June 14, 2023
Here are five rulings from the first six months of 2023 that benefits lawyers should have on their radar.
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ESOP Managers Lose 10th Circ. Arbitration Bid
The Tenth Circuit issued a published opinion Feb. 9 rejecting a radiology company’s bid to compel individual arbitration of an ERISA class action from workers who alleged mismanagement of their employee stock ownership plan, and the ruling has already popped up in district courts denying motions in similar cases nationwide.
A three-judge panel found an arbitration provision tucked into Envision’s ESOP plan documents was invalid because it blocked remedies under ERISA, particularly by taking away ERISA’s promise that workers can sue on their benefit plan’s behalf. The panel first indicated skepticism about reversing a lower court’s decision refusing to compel arbitration during oral arguments in January.
The panel found that a Colorado federal court properly denied the motion to compel arbitration based on a finding that the effective vindication exception under the Federal Arbitration Act applied. That doctrine allows a court to overrule an arbitration agreement if it blocks a party from being able to bring claims under federal law.
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In a sign of the potential impact of the decision, the ruling has already been cited as “persuasive” outside the Tenth Circuit, including by a Delaware federal judge in March who denied a similar motion to compel sought by a cargo airline and its ESOP managers.
The case is Harrison v. Envision Management Holding Inc. Board et al., case number 22-1098, in the U.S. Court of Appeals for the Tenth Circuit.