The U.S. Court of Appeals for the Ninth Circuit affirmed a district court’s opinion that the University of Southern California could not compel arbitration of ERISA claims brought by its employees despite the fact that the parties entered into a broad arbitration agreement. Munro v. University of Southern California, No. 17-55550 (July 24, 2018). The reason? The agreement did not extend to claims brought on behalf of the employees’ retirement plan.
USC and its employees entered into different iterations of an arbitration agreement that covered “all claims . . . that Employee may have against the University or any of its related entities . . . and all claims that the University may have against Employee” including those arising out of federal law. The Ninth Circuit limited its inquiry to whether the arbitration agreement encompassed the dispute at issue and found that it did not.
The court analogized the case to its recent decision in United States ex rel. Welch v. My Left Foot Children’s Therapy, LLC, 871 F.3d 791 (9th Cir. 2017). In Welch, the court found that an employment arbitration agreement did not cover qui tam claims brought by an employee on behalf of the government under the False Claims Act because the claim belonged to the government. Id. at 794. Here, the court reasoned that the breach of fiduciary duty claim is brought on behalf of the plan. Any relief would benefit the plan. Therefore, arbitration agreement does not cover the claim.
The court rejected USC’s argument that because the case involved a defined contribution plan with individual accounts, the relief could individually benefit the plaintiffs, and, therefore, their arbitration agreements covered the claims.
In a footnote, the court refused to reach the employees’ argument that ERISA breach of fiduciary duty claims are inarbitrable as a matter of law, a prior holding of the Ninth Circuit in Amaro v. Continental Can Co., 724 F.2d 747 (9th Cir. 1984). The court hinted that it may agree that intervening Supreme Court decisions indicate Amaro should be overruled, but it was unnecessary for the court to decide the issue given its holding.
The Ninth Circuit’s ruling creates an indirect conflict with a Tenth Circuit case, Williams v. Imhoff, 203 F.3d 758 (10th Cir. 2000). In Williams, the court held that ERISA breach of fiduciary duty claims were subject to arbitration. The case arose under the same factual context as USC: The employees and employer entered into a broad arbitration agreement, and then the employees sued under ERISA § 502(a)(2). Neither party raised the issue of whether the plan had consented to arbitration.