For the second time this month, the U.S. Supreme Court has declined to rule on whether ERISA complaints should be subject to arbitration or be settled in federal courts.
On Oct. 16, the justices, without comment, decided against reviewing a pro-participant decision by the 3rd Circuit Court of Appeals, Philadelphia, in case the Wilmington Trust et al. vs. Marlow Henry. The appeals court had upheld a district court ruling that said Henry's dispute shouldn't be addressed via arbitration.
This case is similar to the Supreme Court's declining on Oct. 10 to review, again without comment, Argent Trust Co., Envision Management Holding et al. vs. Robert Harrison. The 10th Circuit Court of Appeals, Denver, upheld a federal district court's ruling that a participant's ERISA complaint was a matter for the courts — not arbitration.
In both cases, the federal and appeals courts ruled that although participants' retirement plans contained arbitration clauses, these provisions deprived the participants of their full ERISA rights and were unenforceable.
Marlow Henry is a former employee of privately held BSC Ventures Holdings and a participant in the company's employee stock ownership plan. He sued in October 2019, seeking class action status and saying the plan violated ERISA by overpaying for company stock.
He sued Wilmington Trust, the plan's trustee, a BSC executive and a now-former BSC executive, who sold stock to the plan. The defendants said the complaint required arbitration due to a plan provision that calls for a class-action waiver.
However, U.S. District Judge Maryellen Noreika in Wilmington, Del., rejected the defendants' request to dismiss the complaint in September 2021.
"The facts at this stage of the proceedings plausibly support Henry's assertion that he did not have notice (about the arbitration rules) and therefore did not have the necessary intent to manifest assent," the judge wrote.
Given this information, "the class action waiver … also cannot be enforced at this time," the judge wrote.
The defendants appealed, but the 3rd U.S. Circuit Court of Appeals upheld the lower court ruling on June 30, leading to the defendants' petition to the Supreme Court in August.
The plan's class-action waiver "is an unenforceable prospective waiver of Henry's ERISA rights," a three-judge appeals court panel wrote. Because the waiver was an integral part of the arbitration provision, this provision is "void in its entirety."
