Mark Eddingston v. UBS Financial Services

Case: 13-40692 Document: 00512436690 Page: 1 Date Filed: 11/11/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 13-40692
consolidated with
United States Court of Appeals
Fifth Circuit
No. 13-40693 FILED
November 11, 2013
Lyle W. Cayce
BILL HENDRICKS; AUBREY B. STACY, Clerk
Plaintiffs - Appellees
v.
UBS FINANCIAL SERVICES, INCORPORATED,
Defendant - Appellant
______________________________________________
MARK T. EDDINGSTON; JEFFREY M. DAVIS; ELRIDGE NICHOLAS
BOLLICH; RAY A. COX,
Plaintiffs - Appellees
v.
UBS FINANCIAL SERVICES, INCORPORATED,
Defendant - Appellant
Appeals from the United States District Court
for the Eastern District of Texas
USDC Nos. 2:12-CV-606; 2:12-CV-422
Before REAVLEY, ELROD and HAYNES, Circuit Judges.
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PER CURIAM:*
Defendant-Appellant (“UBS”) appeals the district court’s denial of its
motions to compel arbitration. Former UBS financial advisors and branch
managers (the “Plaintiffs”) sued UBS alleging that it violated ERISA by
deeming certain funds in the Plaintiffs’ PartnerPlus Plans (collectively, the
“PartnerPlus Plan”) forfeited upon their departure from the company. Because
the Plaintiffs agreed in the Branch Manager Compensation Plan and Financial
Advisor Compensation Plan (collectively, the “Compensation Plan”) to
arbitrate their claim, we REVERSE the denial of UBS’s motions to compel
arbitration and REMAND for entry of an order compelling arbitration.
I. Factual and Procedural History
During the course of the Plaintiffs’ employment with UBS, the company
issued annual Compensation and PartnerPlus Plans. The Compensation Plan
provides information concerning compensation, benefits, service and merits
awards, and financial programs for UBS’s branch managers and financial
advisors. The versions of the Compensation Plan relevant to this dispute also
contained arbitration and class waiver provisions. Significantly, these
provisions are located in an independent section of the Compensation Plan
entitled “Arbitration.” Each of the Plaintiffs signed Letters of Understanding
and Acknowledgements through which they acknowledged receipt of the
Compensation Plan and agreed to be bound by the terms therein. 1
UBS also issued the PartnerPlus Plan, which is one of the benefits plans
described in the Compensation Plan’s summary sections. The PartnerPlus
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
1 The Letters of Understanding also include arbitration and class waiver provisions
that are substantially similar to the provisions in the Compensation Plan.
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Plan sought “to retain and motivate” certain employees by “providing enhanced
financial awards . . . and . . . permitting the voluntary deferral of Compensation
for a fixed period of years.” The relevant versions of the PartnerPlus Plan
contain an arbitration provision, but they do not contain a class waiver.
The Plaintiffs and UBS made contributions to the PartnerPlus Plan. The
Plaintiffs’ contributions vested immediately, but UBS’s contributions began
vesting six years after the contribution. In the event that a plan participant
separated from UBS, the PartnerPlus Plan provided that the unvested
contributions would be forfeited unless there was a “qualifying separation.” A
qualifying separation required the plan participant to sign a “separation
agreement,” which contained “non-competition, non-solicitation and non-
disclosure provisions.”
When the Plaintiffs departed UBS and refused to sign separation
agreements, UBS determined that its unvested contributions to the
PartnerPlus Plan were forfeited. The Plaintiffs sued UBS, maintaining that
the PartnerPlus Plan is an employee retirement plan governed by ERISA and
that the vesting and forfeiture provisions violated ERISA. The Plaintiffs
requested “all appropriate relief under 29 U.S.C. § 1132(a)(3), including an
injunction against any act or practice which violates ERISA.” The Plaintiffs
sought to represent two classes of plaintiffs—one group of former branch
managers (Hendricks v. UBS Fin. Servs., No. 2:12-CV-606 (E.D. Tex.)) and one
group of former financial advisors (Eddingston v. UBS Fin. Servs., No. 2:12-
CV-422 (E.D. Tex.)).
UBS moved to compel arbitration in both cases. The magistrate judge
denied the motions, concluding that the arbitration clause in the PartnerPlus
Plan did not require arbitration of the Plaintiffs’ claim because the clause
“clearly [did] not extend to the arbitration of class claims.” Further, after
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assuming for purposes of the motions to compel that the PartnerPlus Plan was
a “pension plan” under ERISA, the magistrate judge concluded that the
arbitration clause in the Compensation Plan qualified as an “amendment” to
the PartnerPlus Plan that did not comport with ERISA’s requirements and,
therefore, could not be enforced.
The district court denied reconsideration, and UBS timely appealed. We
granted UBS’s motion to consolidate the Hendricks and Eddingston cases. The
district court subsequently granted the Plaintiffs’ motions for class
certification, and UBS separately filed a petition to appeal the certification
ruling which remains pending. 2
II. Jurisdiction and Standard of Review
We have jurisdiction over the appeal of the district court’s denial of
UBS’s motions to compel arbitration pursuant to 9 U.S.C. § 16. Green Tree
Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 85 (2000); Nicholas v. KBR, Inc., 565
F.3d 904, 907 (5th Cir. 2009) (recognizing this court has jurisdiction over a
denial of a motion to compel arbitration “even though the district court’s denial
of [such a] motion . . . is an interlocutory ruling”). We review the district court’s
denial of a motion to compel arbitration de novo. Am. Heritage Life Ins. Co. v.
Lang, 321 F.3d 533, 536 (5th Cir. 2003).
III. Discussion
The Federal Arbitration Act (“FAA”) provides that
A written provision in . . . a contract evidencing a transaction
involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction, or the refusal
to perform the whole or any part thereof, or an agreement in
2 UBS’s petition to appeal the district court’s grant of class certification is being held
in abeyance pending the outcome of this appeal.
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writing to submit to arbitration an existing controversy arising out
of such a contract, transaction, or refusal, shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.
9 U.S.C. § 2. The Plaintiffs do not contend that the contracts in question are
subject to “revocation.” The Supreme Court has repeatedly held that the FAA
“reflect[s] . . . a ‘liberal federal policy favoring arbitration.’” AT&T Mobility
LLC v. Concepcion, 131 S. Ct. 1740, 1745 (2011) (quoting Moses H. Cone Mem’l
Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24 (1983)); see also Buckeye Check
Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006) (explaining that § 2 of the
FAA “embodies the national policy favoring arbitration”).
Indeed, the FAA “reflects the overarching principle that arbitration is a
matter of contract” and requires us to “rigorously enforce arbitration
agreements according to their terms.” Am. Exp. Co. v. Italian Colors Rest., 133
S. Ct. 2304, 2309 (2013) (citation and internal quotation marks omitted). This
strong policy favoring arbitration “holds true for claims that allege a violation
of a federal statute [such as ERISA], unless the FAA’s mandate has been
overridden by a contrary congressional command.” Id. (citation and internal
quotation marks omitted).
Against this backdrop, we assess whether “the parties have agreed to
arbitrate a particular claim . . . [by] determin[ing]: (1) whether there is a valid
agreement to arbitrate between the parties; and (2) whether the dispute in
question falls within the scope of that arbitration agreement.” Pers. Sec. &
Safety Sys. Inc. v. Motorola Inc., 297 F.3d 388, 392 (5th Cir. 2002) (citation and
internal quotation marks omitted). “In view of the policy favoring arbitration,
we ordinarily resolve doubts concerning the scope of coverage of an arbitration
clause in favor of arbitration.” Id. (citation and internal quotation marks
omitted); see also Mercury Const., 460 U.S. at 24–25. Consequently, “a valid
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agreement to arbitrate applies ‘unless it can be said with positive assurance
that [the] arbitration clause is not susceptible of an interpretation which would
cover the dispute at issue.’” Motorola, 297 F.3d at 392 (alteration in original)
(quoting Neal v. Hardee’s Food Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990)). With
these principles in mind, we turn to the contracts at issue.
A. The Compensation Plan’s Arbitration Clause is a Valid and
Enforceable Agreement to Arbitrate
The Compensation Plan’s arbitration clause provides that “[w]ith the
exception of claims for injunctive relief . . . , any disputes . . . including claims
concerning compensation, benefits or other terms or conditions of employment
and termination of employment . . . will be determined by arbitration.”
Plaintiffs argue that this arbitration clause does not apply to their claim for
relief under the PartnerPlus Plan because the Compensation Plan is merely a
“summary brochure” that serves only to summarize certain benefit plans, such
as the PartnerPlus Plan. As a result, according to the Plaintiffs, the
Compensation Plan lacks any enforceable terms and cannot contradict any
provisions in the PartnerPlus Plan. Examining the provisions, we conclude as
a matter of law that the arbitration provision in the Compensation Plan is not
a “summary” of any benefit plan but rather is an independent and enforceable
provision.
Nevertheless, the Plaintiffs further urge that the parties’ agreements in
the Compensation Plan cannot be enforced because the Compensation Plan
conflicts with or improperly seeks to modify the PartnerPlus Plan in violation
of ERISA. They identify three potential conflicts: (1) the Compensation Plan’s
arbitration provision applies to “all disputes” except for claims for injunctive
relief, whereas the PartnerPlus Plan’s arbitration clause applies only to claims
arising out of the PartnerPlus Plan and does not exempt claims for injunctive
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relief; (2) the PartnerPlus Plan’s arbitration clause provides for the application
of New York law, whereas the Compensation Plan’s provision requires the
application of New Jersey law; and (3) the PartnerPlus Plan’s arbitration
clause does not include a class waiver whereas the Compensation Plan does.
With regard to the first two “conflicts” alleged by the Plaintiffs, we
observe that regardless of whether the PartnerPlus Plan qualifies as an ERISA
plan, the mere presence of differences between the terms in the PartnerPlus
Plan and the Compensation Plan identified by the Plaintiffs does not render
one of them void. Both plans can coexist by providing for arbitration based on
different scenarios. 3
Plaintiffs focus primarily on the “conflict” in the fact that the
Compensation Plan expressly waives class actions, while the PartnerPlus Plan
does not. Based on the Compensation Plan, UBS argues that the Plaintiffs
must arbitrate individually, rather than proceed on a class basis. The
Plaintiffs maintain that in light of Financial Industry Regulatory Authority
(“FINRA”) Rule 13204(a)(1)’s prohibition against class litigation and the
PartnerPlus Plan’s lack of a class waiver, their claims cannot be arbitrated
and, therefore, must proceed as a class in federal court. We conclude that the
PartnerPlus Plan’s lack of a class waiver does not relieve the Plaintiffs from
their independent obligation to submit their claim to arbitration based on the
Compensation Plan. Nevertheless, having concluded that the Compensation
Plan’s arbitration provision requires the Plaintiffs to submit their claim to
3 Although arguing that one plan references New Jersey law and the other New York
law, Plaintiffs fail to explain how these two states’ laws conflict in any way meaningful here
where a violation of federal law is alleged. Thus, we have a “false conflict.” See Kevin M.
Ehringer Enters., Inc. v. McData Servs. Corp., 646 F.3d 321, 326 n.2 (5th Cir. 2011) (observing
that “where all potentially applicable states’ laws do not differ in material respect, the
claimed conflict is a ‘false conflict’” (citing Hininger v. Case Corp., 23 F.3d 124, 126 (5th Cir.
1994))).
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arbitration, we leave for the FINRA arbitration panel to decide whether the
class waiver requires the Plaintiffs to arbitrate on an individual basis. 4 See
Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 451 (2003) (plurality) (concluding
that under the parties’ agreement, “the question—whether the agreement
forbids class arbitration—is for the arbitrator to decide [because] [t]he parties
agreed to submit to the arbitrator ‘[a]ll disputes, claims, or controversies
arising from or relating to this contract or the relationships which result from
this contract’” (alteration in original) (emphasis omitted) (quoting arbitration
clause)); Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d
671, 675 (5th Cir. 2012) (explaining that when the arbitration rules provide
the arbitration panel with authority to determine the scope of its own
jurisdiction, questions concerning arbitrability should be made by the
arbitration panel); see also FINRA Rule 12409 (“The panel has the authority
to interpret and determine the applicability of all provisions under the Code.
Such interpretations are final and binding upon the parties.”).
B. The Scope of the Compensation Plan’s Arbitration Clause
Covers the Plaintiffs’ Claim
Turning to the second prong of the test for compelling arbitration, the
parties do not contest that the nature of the dispute between them falls within
the Compensation Plan’s arbitration clause. This arbitration clause provides
that the parties will arbitrate “any disputes” related to compensation and
employment, including disputes under ERISA. The Plaintiffs’ claims arose as
4 The arbitration clauses in both the Compensation and PartnerPlus Plans provide
that the arbitration should proceed under the FINRA Rules. FINRA Rule 13204(a)(1)
provides that a “[c]lass action claim[] may not be arbitrated.” However, there are certain
exceptions to this provision, including that it does not apply when a “member of the certified
or putative class elects not to participate in the class.” See FINRA Rule 13204(a)(4). Having
concluded that the arbitration clause in the Compensation Plan requires arbitration, we
leave for the arbitrator to determine this rule’s potential effect on the arbitration proceedings.
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a result of their employment with UBS, and they seek to recover compensation
they allege is due to them following their departure from UBS. Specifically,
the Plaintiffs’ complaint alleges that they are “entitled to recover all amounts
to which they [are] entitled under the [PartnerPlus] Plan, including all Firm
Contributions, Market Interest and Turbo Interest purportedly forfeited by
them” following their departure from UBS. Therefore, the Plaintiffs’
compensation claim falls squarely within the scope of the arbitration clause.
However, based on the arbitration clause’s application to “all disputes”
except “claims for injunctive relief,” the Plaintiffs argue that their claim is not
arbitrable because they seek in their complaint—in addition to all equitable
relief available under § 1132(a)(3)—“an injunction against any act or practice
which violates ERISA.” Nonetheless, this exception does not preclude
arbitration of the entirety of the Plaintiffs’ claim because the Plaintiffs have
not confined the relief they seek to merely an injunction, but rather they seek
to recover any relief available under § 1132(a)(3).
Furthermore, as we have previously held in the context of class action
claims for injunctive relief, an injunction is not appropriate when the plaintiff
would not benefit from prospective relief, the plaintiff’s relationship with the
defendant has ended, or the plaintiff essentially seeks monetary damages. See,
e.g., Casa Orlando Apartments, Ltd. v. Fed. Nat. Mortg. Ass’n, 624 F.3d 185,
200 (5th Cir. 2010); Bolin v. Sears, Roebuck & Co., 231 F.3d 970, 978 (5th Cir.
2000) (observing that potential class members “who do not face further harm
from [the defendant’s] actions . . . have nothing to gain from an injunction”);
see also Bauer v. Texas, 341 F.3d 352, 358 (5th Cir. 2003) (“[W]hen a plaintiff
is seeking injunctive or declaratory relief, a plaintiff must allege facts from
which it appears there is a substantial likelihood that he will suffer injury in
the future . . . [and] from which the continuation of the dispute may be
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reasonably inferred.”)(citation omitted). Here, each of these circumstances
counsel against the availability of injunctive relief. Specifically, the Plaintiffs
have failed to identify any prospective relief that they seek through an
injunction, their relationship (and that of the class members they seek to
represent) with UBS has ended, 5 and they unabashedly seek ultimately to
recover monetary relief. 6
Nevertheless, in light of the Plaintiffs’ broad request for all appropriate
equitable relief under § 1132(a)(3) and our conclusion that the dispute must,
in the first instance, be sent to arbitration, we leave the initial decision of the
scope of arbitration to the arbitration panel. See Bazzle, 539 U.S. at 451;
Petrofac, 687 F.3d at 675.
IV. Conclusion
The arbitration clause in the Compensation Plan represents a separate
and independent agreement between the Plaintiffs and UBS to submit “any
disputes” concerning compensation and employment to arbitration.
Regardless of whether the arbitration clause in the PartnerPlus Plan would
otherwise require arbitration, the arbitration provision in the Compensation
5 The named Plaintiffs are no longer employed by UBS and they limit the scope of
the class they seek to represent to branch managers and financial advisors “who left the
employment” of UBS. Further, the Plaintiffs’ claim is necessarily limited to individuals who
have ended their relationship with UBS because the violation of ERISA that they allege only
occurs after there has been a non-qualifying separation between UBS and the PartnerPlus
Plan participant, which results in UBS determination that certain contributions are forfeited.
6 The Plaintiffs’ counsel admitted before the district court and during oral argument
before this court that the Plaintiffs’ purpose in this litigation is to secure monetary damages.
It is clear that the Plaintiffs’ claim at its core is a claim for monetary damages cabined within
a claim for injunctive relief. As the Supreme Court has observed, an injunction requiring a
defendant essentially to pay monetary damages is not a form of relief that was typically
available in equity and, therefore, is not available through § 1132(a)(3). See Great-W. Life &
Annuity Ins. Co. v. Knudson, 534 U.S. 204, 210–11 (2002).
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Plan is enforceable and its scope covers the Plaintiffs’ claim. 7 Accordingly, we
REVERSE the denial of UBS’s motions to compel arbitration and REMAND
for entry of an order compelling arbitration.
7 In the final footnote of their brief, the Plaintiffs explain that they argued to the
district court “that even if there had been an agreement to arbitrate 29 U.S.C. § 1132(a)(3)
claims, such an agreement would be barred by the clear congressional command of ERISA.
Whether Congress intended to prohibit the arbitration of section 1132(a)(3) claims is
indisputably an open question in this Circuit.” However, the Plaintiffs failed to present any
argument or authorities to this court describing the alleged congressional command under
ERISA that would preclude arbitration of their claim and, therefore, they have waived any
argument on this issue. See Bridas S.A.P.I.C. v. Gov’t of Turkm., 345 F.3d 347, 356 n.7 (5th
Cir. 2003) (holding that an argument raised only in a footnote is waived); Douglas W. ex rel.
Jason D.W. by Douglas W. v. Houston Indep. Sch. Dist., 158 F.3d 205, 210 n.4 (5th Cir. 1998)
(“[F]ailure to provide any legal or factual analysis of an issue on appeal waives that issue.”).
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