In Hawkins v. Cintas Corp., No. 21-3156, __F.4th__, 2022 WL 1236954 (6th Cir. Apr. 27, 2022), a case involving issues of first impression for the Sixth Circuit Court of Appeals, the court held that ERISA § 502(a)(2) claims brought in a putative class action are not subject to arbitration provisions found in the plaintiffs’ individual employment agreements. This is because the nature of ERISA § 502(a)(2) claims suggest that they belong to the plan, and not to the individual plaintiffs. Further, the plan sponsor’s and other defendants’ actions do not support a claim that the plan has consented to arbitration. The court affirmed the district court’s denial of Cintas’s motion to compel arbitration.
Plaintiffs-Appellees Raymond Hawkins and Robin Lung were formerly employed by Appellant Cintas Corporation and are participants in the Cintas Partners’ Plan, a defined contribution plan. Plaintiffs brought a putative class action against Cintas alleging that it breached its duties of loyalty and prudence owed to the Plan by offering participants the ability to invest only in actively managed funds, rather than cost-effective passively managed funds, and imprudently charged the Plan expensive recordkeeping fees. During their employment with Cintas, Plaintiffs signed multiple employment agreements, all containing some form of an arbitration provision that requires arbitration of their ERISA claims and prevents class actions.
In resolving whether Plaintiffs’ ERISA § 502(a)(2) claims are required to be arbitrated, the court noted that it has not yet determined whether statutory ERISA claims are subject to arbitration but that every other circuit to consider the issue has held that ERISA claims are generally arbitrable. The court did not reach this issue since neither party argued that Plaintiffs’ ERISA claims could not be subject to arbitration.
The court agreed that Plaintiffs’ employment agreements do not force the case into arbitration because the § 502(a)(2) claims belong to the Plan; suits under § 502(a)(2) are brought in a representative capacity on behalf of the plan as a whole. The court found the Ninth Circuit’s reasoning in Munro v. University of Southern California, 896 F.3d 1088 (9th Cir. 2018) (comparing qui tam suits under the False Claims Act and suits for breach of fiduciary duty under ERISA) to be persuasive and supported by the history of § 502(a)(2) suits. “[B]ecause § 502(a)(2) claims ‘belong’ to the Plan, an arbitration agreement that binds only individual participants cannot bring such claims into arbitration.”
Even assuming Plaintiffs’ right to bring the § 502(a)(2) claim is covered by the arbitration provision, the court found that compelling arbitration would be improper absent Plan consent. Cintas argued that the Plan has consented to arbitration because the plan sponsor has consented to arbitration by filing the lawsuit. Though non-signatories may be bound to an arbitration agreement through agency principles, there is no authority suggesting that the relationship between an ERISA plan and its sponsor is akin to that of alter-ego business entities. Though Cintas could amend the plan documents to include an arbitration provision, the court declined to decide whether an arbitration provision in the plan document would subject § 502(a)(2) claims to arbitration.
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