Benefits & Executive Compensation News

USC Asks Justices to Hear Retirement Plan Arbitration Case

Nov. 30, 2018, 3:43 PM

The University of Southern California asked the U.S. Supreme Court to decide whether a lawsuit challenging how it managed its workers’ retirement savings should go to arbitration or stay in court.

The dispute belongs in arbitration because the workers who filed suit signed employment agreements promising to arbitrate “all claims” they may have against the university, USC said in its Nov. 29 petition. This promise extends to claims involving the school’s retirement plans and brought under the Employee Retirement Income Security Act, the school said.

The decision USC is appealing—which rejected the school’s bid to force arbitration—marked the first time the U.S. Court of Appeals for the Ninth Circuit considered whether arbitration clauses in employment agreements extend to ERISA claims. The workers’ ERISA claims fell outside the scope of these agreements, because the ERISA claims were brought on behalf of the school’s retirement plan and not on behalf of individual workers, the court said.

A ruling from the justices could immediately affect other proposed class actions involving retirement plan fees, including those pending against Charles Schwab Corp. and Franklin Templeton.

The case against USC, which claims the school’s retirement plans carried excessive fees and offered bad investment options, has been closely followed. The U.S. Chamber of Commerce supported USC’s effort to force arbitration, and AARP chimed in in support of the employees’ right to litigate.

The Supreme Court should hear the case in part to correct the Ninth Circuit’s arbitration jurisprudence, which USC said is “anathema” to the goals of the Federal Arbitration Act. The Supreme Court has reviewed five Ninth Circuit decisions declining to enforce arbitration agreements over the past decade, and the justices have reversed four of them so far, USC said.

USC is represented by Gibson Dunn & Crutcher LLP. The employees are represented by Schlichter Bogard & Denton LLP.

The case is Univ. of S. Calif. v. Munro, U.S., No. 18-703, petition for certiorari 11/29/18.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

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