Ninth Circuit Holds ERISA Plan’s Representative-Action Waiver Unenforceable Under Effective-Vindication Doctrine, Affirming Denial of Motion to Compel Arbitration

In Pover v. Capital Group Companies, Inc., — F.4th —-, No. 24-5298, 2026 WL 2196257 (9th Cir. July 30, 2026), Plaintiff sued her former employer, The Capital Group Companies, Inc., and its fiduciaries on behalf of the company’s defined-contribution retirement plan, alleging that the fiduciaries breached their duties of prudence and loyalty by retaining underperforming investment funds to collect transaction fees and by failing to monitor their delegees. Plaintiff brought her claims under ERISA Section 502(a)(2) in a representative capacity on behalf of the Plan, seeking plan-wide monetary and equitable relief, including restitution, disgorgement, removal of breaching fiduciaries, and reformation of the Plan. The Plan contained an arbitration requirement and a waiver provision barring participants from bringing any dispute “on a class, collective or representative basis.” Capital Group moved to compel arbitration under the Federal Arbitration Act. The district court denied the motion, holding that the representative-action waiver was unenforceable because it prospectively waived Plaintiff’s substantive rights and remedies under ERISA, and that the waiver was expressly non-severable. Capital Group appealed.

The Ninth Circuit affirmed. The court reviewed the district court’s decision and its interpretation of ERISA de novo. It explained that ERISA Sections 409(a) and 502(a)(2) work together to provide plan participants a federal cause of action to enforce fiduciary duties owed to the plan, and that claims under Section 502(a)(2) are brought in a representative capacity on behalf of the plan as a whole, with the relief inuring to the plan rather than to individual participants. Relying on Russell and LaRue, the court held that a participant in a defined-contribution plan may bring a Section 502(a)(2) claim to recover for financial harm suffered plan-wide or at the individual-account level because both constitute plan injuries, and that ERISA does not permit a participant to recover only an individualized pro rata share while obtaining equitable relief affecting the entire plan.

The court then applied the effective-vindication doctrine, under which courts will not enforce an arbitration provision that operates as a prospective waiver of a party’s right to pursue statutory remedies. Following its prior decision in Platt v. Sodexo, S.A., the court concluded that there was no meaningful difference between the waiver language in Platt and the prohibition here against claims brought on a “class, collective or representative basis.” Because Plaintiff’s breach-of-fiduciary-duty claims can only be brought in a representative capacity, and because the waiver prevented her from asserting her substantive rights under ERISA, the court held the waiver unenforceable under the effective-vindication doctrine. Turning to severability, the court enforced the waiver provision’s own terms, which specify that if the waiver is found unenforceable, any class, collective, or representative claim must be filed and adjudicated in court rather than in arbitration. The court therefore affirmed the denial of the motion to compel arbitration and directed that Plaintiff’s claims proceed in court.

Judge VanDyke dissented. He would have held that the waiver’s bar on “representative” suits refers only to class or collective actions, not to principal-agent representative suits like Section 502(a)(2) claims brought on behalf of the plan, and that the majority erred in extending Platt without analyzing the waiver’s specific language. He further contended that the court should not have reached the arbitrability question at all because the Plan incorporated the American Arbitration Association Rules and thereby delegated threshold arbitrability questions to the arbitrator, an argument he would have reached notwithstanding Capital Group’s failure to raise it below.