18th Annual Workplace Class Action Report - 2022 Edition

320 Annual Workplace Class Action Litigation Report: 2022 Edition a defined contribution plan who claims that fiduciaries breached their duties to the plan. The Court reasoned that under § 17.10(g) of the Plan Document, Plaintiff could not recover losses to the entire Plan, thus limiting the available remedies that the ERISA explicitly provides. The Court ruled that the provision was thus invalid and unenforceable as Plaintiff had a clear statutory right to seek Plan-wide relief under § § 409(a) and 502(a)(2) of the ERISA, and there was no conflict with the Federal Arbitration Act (“FAA”) because there was no provision of the FAA that prevented a participant from seeking such remedies. Id . at *10-11. In addition, the Court noted that the parties specifically provided that if the elimination of a Plan-wide remedy was unlawful, then the entire arbitration provision should be stricken. For these reasons, the Court ruled that the arbitration provision must be stricken and the request to compel arbitration must be denied. Cooper, et al. v. Ruane Cunniff & Goldfarb, Inc., 2021 U.S. App. LEXIS 6357 (2d Cir. March 4, 2021). Plaintiff, a software development manager for DST Systems, Inc. (“DST”), filed a class action alleging that Defendant, a third-party investment manager for DST’s 401(k) profit-sharing fund (“the Plan”), breached its fiduciary duty under the ERISA by mismanaging the assets of the Plan. Plaintiff claimed that Defendant breached its fiduciary duty by over-allocating the Plan’s assets to Valeant stock, which experienced a sharp decline in stock price starting in 2015 and subsequently reduced the Plan’s assets by over $300 million. Id. at *8. As a condition of Plaintiff’s employment with DST, he agreed to arbitrate “all legal claims arising out of or relating to employment.” Id. at *3. In light of this agreement, Defendant filed a motion to compel arbitration. The District Court granted Defendant’s motion. It found that Plaintiff’s ERISA claims sufficiently related to his employment and thus fell within the scope of the arbitration agreement. Plaintiff appealed, and the Second Circuit reversed the District Court’s order compelling arbitration. On appeal, Defendant argued for affirmance of the District Court’s order on two grounds, including: (i) that Plaintiff’s claims must relate to his employment because he would not have those claims but-for his employment; and (ii) because Plaintiff’s interest in the Plan was a part of his employment compensation from DST. Id. at *14. Plaintiff countered that his ERISA fiduciary duty claims did not fall under the arbitration agreement and that no facts relevant to the his ERISA claims had any bearing on his employment with DST. Id. at *15. In addressing these arguments, the Second Circuit analyzed the arbitration agreement itself, noting that the listed categories of covered employment claims were all personal to the employee, i.e. , wrongful discharge, discrimination, and compensation disputes. The Second Circuit further referenced case law providing that “a claim will ‘relate to’ employment only if the merits of that claim involve facts particular to an individual Plaintiff’s own employment.” Id. at *24. Given that Plaintiff brought the ERISA claims on behalf of the Plan itself, the Second Circuit reasoned that Plaintiff’s action concerned only Defendant’s investment decisions rather than any aspects of his employment with DST. The Second Circuit concluded that, in the ERISA, “Congress imposed liability on individual fiduciaries for breach of their duties” and to interpret the generic employment-related language of the agreement “as mandating arbitration of these claims would unacceptably undercut the viability and public purpose of such actions.” Id. at *4. As a result, the Second Circuit reversed the District Court’s decision compelling arbitration and remanded for further proceedings. Hawkins, et al. v. Cintas Corp., 2021 U.S. Dist. LEXIS 14766 (S.D. Ohio Jan. 27, 2021). Plaintiffs, two former employees of Defendants, filed a class action alleging that Defendants breached their fiduciary duties of loyalty and prudence in violation of the ERISA. Specifically, Plaintiffs claimed that Defendants mismanaged their defined contribution retirement plan (“the Plan”) by failing to consider better costs options and adequately monitor the decision-making of the Plan. Id. at *2. As part of Plaintiffs’ employment with Defendants, Plaintiffs signed an agreement consenting to arbitrate any potential “rights and claims.” Id. at *3. Defendants filed a motion to compel arbitration, but the Court denied the motion. In support of its motion, Defendants contended that Plaintiffs’ employment agreements constituted binding agreements to arbitrate between the parties. Alternatively, Defendants also averred that, “because the Plan is a defined contribution plan with individual accounts,” Plaintiffs’ claims were “inherently individualized…and Plaintiffs should be compelled to individually arbitrate.” Id. at *7-8. As to Defendants’ alternate argument, the Court held that Plaintiffs correctly asserted claims on behalf of the Plan and that Defendants’ reliance on certain case law underlying its argument was misguided. Defendants relied on a U.S. Supreme Court decision – LaRue v. DeWolff, Boberg & Assocs., Inc. , 552 U.S. 248 (2008) – for its contention that Plaintiffs’ claims were so individualized as to warrant individual arbitration, but the Court reasoned that Defendants’ position was contrary to both the LaRue decision and to the statute itself. LaRue held that plan participants may bring breach of fiduciary duty claims on behalf of the Plan, as Plaintiffs did here. In terms of the employment agreement itself, the Court found that the relevant language of