The U.S. Court of Appeals for the Seventh Circuit joined the Sixth Circuit in holding that forum selection clauses in plan documents are valid and enforceable under the Employee Retirement Income Security Act of 1974 (ERISA).
In recent years, the question of whether forum selection clauses are enforceable under ERISA has been litigated in many district courts. The vast majority have found that forum selection clauses are consistent with ERISA’s permissive venue provision and its underlying policies, and the first appellate court to address the issue agreed. See Smith v. Aegon Cos. Pension Plan, 769 F.3d 922 (6th Cir. 2014). The Seventh Circuit’s decision in In re Mathias, No. 16-3808, 2017 WL 3431723 (7th Cir. Aug. 10, 2017), further supports plan sponsors who want to include forum selection clauses in their documents to increase litigation efficiency.
In In re Mathias, a plan participant sought review of a denial of a retransfer motion. The participant initially filed suit in the U.S. District Court for the Eastern District of Pennsylvania. Caterpillar moved to transfer to the Central District of Illinois pursuant to a forum selection clause in the plan document. Mathias argued that ERISA’s venue provision invalidated the forum selection clause. The Eastern District of Pennsylvania disagreed, relying primarily on Smith. In the Central District of Illinois, the participant moved to retransfer, which the court denied based primarily on Smith.
The Seventh Circuit started its analysis by discussing that mandamus was the appropriate vehicle to seek review of a retransfer order. However, the court noted that the Central District of Illinois was bound by law-of-the-case principles, making the motion unlikely to succeed. Furthermore, the party seeking mandamus review of the order “has an uphill fight,” and the Seventh Circuit concluded the high standard was not met here.
Like the two district courts, the Seventh Circuit found the Sixth Circuit’s reasoning in Smith to be convincing. The court was not persuaded by Mathias’ citation to “an obscure decision of the Supreme Court” — Boyd v. Grand Trunk Western Railroad Co., 338 U.S. 263 (1949) — that is often relied upon by plaintiffs in forum selection clause cases.
In 2016, the same issue was raised in a petition for writ of mandamus to the Eighth Circuit under facts similar to Mathias. The Eighth Circuit denied the petition without explanation. In re Clause, No. 16-2607 (8th Cir. Sept. 27, 2016). The secretary of labor filed an amicus brief in support of the participants in each of the three appellate cases, but none of the circuit courts were persuaded.
Despite the strong weight of authority in support of plan sponsors, litigation in this area is likely to continue. Mathias intends to seek en banc review of the Seventh Circuit. Both Smith and Clause filed petitions for writ of certiorari with the Supreme Court, but the court denied the petitions. The Third Circuit will be the next appellate court to weigh in on the matter in Shah v. Wellmark Blue Cross Blue Shield, No. 17-1982. Unlike Mathias and Clause, who sought mandamus review of a retransfer denial, Shah’s case was dismissed pursuant to the forum selection clause. Therefore, like Smith, Shah will not have as much of an uphill battle but will have to contend with two contrary circuit court opinions (and an Eighth Circuit mandamus denial).