A plaintiff’s request for a rehearing by the full court of an appellate court decision backing an arbitration clause in an ERISA claim – has been rejected.
About a month ago, plaintiff Michael Dorman, a participant in the Schwab 401(k) plan who had brought suit against his former employer alleging that Schwab-affiliated funds “charged higher fees and performed more poorly than other investment options on the market,” and that the Schwab entities “violated their fiduciary duties to the Plan in offering these Schwab-affiliated funds without ‘meaningful investigation’ into whether they were prudent investments and whether there were better options, asked for a review (Dorman v. Charles Schwab Corp., 9th Cir., No. 18-15281, order 10/1/19) of the decision by the full court – what’s called an “en banc” review.
His argument? That the court’s Aug. 20, 2019, memorandum opinion “conflicts with this Court’s binding precedent and the decisions of at least four other circuit courts of appeals on an issue that is elemental to the enforcement mechanism of the Employee Retirement Income Security Act of 1974.”
That petitioned came after Schwab prevailed on appeal in the Ninth Circuit, which had cited “intervening Supreme Court case law.”
In this case, the rejection of the petition (Michael Dorman v. The Charles Schwab Corp. et al., case number 18-15281, in the U.S. Court of Appeals for the Ninth Circuit) was short and – well, it was short:
The full court has been advised of the Petition for Rehearing En Banc and no judge of the court has requested a vote on the Petition for Rehearing En Banc. Appellee’s Petition for Rehearing En Banc is also DENIED.
What This Means
The Ninth Circuit’s decision supporting the application of the arbitration clause before filing suit stands – at least in the Ninth Circuit. In that decision, the court noted that it felt it had to “revisit our holding in Amaro v. Continental Can Co., 724 F.2d 747 (9th Cir. 1984), in which we held that ERISA claims were not arbitrable. In light of intervening Supreme Court case law, including American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013), we conclude that our holding in Amaro is no longer good law.”
Arbitration clauses have also been raised as a preemption to litigation in at least two of the university 403(b) fee suits (Munro v. Univ. of S. Cal., 896 F.3d 1088 (9th Cir. 2018); also see Arbitration Clause Clips Excessive Fee Suit), as well as several dealing with 401(k)s (see Judge Extends Employment Arbitration Requirement to Claims Against Advisor and Nordstrom Plan Participant Claims 401(k) Plan Fees No Bargain).
