Retirement Plan Arbitration

401(k) plans often include arbitration clauses requiring disputes to be resolved individually, rather than collectively. Two participants who filed a class action against plan fiduciaries for breach of fiduciary duties, seeking relief for the entire plan. The arbitration provision barred representative actions and limited remedies to individual losses.

The district court denied a motion to compel arbitration, saying the provision violated participants' rights under ERISA. The Sixth Circuit affirmed.

WHY THIS IS IMPORTANT… Courts can invalidate arbitration agreements that conflict with the law or public policy. Here, the doctrine of effective vindication ensured that statutory rights were enforceable, thereby invalidating the limits of the arbitration clause in this 401(k) plan.