January 6, 2025
The Second Circuit knocked down Argent Trust Co.’s bid to arbitrate a case alleging the wealth management company sold inflated shares to a barbecue chain’s employee stock ownership plan, after ruling in a similar case that identical arbitration contract language wasn’t enforceable.
A three-judge panel Friday granted Jamaal Lloyd and Anastasia Jenkins’ unopposed motion for summary affirmance in the appeal brought by Argent, which challenged a lower court’s order denying its request to compel arbitration in the Employee Retirement Income Security Act proposed class action. The ESOP participants said the Second Circuit’s recent rulings in Dejesus Cedeno v. Argent Trust Co. foreclosed the wealth management company’s appeal in their case, and the panel agreed in a one-page order.
“Plaintiffs are seeking the precise remedies that Cedeno was pursuing, and the arbitration clause in this case has the exact same language that was invalidated in Cedeno,” Lloyd and Jenkins said in their September motion. “There is simply no credible argument that the effective vindication holding in Cedeno does not apply to this case.”
In May, the Second Circuit held in Cedeno that Argent couldn’t arbitrate a case alleging it allowed an ESOP to be overcharged in a company stock sale while acting as the plan’s trustee. The court voided the arbitration agreement at issue because it prevented plan participants from seeking planwide remedies offered under ERISA.
The court then rejected Argent’s bid for an en banc rehearing of the decision in July. Argent sought high court review of the case, but its motion for certiorari was denied in November.
Lloyd and Jenkins also fought the arbitration of their suit by arguing that their arbitration agreement was invalid because it prevented them from pursuing rights available under ERISA — namely, by blocking representative actions and preventing employees from removing a fiduciary from the plan. A district judge denied the company’s arbitration bid in December 2022.
Argent appealed the ruling, but in their September motion, Lloyd and Jenkins said the resolution of Cedeno shuttered Argent’s interlocutory appeal. The court in Cedeno “invalidated a materially indistinguishable arbitration clause” compared with the contract at issue in their dispute, they said.
In Cedeno, the Second Circuit found the arbitration agreement couldn’t stand because it only allowed Cedeno to recover losses that he faced individually rather than seek planwide remedies. Lloyd and Jenkins said that they sought the same remedies as Cedeno and that the language at issue in their arbitration clause with Argent was identical to the language the Second Circuit invalidated in Cedeno’s contract.
. . .
Lloyd and Jenkins are represented by Rachana Pathak, Peter K. Stris, John Stokes and Bridget C. Asay of Stris & Maher LLP and by Ryan Wheeler, Michelle C. Yau and Kai H. Richter of Cohen Milstein Sellers & Toll PLLC.
Read 2nd Circ. Says Argent Can’t Force ESOP Suit To Arbitration.