Chamber Backs Mandatory Arbitration of Employee Benefit Issues

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By Jacklyn Wille

The U.S. Chamber of Commerce is asking a federal appeals court to give employers the power to force disputes over employee benefits into arbitration.

The Chamber is backing the University of Southern California in its attempt to move a proposed class action over the fees associated with its retirement plan into arbitration. In a brief filed Nov. 6, the Chamber asked the U.S. Court of Appeals for the Ninth Circuit to rule that employment agreements with arbitration clauses—like the ones USC required its workers to sign—apply to disputes involving retirement plans governed by the Employee Retirement Income Security Act ( Munro v. Univ. of S. Calif. , 9th Cir., No. 17-55550, amicus brief filed 11/6/17 ).

The central question in this lawsuit—whether arbitration clauses in employment agreements extend to ERISA claims—hasn’t yet been addressed by the Ninth Circuit. In March, a federal judge in California blocked USC from sending the dispute into arbitration. The judge said the employees’ claims were brought on behalf of the retirement plan, and the plan itself never consented to arbitration.

If the Ninth Circuit agrees with USC and the Chamber, it could become much harder for retirement plan participants to bring class actions challenging plan fees and other potential mismanagement. The ruling also will have big implications for Franklin Templeton Investments and its employees, which are locked in a similar battle over retirement plan fees that may hinge in part on a severance agreement with an arbitration clause. In that case, which was certified as a class action in July, the parties are currently debating whether the case should be put on hold until the Ninth Circuit makes a decision in the USC matter.

In arguing in favor of arbitration, the Chamber emphasized that 401(k)-style plans like USC’s are fundamentally different from the pension plan at issue in Bowles v. Reade, a 1999 case in which the Ninth Circuit held that pension plan participants can’t release the plan’s claims without authorization. Bowles doesn’t support the idea that participants in 401(k)-style plans can’t be forced into arbitration, the Chamber said.

USC is one of 16 prominent colleges to be targeted by proposed class actions challenging the fees and investment lineups of their retirement plans. Complaints against Cornell, NYU, Columbia, Duke, Emory, Princeton, Johns Hopkins, MIT, and the University of Chicago had varying degrees of early success. So far, only the University of Pennsylvania has won complete dismissal of a lawsuit challenging its retirement plan.

Chamber’s ERISA Activity

This is at least the fourth ERISA-related brief the Chamber has filed in the past two months.

In September, the Chamber asked a federal appeals court to undo a decision granting class-action status to about 22,000 Deutsche Bank employees who challenged the fees associated with their 401(k) plan.

Two weeks later, it urged another appeals court to reject a challenge to the investment strategy CVS Health Corp. adopted with respect to its stable value fund.

Also in October, the Chamber voiced support for Wells Fargo in a case challenging the in-house mutual funds in the company’s 401(k) plan, which workers say earn high fees for Wells Fargo despite the funds’ unimpressive performance.

The brief in the USC case was filed by the U.S. Chamber Litigation Center and Mayer Brown LLP.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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