Michael Dorman v. the Charles Schwab Corporation, 934 F.3d 1107

Background

Plaintiff Michael Dorman participated in Charles Schwab’s defined-contribution 401(k) Plan from 2009 until his employment ended in October 2015 and he withdrew his account in December 2015.
The Plan offered multiple funds, including Schwab-affiliated funds; Dorman sued in 2017 alleging fiduciary breaches under ERISA §§ 502(a)(2) and (3) for keeping poor-performing affiliated funds to generate fees, and sought class-wide relief.
The Plan was amended in December 2014 to add a mandatory arbitration clause (effective Jan 1, 2015) that required individual arbitration and contained a class-action waiver; the Compensation Plan (separate employment plan) also had an arbitration clause carving out “claims for benefits.”
Defendants moved to compel individual arbitration under the Plan’s and Compensation Plan’s arbitration provisions; the district court denied the motion on multiple grounds and the defendants appealed interlocutorily.
The district court ruled the Plan arbitration clause did not bind Dorman because it purportedly took effect after his participation ended, held the Compensation Plan arbitration clause inapplicable or carved out ERISA “claims for benefits,” and found enforceability problems based on plan-consent/ amendment and labor-law (class waiver) concerns.
The Ninth Circuit addressed a threshold legal question on appeal: whether ERISA claims are subject to mandatory arbitration and whether the court’s prior precedent (Amaro) remains good law in light of intervening Supreme Court decisions.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether ERISA statutory claims are arbitrable	ERISA requires judicial protections and minimum standards not satisfiable in arbitration; Amaro bars arbitration of ERISA claims	Arbitration agreements are generally enforceable; arbitration can vindicate statutory rights	Amaro is no longer controlling; Supreme Court decisions (e.g., American Express) make ERISA claims generally arbitrable — Amaro overruled and case remanded
Whether the Plan’s arbitration clause applies to Dorman	Clause enacted after his participation ended so it does not bind him	Clause took effect Jan 1, 2015 while Dorman was still a participant, so it applies	District court erred in concluding the clause did not bind Dorman (remanded for application consistent with arbitrability ruling)
Whether Compensation Plan arbitration clause covers these ERISA claims	Claims are “claims for benefits” expressly carved out and thus not subject to that arbitration clause	Arbitration clause covers disputes arising out of employment and federal law; carve-out does not encompass these suit claims	District court’s conclusion that applicability was unclear is part of the factual/legal questions to be resolved on remand; arbitration is not categorically barred
Enforceability challenges: plan consent, fiduciary amendment timing, and class-waiver/NLRA concerns	A participant cannot waive plan-wide rights without plan consent; fiduciaries cannot amend a plan to insulate themselves after being sued; class waivers may violate labor law per Morris	Plan document can consent to arbitration; intervening Supreme Court law allows individual arbitration and upholds class-waivers in many contexts	Court rejected the district court’s refusal to enforce arbitration based on Amaro and indicated the plan-consent/fiduciary and NLRA class-waiver issues are not a basis to categorically bar arbitration given intervening Supreme Court authority; remanded for further proceedings to apply arbitration clauses consistent with controlling law

Key Cases Cited

Amaro v. Continental Can Co., 724 F.2d 747 (9th Cir. 1984) (held ERISA claims not arbitrable under then-circuit precedent)
American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013) (arbitrators are competent to adjudicate federal statutory claims; individual arbitration can vindicate statutory rights)
Miller v. Gammie, 335 F.3d 889 (9th Cir. 2003) (three-judge panel may decline to follow prior circuit precedent when intervening Supreme Court authority is irreconcilable)
Munro v. Univ. of S. Cal., 896 F.3d 1088 (9th Cir. 2018) (noted force of overruling Amaro)
Comer v. Micor, Inc., 436 F.3d 1098 (9th Cir. 2006) (acknowledged Supreme Court jurisprudence undermining Amaro’s skepticism)
Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016) (held class-action waivers in employment context implicate NLRA; later noted in district opinion and discussed in light of Epic Systems)
Bowles v. Reade, 198 F.3d 752 (9th Cir. 1999) (a participant cannot settle certain ERISA §502(a)(2) claims without plan consent)
Johnson v. Couturier, 572 F.3d 1067 (9th Cir. 2009) (plan fiduciaries cannot evade fiduciary duties by amending plan documents after breaches)
Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018) (upheld enforceability of individualized arbitration agreements against NLRA-based objections)