Compliance December 3, 2018

Case Over Aon Hewitt Financial Engines Agreement Finally Dismissed

According to the docket report for the case, the parties report they have resolved the case.

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The U.S. District Court for the Northern District of Illinois has dismissed with prejudice a case alleging that Aon Hewitt, as a provider to the Caterpillar 401(k) plan, received what amounted to kickbacks from an agreement with Financial Engines to provide advice to plan participants.

Since the court’s finding in March that the plaintiffs failed to state an actionable claim, a first amended complaint has been filed with the court. Both Aon Hewitt and Caterpillar Inc., which was also named as a defendant in the lawsuit, filed motions to dismiss the amended complaint.

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According to the docket report for the case, the parties report they have resolved the case. The judge struck the motions to dismiss in light of the parties’ pending settlement. No details of the resolution were filed with the court.

The judge dismissed the action with prejudice—meaning another complaint cannot be filed—with the parties to bear their own attorneys’ fees and costs.

Similar allegations against Voya Financial and Voya Retirement Advisors and against Xerox HR Soutions were dismissed by federal district courts.
Compliance December 3, 2018

USC Asks Supreme Court to Weigh in on Arbitration of Retirement Plan Claims

The 9th U.S. Circuit Court of Appeals previously concluded that the challenge to the management of the University of Southern California’s retirement plans fell outside the scope of the arbitration agreements because the claims were brought on behalf of the plans, not the individuals.

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The University of Southern California (USC) has asked the U.S. Supreme Court to determine whether participants who filed a lawsuit challenging the management of the university’s two Employee Retirement Income Security Act (ERISA) retirement plans should be compelled to arbitrate their claims pursuant to an agreement signed with the university.

The plaintiffs in the case 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. Denying a motion to compel arbitration, the 9th U.S. Circuit Court of Appeals 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.

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In a petition for writ of certiorari, USC says the question before the high court is, “Whether an agreement to arbitrate ‘all claims’ that an ERISA plan participant ‘may have’ against a plan fiduciary encompasses a breach-of-fiduciary-duty claim under ERISA § 502(a)(2).”

In its petition, USC says the Supreme Court has repeatedly recognized, and granted certiorari to vindicate, the “liberal federal policy favoring arbitration” embodied in the Federal Arbitration Act (FAA). That policy requires, among other things, that “ambiguities as to the scope of [an] arbitration clause” be “resolved in favor of arbitration.”  According to USC, in accordance with the FAA’s statutory objectives, federal courts of appeals apply a presumption in favor of arbitrability and compel arbitration unless it can be said with positive assurance that the dispute is not encompassed by the parties’ agreement to arbitrate.

USC alleges that the 9th Circuit has transformed the FAA’s policy in favor of arbitration into a presumption against arbitration. It says the language of these arbitration agreements is more than adequately broad to encompass respondents’ breach-of-fiduciary-duty claims. “It is therefore impossible to review that expansive language and conclude with ‘positive assurance’ that the parties intended to exclude ERISA breach-of-fiduciary-duty claims from their otherwise-comprehensive arbitration agreements,” USC says in its petition.

In amicus briefs filed with the 9th Circuit, the Charles Schwab Corporation and the U.S. Chamber of Commerce also cited Supreme Court precedent in favor of arbitration.

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