This column previously considered the issue of whether the Employee Retirement Income Security Act ("ERISA") allowed plans to require arbitration of ERISA claims ("Part I").1 Part I discussed the competing views of the
As Part I noted at the time, Smith was pending before the
The upshot is continued uncertainty that plan sponsors will have to navigate to the extent they wish to require arbitration of ERISA claims.
Background on Arbitration Generally
By way of reminder, whether arbitration can, as a general matter, be required is fully endorsed by the Federal Arbitration Act's5 "liberal federal policy favoring arbitration agreements" because it can provide employees and employers "quicker, more informal, and often cheaper resolutions" of workplace-related disputes.6 The question remains, however, whether that general endorsement of arbitration has been "overridden by a contrary congressional command,"7 by any provision of ERISA. The answer to that question points to some of the remaining tension between the Dorman and Triad decisions.
Dorman II Holds ERISA Claims may Broadly be Arbitrated
As discussed in Part I, the Ninth Circuit in Dorman II endorsed a broad right of plan sponsors to require arbitration, both in terms of the breadth of that requirement and the ease by which participants can be deemed to have consented to arbitration.
To recap, the plaintiff in Dorman participated in Schwab's 401(k) plan which, after he left Schwab's employment, was amended to include an arbitration provision.8 The provision required binding arbitration of any "claim, dispute or breach arising out of or in any way related" to the plan.9 It also barred class or multi-participant claims.10
After leaving Schwab, the plaintiff filed an ERISA class action alleging various claims for breach of fiduciary duty and violations of ERISA's prohibited transactions rules.11 In response, the defendants moved to compel arbitration, which the lower court denied. It reasoned, inter alia, that prior Ninth Circuit precedent precluded arbitration because class action waivers were deemed unenforceable.12
On appeal, Dorman v.
The Ninth Circuit in Dorman II then addressed whether arbitration should be compelled. The Ninth Circuit held that the district court erred in several respects. As an initial matter, and as is relevant here to our discussion of the Seventh Circuit's Smith decision, the Ninth Circuit held that the district court incorrectly concluded that the plaintiff was not bound by the Plan's arbitration provision.19 The Ninth Circuit noted that the plaintiff participated in the plan for almost a year after the arbitration provision was enacted.20 And "[a] plan participant agrees to be bound by a provision in the plan document when he participates in the plan while the provision is in effect."21
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Footnotes
1. M. Hlousek and
2. Dorman v.
3. Smith v. Greatbanc Tr. Co., No. 20 C 2350, 2020 WL 4926560 (
4. Smith v. Board of Directors of
5. 9 U.S.C. §§1-16.
6. Epic Sys. Corp. v. Lewis, 138 S.Ct. 1612, 1621 (2018). See also
7.
8. Schwab, 934 F.3d at 1109.
9. Id.
10. Id. at 1009-10.
11. Id.
12. Id. at 1111 (citing Morris v.
13. Dorman v.
14. Id. at 1109.
15. Amaro v. Continental Can Co., 724 F.3d 747 (9th Cir. 1984).
16. Dorman I, 934 F.3d at 1111 (quoting Amaro, 724 F.2d at 752).
17. Id., 934 F.3d at 1111 (citing Italian Colors, 570 U.S. at 233).
18. Dorman I, 934 F.3d at 1112.
19. Dorman II, 780 F. App'x 512-13.
20. Id.
21. Id. at 513 (citing Chappel v. Lab. Corp. of Am., 232 F.3d 719, 723-24 (9th Cir. 2000)).
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