18th Annual Workplace Class Action Report - 2022 Edition

322 Annual Workplace Class Action Litigation Report: 2022 Edition duty against Defendant. The Second Circuit in appeal proceedings ultimately concluded that the Arbitration Agreement did not cover the ERISA fiduciary duty claims because it covered only employment-related disputes, not Plan-related disputes. Class certification was ultimately granted in that action as well. Defendant moved the Court in Ferguson for a temporary restraining order and preliminary injunction to prohibit the Arbitration claimants from prosecuting the arbitrations and related court proceedings in spite of the class certification order. While that motion was pending, Plaintiff filed this action to confirm Plaintiff’s arbitration award. The Court granted the motion. Defendant argued that the Court simply should defer to the Southern District of New York with respect to Plaintiff’s claims because Plaintiff was a member of the class certified in the Ferguson case. However, the Court ruled that Plaintiff’s claims had already been arbitrated to conclusion and therefore it affirmed the arbitration award. Local 640 Trustees, et al. v. CIGNA Health & Life Insurance Co., 2021 U.S. Dist. LEXIS 144092 (D. Ariz. Aug. 2, 2021). Plaintiffs, the Board of Trustees of the IBEW Local No. 640 and Arizona Chapter NECA Health and Welfare Trust Fund, filed a class action as a fiduciary for a welfare benefit plan (the "Plan") alleging violations of the ERISA. Defendant Cigna Health and Life Insurance Co. ("Cigna") moved to dismiss and compel arbitration. The Court granted the motion. Rather than purchase insurance coverage, the Plaintiffs opted to self- fund the Plan. Accordingly, employers, employees, and retirees contributed to the Fund, and that money was then used to pay claims of Plan participants and beneficiaries. Id . at *2. Plaintiffs executed an Administrative Services Only Agreement ("ASO Agreement" or "Agreement") with Cigna to provide claims administration services to the Plan. The Agreement contained a mandatory dispute resolution procedure, which required that "any dispute between the Parties arising from or relating to the performance or interpretation of the ASO Agreement" to "first be referred to an executive level employee of each Party who shall meet and confer with his/her counterpart to attempt to resolve the dispute." Id . at *3. Plaintiffs argued that no arbitration agreement existed between the relevant parties because the Plan "owns the claims raised by the Board," and the Fund, not the Plan, was a party to the ASO Agreement. Plaintiffs further asserted that the claims fell beyond the scope of the arbitration provision. The Court determined that Plaintiffs were compelled to arbitrate under the doctrine of equitable estoppel, as Plaintiffs would "benefit from a winning claim for breach of fiduciary duty." Id . at *10. Further, the Court held that the alleged ERISA claims necessarily reference the ASO Agreement. Finally, Plaintiffs contended that the arbitration provision did not cover the alleged claims because it only applied to disputes between the Fund and Cigna. The Court ruled that since record was ambiguous as to whether the Fund and the Plan were actually distinct entities, under the FAA, "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Id . at *23. For these reasons, the Court granted Defendant’s motion to compel arbitration. Smith, et al. v. Board Of Directors Of Triad Manufacturing, 13 F.4th 613 (7th Cir. 2021) . Plaintiff, a Plan participant, brought a putative class action suit asserting that the Plan’s fiduciaries breached their fiduciary duties and engaged in prohibited transactions in connection with the sale of all of the Plan sponsor’s stock to the Plan. Within two weeks of the transaction, the shares’ ostensible value dropped from $106 million to less than $4 million. After the stock transaction – but before the lawsuit was filed – the Plan sponsor amended the Plan to add an arbitration provision with a class action waiver. The provision prohibited an individual from bringing claims in anything other than an individual capacity, and further provided that an individual could not “seek or receive any remedy which has the purpose or effect of providing . . . relief to any [person] other than the Claimant.” Id . at 616. Based on this language, the Plan moved to compel individual arbitration of Plaintiff’s claims. The District Court denied the motion. On appeal, the Seventh Circuit noted it was guided by the “liberal federal policy favoring arbitration agreements,” but nonetheless affirmed the decision based on the “effective vindication” exception to the FAA. Id . at 620. This exception invalidates arbitration agreements that operate as prospective waivers of a party’s right to pursue statutory remedies. Here, the Seventh Circuit reasoned that Plaintiff sought a variety of equitable remedies – including the potential removal of the Plan’s trustee – which would inescapably have had the effect of providing relief to individuals beyond Plaintiff. As such, the Seventh Circuit determined that Plaintiff’s requested relief was impermissibly in conflict with the Plan’s arbitration provision. The Seventh Circuit explained that its holding was limited to the language of the arbitration provision at issue, and that it was not deciding whether a claimant could be bound by an amendment enacted after his employment ended, or whether a plan sponsor could unilaterally amend a plan to require arbitration as to all