546 F. App'x 514
5th Cir.2013Background
- UBS issued annual Compensation Plans (containing an independent "Arbitration" section and a class-waiver) and separate PartnerPlus benefit plans (which also contained an arbitration provision but no class-waiver); employees signed acknowledgements accepting the Compensation Plan.
- PartnerPlus provided immediate vesting for employee contributions but UBS contributions vested after six years; unvested contributions were forfeited on separation unless a participant executed a separation agreement with restrictive covenants.
- Plaintiffs (former branch managers and financial advisors) left UBS, refused to sign separation agreements, and sued under ERISA § 1132(a)(3) claiming forfeiture of PartnerPlus contributions and seeking injunctive and monetary relief; two district-court suits were consolidated on appeal.
- UBS moved to compel arbitration under the Compensation Plan; the magistrate and district courts denied the motions, reasoning that the PartnerPlus Plan’s lack of a class waiver and that the Compensation Plan impermissibly amended the PartnerPlus Plan under ERISA precluded enforcement.
- On appeal, the Fifth Circuit considered (1) whether a valid arbitration agreement existed and (2) whether the plaintiffs’ ERISA-based dispute fell within its scope, applying the FAA’s strong pro-arbitration policy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity/enforceability of Compensation Plan arbitration clause | Compensation Plan is a non-binding "summary brochure"; its arbitration clause cannot govern PartnerPlus claims | Compensation Plan contains an independent, enforceable arbitration agreement acknowledged by employees | Compensation Plan arbitration clause is a valid, independent agreement enforceable against plaintiffs |
| Conflict with PartnerPlus Plan / ERISA amendment problem | Compensation Plan conflicts with PartnerPlus (scope, governing law, class waiver) and thus unlawfully amends ERISA plan | Differences do not void the Compensation Plan; both instruments can coexist and cover different scenarios | Differences (scope, choice-of-law) do not invalidate Compensation Plan; it can govern disputes here |
| Class-waiver issue and FINRA Rule interaction | PartnerPlus lacks class waiver and FINRA Rule 13204(a)(1) bars class arbitration, so claims must proceed as class action in court | Compensation Plan contains a class waiver and requires individual arbitration; FINRA panel should resolve class-waiver applicability | Plaintiffs must arbitrate; whether class arbitration is permitted under FINRA rules/class waiver is for the arbitrator to decide |
| Arbitrability given requested injunctive relief under § 1132(a)(3) | Plaintiffs seek injunctions under ERISA § 1132(a)(3) (excluded from Compensation Plan’s excepted injunctive-relief carveout), so claim is non-arbitrable | Plaintiffs seek primarily monetary relief and ended employment; injunctive relief is unlikely and the dispute falls within arbitration scope | The requested relief is essentially monetary and non-prospective; the arbitration clause covers the dispute and scope issues go first to the arbitrator |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (FAA embodies strong federal policy favoring arbitration)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal policy favoring arbitration)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (FAA enforces arbitration agreements for statutory claims absent contrary congressional command)
- Am. Exp. Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013) (arbitration agreements are enforced according to their terms)
- Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79 (2000) (jurisdiction over interlocutory appeals from denials to compel arbitration)
- Pers. Sec. & Safety Sys., Inc. v. Motorola Inc., 297 F.3d 388 (5th Cir. 2002) (two-step test: validity and scope of arbitration agreement)
- Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (2003) (arbitrator decides whether agreement permits class arbitration when contract delegates such questions)
- Petrofac, Inc. v. DynMcDermott Petroleum Ops. Co., 687 F.3d 671 (5th Cir. 2012) (arbitration panel can decide arbitrability when rules grant that authority)
- Casa Orlando Apartments, Ltd. v. Fed. Nat. Mortg. Ass’n, 624 F.3d 185 (5th Cir. 2010) (injunctive relief inappropriate when plaintiff seeks only monetary relief and relationship has ended)
- Great–West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) (equitable relief under § 1132(a)(3) does not typically include monetary damages)