However, Ninth Circuit Panel Did Indicate In A Footnote That It Might Have Been Wrong To Say Certain ERISA Claims Inarbitrable As A Matter Of Law.
In Munro v. University of Southern California (USC), No. 17-55550 (9th Cir. July 24, 2018) (published) (Thomas, Chief Judge, author; Friedland, Circuit Judge; and Zilly, W.D. Wash. District Judge by designation) confronted a situation where USC required current and former employees to sign standard employment contracts with arbitration clauses. However, the language only covered them in individual capacities such that the controversy here was whether these arbitration clauses covered employees bringing collective claims for breach of fiduciary duty against USC for the administration of certain ERISA plans. The district judge denied USC’s motion to compel arbitration after concluding that it did not encompass the ERISA plan challenges brought by the employees.
The Ninth Circuit agreed in a 3-0 panel opinion.
The summit issue under the Federal Arbitration Act (FAA) was whether the employment contract’s arbitration clause encompassed the dispute at issue. Employees won on that issue.
Earlier, in U.S. ex rel. Welsh v. My Left Foot Children’s Therapy, LLC, 871 F.3d 791 (9th Cir. 2017), decided under a similar employment contract that an arbitration clause did not cover qui tam claims brought by an employee on behalf of the U.S. government under the False Claims Act (FCA). The Ninth Circuit, in Munro, found that Welch’s reasoning did apply, because qui tam suits under the FCA—where a plaintiff sues for injury to the government—was akin to ERISA fiduciary breach suits—where a plaintiff sues for injury to the ERISA Plan. Beyond that, neither a plaintiff in an FCA suit nor a plaintiff in a similar ERISA suit can alone settle the suit. So, the USC arbitration clause was not broad enough to encompass “representative” claims of the nature alleged under ERISA.
However, not everything was lost from the defense perspective. In a footnote, the Ninth Circuit panel did hint quite strongly that its earlier holding in Amaro v. Continental Can Co., 724 F.2d 747 (9th Cir. 1987) might have been wrongly decided. Amaro found that ERISA 409(a) claims are inarbitrable, but the Ninth Circuit panel suggested this conclusion might have been wrong as a matter of law based on intervening binding authority—but did not have to reach the issue based on its narrower holding.
BLAWG OBSERVATION—I noticed that Eugene Scalia was on the losing side of the arbitration issue. Given his deceased father’s (former SCOTUS Justice Antonin Scalia's) views favoring arbitration and his pronouncements in Concepcion/other cases, his father might be rolling in his grave based on the result in this case, circumspect as it might be.
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