The US Supreme Court decided Monday in an 8-0 judgment, with Justice Barret recused, that the Court of Appeals for the Seventh Circuit Court erred in its Hughes v. Northwestern University decision. The court ordered the appellate court’s judgment to be vacated and remanded the case for further proceedings.

The case concerns the Employee Retirement Income Security Act of 1974 (ERISA), the statute governing employee retirement plans. The petitioners, employees of Northwestern University, alleged that the institution’s retirement plans breached ERISA by failing to minimize bookkeeping fees, offering too many investment options and utilizing needlessly expensive share classes for their mutual funds.

The district court initially dismissed the motion as a matter of law, and the Seventh Circuit affirmed the district court’s decision. In its judgment, the appellate court concluded that allegations of imprudence ultimately failed since participants retained the ability to decide which plans to opt into.

However, the Supreme Court vacated the appellate court’s reasoning, finding that the lower court failed to apply the key precedent set in Tibble v. Edison International. Under Tibble, “a fiduciary is required to conduct a regular review of its investment,” making failure to remove imprudent investments a breach of the ERISA. For these reasons, the court decided that the petitioner’s arguments were unjustly dismissed by the appellate court, which focused on the investor’s choice, overshadowing prudence considerations.

Following the Supreme Court’s order, Hughes will be remanded to the appellate court for reconsideration.