Ninth Circuit Again Voids ERISA Plan Arbitration Clause
A US federal appeals court has again applied the "effective vindication" doctrine to find an ERISA plan's arbitration provision unenforceable, increasing class-action risk for plan sponsors.
The US Court of Appeals for the Ninth Circuit has again invalidated an arbitration clause in an employee benefit plan, continuing a trend of judicial skepticism toward provisions that limit statutory remedies under the Employee Retirement Income Security Act (ERISA). Applying the "effective vindication" doctrine, the panel found the clause unenforceable because it prevented plan participants from seeking remedies that are expressly available under the federal statute, effectively denying them their substantive rights.
For corporate counsel and plan sponsors, this decision undermines a common strategy for mitigating litigation risk and avoiding class actions. The ruling solidifies the Ninth Circuit's position on this issue, creating challenges for national employers seeking to implement uniform arbitration policies across all jurisdictions. It raises the immediate prospect of more court-based litigation, including class actions, over benefits disputes within the western United States. Affected companies should review their plan documents with counsel to assess their enforceability in light of this precedent. The potential for a deepening circuit split may also eventually draw the attention of the US Supreme Court.