Ninth Circuit Revives ERISA Plaintiffs’ Unconscionability Challenge to Plan Arbitration Clause

In a memorandum disposition issued alongside its published opinion in Platt v. Sodexo, S.A., No. 23-55737, —F.4th—, 2025 WL 2203415 (9th Cir. Aug. 4, 2025), the Ninth Circuit reversed in part a district court order compelling arbitration in Avecilla, et al. v. Live Nation Entertainment, Inc., et al., No. 23-55725, 2025 WL 2206153 (9th Cir. Aug. 4, 2025). The court held that while Live Nation validly bound its 401(k) plan to arbitration of ERISA claims through a plan amendment, the plaintiffs—former plan participants—must be permitted to assert unconscionability defenses under federal common law. The court remanded the case for further proceedings on those defenses.

Plaintiffs Pamela Avecilla and Sean Bailey, former employees of Live Nation, brought class claims under ERISA §§ 502(a)(2) and (a)(3), alleging mismanagement of the Live Nation 401(k) Plan that caused millions in losses. Live Nation moved to compel arbitration based on a provision it had added to the Plan, which included a class action waiver.

Plaintiffs opposed arbitration on three grounds: (1) the class action waiver violated the effective vindication doctrine; (2) they had not consented to arbitration; and (3) the arbitration provision was unconscionable. The district court granted Live Nation’s motion, reasoning that the Plan had validly consented and that plaintiffs’ unconscionability defenses, based in California law, were preempted by ERISA.

The Ninth Circuit reversed in part. Relying on its concurrently issued decision in Platt v. Sodexo, the panel reaffirmed that when an employer adds an arbitration clause to an ERISA-governed plan, the relevant consenting party depends on who the claims are brought on behalf of. Because Avecilla and Bailey brought their claims to recover losses for the Plan—not for themselves—the Plan was deemed the consenting party. Since the Plan’s terms gave Live Nation broad authority to amend it, the court agreed that the Plan had consented to arbitration.

However, the panel rejected the district court’s conclusion that plaintiffs’ unconscionability defenses were preempted by ERISA. The court clarified that such defenses arise under the Federal Arbitration Act and federal common law, not state law. Accordingly, ERISA does not foreclose their availability. The court remanded the case to allow the district court to evaluate those defenses in the first instance under federal common law standards.