By: Mark Casciari and Jim Goodfellow
Seyfarth Synopsis: The Ninth Circuit declined to enforce an agreement to arbitrate ERISA Section 502(a)(2) claims, but did not rule out enforcement in other ERISA claim contexts.
In Munro v. University of Southern California, et al., No. 17-5550, 2018 WL 3542996 (9th Cir. July 24, 2018), plaintiffs sought to represent a class of participants in two ERISA-governed defined contribution plans sponsored by the University of Southern California, alleging multiple breaches of fiduciary duty stemming from the administration of those plans. Plaintiffs sought equitable relief on behalf of the plans under ERISA Section 502(a)(2) in the form of monetary relief, removal of the breaching fiduciaries, a full accounting of losses, reformation of the plans, and an order regarding appropriate future investments.
The defendants moved to compel arbitration, as all of the potential class members had signed arbitration agreements to arbitrate all claims that the putative class members or USC had against one another. The agreements expressly covered claims under federal law, including ERISA. The defendants sought further to compel individual, and not class arbitrations, because the arbitration agreements did not specifically allow class arbitration.
The district court denied the motion, and the Ninth Circuit affirmed. The Ninth Circuit analogized the plaintiffs in this case to plaintiffs in a qui tam action brought on behalf of the U.S. Government under the False Claims Act. Citing to its 2017 decision in U.S. ex rel. Welch v. My Left Foot Children’s Therapy, LLC, 871 F.3d 791 (9th Cir. 2017), the Court stated that individual agreements to arbitrate do not extend to qui tam actions because those are brought on behalf of the government by the plaintiffs. Similarly, the Court said, an ERISA Section 502(a)(2) breach of fiduciary duty claim is brought on behalf of an ERISA plan by its participants.
There is more to take away from this decision, however. The Ninth Circuit specifically declined to rule that an agreement to arbitrate ERISA claims is always unenforceable. The Court suggested that it might disagree in a future case with its 1984 decision in Amaro v. Continental Can Co., 724 F.2d 747 (9th Cir. 1984), which it held that ERISA’s “equitable character” could not be satisfied in an arbitral proceeding. The Court referred to “intervening Supreme Court case law,” obviously referring to a number of Supreme Court decisions after 1984, including, most recently the Epiq Systems decision that broadly enforce agreements to arbitrate. So we have not heard the last word from the Ninth Circuit on the enforceability of agreements to arbitrate ERISA claims. And we should expect other Courts of Appeal to address arbitration of ERISA claims, and perhaps create a split in the Circuits that would lead to Supreme Court review. Notwithstanding the Ninth Circuit decision in Munro, arbitration agreements remain a hot topic in federal jurisprudence. Stay tuned.