In the News

ERISA Arbitration Backers See Hope In 2nd Circ. Dissent


May 28, 2024

A split Second Circuit panel backed workers — and joined three other circuits — when it rejected an attempt to force a proposed class action Employee Retirement Income Security Act lawsuit into individual arbitration, but employers are seizing on a dissent from the recent ruling to try to turn the tide.

The 2-1 decision the Second Circuit published May 1 upheld the denial of a motion to compel arbitration from debt relief company Strategic Financial Solutions LLC and Argent Trust Co., the trustee to Strategic’s employee stock ownership plan. Strategic, Argent and other Strategic employees and companies named in the suit sought to force former Strategic worker Ramon Dejesus Cedeno to individually arbitrate claims he first brought in New York federal court in November 2020 and block any claims he brought on behalf of the ESOP.

The panel majority said an arbitration provision in plan documents was invalid because it blocked Cedeno from vindicating rights under the Employee Retirement Income Security Act.

Plaintiff-side attorney Michelle Yau, chair of the benefits practice group at Cohen Milstein Sellers & Toll PLLC, called the decision “a clear victory.”

“Now it’s four circuits that have held pretty much the exact same thing on the effective vindication doctrine,” Yau said. Yau added that the decision was “pretty critical for employees who need to be able to vindicate their rights in court.”

The Second Circuit decision was quickly cited in cases nationwide both at the district level and on appeal involving motions to compel arbitration of ERISA claims. The Second Circuit’s dissent even became the subject of debate at panel arguments before the Sixth Circuit in an employer-side appeal seeking to compel arbitration of a 401(k) fee suit and prompted an additional round of briefing.

Read ERISA Arbitration Backers See Hope In 2nd Circ. Dissent.