The U.S. Supreme Court has again been asked to create uniform guidance for the retirement industry over whether ERISA complaints should be addressed by arbitration or by trial.
The court declined to hear ERISA arbitration cases in February 2019, January 2023 and two in October 2023 from defendants arguing that retirement plan management disputes — 401(k), 403(b) and employee stock ownership plans — should be settled through arbitration.
In the latest petition, Argent Trust Co. vs. Ramon Cedeno et al., filed Oct. 7, the trust company argued that two federal appeals courts “have concluded that there is nothing in ERISA that would preclude individual arbitration of ERISA claims.”
However, four appeals courts “have reached the opposite conclusion in invalidating ERISA plan arbitration provisions” the petition said, adding that such a “circuit split” calls for the Supreme Court to provide guidance.
One of those latter courts of appeals, the 2nd U.S. Circuit Court of Appeals in New York, ruled against Argent in May, which then asked the Supreme Court to reverse the appeals court decision. The appeals court had supported a New York U.S. District Court ruling that rejected the request for arbitration in November 2021.
(While the appeals court was considering the case, the Department of Labor filed an amicus brief supporting Cedeno. The Chamber of Commerce, American Benefits Council and ESOP Association filed amicus briefs supporting Argent).
“The important federal questions presented here (is) as follows: ERISA does not require participants to bring claims on behalf of their entire benefit plans, and nothing in ERISA precludes individual arbitration,” the Argent petition said.
Argent was the former trustee through October 2019 of an ESOP offered by Strategic Financial Services, a financial services firm that employed Cedeno, who has been a plan participant.
Cedeno sued in November 2020 alleging Argent and other defendants caused the plan to “pay more” for the company stock “than it was worth,” according to the petition to the Supreme Court.
Both the District Court and appeals court rulings said an arbitration provision in the Strategic Financial governing document was unenforceable because it restricted Cedeno’s complaint to himself rather than for planwide relief under ERISA, the Argent petition said.
Without a reversal, Argent maintained that the appeals court “effectively concludes” that ERISA prohibits individual arbitration claims. This is “a decision that will have far-reaching unintended effects, even beyond arbitration matters,” the petition said.