Less than two weeks after the Supreme Court declined to hear a dispute over whether a trial or arbitration is the way to settle a defined contribution plan dispute, the justices have been asked again — for the sixth time in five years — to rule on the matter.
In the latest request, Tenneco Inc., which has lost at the federal District Court and appeals court levels, wants the justices to support arbitration in a complaint alleging ERISA violations.
In a Nov. 15 petition, the company said lower courts have offered conflicting arbitration vs. trial rulings in ERISA cases. Tenneco said due process protections for plan fiduciaries “would be obliterated” if the Supreme Court allows a pro-participant federal appeals court ruling to stand.
Tenneco argues that some lower courts have used “judge-made” interpretations to allow ERISA to trump guidelines in the Federal Arbitration Act.
Although the facts differ in the five previous cases that the Supreme Court has declined to review since 2019, there are some common themes. Plan sponsors and trust companies have lost at federal appeals court levels because judges ruled that various arbitration provisions covering individuals as specifically written didn’t cover participants’ claims as representatives of retirement plan participants in an ERISA lawsuit.
ERISA doesn’t prohibit arbitration, but the cases’ outcomes depend on how plan documents are written.
Current and former employees of two Tenneco 401(k) plans sued in May 2022 — they later amended their complaint and the two plans were consolidated — accusing Tenneco, its subsidiaries and fiduciaries of charging excessive investments fees as well as fees for managed accounts, record keeping and administration. They also complained about inadequate management of the investment lineup.
Tenneco countered that employees should take their ERISA dispute to arbitration individually based on employment agreements.
A federal judge in Detroit rejected Tenneco’s argument in August 2023, saying ERISA offers protection to all employees and that "these rights and remedies provided to plans under ERISA may not be taken away by agreement."
The 6th U.S. Circuit Court of Appeals, Cincinnati, affirmed the federal court’s decision in favor of the participants in August 2024.
The participants “seek to proceed in a representative capacity on behalf of the (retirement) plans, which the individual arbitration provision prohibits,” the appeals court judges wrote. Because the individual arbitration provision represents a waiver of participants’ rights, “the arbitration procedure is unenforceable.”
In the petition to the Supreme Court, now known as Tenneco Inc. et al vs. Tanika Parker et al., Tenneco argued that if Congress had wanted ERISA to displace the Federal Arbitration Act, “it would have done so. But it did not.”
Five appeals courts “have now used the dubious judge-made exception to invalidate a plan’s individual arbitration procedure,” the Tenneco petition said. The Supreme Court should review this case to determine whether a plan’s individual arbitration procedure can be invalidated and "resolve the split among the lower courts.”
