Allen Munro v. USC

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ALLEN L. MUNRO, No. 17-55550
individually and as
representatives of a class of D.C. No.
participants and beneficiaries 2:16-cv-06191-VAP-E
on behalf of the University of
Southern California Defined
Contribution Retirement Plan OPINION
and the University of
Southern California Tax
Deferred Annuity Plan;
DANIEL C. WHEELER,
individually and as
representatives of a class of
participants and beneficiaries
on behalf of the University of
Southern California Defined
Contribution Retirement Plan
and the University of
Southern California Tax
Deferred Annuity Plan;
EDWARD E. VAYNMAN,
individually and as
representatives of a class of
participants and beneficiaries
on behalf of the University of
Southern California Defined
Contribution Retirement Plan
and the University of
Southern California Tax
2 MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA
Deferred Annuity Plan; JANE
A. SINGLETON, individually
and as representatives of a
class of participants and
beneficiaries on behalf of the
University of Southern
California Defined
Contribution Retirement Plan
and the University of
Southern California Tax
Deferred Annuity Plan;
SARAH GLEASON,
individually and as
representatives of a class of
participants and beneficiaries
on behalf of the University of
Southern California Defined
Contribution Retirement Plan
and the University of
Southern California Tax
Deferred Annuity Plan;
REBECCA A. SNYDER,
individually and as
representatives of a class of
participants and beneficiaries
on behalf of the University of
Southern California Defined
Contribution Retirement Plan
and the University of
Southern California Tax
Deferred Annuity Plan; DION
MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA 3
DICKMAN; COREY CLARK;
STEVEN L. OLSON,
Plaintiffs-Appellees,
v.
UNIVERSITY OF SOUTHERN
CALIFORNIA; USC
RETIREMENT PLAN
OVERSIGHT COMMITTEE;
LISA MAZZOCCO,
Defendants-Appellants.
Appeal from the United States District Court
for the Central District of California
Virginia A. Phillips, Chief Judge, Presiding
Argued and Submitted May 15, 2018
San Francisco, California
Filed July 24, 2018
Before: Sidney R. Thomas, Chief Circuit Judge, Michelle
T. Friedland, Circuit Judge, and Thomas S. Zilly,* District
Judge.
Opinion by Chief Judge Thomas
*
The Honorable Thomas S. Zilly, United States District Judge for the
Western District of Washington, sitting by designation.
4 MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA
SUMMARY**
Arbitration
The panel affirmed the district court’s denial of
defendants’ motion to compel arbitration of collective claims
for breach of fiduciary duty in the administration of two
ERISA plans.
The plaintiffs, current and former employees of the
University of Southern California, and participants in the two
ERISA plans, were required to sign arbitration agreements as
part of their employment contracts. The panel concluded that
the dispute fell outside the scope of the arbitration agreements
because the parties consented only to arbitrate claims brought
on their own behalf, and the employees’ claims were brought
on behalf of the ERISA plans.
COUNSEL
Eugene Scalia (argued) and Paul Blankenstein, Gibson Dunn
& Crutcher LLP, Washington, D.C.; Debra Wong Yang,
Christopher Chorba, Jennafer M. Tryck, and Samuel Eckman,
Gibson Dunn & Crutcher LLP, Los Angeles, California; for
Defendants-Appellants.
Michael A. Wolff (argued), James Redd, and Jerome J.
Schlichter, Schlichter Bogard & Denton LLP, St. Louis,
Missouri, for Plaintiffs-Appellees.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA 5
Andrew J. Pincus, Archis A. Parasharami, Brian D. Netter,
and Travis Crum, Mayer Brown LLP, Washington, D.C.;
Warren Postman and Janet Galeria, U.S. Chamber Litigation
Center, Washington, D.C.; for Amicus Curiae Chamber of
Commerce.
Mary Ellen Signorille and William Alvarado Rivera, AARP
Foundation Litigation, Washington, D.C., for Amici Curiae
AARP and AARP Foundation.
OPINION
THOMAS, Chief Judge:
We consider in this appeal whether current and former
employees of the University of Southern California may be
compelled to arbitrate their collective claims for breach of
fiduciary responsibility against the Defendants (collectively,
“USC”) for the administration of two ERISA plans. Under
the circumstances presented by this case, we conclude that the
district court properly denied USC’s motion to compel
arbitration.
I
Allen Munro and eight other current and former USC
employees (“Employees”) participate in both the USC
Retirement Savings Program and the USC Tax-Deferred
Annuity Plan (collectively, the “Plans”). In this putative class
action lawsuit, they allege multiple breaches of fiduciary duty
in administration of the Plans.
6 MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA
Each of the individual Employees was required to sign an
arbitration agreement as part of her employment contract.
The nine Employees signed five different iterations of USC’s
arbitration agreement. Consistent among the various
agreements is an agreement to arbitrate all claims that either
the Employee or USC has against the other party to the
agreement. The agreements expressly cover claims for
violations of federal law.
In their putative class action lawsuit, the Employees
sought financial and equitable remedies to benefit the Plans
and all affected participants and beneficiaries, including but
not limited to: a determination as to the method of calculating
losses; removal of breaching fiduciaries; a full accounting of
Plan losses; reformation of the Plans; and an order regarding
appropriate future investments.
USC moved to compel arbitration, arguing that the
Employees’ agreements bar the Employees from litigating
their claims on behalf of the Plan. It also requested the
district court to compel arbitration on an individual, rather
than class, basis because the parties did not specifically agree
to class arbitration. The district court denied USC’s motion,
determining that the arbitration agreements, which the
Employees entered into in their individual capacities, do not
bind the Plans because the Plans did not themselves consent
to arbitration of the claims. USC timely appealed.
The district court had jurisdiction under ERISA
§ 502(e)(1), 29 U.S.C. § 1132(e)(1), and 28 U.S.C. § 1331.
We have jurisdiction under 9 U.S.C. § 16(a)(1)(C), which
authorizes the immediate appeal from an order denying an
application to compel arbitration. We review the issues
presented de novo. Mohamed v. Uber Techs., Inc., 848 F.3d
MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA 7
1201, 1207 (9th Cir. 2016) (denial of a motion to compel
arbitration); Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1021
(9th Cir. 2016) (“district court decisions about the
arbitrability of claims” and “the interpretation and meaning
of contract provisions” (citation and alteration omitted));
Cmty. Bank of Ariz. v. G.V.M. Trust, 366 F.3d 982, 984 (9th
Cir. 2004) (a “district court’s interpretation and construction
of . . . federal law”).
II
The Federal Arbitration Act (“FAA”) “was enacted . . . in
response to widespread judicial hostility to arbitration
agreements.” AT&T Mobility LLC v. Concepcion, 563 U.S.
333, 339 (2011). It “reflect[s] both a ‘liberal federal policy
favoring arbitration,’” id. (quoting Moses H. Cone Mem’l
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)), “and
the ‘fundamental principle that arbitration is a matter of
contract,’” id. (quoting Rent-A-Center, W., Inc. v. Jackson,
561 U.S. 63, 67 (2010)). By the FAA’s terms, “a written
provision in any . . . contract evidencing a transaction
involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction . . . 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.
“[T]he party resisting arbitration bears the burden[s] of
proving that the claims at issue are unsuitable for arbitration
. . . .” Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79,
91 (2000). “[A]ny doubts concerning the scope of arbitrable
issues should be resolved in favor of arbitration . . . .” Moses
H. Cone, 460 U.S. at 24–25.
8 MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA
Where there is no conflict between the FAA and the
substantive statutory provision, “the FAA limits courts’
involvement to ‘determining (1) whether a valid agreement to
arbitrate exists and, if it does, (2) whether the agreement
encompasses the dispute at issue.”’ Cox v. Ocean View Hotel
Corp., 533 F.3d 1114, 1119 (9th Cir. 2008) (quoting Chiron
Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130
(9th Cir. 2000)). “If the response is affirmative on both
counts, then the Act requires the court to enforce the
arbitration agreement in accordance with its terms.” Chiron
Corp., 207 F.3d at 1130. There is no room for discretion, as
the FAA “mandates that district courts shall direct the parties
to proceed to arbitration on issues as to which an arbitration
agreement has been signed.” Id. (quoting Dean Witter
Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)).
III
Turning to the particular arbitration agreements entered
into between the Employees and USC, we must decide
“whether the agreement encompasses the dispute at issue.”
Cox, 533 F.3d at 1119 (citation omitted). Because the parties
consented only to arbitrate claims brought on their own
behalf, and because the Employees’ present claims are
brought on behalf of the Plans, we conclude that the present
dispute falls outside the scope of the agreements.
A
We cannot, of course, compel arbitration in the absence
of an agreement to arbitrate; to do so would be to defeat “the
FAA’s primary purpose of ensuring that private agreements
to arbitrate are enforced according to their terms.” Volt Info.
Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ.,
MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA 9
489 U.S. 468, 479 (1989). “[T]he FAA imposes certain rules
of fundamental importance, including the basic precept that
arbitration ‘is a matter of consent, not coercion.’” Stolt-
Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 681
(2010) (quoting Volt Info., 489 U.S. at 479).
B
To determine whether the agreements extend to the
present controversy, we look first to the text of the
agreements. United States ex rel. Welch v. My Left Foot
Children’s Therapy, LLC, 871 F.3d 791, 796 (9th Cir. 2017).
We recently considered a similar issue in another legal
context—whether 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”). Welch, 871 F.3d 791. In Welch, the arbitration
agreement extended to any claims “either [the employee] may
have against the Company . . . or the Company may have
against [the employee].” Id. at 794. Because “the underlying
fraud claims asserted in a FCA case belong to the government
and not to the relator,” we held that the claims were not
claims that the employee had against the employer and
therefore not within the scope of the arbitration agreements.
Id. at 800 & n.3.
Here, too, the parties agreed to arbitrate “all claims . . .
that Employee may have against the University or any of its
related entities . . . and all claims that the University may
have against Employee.” As in Welch, this language does not
extend to claims that other entities have against the
University. As in Welch, we cannot interpret the catch-all
clause agreeing to arbitrate “[a]ny claim that otherwise would
10 MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA
have been decidable in a court . . . for violation of any federal
. . . statute” to cover claims belonging to other entities. See
Welch, 871 F.3d at 797–98 (interpreting agreement to
arbitrate “all disputes” based on “any . . . federal law” as
limited to disputes between the employee and the employer).
The language of the arbitration agreements here is not
meaningfully distinguishable from that considered in Welch.
The issue, then, is whether claims for breach of fiduciary duty
brought under ERISA must be treated the same as qui tam
claims brought under the FCA.
C
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 (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 (2008);
accord id. at 261 (Thomas, J., concurring).
Out of this basic similarity arises a related
principle—neither the qui tam relator nor the ERISA
§ 502(a)(2) plaintiff may alone settle a claim because that
claim does not exist for the individual relator or plaintiff’s
primary benefit. In Bowles v. Reade, 198 F.3d 752, 760 (9th
Cir. 1999), we held that a plaintiff seeking relief under
ERISA § 409(a) may not settle a claim on behalf of a plan,
but rather can only settle if the plan consents to the
MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA 11
settlement. Unsurprisingly, given the similarities between
FCA and ERISA fiduciary breach claims, we reached a
similar conclusion in a qui tam action brought under the FCA
where the government had initially declined to intervene,
leaving the relator to conduct the action himself. United
States ex rel. Killingsworth v. Northrop Corp., 25 F.3d 715,
720 (9th Cir. 1994). But there, unlike here, the government
had only a right to be heard on the validity of the settlement,
not “an absolute right to block the settlement.” Id. at 720–23.
Significantly, these principles laid the foundation for our
holding in Welch, where we held a qui tam FCA claim to be
outside the scope of an arbitration agreement because the
claim was not one that the employee “may have against [the
employer].” 871 F.3d at 800. Our holding was compelled by
our recognition that the government, rather than the relator,
stands to benefit most from the litigation. Id. And we
reached our conclusion even though the relator is entitled to
more than a nominal share of the government’s recovery. Id.
Moreover, we were unconcerned that the FCA provides that
the relator brings suit not only “for the United States
Government” but also “for the person.” 31 U.S.C. § 3730(b).
And even though in a breach-of-fiduciary duty suit under
ERISA, “the cause of action belong[s] to the individual
plaintiff,” Comer v. Micor, Inc., 436 F.3d 1098, 1103 (9th
Cir. 2006), the same is true of a qui tam suit under the FCA
where the government declines to intervene, see 31 U.S.C.
§ 3730(b)(4)(B) (providing that, in such circumstances, the
“right to conduct the action” lies with the relator). See also
Landwehr v. DuPree, 72 F.3d 726, 732 (9th Cir. 1995)
(holding in ERISA context that the statute of limitations
begins to run when the individual plaintiff learns of the
alleged violations); United States ex rel. Hyatt v. Northrop
12 MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA
Corp., 91 F.3d 1211, 1217–18 (9th Cir. 1996) (holding
similarly in the FCA context).
Relying on LaRue, USC argues that individuals may seek
individual recovery in the context of defined contribution
plans, such as the Plans here, because defined contribution
plans comprise individual accounts. However, LaRue cannot
bear the weight USC places on it. In LaRue, the Supreme
Court held that an individual may bring an ERISA claim
alleging breach of fiduciary duty even if the claim pertains
only to her own account and seeks relief for losses limited to
that account. 552 U.S. at 256. In doing so, the Court made
clear that it had not reconsidered its longstanding recognition
that it is the plan, and not the individual beneficiaries and
participants, that benefit from a winning claim for breach of
fiduciary duty, even when the plan is a defined contribution
plan. Id. (“[A]lthough § 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.”).
Even if LaRue held the meaning USC attributes to it, it
would not control this case. The claims brought by the
Employees arise from alleged fiduciary misconduct as to the
Plans in their entireties and are not, as in LaRue, limited to
mismanagement of individual accounts. Id. at 250–51
(explaining that the lawsuit arose from the fiduciary’s alleged
failure to carry out the participant-plaintiff’s directions). As
we have noted, the Employees seek financial and equitable
remedies to benefit the Plans and all affected participants and
beneficiaries, including a determination as to the method of
calculating losses, removal of breaching fiduciaries, a full
accounting of Plan losses, reformation of the Plans, and an
MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA 13
order regarding appropriate future investments. The relief
sought demonstrates that the Employees are bringing their
claims to benefit their respective Plans across the board, not
just to benefit their own accounts as in LaRue.
In short, there is no principled distinction to be drawn
between this case and Welch. If anything, because recovery
under ERISA § 409(a) is recovery singularly for the plan,
compare 29 U.S.C. § 1109(a), with 31 U.S.C. § 3730(b), the
qui tam relator has a stronger stake in the outcome of an FCA
case than does a § 502(a)(2) plaintiff in an ERISA claim. The
ERISA § 409(a) claims in this suit are not claims an
“Employee may have against the University or any of its
related entities,” and the arbitration agreements cannot be
stretched to apply to them.1
1
The Employees also argue that claims for breach of fiduciary duty
seeking a remedy under ERISA 409(a) are inarbitrable as a matter of law,
citing our decision in Amaro v. Continental Can Co., 724 F.2d 747 (9th
Cir. 1984). In Amaro, we held that ERISA’s mandated “minimum
standards [for] assuring the equitable character of [ERISA] plans” could
not be satisfied in an arbitral proceeding. 724 F.2d at 752. As a three-
judge panel, Amaro binds us unless we conclude that the case is “clearly
irreconcilable” with intervening binding authority. Miller v. Gammie,
335 F.3d 889, 900 (9th Cir. 2003) (en banc). USC contends that Amaro
is “clearly irreconcilable” with intervening Supreme Court case law and,
therefore, we should overrule it. Although the Supreme Court has never
expressly held that ERISA claims are arbitrable, there is considerable
force to USC’s position. See, e.g., Comer v. Micor, Inc., 436 F.3d 1098,
1100–01 (9th Cir. 2006) (discussing the issue in dicta). However, given
our decision that the claims asserted in this case fall outside the arbitration
clauses in the employee agreements, it is unnecessary to decide that
question here. Therefore, we leave the issue of Amaro’s viability for
another day.
14 MUNRO V. UNIVERSITY OF SOUTHERN CALIFORNIA
IV
In sum, the claims asserted on behalf of the Plans in this
case fall outside the scope of the arbitration clauses in
individual Employees’ general employment contracts.
Therefore, the district court properly denied the motion to
compel arbitration. We need not—and do not—reach any
other issues urged by the parties.
AFFIRMED.