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Ninth Circuit Considers Re-Hearing Dorman V. Schwab Arbitration Decision

The Ninth Circuit signaled that it might rehear Dorman v. The Charles Schwab Corp., where earlier this year it held that a mandatory arbitration provision required arbitration of an ERISA fiduciary-breach claim.


In a previous On the Subject, we wrote about the Ninth Circuit’s decisions in the Dorman case. The Ninth Circuit determined that the plaintiff, who sued Schwab for allegedly including underperforming investment options in a 401(k) plan, had to arbitrate his individual claims and could not pursue a class action. On September 10, 2019, the plaintiff asked the Ninth Circuit to rehear the case, either with a panel or en banc, because of a purported conflict with the Ninth Circuit’s decision in Munro v. University of Southern California, 896 F.3d 1088 (9th Cir. 2018). In Munro, the Ninth Circuit held that ERISA fiduciary-breach claims are claims on behalf of a plan, not an individual participant. To Dorman, this means that the Ninth Circuit cannot compel him to arbitrate only his individual claims, but must allow him to pursue claims on behalf of every participant in the plan.

On October 2, 2019, the Ninth Circuit ordered the defendants to respond to Dorman’s Petition. This indicates that the Ninth Circuit may agree to rehear its prior decision that sent Dorman’s claims to arbitration, on an individual basis.

McDermott Thoughts: The Dorman case addresses some rather technical, but extremely important, questions about how courts view ERISA claims for breach of fiduciary duty. At its core, the issue deals with whether an ERISA fiduciary claim is always a claim on behalf of everyone in a plan or whether a court can limit the claim to include losses to only one, or a select group, of participants. The issue also affects whether class-action waiver agreements are enforceable and, whether class actions are inherently included in every ERISA fiduciary-breach claim.

Our view is that there is ample precedent, from the Supreme Court and other courts, recognizing that an ERISA fiduciary-breach claim does not always have to include everyone in a plan. The Supreme Court in LaRue v. DeWolffBoberg & Assocs., Inc., 552 U.S. 248 (2008) held that ERISA permits a fiduciary-breach claim for losses to a plan that affected only one individual’s plan account. There also are cases from District Courts, ruling a fiduciary-breach claim may proceed only where the particular plaintiff suffers a loss to their individual plan account, but barring a fiduciary-breach claim where a particular plaintiff did not suffer such a loss.

With these principles in mind, ERISA fiduciary-breach claims, even though they are for losses to a plan, should not have to include every participant in the plan. Courts have a sufficient basis for determining that class-action waivers are enforceable and to otherwise limit a fiduciary-breach claim to only those losses suffered by a single participant, and not all participants in a plan. In short, the Dorman case raises questions that may have far-reaching impacts on ERISA fiduciary claims.

© 2020 McDermott Will & EmeryNational Law Review, Volume IX, Number 304


About this Author

Theodore Ted M. Becker, Partner, Chicago, Employee Benefits & Executive Compensation, ERISA Litigation,  ESOP Transactions,  Health & Welfare Benefits, Retirement Benefits

Ted Becker focuses his practice on litigation under the Employee Retirement Income Security Act (ERISA) and related federal and state actions, and defense of government investigations and audits relating to employee benefit, health and welfare, and retirement plans brought by the US Department of Labor, the Internal Revenue Service, and the US Department of Justice. He is a leading voice and nationally recognized practitioner in this complex practice area. He has represented public and private companies that sponsor employee benefit, health and welfare, and retirement plans governed by...


Rick Pearl focuses his practice on litigation involving the Employee Retirement Income Security Act of 1974 (ERISA). He represents companies, their benefits committees, plan administrators, fiduciaries, and service providers in complex, class-action litigation and Department of Labor lawsuits, audits, and investigations.  His particular expertise is with actions for breach of fiduciary duty and prohibited transactions.

His litigation experience includes high-profile 401(k)/403(b) lawsuits alleging excessive fees and imprudent investment options and ESOP actions involving valuation issues. 

Rick also helps clients with procurement and renewal of ERISA fiduciary-liability insurance policies. He regularly speaks at national conferences and advises clients on the scope of permissible indemnification agreements under ERISA and state law, and assists with structuring insurance and indemnification programs to protect assets.

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