Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—11th Cir.: Arbitration procedure added to ERISA pension plan violated effective vindication doctrine, (Dec 16, 2025)

By Ronald Miller, J.D.

The key question is whether “the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum.”

The Eleventh Circuit joined its sister circuits in holding that an arbitration provision that eliminated the right to pursue substantive plan-wide remedies under ERISA violated the effective vindication doctrine. This action involved claims under ERISA asserted by plan participants in a terminated employee stock ownership plan. Here, an arbitration provision added to the plan forbid the plaintiffs from asserting substantive rights (like plan-wide relief) under ERISA. Accordingly, the appeals court affirmed a district court’s invalidation of the plan’s Arbitration Procedure and denial of the defendants’ motion to compel arbitration (Williams v. Shapiro, No. 24-11192 (11th Cir. Dec. 15, 2025)).

ESOP. The employer established an employee stock ownership plan (ESOP) to help its employees save for retirement. The plan primarily invested in the company’s own stock.

The ESOP was a “defined contribution plan” under ERISA. A defined contribution plan is “a pension plan which provides for an individual account for each participant and for benefits based solely upon the amount contributed to the participant’s account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant’s account.”

In January of 2017, the plan purchased 1,000,000 shares of company stock for $30 million, making the plan the company the sole owner. In September of 2019, the company and its trustee sold the plan’s shares to a holding company for approximately $34.6 million. Simultaneously, the employer amended the plan document by adding an arbitration clause.

Covered claims. The amendment provided that all covered claims must be resolved exclusively pursuant to the provisions of the “Arbitration Procedure.” Covered claims included any claim made by or on behalf of a current or former employee, a current or former participant or current or former beneficiary or by or on behalf of the Plan, the Trust or under the Trust Agreement, including without limitation claims for breach of fiduciary duty.” The Arbitration Procedure also prohibited “Group, Class, or Representative Arbitrations.”

Termination of plan. Five days after making this amendment to the plan document, the employer terminated the plan. From October of 2019 to December of 2021, the plan distributed the proceeds from the stock sale to the plan’s participants.

ERISA claims. In September 2022, several plan participants filed this action under ERISA and sought to represent a class of approximately 280 plan participants. They alleged that the defendants unlawfully caused the plan to be terminated and “its ‘unallocated’ shares to be redeemed by the company for less than fair market value.” Specifically, they asserted that the plan lost $35.4 million when the defendants schemed to sell the stock for $34.6 million because the stock was actually worth approximately $70 million.

Thereafter, the employer again amended the plan document to state that nothing in the Arbitration Provision shall be construed to preclude a claimant from seeking an injunction to remove or replace a plan fiduciary.

In response, the plaintiffs amended their complaint and asserted the following claims under ERISA: (1) causing prohibited transactions in violation of 29 U.S.C. § 1106(a); (2) engaging in prohibited transactions between the plan and a fiduciary in violation of § 1106(b); (3) breaching the fiduciary duties of prudence and loyalty in violation of § 1104(a)(1); (4) knowingly participating in the breach, giving rise to co-fiduciary liability under § 1105(a); (5) knowingly participating in prohibited transactions in violation of § 1132(a)(3); (6) knowingly participating in breaches of the du-ties of prudence and loyalty, also in violation of § 1132(a)(3); and (7) breaching the terms of the plan in violation of § 1132(a)(3)(A). They specifically requested disgorgement of profits and restitution for losses to the plan. They also sought to reform the plan document to eliminate the third and fourth amendments, and to rescind the plan’s stock purchase agreement.

Motion to compel arbitration. The defendants moved to compel arbitration under the Federal Arbitration Act. The district court ruled that the individual plan participants “gave no assent” to arbitrate their claims for rescission and restitution. The court held, however, that the plan itself “maintained a legal existence such that it could assent to arbitration” through the third and fourth amendments to the plan document.

The district court nevertheless denied the defendants’ motion to compel arbitration and invalidated the Arbitration Procedure because ERISA authorizes plan-wide relief, and the Arbitration Procedure specifically prohibited such relief. The court held that the Arbitration Procedure was entirely unenforceable because it was non-severable.

Individual arbitration. On appeal, the defendants argued that the plaintiffs’ substantive statutory right is to assert claims relating to their individual plan accounts, and that this right is sufficiently vindicated in individual arbitration as required by the Arbitration Procedure. They also contended that the district court erred in ruling that the individual plaintiffs did not assent to arbitration because their participation in the plan constituted their assent to be bound by the plan document, including the Arbitration Procedure.

Effective vindication doctrine. The effective vindication doctrine invalidates arbitration provisions that prospectively waive “a party’s right to pursue statutory remedies.” The key question is whether “the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum.”

The parameters of the doctrine are to prevent “prospective waiver of a party’s right to pursue statutory remedies,” and would “certainly cover a provision in an arbitration agreement forbidding the assertion of certain statutory rights.” Accordingly, the Eleventh Circuit adopted and applied the effective vindication doctrine.

Eleventh Circuit cases recognize the existence of the effective vindication doctrine. Further, the effective vindication doctrine has been applied to the waiver of ERISA statutory rights by six sister circuits in the last five years, including the Ninth, Sixth, Seventh, Second, Third, and Tenth Circuits. Moreover, no circuits have rejected the doctrine.

Prospective waiver. Next, the appeals court turned to consider whether the “Arbitration Procedure” at issue here constituted a prospective waiver of statutory rights granted by ERISA.

As relevant here, 29 U.S.C. § 1109(a) establishes liability for breaches of fiduciary duty. ERISA expressly provides that plan participants may bring a civil action for relief under § 1109. The Supreme Court has stated that § 1109(a) is primarily concerned with the possible misuse of plan assets, and with remedies that would protect the entire plan, rather than with the rights of an individual beneficiary. Thus, ERISA provides for “‘plan-related’ relief.”

Six circuits have held that “arbitration provisions preventing individuals from obtaining the plan-wide relief available under [§ 1109(a)] violate the effective vindication doctrine.” Here, the Eleventh Circuit joined its sister circuits and affirmed the district court’s ruling that the Arbitration Procedure was unenforceable.

Relief to plan. Section 1109(a) “provides relief ‘singularly to the plan’ rather than an individual plaintiff,” and § 1132(a)(2) “claims are understood as claims ‘brought in a representative capacity on behalf of the plan as a whole.’” The Arbitration Procedure here plainly disallowed claims brought “in a representative capacity,” as well as claims that “seek or receive any remedy which has the purpose or effect of providing additional benefits or monetary or other relief to any individual or entity other than the Claimant.”

In sum, Sections 1109(a) and 1132(a)(2) create a statutory cause of action “in which a single agent [i.e., a plan participant] litigates on behalf of a single principal [i.e., the plan,]” under Section 1109(a) for “any losses to the plan[.]”

Thus, the appeals court concluded that the Arbitration Procedure’s preclusion of ERISA statutory claims brought “in a representative capacity,” for relief which benefits anyone other than the individual claimant, prevents the plaintiffs from effectively vindicating Sections 1109(a) and 1132(a)(2) in the arbitral forum.

Severability. Whether or not a severability provision in an arbitration agreement “is to be given effect is a question of state law.” Georgia law looks to the “intent of the parties” in “determining whether a contract is severable such that the remaining contract provisions will survive even if one or more provisions of the contract are void.” Based on the express language of the Arbitration Procedure, the problematic language in the Arbitration Procedure was not severable, the appeals court found. Accordingly, the Arbitration Procedure was invalidated in its entirety.

The case is No. 24-11192.

Judge: Jordan, A.

Attorneys: Rachana Pathak (Stris & Maher) for Eboni Williams. Bryan House (Foley & Lardner) for Gerald Shapiro.

Companies: A360 Holdings LLC

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