RAYMOND HAWKINS and ROBIN LUNG, individually and on behalf of all others similarly situated v. CINTAS CORPORATION; INVESTMENT POLICY COMMITTEE; SCOTT D. FARMER, BOARD OF DIRECTORS OF CINTAS CORPORATION
No. 21-3156
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
April 27, 2022
RECOMMENDED FOR PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b) File Name: 22a0089p.06
Appeal from the United States District Court for the Southern District of Ohio at Cincinnati. No. 1:19-cv-01062—Timothy S. Black, District Judge.
Argued: December 9, 2021
Decided and Filed: April 27, 2022
Before: BOGGS, GIBBONS, and NALBANDIAN, Circuit Judges.
COUNSEL
ARGUED: Robert N. Hochman, SIDLEY AUSTIN LLP, Chicago, Illinois, for Appellants. Mark K. Gyandoh, CAPOZZI ADLER, P.C., Harrisburg, Pennsylvania, for Appellees. ON BRIEF: Robert N. Hochman, Mark B. Blocker, Chris K. Meyer, Caroline A. Wong, M. Caroline Wood, SIDLEY AUSTIN LLP, Chicago, Illinois, for Appellants. Mark K. Gyandoh, Donald R. Reavey, Gabrielle Kelerchian, CAPOZZI ADLER, P.C., Harrisburg, Pennsylvania, for Appellees.
BOGGS, Circuit Judge. In deciding whether a case belongs in arbitration, a court typically asks whether the party bringing the claim has agreed to arbitrate. But sometimes it is difficult to discern exactly who is bringing what claim. Here, individual would-be plaintiffs agreed to arbitrate certain claims, but the claim they seek to adjudicate is brought through an unusual procedure on behalf of an abstract entity.
Plaintiffs-Appellees Raymond Hawkins and Robin Lung alleged that their former employer, Appellant Cintas Corporation, breached the fiduciary duties it owed to the company‘s retirement plan. They brought a putative class action pursuant to
This case presents issues of first impression for this court. The weight of authority and the nature of
I. BACKGROUND
Appellant Cintas is a national uniform and business-supply company. As with many companies, Cintas has established a retirement plan—the Cintas Partners’ Plan (the “Plan”)—for its employees. The Plan is a “defined contribution” plan, meaning that the Plan‘s sponsor selects a “menu” of investment options in which each participant can invest. Cintas is the Plan‘s sponsor. Each participant in the Plan maintains an individual account, the value of which is based on the amount contributed, market performance, and associated fees.1
Plaintiffs Raymond Hawkins and Robin Lung, who were Cintas employees participating in the Plan, contend that Cintas breached both duties. First, they argue that Cintas offered participants the ability to invest only in actively managed funds, rather than more cost-effective passively managed funds. Second, they claim that Cintas charged the Plan imprudently expensive recordkeeping fees.
Hawkins and Lung sued Cintas, as well the Cintas Investment Policy Committee (which is tasked with administering the Plan) and the Cintas Board of Directors (which appoints members to the committee).3 The suit was brought as a putative class action; Plaintiffs seek to represent all participants in or beneficiaries of the Plan during the class period.
But Plaintiffs entered into multiple employment agreements with Cintas during the course of their employment. While the various agreements differ slightly, all contained materially similar arbitration provisions and a provision preventing class actions.4 A representative example of Section 8—the relevant section—includes the following language (with added emphasis):
The rights and claims of Employee covered by this Section 8, including the arbitration provisions below, specifically include but are not limited to all of Employee‘s rights or claims arising out of or in any way related to Employee‘s employment with Employer, such as rights or claims arising under the Age Discrimination in Employment Act, as amended, Title VII of the Civil Rights Act of 1964, as amended (including amendments contained in the Civil Rights Act of 1991), the Americans With Disabilities Act, 42 U.S.C. § 1981, the Fair Labor Standards Act, the Employee Retirement Income Security Act, state anti-discrimination statutes, other state or local laws regarding employment, common law theories such as breach of express or implied contract, wrongful discharge defamation, and negligent or intentional infliction of emotional distress.
. . .
Either party desiring to pursue a claim against the other party will submit to the other party a written request to have such claim, dispute or difference resolved through impartial and confidential arbitration. . . .
Except for workers’ compensation claims, unemployment benefits claims, claims for a declaratory judgment or injunctive relief concerning any provision of Section 4 and claims not lawfully subject to arbitration, the impartial arbitration proceeding, as provided above in this Section 8, will be the exclusive, final and binding method of resolving any and all disputes between Employer and Employee.
. . .
Except as otherwise required under applicable law, Employee and Employer expressly intend and agree that class action and representative action procedures shall not be asserted, nor will they apply, in any arbitration pursuant to this Section 8; Employee and Employer agree that each will not assert class action or representative action claims against the other in arbitration or otherwise; and Employee and Employer shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person.
Arguing that those agreements required Hawkins and Lung to arbitrate these claims, Cintas moved to compel arbitration and stay the federal proceedings. The district court denied both motions. It concluded that the action was brought on behalf of the Plan, and it was therefore irrelevant that Hawkins and Lung had consented to arbitration through their employment agreements. Because the Plan itself did not consent, the court reasoned, the matter was not subject to arbitration. Cintas now timely appeals.
II. ANALYSIS
A
We review a denial of a motion to compel arbitration de novo. Huffman v. Hilltop Cos., LLC, 747 F.3d 391, 394 (6th Cir. 2014). The
This court has not yet determined whether statutory ERISA claims are subject to arbitration. But “every other circuit to consider the issue” has held that “ERISA claims are generally arbitrable.” See Smith v. Bd. of Dirs. of Triad Mfg., Inc., 13 F.4th 613, 620 (7th Cir. 2021) (collecting cases from the Second, Third, Fifth, Eighth, Ninth, and Tenth Circuits). We need not reach that issue, however,
“ERISA imposes high standards of fiduciary duty upon administrators of an ERISA plan.” Krohn v. Huron Mem‘l Hosp., 173 F.3d 542, 547 (6th Cir. 1999).
B
Cintas contends that the Plaintiffs agreed to arbitrate all “rights and claims” relating to their employment, including the ERISA claims at issue here. The breach-of-fiduciary-duty claims and the “right” to assert them “belong,” it argues, to the Plaintiffs alone, and therefore this case belongs in arbitration. Plaintiffs respond, and the district court agreed, that although Plaintiffs are bringing a putative class action, the claims belong to the Plan itself. It is irrelevant, according to Plaintiffs, that they may have agreed to arbitrate certain claims, since the Plan has not likewise consented to arbitration. We agree that the Plaintiffs’ employment agreements do not force this case into arbitration.
1
There, the plaintiff alleged that he directed his employer to make certain changes to investments in his individual retirement account. Id. at 251. The employer failed to follow through, allegedly causing the plaintiff‘s account to be depleted. Ibid. Arguing that this failure constituted a breach of fiduciary duty, the employee sued under
The Court first observed that ERISA imposed statutory duties on plan fiduciaries to “ensur[e] that ‘the benefits authorized by the plan’ are ultimately paid to participants and beneficiaries.” Id. at 253 (quoting Russell, 473 U.S. at 142). The plaintiff in Russell, the Court explained, “received all of the benefits to which she was contractually entitled.” Id. at 254. She therefore was not entitled to recovery pursuant to
But with the advent of defined-contribution plans, fiduciary misconduct could “diminish[] plan assets payable to all participants and beneficiaries, or only to persons tied to particular individual accounts.” Id. at 255-56. Therefore, Russell‘s “emphasis on protecting the ‘entire plan’ from fiduciary misconduct” no longer applies in the defined-contribution context. Id. at 254. Now, the “victim” could be an individual account, even if the plan as a whole remains secure. Id. at 255-56. The Court “therefore [held] that although § 502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries, that provision does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant‘s individual account.” Id. at 256.
LaRue therefore means that while any claims properly brought under
2
To demonstrate that these claims belong to the Plan, Plaintiffs look to out-of-circuit cases analyzing LaRue. Primarily, they rely on Munro v. Univ. of S. Cal., 896 F.3d 1088 (9th Cir. 2018).5 That case presented facts nearly identical to this case. Employees signed arbitration agreements as part of their employment contracts requiring both the employer and employee to “arbitrate all claims that either the Employee or [the Employer] has against the other party.” Id. at 1090. A group of employees filed a putative class action alleging breaches of fiduciary duty by administrators of two ERISA-governed retirement plans.6 Ibid. The question before the court, as here, was whether the employer could compel the plaintiffs to arbitrate the breach-of-fiduciary-duty claims.
The Ninth Circuit looked to a different case which asked a similar question: “[W]hether a standard employment arbitration agreement covered qui tam claims brought by the employee on behalf of the United States under the False Claims Act (‘FCA‘).” Id. at 1092 (citing United States ex rel. Welch v. My Left Foot Children‘s Therapy, LLC, 871 F.3d 791 (9th Cir. 2017)). There, “[b]ecause ‘the underlying fraud claims asserted in a FCA case belong to the government and not to the relator,’ [the Ninth Circuit] held that the
There is no shortage of similarities between qui tam suits under the FCA and suits for breach of fiduciary duty under ERISA. Most importantly, both qui tam relators and ERISA § 502(a)(2) plaintiffs are not seeking relief for themselves. A party filing a qui tam suit under the FCA seeks recovery only for injury done to the government, Vt. Agency of Nat. Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 771–72, 120 S. Ct. 1858, 146 L. Ed. 2d 836 (2000), and a plaintiff bringing a suit for breach of fiduciary duty similarly seeks recovery only for injury done to the plan. LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248, 256, 128 S. Ct. 1020, 169 L. Ed. 2d 847 (2008); accord id. at 261, 128 S. Ct. 1020 (Thomas, J., concurring).
The court in Munro interpreted the principle in Welch as “compelled by [the] recognition that the government, rather than the relator, stands to benefit most from the litigation.” Id. at 1093 (citing Welch, 871 F.3d at 800). The qui tam claims were outside the scope of the arbitration agreement even though “the relator is entitled to more than a nominal share of the government‘s recovery” and “the FCA provides that the relator brings suit not only for ‘the United States Government’ but also ‘for the person.‘” Ibid. (quoting Welch, 871 F.3d at 800 and
Nor did LaRue compel a different result: “The relief sought demonstrate[d] that the Employees [were] bringing their claims to benefit their respective Plans across the board, not just to benefit their own accounts as in LaRue.” Id. at 1094. Ultimately, then, even though
While Munro is not binding on this court, its reasoning is persuasive and supported by the history of
As [§ 502(a)(2)] addresses losses to ERISA plans resulting from fiduciary misconduct, the Supreme Court has held that suits under it are derivative in nature—that is, while various parties are entitled to bring suit (participants, beneficiaries, fiduciaries, and the Secretary of Labor), they do so on behalf of the plan itself. Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 144, 105 S. Ct. 3085, 87 L. Ed. 2d 96 (1985); see also In re Schering-Plough Corp. ERISA Litigation, 420 F.3d 231, 241 (3d Cir.2005). Consequently, the plan takes legal title to any recovery, which then inures to the benefit of its participants and beneficiaries.
Id. at 295 (footnote omitted).
The derivative nature of these actions comes from common-law trust principles: “[§ 502(a)(2)] merely codifies for ERISA participants and beneficiaries a classic trust-law process for recovering trust losses through a suit on behalf of the trust.” Id. at 296. Although
3
Cintas stops short of arguing that Munro was wrongly decided.7 Instead, it aims to distinguish the employment agreements in Munro from those signed by Hawkins and Lung. While the agreements in Munro required the employees to “arbitrate ‘all claims,‘” Munro, 896 F.3d at 1092, the agreements here, as Cintas recites, “cover ‘all of Employee‘s rights or claims arising under . . . the Employee Retirement Income Security Act.’ By contrast, the agreements in Munro covered only ‘claims’ of the employees—not any ‘rights‘—and they did not refer to ERISA at all.” Appellant Br. at 21 (emphasis and alterations in original) (citations omitted). The “right” to bring the
But the inclusion of the word “rights” does not render the Plaintiffs’ agreements fundamentally different from the agreements in Munro and Welch. Cintas does not provide any case law interpreting the word “rights.” And Plaintiffs’ “right,” even according to Cintas, is to bring a representative action pursuant to
Moreover, Cintas‘s argument glides over the text of the employment agreements, which do not expressly require employees to “arbitrate” all “rights.” Instead, the arbitration section contains three key provisions. The first is: “The rights and claims of Employee covered by this Section 8, including the arbitration provisions below, specifically include but are not limited to all of Employee‘s rights or claims arising out of or in any way related to Employee‘s employment with Employer, such as rights or claims arising under [ERISA].” The second relevant provision, with added emphasis, is: “Either party desiring to pursue a claim against the other party will submit to the other party a written request to have such claim, dispute or difference resolved through impartial and confidential arbitration.” The third, finally, is:
“Except for workers’ compensation claims, unemployment benefits claims, claims for a declaratory judgment or injunctive relief concerning any provision of Section 4 and claims not lawfully subject to arbitration, the impartial arbitration proceeding, as provided above in this Section 8, will be the exclusive, final and binding method of resolving any and
all disputes between Employer and Employee.”
In other words, a “claim, dispute or difference” is subject to arbitration, and the employee‘s ERISA-related rights and claims are “covered” by the “arbitration provision.” So it is not “rights” that are subject to arbitration, but “claims,” “disputes,” and “differences.” The arbitration provisions in Plaintiffs’ employment agreements, therefore, are not materially different from the corresponding provisions in Munro (employees agreed to arbitrate “all claims”) and Welch (employees agreed to arbitrate “all disputes”). 896 F.3d at 1092; 871 F.3d at 797-98.
Cintas also argues that, unlike the Plaintiffs in Munro, the Plaintiffs here are actually asserting claims on their own behalf, not on behalf of the Plan. First, it distinguishes defined-contribution plans (such as the Plan) from defined-benefit plans and asserts that the former claims belong to the individual participant because “any relief that the participant obtains depends on the value of her individual account and redounds entirely to her.” True, the Ninth Circuit has observed, in dicta, that an ERISA claim “belonged to the individual plaintiff” and not the plan. Comer v. Micor, Inc., 436 F.3d 1098, 1103 (9th Cir. 2006). But the context was different—the court was discussing its holding in a prior case where it declined to treat the plan as the “real plaintiff” because doing so would unfairly bar the plaintiff‘s claim due to a statute of limitations. Ibid. (quoting Landwehr v. DuPree, 72 F.3d 726, 732 (9th Cir. 1995)).
Moreover, interpreting the claim as belonging to the individual, rather than the Plan, appears to conflict with LaRue, which held that “§ 502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries.” 552 U.S. at 256; accord id. at 261 (“The plain text of
Nor does Cintas‘s selective quotation of the Complaint persuade otherwise. It is true that Plaintiffs state that they are seeking relief “on behalf of themselves.” But the Complaint plainly seeks relief for the Plan as a whole and expressly states that Plaintiffs are suing on behalf of the Plan. It is also true that Plaintiffs are proceeding as a putative class. That appears to be due, however, to the unusual representative nature of a
Cintas‘s other examples supposedly demonstrating that Plaintiffs “understood” they were filing individual claims fare similarly. For example, Cintas notes that Plaintiffs brought a putative class action, contending that if they were truly representing the Plan, and not individuals, this would be unnecessary. It also notes that Plaintiffs seek attorney‘s fees for their own attorneys, though these attorneys do not represent the Plan.
Those arguments are unpersuasive. The fact that Plaintiffs are seeking certain relief, some of which they may ultimately not be entitled to, does not bear on the legal status of their claims. And Plaintiffs do not concede that their action requires an ultimate grant of class certification. Instead,
A different sort of claim might change the analysis. In LaRue, for example, Chief Justice Roberts suggested that some suits masquerading as
But the claim in LaRue had more hallmarks of a
Ultimately, the Plaintiffs are seeking Plan-wide relief through a statutory mechanism that is designed for representative actions on behalf of the Plan. The weight of authority suggests that these claims should be thought of as Plan claims, not Plaintiffs’ claims. And because the arbitration provisions only establish the Plaintiffs’ consent to arbitration, the employment agreements do not subject these claims to arbitration.
C
1
Even assuming arguendo that the claims here are the Plaintiffs’ claims, or that it is Plaintiffs’ right to bring the claim and that
Cintas responds that waivers and releases are the wrong analogy. Instead, it urges, we should think of arbitration provisions as specialized forum-selection clauses: Just as Plaintiffs chose to bring this case in Ohio federal court, so too they “chose” to arbitrate ERISA claims. Cintas cites Smith, 769 F.3d 922, for this proposition. There, this court considered whether ERISA precluded the application of a venue-selection clause in the plan documents. Id. at 931-33. To support the conclusion that those clauses were enforceable, we observed that “[w]e have previously upheld the validity of mandatory arbitration clauses in ERISA plans.” Id. at 932 (citing Simon v. Pfizer Inc., 398 F.3d 765, 773 (6th Cir. 2005)). But in Simon, the claims subject to arbitration stemmed from the same agreement that contained the arbitration provision. 398 F.3d at 772-73. And, moreover, we held that the plaintiff‘s statutory ERISA claims were not subject to arbitration because the arbitration provision‘s scope was limited to disputes concerning termination. Id. at 775-76. In both decisions, then, arbitration provisions in the plan documents were dispositive; individual employment agreements did not play a role. Smith does not therefore suggest that individuals can consent to arbitration without the consent of the Plan. Nor does Cintas provide any authority suggesting that Plaintiffs can unilaterally bind an ERISA plan to arbitration in the absence of an arbitration provision in the plan documents or some other manifestation of the plan‘s consent.
2
Finally, Cintas argues in the alternative that even if the Plan‘s consent is required, it nonetheless should prevail because the Plan has consented to arbitration here. Noting that the Plan can only act through its agents, it suggests that a plan sponsor, acting alone, can enter into agreements that bind a plan. It also suggests that because the sponsor has consented to arbitration (including by filing this lawsuit) the Plan has also consented. But Cintas stretches case law too far. True, we have held that non-signatories may be bound to an arbitration agreement through agency principles. See Crossville Med. Oncology, P.C. v. Glenwood Sys., LLC, 310 F. App‘x 858, 860 (6th Cir. 2009) (quoting Javitch v. First Union Sec., Inc., 315 F.3d 619, 629 (6th Cir. 2003)). But
Its estoppel theory is similarly underdeveloped.8 But neither of the two cited cases involved arbitration. Deschamps v. Bridgestone Americas, Inc. Salaried Employees Retirement Plan discussed equitable estoppel in the ERISA context and listed several elements required for a finding of equitable estoppel. See 840 F.3d 267, 273 (6th Cir. 2016). The same is true of Paul v. Detroit Edison Co. & Michigan Consolidated Gas Co. Pension Plan, 642 F. App‘x 588, 593 (6th Cir. 2016). Cintas does not attempt to explain how those requirements are met here.
The fact that other non-signatories to the employment agreements, such as Cintas‘s board, investment policy committee, and CEO, are parties to the lawsuit also does not help Cintas‘s position. Cintas suggests that including them as defendants constitutes a tacit admission that those parties consented to arbitration, and that the Plan should be treated like these non-signatories. But Plaintiffs have not suggested that those parties have in fact consented to arbitration. Instead, the lawsuit alleges that those parties, acting on behalf of Cintas, have breached fiduciary duties owed to the Plan.
Ultimately, Cintas‘s position dissolves the distinction between the Plan sponsor and the Plan as a legal entity. Moreover, as the district court observed, Cintas is hinting that it should be able to unilaterally decide it wants to arbitrate claims against itself. See Brown ex rel. Henny Penny Corp. Emp. Stock Ownership Plan v. Wilmington Tr., N.A., No. 3:17-cv-250, 2018 WL 3546186, at *5 (S.D. Ohio July 24, 2018) (“Allowing the fiduciary to unilaterally require plan participants to arbitrate claims for breach of fiduciary duty would, in a sense, be allowing the fox to guard the henhouse.”) (quotation marks and citation omitted). True, Cintas could amend the plan documents to include an arbitration provision, which might accomplish the same goal. But we need not, and do not, decide whether an arbitration provision in the plan documents would subject
In the absence of a sufficient manifestation of the Plan‘s consent to arbitrate these claims, we hold that the Plan has not consented to arbitration. There is, therefore, no basis for the Plaintiffs’ claims to be arbitrated.
III. CONCLUSION
For the reasons given above, we AFFIRM the district court‘s conclusion that the
Notes
LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248, 250 n.1 (2008) (citations omitted).As its names imply, a “defined contribution plan” or “individual account plan” promises the participant the value of an individual account at retirement, which is largely a function of the amounts contributed to that account and the investment performance of those contributions. A “defined benefit plan,” by contrast, generally promises the participant a fixed level of retirement income, which is typically based on the employee‘s years of service and compensation.