The U.S. District Court for the Western District of Texas has ruled on the request to compel arbitration in the case of Torres vs. Greystar.

In short, the judge has granted the defense’s motion to compel individual arbitration of the Employee Retirement Income Security Act (ERISA) lawsuit, which had sought class action status on behalf of participants in the Greystar 401(k) Plan.

Without directly citing it, the pro-arbitration decision from the Texas District Court calls to mind a recent and increasingly influential ruling in the 9th U.S. Circuit Court of Appeals, which cited new Supreme Court precedents that seemingly allow for forced arbitration under ERISA. Prior to that ruling by the 9th Circuit, the U.S. District Court for the Northern District of California had ruled in favor of plaintiffs’ proposed class certification. Significantly, the 9th Circuit overturned and remanded the District Court’s decision on the grounds that it is no longer “good law” to conclude that ERISA plaintiffs as a general mater cannot be forced into arbitration.  

Now, courts in other Circuits are seemingly embracing this theory. This case for example is playing out in the 5th Circuit.

Torres vs. Greystar was initially filed by a participant in the Greystar 401(k) Plan against the property management firm, alleging it breached its fiduciary duties ERISA by allowing excessive administrative and investment fees to be charged. According to the complaint, for every year between 2013 and 2017, the administrative fees charged to plan participants were greater than 90% of peer plan fees when fees are calculated as cost per participant. And for every year between 2013 and 2017 but one, the administrative fees charged to plan participants were greater than 90% of peer plan fees when fees are calculated as a percent of total assets. The lawsuit also alleged that as of December 31, 2017, the fees for the investment options then in the plan were up to three-times more expensive than available alternatives in the same investment style.

The new order in the Texas District Court does not address these matters directly. Instead, in two short pages, it summarily grants’ the defense’s motion to compel individual arbitration, while also technically holding in abeyance and staying the defense’s motion to dismiss the case outright.

As detailed in the ruling, this case is referred to arbitration, for determination of the following issues: “(i) Whether any claim in this lawsuit is excluded from the Greystar Mutual Agreement to Arbitrate Claims, because it is based on ‘stock option plans, team member pension and/or welfare benefit plans which contain some form of a grievance, arbitration, or other procedure for the resolution of disputes under the plan,’ as provided in Section A of the Agreement; (ii) whether plaintiff’s individual representative claim on behalf of the Greystar 401 (k) Plan under 29 U.S.C. § 1132(a)(2) is waived under Section B of the Agreement; and (iii) whether waiver of an individual representative claim under Section B is an issue to be determined by the arbitrator, rather than the Court, under section C of the Agreement.”

The court notes this case is also referred to arbitration “for ruling on the individual claim, if any, that plaintiff has raised on her own behalf as a beneficiary of the Greystar 401(k) Plan, separate and apart from her claim on behalf of the plan.” The judge also notes this order “does not prohibit the parties from arguing during arbitration that other issues may, or must, be considered by the arbitrator.”

Further proceedings in the case are stayed pending the outcome of the arbitration process.