Charles Schwab Loses Second Try to Send Fee Case to Arbitration

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Carmen Castro-Pagan

Charles Schwab Corp. couldn’t convince a federal judge in California to reconsider her decision to deny the arbitration of a lawsuit over the alleged mismanagement of the financial company’s 401(k) plan.

Charles Schwab failed to show why—in January when the court refused to send the case to arbitration—it was unable to submit the arbitration clause version it now claims applies to the worker who filed the lawsuit, Judge Claudia Wilken of the U.S. District Court for the Northern District of California held July 9.

Wilken in January held that Charles Schwab couldn’t use an arbitration agreement in employment contracts or 401(k) plan documents to block a lawsuit over how the plan is managed, because the lawsuit was brought “on behalf of the plan.”

This ruling was consistent with other recent decisions against Franklin Templeton and the University of Southern California in similar 401(k) disputes.

Charles Schwab’s motion to compel arbitration was based on the argument that the version of the plan document dated January 2016 and executed in June 2016 contained an enforceable arbitration agreement applicable to the worker who filed the lawsuit. In her January ruling, Wilken held that the June 2016 version was executed after the worker had ceased to participate in the plan, and thus couldn’t bind him to arbitration.

Charles Schwab sought leave from the court to file a motion for reconsideration of the January ruling, arguing that it had a previous plan document with an arbitration clause adopted in December 2014 that applied to the worker. In a two-page order, Wilken denied the bank’s move, holding that reconsideration is “unwarranted.”

Schneider Wallace Cottrell Konecky Wotkyns LLP and Berger Montague PC represent the worker. Proskauer Rose LLP and Shepherd Finkelman Miller & Shah LLP represent Charles Schwab.

The case is Dorman v. Charles Schwab Corp., N.D. Cal., No. 4:17-cv-00285-CW, order denying defendants’ motion for leave to move for partial reconsideration 7/9/18.

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