It appears questions raised by the Ninth Circuit’s decision in Dorman v. Charles Schwab Corp., Case No. 18-15281 (9th Cir., Aug. 20, 2019), may move towards resolution sooner than anticipated, with the plaintiff filing an en banc petition last week.

Arguments within the statement and supporting memorandum center on the Dorman court’s application of the Supreme Court’s Epic Systems Corp. v. Lewis precedent, chiefly that its applicability is limited in relation to ERISA claims brought in a representative capacity:

Epic Systems “did not address whether ERISA, an entirely different statute, creates a right to bring a representative action.  Mass. Mutual, LaRue and Munro, by contrast, have all ruled that fiduciary breach claims under ERISA are inherently representative.”  En Banc Petition Brief, p. 12, n.5.

The petition also claims that

the panel’s decision crashes head-on with the Supreme Court’s concern about arbitration-related waivers eliminating the enforcement of federal rights; namely, when they purport to eliminate the right to pursue a remedy guaranteed by statute.

EP Brief, p. 13. The petition argues that if an ERISA plaintiff brings claims subject to a valid arbitration clause, under the Dorman court’s ruling, any relief sought would be limited to individual relief, and fiduciary defendants “would be relieved of virtually all of their liability under  § 1109, except to the extent that liability relates to an individual’s account.” EP Brief, pp. 12-13.

The Dorman court distinguished the case from those in Munro v. University of Southern California, No. 16-cv-06191, 2018 WL 3542996 (9th Cir., Jul. 24, 2018) on two separate fronts.

The first obvious factual difference is that the Dorman plans contained an arbitration agreement (as opposed to the clause appearing in an employment agreement in Munro).  The second difference was the scope of the agreements at issue.  In Dorman, the plaintiff’s relief could, conceptually at least, be resolved as an individual claim – ultimately the recovery of losses sustained on his individual retirement account(s) owing to alleged fiduciary breach.

The larger issue is, hypothetically, somewhere between both Dorman and Munro – a class of plaintiffs seeking to litigate claims clearly brought on behalf of their plan (removal of breaching fiduciaries and reformation) yet faced with an arbitration provision contained within the relevant plan itself and barring class-wide arbitration.  Consistent with the Munro holding, an ERISA plaintiff seeking judicial remedy which exists for the benefit of a plan may not alone settle a claim.  Munro, Slip Op. at 11.  If arbitration were compelled, would a plan-appointed representative step in or is that not the position already occupied by a plaintiff bringing a derivative action? Would a split of the individual claims and the ‘clear’ plan-relief claims be compelled, resulting in the possibility of two distinct resolutions on fact?

While these specific questions may not be directly answered even through an en banc rehearing, the hope is that clarity in some form regarding protection guaranteed to ERISA plans of a right to representational adjudication of plan-wide relief, in the context of an (arguably) otherwise valid arbitration clause, may emerge.[1]

[1] The Dorman plaintiff’s brief also argues that “§ 1110(a) renders void the arbitration provision’s prohibition on seeking plan-wide relief under § 1109 in a representative capacity.”  EB Brief, p. 15.  ERISA Section 410, 29 U.S.C. § 1110(a), bars any contractual provision which would relieve a fiduciary from liability.  In this sense, clarification of the general rights guaranteed to an ERISA plan, as a whole, for a “deputized” plan-appointed representative may hold the answers toward the validity of broad ERISA arbitration clauses, such as that at issue in Dorman.