The most interesting – and, maybe, most important – opinion today takes place in a concurrence, as a Senior Circuit Court Judge hints at the demise of the effective vindication doctrine.  For ERISA practitioners, a court weighs in on when arbitration clauses waiving representative actions are enforceable.  International arbitration raises its head, again, today in a decision addressing the statute of limitations for enforcing ICSID awards.  

ERISA Class Action Waivers; Questioning the Effective Vindication Doctrine

The Sixth Circuit holds that the effective vindication doctrine bars enforcement of a class action waiver in an ERISA action which alleges that the fiduciary’s conduct damaged all beneficiaries of the ERISA plan, not just the individual plaintiff, Parker v. Tenneco, Inc., 2024 U.S. App. LEXIS 20984 (6^th Cir. August 20, 2024).  In doing so, it cites its own precedent and the holdings of four other Circuits.

Plaintiffs are participants in a 401(k) plan offered by Tenneco.  They allege that the fiduciaries of the plan breached their duties by choosing investments which were more costly than other, essentially identical, options and that the fees charged were unreasonably high.  As a result, Plaintiffs claim that the value of the entire retirement plan was reduced.  They seek declaratory relief and damages “in the amount of any losses the Plans suffered, to be allocated among the participants’ individual accounts in proportion to the accounts’ losses.”  The Plan documents include an arbitration provision which requires that all claims “must be brought solely in the Claimant’s individual capacity, and not in a representative capacity or on a class, collective, or group basis.”  The Defendants moved to compel arbitration of the claims on an individual basis.  The District Court denied the motion, and this appeal ensued.  The Circuit Court, in an opinion by Judge Gibbons, joined by Judge Stranch, with a concurrence by Judge McKeague, affirms.

The court looks to the “effective vindication” doctrine in holding that applying the arbitration provision’s individual claim mandate would prohibit plaintiffs from enforcing the statutory rights contained in ERISA.  That act provides that any person who is a fiduciary with respect to a plan who breaches its duties under ERISA “shall be personally liable to make good to such plan any losses resulting from each such breach, and to restore to such plan any profits of such fiduciary. . . .” (Emphasis added).  The court holds that, if an individual may only bring a personal claim, he or she cannot fully assert the Plan’s rights described above. “The individual provision thus eliminates the ability to proceed in a representative capacity on behalf of the Plans and obtain relief for losses to the Plans which as demonstrated in [cited cases] are substantive statutory rights provided by ERISA.  The provision is therefore unenforceable as a prospective waiver of those statutory rights.”  The Court draws a distinction between claims which would only benefit the individual plan member and those which seek relief on behalf of the Plan itself.  Here, the court opines, “the complaint invokes not just individual injuries to a particular account, but ‘plan injuries’ – and overall reduction in the Plans’ savings via the provision of high-costs investment options and excessive fees. . . . Additionally, the monetary remedies that Parker requests flow to the Plans, not individual participants.”

The case forges no new ground, since four other Circuits and the Sixth itself have already held that requiring individual arbitration of Plan-wide losses means that a plaintiff may not “effectively vindicate” the Plan’s rights under ERISA.  The more interesting aspect of the case rests in Judge McKeague’s brief concurrence.  While he joins the judgment of the majority based on the Circuit’s prior holding in Hawkins v. Cintas Corp., 32 F. 4^th 625 (6^th Cir. 2022), he opines that “writing on a blank slate, this case would be difficult.  It raises hard questions of statutory interpretation, requires us to consider the interplay between ERISA and the FAA, and tasks us with applying a judge-made doctrine.”  The doctrine to which he refers is the “effective vindication” principle.  Citing SCOTUS’s opinion in Egbert v. Boule, 596 U.S. 482 (2022), and Loper v. Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), which overruled the Chevron doctrine, Judge McKeague writes that “judge-made doctrines are being scaled back.”  He predicts that “the effective vindication doctrine may be next.”  Invoking the “national policy favoring arbitration” and the principle that “arbitration agreements should be enforced unless the contract was not properly made,” Judge McKeague sends a signal to other courts (including SCOTUS?) and counsel that challenges to effective vindication might be in play.  Counsel faced with an opponent’s reliance on the doctrine might keep this opinion close at hand.

Statute of Limitations to Enforce an ICSID Arbitration Award

In Titan Consortium 1, LLC v. Argentine Republic, 2024 U.S. Dist. LEXIS 147331 (D.D.C. August 19, 2024), Judge Cobb addresses the applicable statute of limitations in an action to enforce an arbitration award issued by the International Centre for Settlement of Investment Disputes (“ICSID”).

The case also highlights the lengthy process for obtaining an enforceable award under that Convention.  In 2008, a claim was filed with ICSID relating to Argentina’s alleged expropriation of two airlines.  Nine years later, the ICSID tribunal issued an award ordering Argentina to pay over $320 million in damages, plus $3.5 million in legal fees and interest. In 2019, Argentina’s application to annul the award was denied. In 2021, an assignee of the original claimant filed this action to enforce the award.  The defendant argued that the application was untimely under the FAA and the arbitration provisions of DC law.

The Court starts its analysis with 22 U.S.C. § 1650a, which “endows federal courts with exclusive jurisdiction over [actions to enforce ICSID awards] and mandates that ICSID awards ‘be given the same full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of the several states.’” However, the act provides no statute of limitations for such enforcement proceedings.  Therefore, Judge Cobb holds, there is a “strong presumption” that the court must apply the most analogous state – or in this case, District of Columbia – statute of limitations.  That statute, the court finds, is the D.C. twelve-year limitation period for the enforcement of a “final judgment or final decree for the payment of money rendered in the Superior Court of the District of Columbia.”  In doing so, the court rejects a claim that the more limited period to confirm an award under either the FAA or the D.C. Arbitration Act is more appropriate. While those statutes “create procedures to confirm awards, the plain text of Section 1650a compels courts to enforce awards, and to do so as if they were state court judgments.” (Emphasis in original).  In so holding, the court rejects Argentina’s claim that looking to the laws of various states will result in an undesirable variation in the time frame for enforcing such awards – “lack of uniformity is ‘just the cost[] of the rule itself.’”(Internal citation omitted).  Further, Judge Cobb opines that, in the context of ICSID proceedings, where “post-award annulment proceedings can postpone the effective finality of awards for several years,” the three-year limitations period under the FAA for confirmation of awards “might force many parties to waste time in parallel proceedings (possibly across multiple countries, no less) just for the sake of claim preservation.”

One of the questions that arises in a first read of the opinion is why the court looked to the D.C. statute for the enforcement of judgments in the District’s own courts, when an ICSID award clearly does not have its origin in D.C. Superior Court.  In one paragraph, Judge Cobb deals with the question by holding that the applying the D.C. statute for the enforcement of foreign judgments statute is “unworkable,” pointing out in a footnote that the statute requires the court to look to the statute of limitations of the jurisdiction in which the judgment was rendered – and, for an ICSID award, there is no such jurisdiction.

Have a good weekend.  

David Reif, FCIArb
Reif ADR
Dreif@reifadr.com