. It also

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TIBBLE V. EDISON INTERNATIONAL 17

 Cf. Stern v. IBM Corp., 326 F.3d 1367, 1371–72 (11th Cir. 2003) 7

(commenting that the “views of the agency entrusted with interpreting and

enforcing ERISA carry considerable weight”).

 No party or amicus has invoked Auer deference, which governs agency

8

interpretations of its “own ambiguous regulation.” Gonzales, 546 U.S. at

255. To qualify for that, the DOL would need to show ambiguity and

would need to demonstrate that its regulation, which added the modifier

empowered the Secretary to bring civil enforcement actions.

Id. § 1132(a)(2). These charges plainly satisfy the first

requirement under Mead. See, e.g., Gonzales v. Oregon, 546

U.S. 243, 258 (2006) (explaining that “[i]n many cases

authority is clear because the statute gives an agency broad

power to enforce” its provisions). As for Mead’s second

consideration, we do not view the fact that the interpretation

appears in a final rule’s preamble as disqualifying it from

Chevron deference. Edison cites nothing authoritative for

cabining that doctrine to materials destined for the pages of

the Code of Federal Regulations. Though not a necessary

condition, a notice-and-comment rule is virtually assured

eligibility for Chevron deference. See, e.g., Mead, 533 U.S.

at 230–31; Renee v. Duncan, 686 F.3d 1002, 1011 (9th Cir.

2012). Additionally, other factors significant to whether

deference is owed are present here. DOL has expressed its

position for two decades, ERISA is “an enormously complex

and detailed statute,” Conkright v. Frommert, 130 S. Ct.

1640, 1644 (2010), and this question is of central import to its

administration. See Barnhart v. Walton, 535 U.S. 212, 222

(2002).7

B

Because the 1992 interpretation clears the Mead

threshold, we proceed to the well-trod Chevron inquiry. This 8

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18 TIBBLE V. EDISON INTERNATIONAL

“direct or necessary,” more than parroted or “paraphrase[d] the statutory

language.” Id. at 257; see Langbecker, 476 F.3d at 310 n.22 (questioning

the presence of ambiguity in the 1992 regulation).

calls on the court to examine the plain meaning of the text

and apply other relevant canons of statutory interpretation to

ascertain whether Congress had a fixed “intention on the

precise question at issue” that the agency must abide.

Wilderness Soc’y v. U.S. Fish & Wildlife Serv., 353 F.3d

1051, 1060 (9th Cir. 2003) (en banc).

If so, “that intention is the law and must be given effect.”

Id. If not, the court defers to the agency, provided that its

interpretation is not “arbitrary, capricious, or manifestly

contrary to the statute.” Id. at 1059; see also Nat’l Cable &

Telecomm. Ass’n v. Brand X Internet Servs., 545 U.S. 967,

980 (2005) (explaining that “ambiguities in statutes within an

agency’s jurisdiction to administer are delegations of

authority to the agency to fill the statutory gap in reasonable

fashion”). These inquiries can be pursued in two steps, or all

at once. Compare Wilderness Soc’y, 353 F.3d at 1059, with

Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 218 n.4

(2009) (embracing single-step analysis because “if Congress

has directly spoken to an issue then any agency interpretation

contradicting what Congress has said would be

unreasonable”).

In Langbecker, the Fifth Circuit concluded that the DOL’s

interpretation of section 404(c) could not receive Chevron

deference “because it contradicts the governing statutory

language.” 476 F.3d at 311. Respectfully, we disagree.

Section 404(c) speaks of “any breach, which results from” a

participant’s exercise of control. “Result from” means “[t]o

arise as a consequence, effect, or outcome of some action.”

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TIBBLE V. EDISON INTERNATIONAL 19

Oxford English Dictionary (3d ed. 2010); see Wilderness

Soc’y, 353 F.3d at 1060 (“[A] fundamental canon of

construction provides that unless otherwise defined, words

will be interpreted as taking their ordinary, contemporary,

common meaning.” (internal quotation marks ommitted)).

Thus as cogently explained by DOL in its brief, “the

selection of the particular funds to include and retain as

investment options in a retirement plan is the responsibility

of the plan’s fiduciaries, and logically precedes (and thus

cannot ‘result[] from’) a participant’s decision to invest in

any particular option.” As previously noted, the DOL

expressed the same position in a notice-and-comment

rule—albeit less succinctly. The preamble to the 1992 final

rule states

that the act of limiting or designating

investment options which are intended to

constitute all or part of the investment

universe of an ERISA 404(c) plan is a

fiduciary function which, whether achieved

through fiduciary designation or express plan

language, is not a direct or necessary result of

any participant direction of such plan. Thus,

for example, in the case of look-through

investment vehicles, the plan fiduciary has a

fiduciary obligation to prudently select such

vehicles, as well as a residual fiduciary

obligation to periodically evaluate the

performance of such vehicles to determine,

based on that evaluation, whether the vehicles

should continue to be available as participant

investment options. Similar fiduciary

obligations would exist in the case of an

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20 TIBBLE V. EDISON INTERNATIONAL

 Since then, that court has indicated that it may, in the appropriate case, 9

reconsider its decision in order to reflect the possibility that Chevron

deference is now owed to the DOL’s interpretation. Renfro v. Unisys

Corp., 671 F.3d 314, 328–29 (3d Cir. 2011); see also Langbecker, 476

F.3d at 322 (Reavley, J., dissenting) (suggesting that the earlier Unisys

case may no longer be good law); DiFelice v. U.S. Airways, Inc., 404

F. Supp. 2d 907, 909 (E.D. Va. 2005) (same).

investment universe consisting of investment

alternatives which are not look-through

investment vehicles but which are specifically

designated by plan fiduciaries.

57 Fed. Reg. at 46,924 n.27 (emphasis added). Although this

rule invokes the regulatory terms “direct and necessary,” 29

C.F.R. § 2550.404c-1(d)(2), the agency’s ability to make the

same point in its amicus brief and in the new 2010 rule

without that terminology suggests that this gloss may not be

essential. See Langbecker, 476 F.3d at 311. In our view,

though, this does not diminish the validity of its

interpretation.

In an opinion that has been read by some to support the

no-deference view, the Third Circuit keyed in on the fact that

section 404(c) also speaks of “any loss” resulting from a

participant’s control. In re Unisys, 74 F.3d at 445. For a 9

401(k) (or for any defined-contribution plan for that matter),

it is admittedly the case that monetary damage flowing from

a fiduciary’s imprudent design of the investment menu passes

through the participant, as intermediary. But is it proper to

conclude that those losses, in the language of section 404(c),

“result from” the participant’s choice? This might seem an

odd question given that, literally speaking, there can be no

loss without the participant selecting an investment.

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TIBBLE V. EDISON INTERNATIONAL 21

But, “[i]njuries have countless causes, and not all should

give rise to legal liability.” CSX Transp., Inc. v. McBride,

131 S. Ct. 2630, 2637 (2011). Undoubtedly, in these

situations, a fiduciary’s decision to include an investment

option on the plan menu also is a cause of any participant’s

loss. Confronted with this difficulty, DOL has effectively

imported the tort-law notion of proximate cause to conclude

that the most salient cause (as between the two) is the

fiduciary’s imprudence. See id. (“What we . . . mean by the

word proximate, one noted jurist has explained, is simply

this: Because of convenience, of public policy, of a rough

sense of justice, the law arbitrarily declines to trace a series

of events beyond a certain point.”) (omission in original)

(internal quotation marks and alteration omitted).

We deem this “a reasonable interpretation of the statute.”

Entergy Corp., 556 U.S. at 218. ERISA “allocates liability

for plan-related misdeeds in reasonable proportion to the

respective actors’ power to control and prevent the

misdeeds.” Mertens v. Hewitt Assocs., 508 U.S. 248, 262

(1993). As compared to the beneficiary, the fiduciary is

better situated to prevent the losses that would stem from the

inclusion of unsound investment options. It can design a

prudent menu of options. Second, Chevron deference is

meant to foster “coherent and uniform construction of federal

law.” Orthopaedic Hosp. v. Belshe, 103 F.3d 1491, 1495 (9th

Cir. 1997). Our acknowledgment of the flexibility inherent

in the phrase “result from” promotes this, because DOL

adopts a similar interpretation with regard to breaches

that—unlike claims of imprudent plan design—do

chronologically follow a participant’s decision. Concluding

that “a fiduciary is relieved of responsibility only for the

direct and necessary consequences of a participant’s exercise

of control,” 57 Fed. Reg. at 46,924, DOL takes the position

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22 TIBBLE V. EDISON INTERNATIONAL

 Among these are that at least three investment options are offered, 10

“which constitute a broad range of investment alternatives,” and that

participants have the power to direct their investments “no less frequently

than once within any three month period.” 29 C.F.R. § 2550.404c1(b)(2)(ii)(C)(1).

that errors in carrying out the investment elections of a

beneficiary give rise to liability notwithstanding that any

associated loss technically also “results from such

participant’s or beneficiary’s exercise of control.” 29 U.S.C.

§ 1104(c)(1)(A)(ii). These are just the sort of “difficult

policy choices that agencies are better equipped to make than

courts.” Brand X, 545 U.S. at 980.

We also reject the argument raised by Edison and the

Employment Law Council that DOL’s interpretation renders

section 404(c) a meaningless provision. When certain

conditions are complied with, the provision safeguards 10

fiduciaries from being liable for participants’ substantive

investment decisions. 57 Fed. Reg. at 46,924. “The purpose

of section 404(c) is to relieve the fiduciary of responsibility

for choices made by someone beyond its control.” Howell,

633 F.3d at 567. These include matters such as,

hypothetically, “the participant’s decision to invest 40% of

her assets in Fund A and 60% in Fund B, rather than splitting

assets somehow among four different funds, [or] emphasizing

A rather than B.” Id.

It is, indeed, the contrary view pressed by Edison that

would render parts of the ERISA statute a nullity by making

it nearly impossible for defined-contribution-plan

beneficiaries to vindicate fiduciary imprudence. Cf. LaRue v.

DeWolff, Boberg & Assocs., Inc., 552 U.S. 248, 256 (2008)

(citing the DOL’sregulationsimplementing section 404(c) in

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TIBBLE V. EDISON INTERNATIONAL 23

rejecting the converse interpretation); see also Langbecker,

476 F.3d at 321 (Reavley, J., dissenting) (“All commentators

recognize that § 404(c) does not shift liability for a plan

fiduciary’s duty to ensure that each investment option is and

continues to be a prudent one.”).

Because DOL’s interpretation of how the safe harbor

functions is consistent with the statutory language, we

conclude that the district court properly decided that section

404(c) did not preclude merits consideration of beneficiaries’

claims. See Tibble, 639 F. Supp. 2d at 1121.

IV

Edison on its cross appeal raises another argument that

could waylayour analysis of beneficiaries’ substantive claims

on their appeal. It contends that the district court improperly

certified beneficiaries’ case as a class action under Federal

Rule of Civil Procedure 23.

Rule 23 sets out four prerequisites in subsection (a). A

class must be “so numerous that joinder of all members is

impracticable,” (a)(1), there must be “questions of law or fact

common to the class,” (a)(2), “the claims or defenses of the

representative parties” must be “typical of the claims or

defenses of the class,” (a)(3), and those representatives must

“fairly and adequately protect the interests of the class,”

(a)(4). Classes must also comply with “at least one of the

requirements of Rule 23(b).” Zinser v. Accufix Research

Inst., Inc., 253 F.3d 1180, 1186 (9th Cir. 2001).

For the first time on its cross appeal and relying on outof-circuit authority, Edison argues that this class action was

improperly certified because the claims of the representative

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24 TIBBLE V. EDISON INTERNATIONAL

 The MFS Total Return fund. 11

plaintiffs are not typical to the claims of the class at large.

See Spano v. Boeing Co., 633 F.3d 574, 586 (7th Cir. 2011)

(expounding on Rule 23(a)(3)’s “typicality requirement”). In

Spano, the court stated that “it seems that a class

representative in a defined-contribution case would at a

minimum need to have invested in the same funds as the class

members.” Id. Seizing on this statement, Edison contends

that one of the three funds successfully litigated at trial was

not held by any of the six named plaintiffs. This violates 11

Rule 23(a)(3), it claims, and requires that we reverse the class

certification order.

Beneficiaries correctly argue that arguments not raised in

the district court ordinarily will not be considered on appeal.

Dream Palace v. Cnty. of Maricopa, 384 F.3d 990, 1005 (9th

Cir. 2004). “This rule serves to ensure that legal arguments

are considered with the benefit of a fully developed factual

record, offers appellate courts the benefit of the district

court’s prior analysis, and prevents parties from sandbagging

their opponents with new arguments on appeal.” Id. In

contrast to this typicality argument, Edison’s only Rule 23(a)

arguments below were (i) a lack of commonality because the

then-live misrepresentation claims would require

individualized proof of reliance and (ii) a failure of adequacy.

Edison concedes that it framed its argument strictly “as an

adequacy issue below” but claims that because this inquiry

can overlap with the typicality analysis, its presentation in the

lower court suffices.

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TIBBLE V. EDISON INTERNATIONAL 25

 See, e.g., Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 612–13 (9th 12

Cir. 2010) (en banc), rev’d on other grounds by Wal-Mart Stores Inc. v.

Dukes, 131 S. Ct. 2541 (2011).

 Although there are exceptions to waiver when “the issue is purely one 13

of law, does not affect or rely upon the factual record developed by the

parties, and will not prejudice the party against whom it is raised,” these

criteria are not satisfied. Dream Palace, 384 F.3d at 1005. Which funds

the named plaintiffs invested in is a factual issue and the beneficiaries

almost certainly would have tried their case differently (i.e., chosen

different representatives) had this issue been raised at the appropriate

stage, thus demonstrating prejudice. Janes v. Wal-Mart Stores, Inc., 279

F.3d 883, 888 n.4 (9th Cir. 2002). Given that Edison’s Rule 23(a)

argument on appeal is new and does not fall within the recognized, but

narrow, exceptions to this form of waiver, we exercise our discretion to

decline to decide it. Dream Palace, 384 F.3d at 1005.

While we have indulged some liberality as to whether a

particular Rule 23(a) subdivision has been pressed, the 12

presentation must have been “raised sufficiently for the trial

court to rule on it.” In re Mercury Interactive Corp. Sec.

Litig., 618 F.3d 988, 992 (9th Cir. 2010). Here, the district

court found that “[d]efendants [did] not challenge whether the

claims of the individual plaintiffs are typical to the class.” As

to adequacy, Edison’s critique below centered on a

“contention that the named plaintiffs [were] nothing more

than ‘window dressing or puppets for class counsel’” in that

they were not knowledgeable about their legal claims—a far

cry from its appellate contention about these beneficiaries’

investments. In light of the failure to present the issue to the 13

district court, we expressly reserve the question of whether

the Ninth Circuit should adopt a rule akin to that articulated

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26 TIBBLE V. EDISON INTERNATIONAL

 And since it has not even been raised on appeal, we also express no 14

view about whether defined-contribution plans are properly certified under

Rule 23(b)(1)(A), as the district court concluded.

 See also 2 Ronald J. Cooke, ERISA Practice and Procedure § 6:10 15

(2012) (“Courts have consistently ruled that action inconsistent with plan

documents constitutes a breach of fiduciary duty.”). As in California

Ironworkers, we simply assume, without deciding, that beneficiaries’

theory is actionable. 259 F.3d at 1042.

in Spano, or whether the circumstances of that case would be

distinguishable from ours.14

V

We now turn to the merits of the main appeal.

Beneficiaries argue that the district court erred in granting

summary judgment to Edison on their claim that revenue

sharing between mutual funds and the administrative service

provider violated the Plan’s governing document, as well as

was a conflict of interest.

A

Because ERISA requires fiduciaries to discharge their

duties “in accordance with the documents and instruments

governing the plan,” 29 U.S.C. § 1104(a)(1)(D), violations of

the written plan have been recognized as a basis for liability.

See, e.g., Cal. Ironworkers Field Pension Trust v. Loomis

Sayles & Co., 259 F.3d 1036, 1042 (9th Cir. 2001).15

Since 1997, Plan section 19.02 has stated: “The cost of

the administration of the Plan will be paid by the Company.”

Edison contracted with Hewitt Associates, LLC, for a variety

of services, including the drafting of Plan updates and

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TIBBLE V. EDISON INTERNATIONAL 27

regulatory reports. Hewitt also maintained the system by

which beneficiaries designate their contribution amounts and

make their investment elections. The addition of a large

menu of mutual funds in 1999 made the Plan more expensive

to administer, so Edison availed itself of a practice known in

the industry as revenue sharing. Under this arrangement,

mutual funds transfer a portion of their fees to the Plan’s

service provider, Hewitt. That revenue reimburses Hewitt for

its recordkeeping and other costs. In turn, Edison receives a

credit on its bills from Hewitt.

Beneficiaries, while conceding this new practice of

revenue sharing was disclosed during the negotiations to

expand the Plan offerings, argue that the arrangement

violated the language of the Plan because it allowed Edison

to escape from part of the obligation to pay. With a

December 26, 2006 amendment this Plan language was

revised to state that “[t]he cost of administration of the Plan,

net of any adjustments by service providers, will be paid by

the Company.” (emphasis added). The parties agree that

under the new language these offsets are perfectly

appropriate. The issue that arises, however, is whether the

district court correctly determined that no triable issue existed

over whether the pre-amendment version of section 19.02

allowed offsets. See Fed. R. Civ. P. 56(a). At bottom, this is

a simple interpretive matter, but like most issues arising

under ERISA there are complications.

1

In addition to the pension plan at issue in this case,

ERISA also governs “employee welfare benefit” plans such

as those for health or disability. See 29 U.S.C. § 1002(1)–(2).

“[T]he validity of a claim to benefits under an ERISA plan is

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28 TIBBLE V. EDISON INTERNATIONAL

likely to turn on the interpretation of terms in the plan at

issue.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,

115 (1989). The Supreme Court has handed down a trio of

opinions explaining the framework for review when those

disputes reach the judiciary. See Conkright, 130 S. Ct. at

1646 (discussing the Court’s two prior precedents, Firestone

and Metropolitan Life Insurance Co. v. Glenn). The proper

standard of review hinges, in part, on what the plan

instrument says about interpretation. When the plan is silent,

judges review its terms de novo. But, when the plan grants

interpretive authority to its administrator, as is usually the

case, a deferential abuse of discretion standard applies to the

administrator’s determinations.

The Edison Plan has a provision that speaks to

interpretation; it vests the company’s Benefits Committee

with the “full discretion to construe and interpret [its] terms

and provisions.” See, e.g., Sandy v. Reliance Std. Life Ins.

Co., 222 F.3d 1202, 1206–07 & n.6 (9th Cir. 2000). The Plan

even purports to make interpretations by the Committee

“final and binding on all parties.” Taking stock of these

principles, the district court applied the abuse of discretion

standard and then concluded that Edison’s view that the

language did not foreclose revenue sharing had been

reasonable.

Yet, as we noted at the outset, the Supreme Court

expounded these interpretive principles in the context of

“§ 1132(a)(1)(B) actions challenging denials of benefits.”

Firestone, 489 U.S. at 108. At least one court has held that in

cases implicating ERISA § 404 fiduciary duties, the standard

fleshed out in Firestone, Glenn, and Conkright is not

applicable. See John Blair Commc’ns, Inc. Profit Sharing

Plan v. Telemundo Grp., Inc. Profit Sharing Plan, 26 F.3d

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TIBBLE V. EDISON INTERNATIONAL 29

360, 369–70 (2d Cir. 1994). Other courts of appeals have

declined to follow suit. See Hunter v. Caliber Sys., Inc., 220

F.3d 702, 711–12 (6th Cir. 2000); Moench v. Robertson, 62

F.3d 553, 565 (3d Cir. 1995) (expressly disagreeing with

John Blair). We agree with the Third and Sixth Circuits.

i

At least three considerations prompt us to hold that the

usual abuse of discretion standard applies to cases such as

this. First, there are disquieting parallels between the John

Blair exception and that same circuit’s “one-strike-andyou’re-out” approach to conflicts-of-interest, which the

Supreme Court repudiated in 2010. See Conkright, 130 S. Ct.

at 1646–47. In so doing, the Court explained that Firestone

“set out a broad standard of deference without any suggestion

that the standard was susceptible to ad hoc exceptions like the

one adopted by the Court of Appeals.” Id.

Second, though mindful that the Firestone case expressed

“no view as to the appropriate standard of review for actions

under other remedial provisions of ERISA,” we conclude that

the principles underlying that 1989 decision, as well as

subsequent guidance on the matter, leave little doubt that its

teaching governs ERISA globally. 489 U.S. at 108. After

uttering that caveat, Firestone, in nearly the next breath,

announces that its holding does not stem from an interpretive

gloss on the welfare-benefits provision, or from any section

of ERISA for that matter. Id. at 109 (“ERISA does not set

out the appropriate standard of review for actions under

§ 1132(a)(1)(B) challenging benefit eligibility”). Instead,

because “ERISA abounds with the language and terminology

of trust law” and because of legislative history to that effect,

that body of law—not a discrete provision—dictated “the

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30 TIBBLE V. EDISON INTERNATIONAL

The law of trusts was even the basis for the dual-track standard 16

whereby, absent a contrary designation, de novo review applies. See id.

at 111 (“[W]here discretion is conferred upon the trustee with respect to

the exercise of a power, its exercise is not subject to control by the court

except to prevent an abuse by the trustee of his discretion.” (emphasis

added) (quoting Restatement (Second) of Trusts § 187 (1959)).

appropriate standard of review.” Id. at 110–11 (“Trust

principles make a deferential standard of review appropriate

when a trustee exercises discretionary powers”).16

This precise insight led the Third Circuit to reject John

Blair. See Moench, 62 F.3d at 565 (“[W]e believe that after

Firestone, trust law should guide the standard of review over

claims . . . not only under section 1132(a)(1)(B) but also over

claims filed pursuant to 29 U.S.C. § 1132(a)(2) based on

violations of the fiduciary duties set forth in section

1104(a).”). Further evidence that the principles underlying

the trilogy of benefits cases extend here is that “common law

trust principles animate the fiduciary responsibility provisions

of ERISA.” Acosta v. Pac. Enters., 950 F.2d 611, 618 (9th

Cir. 1991); see also Cent. States, Se. & Sw. Areas Pension

Fund v. Central Transp., Inc., 472 U.S. 559, 570–71 (1985)

(identifying the statutorily prescribed duties of loyalty and of

prudence as imported from trust law).

Third, we observe that applying deference across the

board, “by permitting an employer to grant primary

interpretive authority over an ERISA plan to the plan

administrator,” has the added virtue of “preserv[ing] the

‘careful balancing’ on which ERISA is based.” Conkright,

130 S. Ct. at 1649. In particular, it helps keep administrative

and litigation expenses under control, which could otherwise

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TIBBLE V. EDISON INTERNATIONAL 31

“discourage employers from offering [ERISA] plans in the

first place.” Id. (alteration in original).

ii

In addition to these primary considerations, there are

shortcomings with the John Blair decision itself. In it, the

Second Circuit appealed to the notion that fiduciary duty and

conflict-of-interest suits, i.e., under ERISA § 406, arise when

the plan administrator has fallen prey to invalid

considerations—matters other than the well-being of

beneficiaries. See John Blair, 26 F.3d at 369. Yet when the

Supreme Court had the opportunity to craft a new review

standard for plan administrators adjudicating claims under a

financial conflict of interest, it saw “no reason to forsake

Firestone’s reliance upon trust law.” Metro. Life Ins. Co. v.

Glenn, 554 U.S. 105, 116 (2008); see also Conkright, 130

S. Ct. at 1647 (explaining that “we held in Glenn [that] a

systemic conflict of interest does not strip a plan

administrator of deference”). Furthermore, John Blair drew

its insight about the need to limit Firestone from a thendecade-old Third Circuit opinion that the Third Circuit came

to read differently. Compare John Blair, 26 F.3d at 369

(discussing Struble v. N.J. Brewery Emps. Welfare Trust

Fund, 732 F.2d 325, 333–34 (3d Cir. 1984)), with Moench, 62

F.3d at 565.

Both the affirmative case for the abuse of discretion

standard and difficulties with John Blair impel us to apply

Firestone, and so we do.

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32 TIBBLE V. EDISON INTERNATIONAL

2

ERISA administrators abuse their discretion if they act

without explanation or “construe provisions of the plan in a

way that conflicts with the plain language of the plan.” Day

v. AT&T Disability Income Plan, 698 F.3d 1091, 1096 (9th

Cir. 2012). We are instructed not to disturb those

interpretations if they are reasonable. See Conkright, 130

S. Ct. at 1651.

To start with, we discern no explicit conflict with the

plain language of the Plan. See Day, 698 F.3d at 1096.

Section 19.02 required the company to pay the costs, and

Edison did. Although beneficiaries argue that the “costs” are

the expenses associated with Hewitt before the offsets, the

more natural reading is that “costs” simply are whatever bills

Hewitt presented Edison with. Under this commonsense

reading, the Plan merely assigned Edison an affirmative

obligation to pay. It did not, as beneficiaries would have it,

prohibit “Hewitt’s recordkeeping services from being paid by

a third party such as mutual funds.” That kind of

interpretation, nonsensically, would also imply that if Hewitt

had simply lowered its prices (maybe due to efficiency or

market pressure) Edison would be somehow shirking its

obligation under Plan § 19.02.

Beyond the text, in conducting abuse of discretion review,

courts consider “various [other] criteria for determining the

reasonableness of a fiduciary’s discretionary decision.”

Booth v. Wal-Mart Stores, Inc. Assocs. Health & Welfare

Plan, 201 F.3d 335, 342 (4th Cir. 2000). Viewing the matter

in terms of those considerations further establishes the

soundness of Edison’s position. Its view is most “consistent

with the goals of the plan,” as it facilitated the expansion of

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TIBBLE V. EDISON INTERNATIONAL 33

the Plan’s mutual fund offerings. Id. We also note that

section 19.02 has been applied consistently over time.

Undisputed evidence showed that the union negotiators and

Edison had “extensive discussions with regard to how

revenue sharing from the mutual funds would be used.” Also,

between 1999 when the process started, and 2006 when the

language was modified, on at least seventeen occasions

participants were specifically advised that mutual funds were

being used to reduce the cost of retaining Hewitt. For

example, one Summary Plan Description in evidence said:

“the fees received by Edison’s 401(k) plan recordkeeper are

used to reduce the recordkeeping and communication

expenses of the plan paid by the company.” Another

consideration under the abuse of discretion standard is

“whether the challenged interpretation is at odds with the

procedural and substantive requirements of ERISA itself.” de

Nobel v. Vitro Corp., 885 F.2d 1180, 1188 (4th Cir. 1989)

(citing Blau v. Del Monte Corp., 748 F.2d 1348, 1353 (9th

Cir. 1984)). Although we explain the reasoning behind this

observation next, we are satisfied that revenue sharing as

carried out by Edison does not violate ERISA.

B

Beneficiaries alternatively argue that the statute’s

conflicts provision, ERISA § 406(b)(3), prohibits the practice

of revenue sharing. ERISA § 406 is similar to a duty-ofloyalty provision. See Mass. Mut. Life Ins. Co. v. Russell,

473 U.S. 134, 143 n.10 (1985). It prohibits the type of

business deals “likely to injure the pension plan.” Wright v.

Or. Metallurgical Corp., 360 F.3d 1090, 1100 (9th Cir.

2004).

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34 TIBBLE V. EDISON INTERNATIONAL

1

ERISA § 406(b)(3) provides that:

A fiduciary with respect to a plan shall not

receive any consideration for his own personal

account from any party dealing with such plan

in connection with a transaction involving the

assets of the plan.

29 U.S.C. § 1106(b)(3). Beneficiaries’ claim is that Edison’s

revenue sharing arrangement violated this provision because

Edison received “consideration” in the form of discounts for

administrative expenses from Hewitt, which was a “party

dealing with” the Plan. The DOL, though, has issued several

non binding advisory opinions staking out the position that a

fiduciary does not violate section 406(b)(3) so long as “the

decision to invest in such funds is made by a fiduciary who is

independent” of the fiduciary receiving the fee. DOL

Advisory Op. 2003-09A, 2003 WL 21514170 (June 25,

2003);see also DOL Advisory Op. 97-15A, 1997 WL 277980

(May 22, 1997) (fiduciary that “does not exercise any

authority or control” to cause the suspect investment is not

liable).

Relying on these concepts, the district court granted

summary judgment to Edison. To do so, it conceived of

“Edison,” not as a unified corporate entity, but in terms of its

constituent parts. In brief, the “fiduciaries” named in the Plan

include the Southern California Edison Benefits Committee

and its members, as well as the Edison International Trust

Investment Committee and its members. The “Plan Sponsor”

is Southern California Edison, while its Benefits Committee

is designated under ERISA as the “Plan Administrator.” See

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TIBBLE V. EDISON INTERNATIONAL 35

 To the extent a Plan Sponsor has or exercises discretionary authority 17

in the administration or management of the Plan, ERISA deems that

sponsor a fiduciary. See Mathews v. Chevron Corp., 362 F.3d 1172, 1178

(9th Cir. 2004) (discussing 29 U.S.C. § 1002(21)(A)).

29 U.S.C. § 1002(16)(A)(i), (B). Edison International’s 17

CEO appoints the Investment Committee and Southern

California Edison’s CEO handles appointments to the

Benefits Committee.

In light of this diffusion of responsibility, the district

court observed that, asthe sole contracting party with Hewitt,

only the subsidiary Southern California Edison had received

the credit from administrative expenses. It then noted that it

was the Investment Committee of the parent company,

Edison International, which had selected the mutual funds

that featured revenue sharing. From this, the court drew the

conclusion that a different fiduciary had received the

“consideration” than the fiduciary which had (in the DOL’s

parlance) exercised “authority or control” over the offending

investment. Therefore, the mutual fund revenue sharing had

not violated section 406(b)(3).

As amicus curiae, the DOL vigorously objects to the

lower court’s parsing of Edison International this way, and

objects to what it considers an overly broad reading of its

advisory opinions. DOL maintains that permitting

“fiduciaries to make plan asset investment decisions that

result in the company on which they serve as directors and

officers receiving an economic benefit from a third party is

precisely the kind of transaction—rife with the potential for

abuse—that Congress intended to prohibit in section

406(b)(3).” In response, Edison argues that the separate legal

identities of the committees and companies are meaningful,

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36 TIBBLE V. EDISON INTERNATIONAL

and calls to our attention the district court’s finding that

beneficiaries had not marshaled evidence that justified

disregarding their putative separateness.

We review the district court’s entry of summary judgment

de novo, and we are empowered to affirm on any basis the

record will support. See Gordon v. Virtumundo, Inc., 575

F.3d 1040, 1047 (9th Cir. 2009). In light of that, we reserve

for another case whether the lower court’s control

determinations are defensible and, instead, proceed to

consider the basis for affirmance expressly advocated by the

DOL.

2

The DOL directs our attention to its regulatory

interpretation at 29 C.F.R. § 2550.408b-2(e)(3), which states

that “[i]f a fiduciary provides services to a plan without the

receipt of compensation or other consideration (other than

reimbursement of direct expenses properly and actually

incurred in the performance of such services . . . ), the

provision of such services does not, in and of itself, constitute

an act described in section 406(b) of the Act.” Assuming that

the Edison Plan permitted revenue sharing (as we concluded

above), then as DOL explains, the discounts on its invoices

from Hewitt “would not constitute the receipt of any

‘consideration’” by Edison “within the meaning of the section

406(b)(3) prohibition.” In further support, the agency cites

one of its opinion letters that permitted, under the authority of

section 2550.408b-2(e), a fiduciary to receive reimbursement

from an unrelated mutual fund of direct expenses for which

the plan would otherwise be liable. See DOL Advisory Op.

97-19A, 1997 WL 540069 (Aug. 28, 1997).

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TIBBLE V. EDISON INTERNATIONAL 37

 ERISA § 408 grants exemptions from prohibited transactions. At 18

issue in Patelco was the part of that section stating “[n]othing in section

1106 of this title shall be construed to prohibit any fiduciary from . . . (2)

receiving any reasonable compensation for services rendered, or for the

reimbursement of expenses properly and actually incurred, in the

performance of his duties with the plan. . . .”

The district court intimated that our Patelco Credit Union

v. Sahni decision might be to the contrary. 262 F.3d 897 (9th

Cir. 2001). It is not, although we do not fault the district

court for its misconception. It did not have the advantage,

afforded us, of DOL’s participation in tackling these

regulatory intricacies. In Patelco, the fiduciary had

wrongfully deposited ERISA Plan assets—two checks

payable to the company—into his own account. Id. at 903,

908. This straightforwardly constituted “consideration for his

own personal account” from a “party dealing with [the] plan,”

in violation of ERISA § 406(b)(3). Id. at 909–10.

Confronted with that scenario, we vindicated DOL’s

pronouncement that when a fiduciary self-deals in violation

of ERISA § 406(b), the “reasonable compensation exception”

found in section 408(b)(2) cannot be used as a shield from

liability. Id. at 910–11; see also Dupree v. Prudential Ins.

Co. of Am., No. 99-8337, 2007 WL 2263892, at *42 (S.D.

Fla. Aug. 7, 2007) (explaining this).18

By contrast in our case, section 2550.408b-2(e)(3), as it

is “routinely interpreted by the DOL,” exempts revenue

sharing payments from the very definition of consideration.

Dupree, 2007 WL 2263892, at *42. The Department’s

position is that ratherthan constituting “consideration,” “such

payments may be considered ‘reimbursement’ within the

meaning of regulation section 2550.408b-2(e).” DOL

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38 TIBBLE V. EDISON INTERNATIONAL

 Lest there be any doubt about the distinction between the issue in 1 9

Patelco and the issue that arises in this case, we point out that in this very

same advisory opinion the DOL also discusses the interpretation we

upheld in Patelco—thus demonstrating that the two interpretations are

compatible. Compare Advisory Op. 97-19A (“Regulation 29 C.F.R.

2550.408b-2(a) indicates that ERISA section 408(b)(2) does not contain

an exemption for an act described in section 406(b) even if such act occurs

in connection with a provision of services which is exempt under section

408(b)(2).”), with Patelco, 262 F.3d at 910 (quoting section 2550.408b2(a) as stating “[h]owever, section 408(b)(2) does not contain an

exemption from acts described in section 406(b)(1) of the Act . . . section

406(b)(2) of the Act . . . or section 406(b)(3) of the Act.).

Advisory Op. 97-19A. That means it is not a section 19

406(b)(3) violation at all.

Aside from citing Patelco as the lower court understood

it, beneficiaries’ only response is, in effect, that we ought to

read DOL’s regulations and opinion letters differently than

DOL has counseled in its amicus brief. We decline to do so.

Notably, courts are instructed to “defer to an agency’s

interpretation of its own regulation, advanced in a legal brief

unless that interpretation is ‘plainly erroneous or inconsistent

with the regulation.’” Chase Bank USA, N.A. v. McCoy, 131

S. Ct. 871, 880 (2011) (discussing Auer deference). We

mention this not because we resolve whether this view is

permissible either under ERISA or the regulation, but simply

to explain why beneficiaries have not convinced us to reject

DOL’s interpretation in this case.

VI

Beneficiaries next claim that Edison violated its duty of

prudence under ERISA by including several investment

vehicles in the Plan menu: (i) mutual funds, (ii) a short-term

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TIBBLE V. EDISON INTERNATIONAL 39

investment fund akin to a money market, and (iii) a unitized

fund for employees’ investment in Edison stock.

A

ERISA demands that fiduciaries act with the type of

“care, skill, prudence, and diligence under the circumstances”

not of a lay person, but of one experienced and

knowledgeable with these matters. 29 U.S.C.

§ 1104(a)(1)(B). Fiduciaries also must act exclusively in the

interest of beneficiaries. Id. § 1104(a)(1). These obligations

are more exacting than those associated with the business

judgment rule so familiar to corporate practitioners, Howard

v. Shay, 100 F.3d 1484, 1489 (9th Cir. 1996), a standard

under which courts eschew any evaluation of “substantive

due care.” Brehm v. Eisner, 746 A.2d 244, 264 (Del. 2000),

cited in Pac. Nw. Generating Coop. v. Bonneville Power

Admin., 596 F.3d 1065, 1077 (9th Cir. 2010). To enforce this

duty of prudence, we consider the merits of the transaction

and “the thoroughness of the investigation into the merits of

the transaction.” Howard, 100 F.3d at 1488 (emphasis

added). Courts are in broad accord that engaging consultants,

even well-qualified and impartial ones, will not alone satisfy

the duty of prudence. See George v. Kraft Foods Global,

Inc., 641 F.3d 786, 799–800 (7th Cir. 2011) (collecting cases

from the Second, Fifth, Seventh, and Ninth Circuits).

Under the common law of trusts, which helps inform

ERISA, a fiduciary “is duty-bound ‘to make such investments

and only such investments as a prudent [person] would make

of his own property having in view the preservation of the

[Plan] and the amount and regularity of the income to be

derived.’” In re Unisys., 74 F.3d at 434 (quoting Restatement

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40 TIBBLE V. EDISON INTERNATIONAL

(Second) of Trusts § 227 (1959)) (first alternation in

original).

B

1

A mutual fund is a pool of assets, chiefly a portfolio of

securities bought with the capital contributions of the fund’s

shareholders. Jones v. Harris Assocs. L.P., 130 S. Ct. 1418,

1422 (2010). Joined by the AARP as an amicus, beneficiaries

seek a ruling that including mutual funds of the sort available

to the investing public at large (“retail” or “brand-name”

funds) is categorically imprudent. Their position is that under

ERISA, fiduciaries must offer institutional investment

alternatives such as “commingled pools” or “separate

accounts.”

Mutual funds, however, have a variety of unique

regulatory and transparency features that make it an applesto-oranges comparison to judge them against AARP and

beneficiaries’ suggested options. As Chief Judge Easterbook,

writing for the Seventh Circuit, has usefully summarized:

A pension plan that directs participants into

privately held trusts or commingled pools (the

sort of vehicles that insurance companies use

for assets under their management) lacks the

mark-to-market benchmark provided by a

retail mutual fund. It can be hard to tell

whether a closed fund is doing well or poorly,

or whether its expenses are excessive in

relation to the benefits they provide. It can be

hard to value the vehicle’s assets (often real

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TIBBLE V. EDISON INTERNATIONAL 41

estate rather than stock or bonds) when

someone wants to withdraw money, and any

error in valuation can hurt other investors.

Loomis v. Exelon Corp., 658 F.3d 667, 671–72 (7th Cir.

2011). As beneficiaries admit in their briefing, brand-name

mutual funds are generally easy to track via newspaper or

internet sources. This, in fact, was a stated goal of the report

issued by the Joint Study Group of human resource managers

and employee union representatives empaneled to expand the

Plan menu. Relatedly, as other courts have recognized, nonmutual fund alternatives such as commingled pools are not

subject to the same “reporting, governance, and transparency

requirements” as mutual funds, which are governed by the

Securities Act of 1933 and the Investment Company Act of

1940. See Renfro v. Unisys Corp., 671 F.3d 314, 318 (3d Cir.

2011); Harris Assocs., 130 S. Ct. at 1422.

Further, the undisputed evidence was that during

collective bargaining the union requested “forty name-brand

retail mutual funds for inclusion in the Plan.” While

conceding this, the beneficiaries claim that the union did not

know what was in its members’ best interest. Because

participant choice is the centerpiece of what ERISA envisions

for defined-contribution plans, these sorts of paternalistic

arguments have had little traction in the courts. See, e.g.,

Loomis, 658 F.3d at 673; Renfro, 671 F.3d at 327–28

(observing that imprudence is less plausible “in light of an

ERISA defined-contribution 401(k) plan having a reasonable

range of investment options with a variety of risk profiles and

fee rates”).

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42 TIBBLE V. EDISON INTERNATIONAL

2

Also before us under the mutual fund umbrella is

beneficiaries’ claim that the particular mutual funds Edison

selected charged excessive fees, which rendered their

inclusion imprudent. Part of this challenge is a broadside

against retail-class mutual funds, which do generally have

higher expense ratios than their institutional-class

counterparts. As the district court explained in its post-trial

findings of fact, this is because with institutional-class mutual

funds “the amount of assets invested is far greater than [that

associated with] the typical individual investor.” The

Seventh Circuit has repeatedly rejected the argument that a

fiduciary “should have offered only ‘wholesale’ or

‘institutional’ funds.” See Loomis, 658 F.3d at 671; Hecker,

556 F.3d at 586 (“[N]othing in ERISA requires [a] fiduciary

to scour the market to find and offer the cheapest possible

fund (which might, of course, be plagued by other

problems).”). We agree. There are simply too many relevant

considerations for a fiduciary, for that type of bright-line

approach to prudence to be tenable. Cf. Braden v. Wal-Mart

Stores, Inc., 588 F.3d 585, 596 (8th Cir. 2009)

(acknowledging that a fiduciary might “have chosen funds

with higher fees for any number of reasons, including

potential for higher return, lower financial risk, more services

offered, or greater management flexibility”).

Nor is the particular expense ratio range out of the

ordinary enough to make the funds imprudent. In Hecker, the

court upheld the dismissal of a similar excessive fee claim

where the range of expenses varied from .07 to 1% across a

pool of twenty mutual funds. 556 F.3d at 586. Here, the

summary-judgment facts showed that the expense ratio varied

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TIBBLE V. EDISON INTERNATIONAL 43

 See Meyer v. Oppenheimer Mgmt. Corp., 895 F.2d 861, 863 (2d Cir. 20

1990) (“Promulgated in 1980, [U.S. Securities and Exchange

Commission] Rule 12b-1 permits an open-end investment company to use

fund assets to cover sale and distribution expenses pursuant to a written

plan approved by a majority of the fund’s board of directors . . . and a

majority of the fund’s outstanding voting shares. . . . Prior to this Rule,

brokers had to bear these expenses themselves.”).

from .03 to 2%, and there were roughly forty mutual funds to

choose from.

3

Before we leave the topic of mutual funds we find it

necessary to make one last observation. Much time at oral

argument and ink in the briefs were devoted to debating the

question of whether the revenue sharing typically associated

with mutual funds adversely impacts plan beneficiaries.

Today we have held that the practice here did not violate the

terms of the Edison Plan or violate ERISA § 406(b)(3).

 Mutual funds generate this revenue by charging what is

known as a Rule 12b-1 fee to all investors participating in the

fund. Edison takes the position that because that fee applies 20

to Plan beneficiaries and all other fund investors alike, the

allocation of a portion of that total 12b-1 fee to Hewitt is

irrelevant. As it put the matter at oral argument: “the mutual

fund advisor can do whatever it wants with the fees;

sometimes they share costs with service providers who assist

them in providing service and sometimes they don’t.” This

benign-effect, of course, assumes that the “cost” of revenue

sharing is not driving up the fund’s total 12b-1 fee and, in

turn, its overall expense ratio. It also assumes that fiduciaries

are not being driven to select funds because they offer them

the financial benefit of revenue sharing. The former was not

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44 TIBBLE V. EDISON INTERNATIONAL

 In fact, the district court found that “in 33 of 39 instances, the changes 21

to the mutual funds in the Plan evidenced either a decrease or no net

change in the revenue sharing received by the Plan.”

explored in this case and the evidence did not bear out the

latter, but we do not wish to be understood as ruling out the 21

possibility that liability might—on a different record—attach

on either of these bases.

C

The next contention can be addressed briefly.

Beneficiaries argue that it was imprudent for Edison to

include a short-term investment fund (or “STIF”) rather than

a stable value fund. Both types of investments are

conservative in that they emphasize capital preservation

rather than the maximization of returns. A stable value fund

generally consists of short-to-medium duration bonds paired

with insurance contracts that guard against interest rate

volatility, and the record here indicates that beneficiaries are

correct that they typically outperform money market funds.

A STIF is similar to a traditional money market fund, which

invests in what might be loosely termed “money,”

instruments such as “short-term securities of the United

States Government or its agencies, bank certificates of

deposit, and commercial paper.” Harris Assocs., 130 S. Ct.

at 1426 n.6. The regulatory regime is different for the two

instruments however:registered money markets must comply

with the Investment Company Act, whereas banking

regulations set the rules of the road for STIFs.

When applying the prudence rule in section

1104(a)(1)(B), “the primary question is whether the

fiduciaries, at the time they engaged in the challenged

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TIBBLE V. EDISON INTERNATIONAL 45

transactions, employed the appropriate methods to investigate

the merits of the investment and to structure the investment.”

Cal. Ironworkers, 259 F.3d at 1043 (internal quotation marks

omitted). Thus, fatal to beneficiaries is uncontroverted

evidence that there were discussions about the pros and cons

of a stable-value alternative. Furthermore, an investment

staffer testified at his deposition that in 1999 his team

determined that a short-duration bond fund already on the

menu filled the same investment niche as would have a stable

value fund.

D

Beneficiaries also charge that the inclusion of the unitized

stock investment was imprudent, despite it being an industry

standard for large 401(k)’s. Their main contention is that

during the class period a roughly 77% gain in Edison’s stock

price yielded Plan investors only around a 67% return. But

hindsight is the wrong metric for evaluating fiduciary duty.

See Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915, 918

(8th Cir. 1994); DiFelice, 497 F.3d at 424.

This dilution, or “investment drag,” that occurs when

stock prices rise as compared to a direct stock investment is

a well-recognized characteristic of unitized funds. The

reason they are called “unitized” is that participants own units

of a fund that invests primarily in company stock, but also in

“cash and other similar highly liquid investments.” George,

641 F.3d at 792. These non-stock portions of the unitized

fund generate lower rates of return than does the stock. Why

use the device then? The advantages are twofold. The cashbuffer gives investors increased liquidity. See id. at 793

(explaining that money can be dispersed without delay

because sales of units are paid out from the cash). Also, “in

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46 TIBBLE V. EDISON INTERNATIONAL

a market in which the relevant stock is declining, the presence

of cash in the fund would be a good thing” because it

functions as a hedge. Id.

Citing George, beneficiaries correctly note that, there, the

court withheld summary judgment because there was a

genuine issue of material fact as to whether the fiduciary had

considered “implementing changes to the [fund] in order to

reduce or eliminate investment and transactional drag.” Id.

at 796 n.8. Yet, by contrast, the district court here found

vigilance on the part of the Edison Investment Committee to

minimize this phenomenon. “For example, in July 2004, the

issue of how much cash should be held in the Edison Stock

Fund was raised.” Because active trading had decreased, the

decision was made to reduce the cash target. See Taylor v.

United Techs. Corp., No. 3:06-CV-1494, 2009 WL 535779,

at *9 (D. Conn. 2009) (“The evidence indicates that UTC’s

evaluation of the merits of retaining cash to provide

transactional liquidity satisfies the prudent person standard.”).

Because the choice to include unitization was objectively

reasonable as well as informed, and because the evidence

establishes that Edison oversaw the fund as conditions

changed, we agree that summary judgment was proper.

VII

Continuing with our application of the prudence standard,

we confront the final issue in the case: Edison’s argument on

cross appeal that the district court erred in concluding—after

a three-day bench trial and months of post-trial evidence and

briefing—that the company had been imprudent in deciding

to include retail-class shares of three specific mutual funds in

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TIBBLE V. EDISON INTERNATIONAL 47

 They were the William Blair Small Cap Growth Fund, the PIMCO 22

(Allianz) RCM Global Technology Fund, and the MFS Total Return Fund.

As mentioned earlier, other retail funds for which the initial decision to

invest was time-barred were litigated (unsuccessfully) under a theory that

Edison breached its duties by not converting them into institutional shares

upon the occurrence of “triggering events” after August 16, 2001.

 Although the funds advertised investment minimums, the district court 23

amply documented that it is common knowledge in the financial industry

that these will be waived for “large 401(k) plans with over a billion dollars

in total assets, such as Edison’s.” In fact, defendants’ own expert witness

had “personally obtained such waivers for plans as small as $50 million

in total assests—i.e, 5 percent the size of the Edison plan.”

the Plan menu. The basis of liability was not the mere

22

inclusion of retail-class shares, as the court had rejected that

claim on summary judgment. Instead, beneficiaries prevailed

on a theory that Edison has failed to investigate the

possibility of institutional-share class alternatives.

A

In reviewing a judgment after a bench trial, we evaluate

the district court’s factual findings “for clear error and its

legal conclusions de novo.” Lee v. W. Coast Life Ins. Co.,

688 F.3d 1004, 1009 (9th Cir. 2012).

Here, the lower court’s unchallenged findings are that

during the relevant time period (i) all three funds offered

institutional options in which the Edison 401(k) Savings Plan

almost certainly could have participated, (ii) those options 23

were in the range of 24 to 40 basis points cheaper than the

retail class options the Plan did include, and—crucially—(iii)

between the class profiles, there were no salient differences

in the investment quality or management.

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48 TIBBLE V. EDISON INTERNATIONAL

 HFS is an affiliate of the Plan’s services provider, Hewitt Associates. 24

Their respective roles are separate and distinct.

B

Since at least 1999, Edison has contracted with Hewitt

Financial Services (“HFS”) for investment consulting 24

advice. It argued below, and re-urges here, that it reasonably

depended on HFS for advice about which mutual fund share

classes should be selected for the Plan.

HFS frequently engages with the Investment Committee

staff at Edison to help design and manage the Plan menu. It

applies the investment staff’s criteria: (1) fund

stability/management, (2) diversification, (3) performance

relative to benchmarks, (4) expense ratio relative to the peer

group, and (5) the accessibility of public information on the

fund. HFS then approaches the Committee with options and

discusses their respective merit with its members. And to

keep Edison abreast of developments, it provides the

Committee with monthly, quarterly, and annual investment

reports. We offer this background to illustrate a point, which,

though it should be unmistakable, seems to have eluded

Edison in its briefing. HFS is its consultant, not the fiduciary.

“As Judge Friendly has explained, independent expert advice

is not a ‘whitewash.’” Shay, 100 F.3d at 1489 (quoting

Donovan v. Bierwirth, 680 F.2d 263, 272 (2d Cir. 1982)).

Our Shay factors recognize this by not simply requiring that

the fiduciary (1) probe the expert’s qualifications, and (2)

furnish the expert with reliable and complete information, but

also requiring it to “(3) make certain that reliance on the

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TIBBLE V. EDISON INTERNATIONAL 49

 This framework has been followed by our sister circuits. See, e.g.,

25

Bussian v. RJR Nabisco, Inc., 223 F.3d 286, 301 (5th Cir. 2000);

Hightshue v. AIG Life Ins. Co., 135 F.3d 1144, 1148 (7th Cir. 1998).

expert’s advice is reasonably justified under the

circumstances.” Id.25

Applying Shay, the district court found that Edison failed

to satisfy element (3)—reasonable reliance. We agree. Just

as fiduciaries cannot blindly rely on counsel, Donovan v.

Mazzola, 716 F.2d 1226, 1234 (9th Cir. 1983), or on credit

rating agencies, Bussian, 223 F.3d at 301, a firm in Edison’s

position cannot reflexively and uncritically adopt investment

recommendations. See In re Unisys, 74 F.3d at 435–36

(“[W]e believe that ERISA’s duty to investigate requires

fiduciaries to review the data a consultant gathers, to assess

its significance and to supplement it where necessary.”);

Shay, 100 F.3d at 1490 (fiduciaries should “make an honest,

objective effort” to grapple with the advice given and, if need

be, “question the methods and assumptions that do not make

sense”). The trial evidence—from both beneficiaries’ and

Edison’s own experts—shows that an experienced investor

would have reviewed all available share classes and the

relative costs of each when selecting a mutual fund. The

district court found an utter absence of evidence that Edison

considered the possibility of institutional classes for the funds

litigated—a startling fact considering that supposedly the

“expense ratio” was a core investment criterion.

However, because the “goal is not to duplicate the

expert’s analysis,” had Edison made a showing that HFS

engaged in a prudent process in considering share classes this

might have been a different case. Bussian, 223 F.3d at 301.

But despite having ample opportunities, Edison “did not

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50 TIBBLE V. EDISON INTERNATIONAL

present evidence of: the specific recommendations HFS made

to the Investments Staff regarding those funds, what the scope

of HFS’s review was, whether HFS considered both the retail

and institutional share classes” or what questions or “steps the

Investments Staff [pursued] to evaluate HFS’

recommendations.”

On this record we have little difficulty agreeing with the

district court that Edison did not exercise the “care, skill,

prudence, and diligence under the circumstances” that ERISA

demands in the selection of these retail mutual funds. 29

U.S.C. § 1104(a)(1)(B). Its cross appeal thus fails.

VIII

For the foregoing reasons, the judgment of the district

court is AFFIRMED. The parties shall bear their own costs

on appeal.

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