On January 20, 2022, the United States District Court for the Southern District of Florida enforced a mandatory arbitration and class action-waiver provision (Arbitration Provision) in an ERISA-governed defined contribution plan, precluding a putative class of former and current plan participants from pursuing breach-of-fiduciary duty claims against plan fiduciaries in federal court. The plaintiffs in Holmes v. Baptist Health South Florida, Inc., 2022 WL 180638, argued that the plan’s Arbitration Provision was unenforceable as it both violated the “effective vindication” doctrine and was unenforceable because the participants did not knowingly agree to it. The court rejected both arguments.
Holmes adds to the flurry of recent decisions on the enforceability of mandatory arbitration and class action-waiver provisions in defined-contribution plans, which have yielded inconsistent results and are still working their way through courts of appeals. However, plan sponsors following this line of cases can glean several takeaways from the Holmes decision:
- Federal courts continue to hold that ERISA claims may be subject to mandatory arbitration.
- Holmes is the first federal district court decision in the Eleventh Circuit enforcing arbitration and class action-waiver provisions in defined-contribution plans against claimants bringing claims under ERISA § 502(a)(2).
- There is now at least one federal district court in the Eleventh Circuit that has followed the Ninth Circuit in holding that only the plan, and not the plan’s participants, need to have consented to a mandatory arbitration and class action-waiver provision for the provision to apply to the participants’ claims under ERISA §§ 409(a) and 502(a)(2).
- There is a split arising among federal courts as to whether arbitration and class action-waiver provisions may preclude plan participants from obtaining relief that ERISA makes available, such as the removal of fiduciaries. For now, at least one federal district court in the Eleventh Circuit has said that it may, while the Seventh Circuit recently held that it may not. We expect that Holmes will be appealed to the Eleventh Circuit, so this is an issue to watch.
- Given the disagreement among district courts as to the propriety of ERISA plans’ relief-limiting provisions, plan sponsors that wish to maximize the enforcement potential of their arbitration provisions should ensure that the language does not preclude relief available under ERISA — and severability provisions should authorize courts to sever only those portions of a plan that are unenforceable or contrary to law.
For the full alert, visit the Faegre Drinker website.
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