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U.S. Supreme Court declines to hear appeal filed by USC in 403(b) case

The U.S. Supreme Court on Monday declined a request by the University of Southern California to review adverse rulings by lower courts for its effort to compel arbitration in an ERISA lawsuit filed by participants in two retirement plans.

The court offered no comment in denying the petition in the case of the University of Southern California et al. vs. Munro et al.

Participants in two 403(b) plans filed suit in August 2016 in U.S. District Court in Los Angeles, alleging that plan managers had breached their fiduciary duties.

They said the plans had too many record keepers — four — and that fiduciaries should have used the plans' asset sizes to negotiate lower fees. The plaintiffs alleged that the fiduciaries failed to conduct competitive bidding for record keepers.

However, the university filed a claim in December 2016 seeking to dismiss the lawsuit because the university employees had signed arbitration agreements as a condition of employment.

In March 2017, Virginia Phillips, chief U.S. district judge ruled for the plaintiffs, saying arbitration didn't apply to the ERISA complaint. The arbitration agreements "do not prevent them from filing their (ERISA) claims in court on behalf of the plans," she wrote.

The university appealed, but a three-judge panel of a federal appeals court ruled that the District Court judge's finding was correct.

The university's arguments "fall outside the scope of the arbitration clauses in individual employees' general employment contracts," the 9th U.S. Circuit Court of Appeals court wrote in July.

The Supreme Court's action on the arbitration request means participants now can prepare for a trial on the original complaint, Jerome Schlichter, the plaintiff's lead attorney, said in an email. Mr. Schlichter is founder and managing partner of Schlichter Bogard & Denton.

The University of Southern California Defined Contribution Retirement Plan had assets of $2.92 billion and the University of Southern California Tax-Deferred Annuity Plan had assets of $2.88 billion as of Dec. 31, 2017, according to the latest Form 5500 filings.