U.S. Supreme Court Lets Stand Denial to Compel Arbitration in USC ERISA Lawsuit

The U.S. Supreme Court has denied the University of Southern California’s (USC)’s petition to have the high court determine whether participants who filed a lawsuit challenging the management of the university’s two Employee Retirement Income Security Act (ERISA) retirement plans should be compelled to arbitrate their claims pursuant to an agreement signed with the university.

The plaintiffs in the case were required to sign arbitration agreements as part of their employment contracts. These agreements stated that these employees could only arbitrate claims brought on their own behalf. Denying a motion to compel arbitration, the 9th U.S. Circuit Court of Appeals concluded that the dispute fell outside the scope of the arbitration agreements because the claims were brought on behalf of the ERISA plans, not the individuals.

With the denial Supreme Court’s denial to review the case, participants may proceed with their lawsuit.

The lawsuit against USC notes that in March 2016, the university made certain changes to its plans. It removed one of the plan’s four recordkeepers for future contributions, eliminated hundreds of mutual funds, removed certain fixed and variable annuity investment options, and froze contributions to certain other fixed and variable annuity investment options. The changes made by the university resulted in participants now being offered a total of approximately 34 investment options, rather than 340, across the plans’ three remaining recordkeepers.

However, the complaint says, despite these changes, the defendants in the case continue to include high-priced investment options in the plans, retain three recordkeepers, and continue to allow excessive recordkeeping fees to be charged to the plans. The complaint also alleges that as part of the communications about the changes to participants, the university acknowledged that the plans’ previous structure caused the plans to pay unreasonable recordkeeping and investment fees.