This week, the court is relaunching an ERISA claim and forcing arbitration of a dispute over Internet tribal payday loans.
WARMENHOVEN v. NETAPP, INC.
The Court held that the PowerPoint presentations did not constitute plan documents and that, therefore, any representation they contained could not override ERISA’s default rule that social assistance plans can be changed at any time. time, and that a fair claim for breach of fiduciary duty under Section 1132 (a) (3) of ERISA does not require proof of intent to deceive.
The panel: Judges Christen, Bade and Feinerman (ND Ill.), With Judge Feinerman writing the opinion.
Climax : “[T]ERISA’s default rule is that pension plans do not vest and can be changed at any time. . . A plan can override this default rule, but only if it does so expressly in a plan document.
Background: After NetApp implemented a phased termination of its NetApp executive medical pension plan, seven retired executives sued NetApp, alleging that the plan termination violated the 1974 Act respecting retirement income security. employees (“ERISA”) because they were promised lifetime benefits. They argued both a direct claim for benefits under Section 1132 (a) (1) (B) of ERISA, and another claim for fair relief under Section 1132 (a) (3) on the grounds that NetApp allegedly misrepresented that the plan offered lifetime benefits. The district court granted NetApp summary judgment on the two claims and a retired executive upheld an appeal.
Results: The Ninth Circuit partially upheld, partially canceled and returned. The court upheld the district court’s grant of summary judgment to NetApp on the executive’s direct retirement benefit claim under section 1132 (a) (1) (B) or ERISA. The panel explained that the default rule under ERISA is that employers can freely terminate social benefit schemes like the scheme in question. PowerPoint presentations presented to the retired executive by HR suggesting that NetApp would maintain the health insurance benefit for the life of members did not override the default rule as they were not plan documents as they were did not claim to meet the requirements of a written instrument. under Section 1102 (b) of ERISA. The cases finding de facto ERISA plans based on informal commitments to provide services are inapplicable in situations where the plan promoter has prepared a written instrument.
The court overturned the district court’s grant of summary judgment to NetApp on the retired executive’s claim for fair relief under section 1132 (a) (3). The court explained that trustees are in breach of their duties if they mislead plan members or distort the terms or administration of a plan. Disagreeing with the District Court and the Seventh Circuit, the Court held that proof of a breach of fiduciary duty under ERISA does not require a demonstration of intent to deceive. As there was a genuine dispute over material facts as to whether NetApp incorrectly told plan members that its plan provided lifetime health benefits, the executive’s claim for fiduciary duty in retirement survived. summary judgment. The Court did not consider whether the retired executive would be entitled to an appropriate fair remedy to redress the alleged wrong – another requirement of a fair claim under Section 1132 (a) (3) – but did rather left that issue to the district court to consider the referral. The retired executive did not waive this issue by not expressing it in its opening brief, as the issue had not been decided by the district court.
BRICE v. HAYNES INVESTMENTS
The Court held that an agreement delegating to an arbitrator the question of whether the underlying arbitration agreement with a choice of law provision choosing tribal law was inapplicable was not in itself inapplicable because its language simple did not prevent the plaintiffs from pursuing their contention that the arbitration agreement invalidly and prospectively waived their rights to sue under federal law before the arbitrator.
The panel: Justices W. Fletcher, Forrest and VanDyke, with Judge Forrest writing the opinion, and Judge W. Fletcher dissenting.
Climax : “We do not dispute that the borrowers have a reasonable argument that the arbitration agreement as written precludes them from asserting their RICO or other federal claims in the arbitration. . . . And if this is true, the arbitration agreement is probably unenforceable as a potential waiver. . . . But, where there is a clear delegation provision, that is not for us – or anyone wearing a black dress – to decide. “
Background: The applicants (“borrowers”) obtained short-term, high-interest loans from Indian tribal lenders (“tribal lenders”). Tribal Lenders’ standard loan agreements contain an agreement to arbitrate any dispute arising out of the contract. Each arbitration agreement includes a delegation clause requiring that an arbitrator, and not a court, decide “any question concerning the validity, applicability or scope of [the loan] agreement or [arbitration agreement]. The loan contracts also state that the contracts ‘shall be governed by the laws of the tribe’ or ‘tribal law’ and that an arbitrator shall ‘apply tribal law and the terms of this agreement.’ The borrowers asserted that the Payday loans they had taken out from tribal lenders were illegal under the Racketeer Influenced and Corrupt Organizations Act and California law and filed class actions against the defendants, including the tribal lenders and certain investors (“Investors” The investors requested binding arbitration, but the district court dismissed the claims, concluding that each contract was unenforceable because it prospectively waived the borrowers’ right to pursue federal statutory claims by forcing the arbitrator to apply the law. The district court ruled that each delegation provision was inapplicable for the same reason. Several investors have appealed.
Results: The Ninth Circuit has reversed. The tribunal felt that it should first focus on the applicability of the delegation provision in particular, and not on the arbitration agreement as a whole. The Borrowers argued that the arbitration agreement and the delegation provision were inapplicable under the prospective waiver doctrine because they waived the Borrowers’ rights to seek remedies under federal law. But given the plain language of the delegation provision, the tribunal concluded that it does not preclude the arbitrator from considering applicability disputes based on federal law. The court did not dispute that the choice of the tribal law loan agreement as the governing authority may mean that the arbitrator will ultimately decide that it cannot consider a challenge to the applicability of the arbitration agreement in its set on the basis of a potential waiver if tribal law does not recognize this doctrine. But, the court explained, this possibility does not prevent Borrowers from to chase their challenge to the enforcement of the prospective waiver in arbitration, which is key to determining whether the delegation provision is itself a prospective waiver. The tribunal acknowledged that its finding departed from the findings of some of its sister circuits, but disagreed with them because they viewed the potential waiver in the context of the arbitration agreement as a whole, and not as it applied to the delegation provision. The tribunal noted that if the arbitrator concludes that she cannot consider a challenge to the prospective waiver of the applicability of the arbitration agreement, the borrowers can return to court and argue that the arbitrator has exceeded. his powers.
Justice W. Fletcher was dissenting. Justice Fletcher concluded that the court’s decision failed to understand the effect of choice of law provisions in agreements. Under these provisions, the arbitrator can only apply tribal law and a small, irrelevant subset of federal law, which will prevent him from applying the law necessary to determine whether the delegation provisions and convention arbitration are valid. This, Fletcher J. concluded, invalidates both the delegation provisions and the arbitration agreements.