Recent Developments in the Enforcement of ERISA Class Action Waiver and Arbitration Clauses

In recent months, various federal district and circuit courts have considered the enforceability of language in employer-sponsored retirement and welfare plans requiring that participants arbitrate their claims for breach of fiduciary duty individually—and not through class actions. Recently, I had the opportunity to moderate a panel discussion on this topic with Radha (Rachana) Pathak of Stris & Maher LLP and Todd Wozniak of Holland & Knight LLP. Radha and Todd both have extensive experience litigating class actions on this subject, with Radha primarily representing pension and welfare plan participants and beneficiaries, and Todd primarily defending companies and fiduciaries. 

During a one-hour webinar hosted by JAMS, the panel discussed these developments, including cases pending in the Second, Sixth, Ninth and Eleventh circuits. The panel first reviewed the background of the Federal Arbitration Act, including case law enforcing clauses providing for the arbitration of statutory claims and class action waivers. The panel also explained the “effective vindication” doctrine, which holds unenforceable arbitration agreements that include a prospective waiver of a party’s right to pursue statutory remedies.

The discussion focused on whether the effective vindication doctrine renders unenforceable clauses mandating individual (non-class) arbitration of breach of fiduciary duty claims under plans governed by the Employer Retirement Income Security Act (ERISA). While defendants seeking to enforce such clauses point to the Ninth Circuit’s 2019 unpublished decision in Dorman v. Charles Schwab, as well as several district court decisions, the Second, Third, Sixth, Seventh and Tenth circuits have more recently ruled that the arbitration/class action waiver clauses violated the effective vindication doctrine.

The panel discussed efforts by Employers and fiduciaries to enforce arbitration/class action waiver clauses in ERISA plans in light of this case law. The Eleventh Circuit has yet to rule on the issue, and defendants point to the vigorous dissent to the Second Circuit’s recent decision applying the effective vindication doctrine in Cedeno v. Sasson. Several cases now before the Ninth Circuit may also shed on light on the extent to which a circuit split warranting Supreme Court review exists.

In the meantime, disputes over the enforceability of ERISA arbitration/class action waiver clauses are likely to persist. In some cases, plan sponsors and fiduciaries seeking to enforce such clauses have successfully identified differing language in ERISA arbitration/class action clauses. Parties also dispute whether plan participants should be deemed even to have consented to arbitration.

The panel’s discussion and questions from the audience underscore that in the foreseeable future, courts and litigants will continue to address the scope and enforceability of arbitration/class action waivers in ERISA plans.