The University of Southern California petitioned the U.S. Supreme Court on Thursday to establish a rule that would prevent retirement plan participants from filing class-action lawsuits with regard to ERISA breach-of-fiduciary-duty claims.
The petition stems from a decision reached by the 9th U.S. Circuit Court of Appeals in July that said USC cannot compel participants in two retirement plans to accept arbitration rather than proceed with a trial to address ERISA complaints against university fiduciaries. The appeals court upheld a March 2017 decision by a Los Angeles U.S. district judge in the case of Munro et al. vs. University of Southern California.
"This court should grant review to establish a uniform national rule" regarding arbitration in ERISA breach-of-fiduciary-duty claims "and to reject the Ninth Circuit's most recent challenge to 'the federal policy in favor of arbitral dispute resolution,' " the petition stated, citing a 1985 Supreme Court case.
In its petition, the university, with reference to the Federal Arbitration Act, said the Supreme Court has "repeatedly held" that "where parties have entered into a valid arbitration agreement, 'any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.'"
With its July decision, the appeals court "flipped this well-established rule on its head," the petition stated, adding the ruling "creates a presumption against arbitration that will have profound practical consequences."
In August 2016, nine current and former employees of the university filed suit alleging assorted violations of ERISA in the management of the two university retirement plans — the University of Southern California Defined Contribution Retirement Plan and the University of Southern California Tax-Deferred Annuity Plan, which have combined assets of $5.6 billion.
In its decision, the appeals court said that although university employees were required to sign arbitration agreements as a condition of employment, the argument by the university and other defendants falls "outside the scope of the arbitration clauses in individual employees' general employment contracts."
In the original suit, the plaintiffs criticized the university fiduciaries for employing four record keepers because "prudent fiduciaries of similarly sized defined contribution plans use a single record keeper rather than hiring multiple record keepers and custodians or trustees."
The plaintiffs said the university should have used its plans' asset size "to provide economies of scale," enable the payment of "reasonable record-keeping fees," and avoid "duplication of services when one record keeper is used."