Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—9th Cir.: Employer denied motion to compel arbitration of claims brought on behalf of retirement plan, (Jul 31, 2026)

By Ronald Miller, J.D.

The effective-vindication doctrine prevents enforcement of an arbitration provision “if it ‘operate[s] as a prospective waiver of a party’s right to pursue statutory remedies,’ including a prohibition on ‘the assertion of certain statutory rights.’”

A divided Ninth Circuit panel affirmed a district court’s denial of an employer’s motion to compel arbitration in a case in which an employee sued an employer on behalf of a retirement-savings plan, alleging that the fiduciaries mismanaged the plan’s investments. The employer moved to compel arbitration of the employee’s suit, asserting that the employee was bound by an arbitration requirement adopted by the plan. However, the appeals court concluded that the plan’s representative-action waiver was not enforceable under the effective-vindication doctrine. Accordingly, the judgment of the district court was affirmed. Judge VanDyke filed a separate dissenting opinion (Pover v. The Capital Group Companies, Inc., No. 24-5298 (9th Cir. July 30, 2026)).

Retirement plan. The employer is a global asset manager that sponsors a retirement plan for its employees. The plan allows each participant to maintain an individual account funded by contributions from each participant and the employer, as well as the participant’s investment earnings. The participants may direct how their individual accounts are invested by selecting from a menu of investment options provided by the plan. The employer collects a transaction fee from the investment funds included in the plan’s menu.

ERISA governs the plan and the terms of the plan document. According to the plan document, an administrative committee serves as the plan’s fiduciary and may amend or modify the plan. As relevant here, the committee amended the plan before this litigation by adding two provisions related to dispute resolution: (1) an arbitration requirement; and (2) a waiver of class, collective, and representative actions.

Investment options. The employee sued the employer, the plan fiduciary, and related fiduciaries, alleging that the employer breached its fiduciary duties to the plan by retaining certain investment options for participants despite their poor performance.

Further, the employee alleged that the employer knew certain investment funds were underperforming but retained them in its offerings to collect the substantial transaction fees generated by the funds. She asserted that the employer’s failure to remove these funds from the plan’s investment menu violated its duties of prudence and loyalty to the plan, and that it failed to monitor its delegees.

The employee sought plan-wide monetary and equitable relief provided under ERISA, including declarations that the fiduciaries breached their duties owed to the plan, “restitution and disgorgement,” and an order: (1) requiring the fiduciaries to pay “the losses resulting from each breach of fiduciary duty and to restore to the Plan” any lost profits; (2) removing plan fiduciaries; and (3) reforming the plan to include only prudent investments, among other relief.

Moving to compel arbitration, the employer asserted that the employee was bound by the plan’s arbitration requirement. The employee countered that the plan’s representative-action waiver was unenforceable under the effective-vindication doctrine, and arbitration was thus not required because the waiver foreclosed her ability to represent the plan and pursue plan-wide relief on its behalf, undermining her rights under ERISA.

The district court denied the employer’s motion to compel arbitration. It agreed that the plan’s representative-action waiver could not be enforced because it prospectively waived the employee’s substantive rights and remedies under ERISA. The employer appealed.

Effective-vindication doctrine. This case considered the interaction between two federal statutes: ERISA, which entitles plan participants to sue for mismanagement of their retirement plan, and the FAA, which requires courts to enforce valid agreements to arbitrate. At the intersection of these statutes is the judicially created effective-vindication doctrine that renders unenforceable arbitration agreements that prevent the vindication of statutorily protected rights and remedies.

Arbitration agreement. An arbitration agreement “does not alter or abridge substantive rights; it merely changes how those rights will be processed.” The Ninth Circuit recently joined several sister circuits in holding that “arbitration provisions preventing individuals from obtaining the plan-wide relief available under § 409(a) violate the effective-vindication doctrine,” Platt v. Sodexo S.A.

In Platt, the Ninth Circuit explained that the effective-vindication doctrine prevents enforcement of an arbitration provision “if it ‘operate[s] as a prospective waiver of a party’s right to pursue statutory remedies,’ including a prohibition on ‘the assertion of certain statutory rights.’”

Representative-action waiver. The employee’s complaint made clear that she sought to represent the plan and to pursue the full extent of plan-wide relief available under ERISA. The complaint cited Section 502(a)(2), noting that the statute “authorizes any participant or beneficiary of the Plan to bring an action individually on behalf of the Plan to enforce a breaching fiduciary’s liability to the plan” under Section 409(a). And it stated that the employee sought to “act[] in this representative capacity.” The complaint also outlined a spectrum of both monetary recovery and equitable remedies sought that would necessarily affect the entire plan.

To determine whether the representative-action waiver bars the employee’s claims, the appeals court had to answer two questions: (1) whether the waiver prevents the employee from bringing claims on behalf of the plan; and (2) whether ERISA limits a participant in a defined-contribution plan to seeking monetary recovery related only to her individual account.

The employer argued that “representative,” as used in this provision, referred only to collective actions, not to actions brought by a plan participant on behalf of the plan. The appeals court was not persuaded. It observed that it has held that § 502(a)(2) claims asserting breach of fiduciary duty are always “representative” in the first sense because the participant-plaintiff “seeks recovery only for injury done to the plan.” Thus, the representative nature of the employee’s claim was clear.

Representative. The remaining question was simply how to interpret “representative,” as used in the waiver. On this, the decision in Platt controlled. The appeals court found that there was no meaningful difference between the prohibition against “any purported class or representative proceeding” in Platt, and the prohibition against any claim brought on a “class, collective or representative basis” here.

According to the employer, a defined-contribution plan participant may nevertheless recover only those monetary losses suffered by her individual account, plus other appropriate equitable relief, which is all recoverable in individual arbitration under the plan’s arbitration provisions. The court found the employer mistaken.

Here, the employee alleged fiduciary breaches that harmed the plan as a whole. She alleged that the employer retained a set of five mutual funds among its menu of investment options, despite knowing they were underperforming because they generated millions in “fee income,” and instead should have replaced those funds. This alleged breach “falls squarely within th[e] category” of duties that Section 409(a) imposes on plan fiduciaries. Under Section 502(a)(2), the employee was entitled to bring an action on behalf of the plan to recover any resulting losses, as well as “such other equitable or remedial relief as the court may deem appropriate.”

The appeals court held that the plan’s representative-action waiver prevents Pover from enforcing her substantive rights under ERISA because her breach-of-fiduciary-duty claims can only be brought in a representative capacity. Accordingly, the waiver was unenforceable under the effective-vindication doctrine.

Dissent. Judge VanDyke dissented from the appeals court ruling, arguing that the bar on “representative” suits in the arbitration clause’s class-action waiver did not refer to third-party suits on behalf of the plan. Moreover, the dissent argued that the appeals court should not have decided the issue of arbitrability, because the parties expressly agreed to allow an arbitrator to decide threshold questions of arbitrability, expressing their desire to keep courts out of this dispute. Thus, Judge VanDyke would have sent the question of arbitrability to the arbitrator.

The case is No. 24-5298.

Judge: Forrest, D.

Attorneys: Charles H. Field Jr. (Sanford Heisler Sharp McKnight) for Cathy Pover. Parker A. Rider-Longmaid (Skadden Arps Slate Meagher & Flom) for The Capital Group Companies, Inc.

Companies: The Capital Group Companies, Inc.; The Board of Directors of The Capital Group Companies, Inc.; The U.S. Retirement Benefits Committee of The Capital Group Companies, Inc.

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