Arbitration Of ERISA Claims Part II: Courts Continue To Grapple With Competing Considerations

Published date31 January 2022
Subject MatterEmployment and HR, Litigation, Mediation & Arbitration, Retirement, Superannuation & Pensions, Employee Benefits & Compensation, Employee Rights/ Labour Relations, Arbitration & Dispute Resolution, Class Actions
Law FirmJenner & Block
AuthorMr Joseph J. Torres

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 U.S. Court of Appeals for the Ninth Circuit in Dorman v. Charles Schwab Corp. ("Dorman II")2 and a lower court from the U.S. District Court for the Northern District of Illinois in Smith v. Greatbanc Tr. Co.3

As Part I noted at the time, Smith was pending before the U.S. Court of Appeals for the Seventh Circuit. Since then, the Seventh Circuit issued its decision in Smith v. Board of Directors of Triad Mfg., Inc., affirming the lower court's decision.4 However, as discussed below, the Seventh Circuit's reasoning differs slightly from the lower court in at least one significant respect that is supportive of the idea that ERISA claims can be arbitrated. But in other respects, the Seventh Circuit's decision points to some possible limits on what plan sponsors may require be arbitrated.

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...

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