Summary
In a published opinion, the Third Circuit held that ERISA plan participants bringing derivative fiduciary-breach claims under § 502(a)(2) on behalf of the plan are bound by the plan’s arbitration agreement, even if they never personally consented to arbitrate. The court reasoned that such claims belong to the plan, not the individual participants, so the plan’s consent to arbitrate controls. Accordingly, the district court’s order compelling arbitration was affirmed. This case clarifies that a plan’s arbitration provision applies to derivative ERISA claims brought by participants.
Topics
Practice areas
Questions Presented
- Whether Appellants, who did not personally agree to arbitrate, are bound by the arbitration agreement in the Plan's contract with NFP when they bring derivative claims on behalf of the Plan under ERISA § 502(a)(2).
Holdings
- Appellants' claims belong to the Plan, so the Plan's consent to arbitrate controls and Appellants must arbitrate their claims.
Key quotations
“Because Appellants’ claims belong to the Plan, the Plan’s consent to arbitrate controls.” (5)
“The weight of authority and the nature of § 502(a)(2) claims suggest that these claims belong to the plan, not to individual [p]laintiffs.” (7)
“Whereas in Munro and Hawkins the plaintiffs had agreed to arbitrate and the plans had not, here the Plan agreed to arbitrate, not Appellants. The difference in direction does not change the result: the Plan’s agreement to arbitrate is what matters, and that agreement applies to Appellants’ claims on the Plan’s behalf.” (8)
Factual background
Beth Berkelhammer and Naomi Ruiz participated in the ADP TotalSource Retirement Savings Plan, an investment portfolio managed by NFP Retirement, Inc. The Plan's contract with NFP (Investment Advisory Agreement) contained an arbitration clause. Appellants sued on behalf of the Plan under ERISA § 502(a)(2) for breaches of fiduciary duties. NFP moved to compel arbitration.
Procedural history
The District Court granted NFP's motion to compel arbitration, holding that Berkelhammer and Ruiz stand in the Plan's contractual shoes and must accept the terms of the Plan's contract. Appellants appealed.