Erisa Benefits Case Not Subject to Arbitration

Employees in Washington, D.C., may be interested in the outcome of an ongoing case in which a group of ERISA plan participants are pursuing claims for a breach of fiduciary duty. The Court of Appeals for the Ninth Circuit upheld a ruling that the participants were not required to go to arbitration despite the existence of employment agreements requiring arbitration of disputes. The court said that the claimants were not representing their own interests but those of the ERISA plan itself.

Nine current and former employees of the University of Southern California are pursuing a claim against the university, its retirement plan and one fellow member of the Retirement Plan Oversight Committee. They accuse them of failing to live up to their responsibilities to reduce the fees and expense of the plan; they also accuse those parties of failing to use good judgment in selecting investments for the plan. In their lawsuit, the claimants are seeking both monetary compensation and equitable actions that can benefit the plan as a whole.

In response, the university’s lawyers argued that the claimants were subject to mandatory arbitration due to language in their employment agreements. However, the motion was denied by the federal district court, noting that the claims were brought on behalf of the ERISA benefits plan and not themselves. In the appeal, the Ninth Circuit court said that the arbitration clause did not extend to the plan’s own claims for a breach of fiduciary duties.

By permitting ERISA beneficiaries and participants to continue their claims in court rather than subjecting them to arbitration, the court is allowing them to develop public precedent on the issue. Members of an ERISA plan who are concerned that the plan is being poorly managed to the detriment of its members may consult with a benefits lawyer about how to protect their rights.

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