By Pension and Benefits Editorial Staff
A federal trial court did not err in transferring an ERISA fiduciary breach action from California to Minnesota, pursuant to a forum selection clause in a 401(k) plan, according to the U.S. Court of Appeals in San Francisco (CA-9). ERISA does not bar forum selection clauses and the plan’s clause did not undermine ERISA’s goal of allowing ready access to the federal courts, the court explained.
Plan forum selection clause. A participant in a 401(k) plan maintained by Wells Fargo brought a putative class action suit in California, challenging the inclusion of company-affiliated investment options in the plan as a breach of ERISA’s fiduciary duties of prudence and loyalty.
Relying on a forum selection clause in the plan, which required ERISA claims to be litigated in Minnesota (where the plan was administered), Wells Fargo moved to transfer the case to that venue. The trial court granted the motion. Subsequently, the participants requested that the Ninth Circuit issue a writ of mandamus, rescinding the transfer order.
In order to secure relief, the participants needed to prove that the trial court committed clear error when it transferred the case. Thus, the participants were required to demonstrate that Wells Fargo’s forum selection clause was barred by ERISA. Concluding that neither ERISA’s language and purpose, nor judicial precedent, invalidated the plan’s forum selection clause, the court denied the writ of mandamus.
ERISA allows for forum selection. ERISA Sec. 502 states that an action may be brought where: (1) the plan is administered; (2) the breach took place; or (3) a defendant resides or may be found. The participants contended that, because ERISA Sec. 502 authorizes three venue locations, the plan’s venue restriction violated ERISA and the statutory purpose of providing ready access to the federal courts.
The appeals court rejected the participants’ argument, noting that ERISA Sec. 502 opens up three venues for suit, but not does not require that all three be available. Accordingly, ERISA does not bar Wells Fargo and the participants from agreeing to litigate claims in one of the statutorily authorized venues.
Forum selection furthers goal of allowing access to federal courts. In addition, the court explained, Wells Fargo’s forum selection clause does not undermine ERISA’s goal of allowing ready access to the federal courts. In fact, the court reasoned, in adopting a forum selection clause, rather than an arbitration provision, Wells Fargo actually guaranteed the participants venue in a federal court.
Finally, the court explained that Wells Fargo’s forum selection clause was not incompatible with ERISA’s more general policy goals. For example, the court stressed that the forum selection clause furthered ERISA’s goal of encouraging uniformity in decisions interpreting that plan, which decreases costs and advances ERISA’s goal of providing low-cost plans.
Source: Becker v. United States District Court for the Northern District of California, Oakland (CA-9).
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