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Compliance July 25, 2018
Appeals Court Allows Case Against USC to Proceed
The panel concludes that the dispute against the University of Southern California fell outside the scope of the arbitration agreements that the participants signed.
Reported by Lee Barney
In the case of Munro vs. University of Southern California, the United States Court of Appeals for the Ninth Circuit upheld the district court’s denial of defendants’ motion to compel arbitration of collective claims for breach of fiduciary duty in the administration of two Employee Retirement Income Security Act (ERSA) plans. USC had wanted to settle the case through arbitration, but the court ruled that the lawsuit can proceed.
The plaintiffs, current and former employees of the University of Southern California (USC), and participants in the two ERISA plans, were required to sign arbitration agreements as part of their employment contracts. These agreements stated that these employees could only arbitrate claims brought on their own behalf. The panel concluded that the dispute fell outside the scope of the arbitration agreements because the claims were brought on behalf of the ERISA plans, not the individuals.
Allen Munro and eight other current and former USC employees participate in both the USC Retirement Savings Program and the USC Tax-Deferred Annuity Plan. They allege multiple breaches of fiduciary duty in the administration of these two plans.
In their lawsuit, the employees seek financial and equitable remedies to benefit the plans and all affected participants and beneficiaries, including a determination as to the calculating of losses, removal of breaching fiduciaries, a full accounting of plan losses, reformation of the plans, and an order regarding appropriate future investments.
USC argued that because of the arbitration agreements that the employees signed—each signing five different iterations of this agreement—the employees did not have the right to litigate their claims on behalf of the plan. The court ruled that because the participants in the ERISA plans consented to only arbitrate claims brought on their own behalf—but the claims were brought on behalf of the plans—the dispute falls outside the scope of the arbitration agreements, and, therefore, the case can proceed.
The full text of the opinion can be viewed here.