PLANADVISER - Fall 2023 - 35
relief, a statutory remedy provided by ERISA.
The District Court sided with Henry on the basis that he
had not consented to the arbitration agreement, because it
was added unilaterally. But the court did not rule separately
on the validity of the class waiver and mandatory arbitration
provisions. The defendants appealed to the 3rd Circuit.
The 3rd Circuit upheld that decision but with very different
reasoning. The court ruled that planwide relief-meaning a
remedy that addresses all affected members of the plan-is
protected by ERISA. An individual may not waive a statutory
remedy for a plan, because it is not the individual's right to
waive; it is the plan's right. The court did not rule separately
on the consent issue, because, by voiding the waiver provision,
the arbitration provision was
automatically voided per the text of
the plan document.
Boyko says, " Most courts are not
allowing defendants to escape
planwide relief through arbitration
agreements and other plan terms "
and are ruling that " it is unlawful to
have a waiver for a statutory right
or remedy. "
Still, that has not stopped plans
Jones disagrees, saying she believes the 9th Circuit was
essentially correct. She argues that the Supreme Court has
upheld arbitration agreements, and " there is nothing special
about ERISA. " Participation in a plan is like a contract, and
if it contains a class action waiver, then you agreed to waive
that right by participating.
Jones adds that participants are waiving only their right
to sue on behalf of the plan, but are not waiving rights that
belong to others, because other participants still retain
their individual right to bring suit separately and win an
individual judgment for their own account.
The notion that individuals may not waive class action
rights because those rights justly belong to the plan and
are therefore not theirs to waive " is
from adding these clauses to their
plan document, especially in light
of the 9th Circuit decision. Boyko
explains that " it is very common "
for plans with these provisions to
pair them together, meaning if one is
rendered unenforceable then the other is also, automatically.
This prevents a " nightmare " scenario for defendants
... if a court
found the class
action waiver to
be invalid, then
also be voided.
where a class waiver is voided, either by a court or an arbitrator,
but the arbitration clause remains intact, he says. In
such a scenario, the arbitrator would potentially be able to
rule in favor of an entire class-i.e., in the place of a judge-
rather than an individual, as, if the two provisions were not
tied together and the class waiver were voided, the mandatory
arbitration would remain and therefore go forward.
Even an individual arbitration would be problematic
for a plan sponsor if the arbitrator awards relief, such as
removal of plan fiduciaries, or makes a finding about the
prudence of a particular plan investment.
The crux of these decisions, says Boyko, is not that arbitration
as such is unlawful; it is the pairing with a class
action waiver or a prohibition of relief that goes beyond the
plaintiff's own account. Mandatory arbitration is not a per
se violation of ERISA, but when paired with a class action
waiver, it amounts to an individual waiving rights that
belong to the plan.
Courts have ruled that " the plan can agree to arbitration,
but the plan can't agree and limit the award to one
individual " through a class waiver. " You can waive your
procedural right to go to court " says Boyko, " but not your
statutory right to planwide remedies. "
a plaintiff-driven concept " because
" you can waive your right to bring a
representative action. I don't think
you're waiving other people's rights
when they can bring their own
case, " Jones says.
She adds that many plaintiffs are
awarded tiny sums of money in class
action settlements, sometimes lower
than $100, and these cases are " just
an easy way to get a settlement for
copycat plaintiff attorneys. "
Boyko counters that, by requiring
individuals to proceed as an individual
in arbitration or in court,
plans can limit the damage done to
them, even if the harm inflicted on
participants is greater.
Individual cases also reduce the incentive for ERISA
plaintiff attorneys to take cases because a suit brought by
an individual would have a lower judgment amount than
one brought by a class, he says. If no individual has a strong
incentive to bring a case, though, then imprudent sponsors
inflicting small to moderate amounts of financial harm on
many individuals will not be held accountable, even if the
aggregate harm is great.
In other words, a class action waiver creates a collective
action problem intended to prevent any litigation from taking
place, Boyko argues. " ERISA provides that a participant's case
is on behalf of the plan, meaning a collective action for all.
Rule 23 [class actions] is there to provide due process protections
to the other members of the class. There is no good
reason to argue the other members of the class are betterprotected
by eliminating their class action rights. "
Boyko says it is possible the Supreme Court will take up
the issue, but " it is more likely to see the 9th Circuit coming
down and changing the 2019 decision, to avoid a conflict
between the circuits, but it could go to the Supreme Court. "
Jones is more bullish on the possibility of these cases to
be resolved by SCOTUS and favorably for defendants. " I do
think the Supreme Court might take this up, " she says, noting
that at least one case has requested a hearing by the court
and this request is still pending. -Paul Mulholland
Practice Management | Fall 2023 | planadviser.com 35
PLANADVISER - Fall 2023
Table of Contents for the Digital Edition of PLANADVISER - Fall 2023
At the Core
A Need to Show Value
The Talent Pipeline
Inside the Deal
Are They Legally Binding?
The SEC on Cybersecurity
From Managing to Leading
Can You Predict Client Stress?
PLANADVISER - Fall 2023 - C1
PLANADVISER - Fall 2023 - FC1
PLANADVISER - Fall 2023 - FC2
PLANADVISER - Fall 2023 - C2
PLANADVISER - Fall 2023 - 1
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PLANADVISER - Fall 2023 - 12
PLANADVISER - Fall 2023 - 13
PLANADVISER - Fall 2023 - 14
PLANADVISER - Fall 2023 - 15
PLANADVISER - Fall 2023 - At the Core
PLANADVISER - Fall 2023 - 17
PLANADVISER - Fall 2023 - 18
PLANADVISER - Fall 2023 - 19
PLANADVISER - Fall 2023 - A Need to Show Value
PLANADVISER - Fall 2023 - 21
PLANADVISER - Fall 2023 - 22
PLANADVISER - Fall 2023 - 23
PLANADVISER - Fall 2023 - 24
PLANADVISER - Fall 2023 - 25
PLANADVISER - Fall 2023 - The Talent Pipeline
PLANADVISER - Fall 2023 - 27
PLANADVISER - Fall 2023 - 28
PLANADVISER - Fall 2023 - 29
PLANADVISER - Fall 2023 - Inside the Deal
PLANADVISER - Fall 2023 - 31
PLANADVISER - Fall 2023 - Demand Performance
PLANADVISER - Fall 2023 - 33
PLANADVISER - Fall 2023 - Are They Legally Binding?
PLANADVISER - Fall 2023 - 35
PLANADVISER - Fall 2023 - The SEC on Cybersecurity
PLANADVISER - Fall 2023 - 37
PLANADVISER - Fall 2023 - From Managing to Leading
PLANADVISER - Fall 2023 - Can You Predict Client Stress?
PLANADVISER - Fall 2023 - 40
PLANADVISER - Fall 2023 - C3
PLANADVISER - Fall 2023 - C4