January 29, 2023

Volume XIII, Number 29


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January 26, 2023

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Sixth Circuit Rejects Arbitration for Proposed Fiduciary Breach Class Action

The Sixth Circuit, in a matter of first impression for that Circuit, held an arbitration clause contained in an individual employment agreement did not apply to ERISA fiduciary breach claims brought on behalf of a defined contribution plan.  The case is Hawkins et al. v. Cintas Corp., No. 21-2156, __ F.4th __, 2022 WL 1236954 (6th Cir. 2022).

Plaintiffs, former Cintas Corp. employees, sued the company and its investment committee under Section 502(a)(2) of ERISA on behalf of its 401(k) plan, alleging that defendants breached their fiduciary duties of prudence and loyalty with respect to the management of the plan.  Cintas moved to compel arbitration, arguing that an arbitration clause in plaintiffs’ employment agreements covered the claims they now sought to bring.

Last year, a judge in the Southern District of Ohio denied defendants’ motion to compel arbitration, reasoning that individual arbitration agreements could not cover claims under Section 502(a)(2) because such claims are brought on behalf of the plan.

The Sixth Circuit affirmed.  While the court stopped short of deciding whether Section 502(a)(2) claims could ever fall within the scope of an arbitration clause in an individual employment agreement, it held that plaintiffs’ claims did not fall within the arbitration clauses here.  The court reasoned that because such claims “belong” to the Plan, they cannot be forced into arbitration based on agreements that bind only individual participants.  Moreover, the court found that, in this case, the agreements established only plaintiffs’ consent to arbitration, but not the plan’s.

Proskauer’s Perspective

The Sixth Circuit’s decision is notable in several ways.  For one, it joins the Second, Seventh, and Ninth Circuits in rejecting arbitration of Section 502(a)(2) claims based on a clause in an individual employment agreement, though these courts reached the same result based on varied reasons, including that the clause did not reach ERISA claims (as opposed to typical employment-related claims) and that the clause violated the “effective vindication” exception to the Federal Arbitration Act where it would limit the relief authorized under Section 502(a)(2) (see our previous blog posts discussing the Second and Seventh Circuit decisions).

Additionally, the Sixth Circuit explicitly limited its decision to the arbitration clause contained in the employment agreements but left open the question of whether an arbitration clause in a plan document would lead to a different result, as it did in the Ninth Circuit in 2019 (see our previous post).  Given the increased use of arbitration clauses and frequency with which plaintiffs bring ERISA fiduciary breach claims, courts outside the Ninth Circuit may very well face this question in the near future.

© 2023 Proskauer Rose LLP. National Law Review, Volume XII, Number 125

About this Author

Myron D. Rumeld, Employment, Litigation, Proskauer Law Firm

Myron D. Rumeld has over thirty years of experience handling all aspects of ERISA litigation at both the trial and appellate level. His broad experience includes numerous representations of 401(k) plan fiduciaries defending class action employer stock and excessive fee claims. He is defending class action suits against Foot Locker, Charles Schwab and Neuberger Berman.

Chambers USA cites Myron as a “brilliant” and “sensational litigator,” who is "sharp, articulate, clever, and deeply committed to the work he...

Tulio D. Chirinos, Labor, Employment, Attorney, Proskauer, Law firm

Tulio D. Chirinos is an Associate in the Labor & Employment Department, and a member of the Employee Benefits, Executive Compensation, and ERISA Litigation Practice Center, resident in the New Orleans office.

Tulio works on a wide variety of employment law and benefit matters, including Title VII of the Civil Rights Act, the Fair Labor Standards Act, ERISA breach of fiduciary duty claims, and ERISA benefits claims. He is also a contributing author to Chapter 20 of the fifth edition of BNA’s ERISA Litigation treatise, which will be published in 2014. Prior to joining...

Law Clerk

Sydney L. Juliano is a law clerk in the Labor & Employment Department and a member of the Employee Benefits & Executive Compensation group.

Sydney received her J.D. from the University of Virginia School of Law, where she was an Articles Editor of the Journal of Law and Politics and the Director of Coaching for the Extramural Moot Court team. While at UVA, she worked at the U.S. Attorney’s office for the Southern District of Florida.