On July 24, the US Court of Appeals for the Ninth Circuit held in Munro v. University of Southern California that ERISA Section 502(a)(2) claims for breach of fiduciary duty fell outside the scope of the plaintiffs’ individual arbitration agreements because only those individual employees—and not their 403(b) plans—consented to arbitration. The ruling affirmed the district court’s denial of the University of Southern California’s motion to compel arbitration. The 403(b) plan litigation will now continue in the Central District of California, where District Judge Virginia A. Philips had previously stayed the matter pending USC’s appeal.
In Munro, the plaintiffs brought a putative class action lawsuit against USC alleging claims for breach of ERISA’s fiduciary duties in connection with fees and expenses charged to two ERISA defined contribution plans (the USC Plans). The plaintiffs filed their claims under ERISA Section 502(a)(2), 29 U.S.C. § 1132(a)(2), on behalf of the USC Plans. Thereafter, USC moved to compel arbitration pursuant to arbitration agreements signed by each of the nine plaintiffs. These agreements required the plaintiffs to arbitrate “claims for violation of any federal, state or other governmental law, statute, regulation, or ordinance.” However, the district court denied USC’s motion to compel arbitration, holding that the arbitration agreements were unenforceable as to the plaintiffs’ ERISA claims because the USC Plans were the real parties in interest to Section 502(a)(2) claims, and the USC Plans had not consented to arbitration. Munro v. Univ. of S. Cal. (C.D. Cal. Mar. 23, 2017) (“[P]articipants cannot sign an arbitration agreement, without the consent of a plan, that prevents the participants from bringing a § 502(a)(2) claim on behalf of the plan.”).