Eleventh Circuit Affirms No Waiver of Core ERISA Remedies

Williams v Shapiro, No. 24-11192 (11^th Cir. Jan. 3, 2025) adds the Eleventh Circuit to a growing list of appellate courts rejecting ESOP-related arbitration provisions that attempt to confine claims to individualized relief.

            In 2019 A360 and its trustee sold all ESOP owned company stock to a new entity.  At the same time, they amended the plan to add a mandatory arbitration clause which required individual arbitration only and prohibited class, group, or plan-wide relief.

            Former plan participants sued alleging breach of fiduciary duty and undervaluation of ESOP shares. They sought plan-wide monetary and equitable relief.

            Defendants moved to compel arbitration.

            The districted court denied Defendant's motion to compel arbitration and the Eleventh Circuit affirmed the district court.

The Eleventh Circuit noted the Supreme Court has acknowledged the effective vindication doctrine may be applicable depending on circumstances stating, “The relevant holding in Italian Colors was that the effective vindication doctrine did not invalidate a certain arbitration clause. See 570 U.S. at 238–39. To reach that result, the Supreme Court had to set out the parameters of the doctrine. See id. at 236 (explaining that the doctrine finds its origin in the desire 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”) (emphasis added). It seems to us, therefore, that the discussion of the doctrine in Italian Colors cannot be passed off as mere dicta. See Escobar v. Celebration Cruise Operator, Inc., 805 F.3d 1279, 1291 (11th Cir. 2015) (stating that in Italian Colors “the Supreme Court acknowledged the effective vindication doctrine,” which had “originated as dictum in Mitsubishi Motors”). [American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013)].

Here, the arbitration clause prohibited plan wide relief. ERISA §502(a)(2) expressly authorizes participants to seek plan‑wide relief for fiduciary breaches. By prohibiting such relief, the arbitration clause attempted to erase a substantive statutory remedy.

The court emphasized that ERISA’s fiduciary‑breach provisions are designed to protect the plan as a whole, not just individual accounts. Limiting participants to individualized relief would fundamentally alter the statute’s enforcement scheme.

This decision continues a national trend. Courts are increasingly skeptical of arbitration clauses that attempt to limit ERISA remedies, especially in ESOP transactions. The Eleventh Circuit is now aligned with the Second, Third, Seventh, and Tenth Circuits on this issue.

This serves as a reminder that while arbitration is favored, it cannot be used to erase statutory rights.