Court Opinion

ID: 9409277
Source: CourtListenerOpinion
Date Created: 2023-07-17 17:00:56.654791+00
Date Added: 2024-06-11T17:20:49.227094
License: Public Domain

PRECEDENTIAL

        UNITED STATES COURT OF APPEALS
             FOR THE THIRD CIRCUIT
                  _____________

                        No. 22-1618

                      _____________

      BETH BERKELHAMMER, individually and as
representative of a class of participants and beneficiaries on
 behalf of the ADP TotalSource Retirement Savings Plan;
NAOMI RUIZ, individually and as representative of a class
   of participants and beneficiaries on behalf of the ADP
            TotalSource Retirement Savings Plan,
                                               Appellants

                                 v.

    ADP TOTALSOURCE GROUP, INC.; AUTOMATIC
  DATA PROCESSING, INC.; ADP TOTALSOURCE
   RETIREMENT SAVINGS PLAN COMMITTEE;
       NFP RETIREMENT, INC.; JOHN DOES 1-40
               _______________

             On Appeal from the United States
        District Court for the District of New Jersey
                  (D.C. No. 2-20-cv-05696)
          District Judge: Honorable Esther Salas
                     _______________
                         Argued
                     December 6, 2022

   Before: SHWARTZ, MATEY, and FUENTES, Circuit
                     Judges.

                   (Filed: July 17, 2023)
                     _______________

Jerome J. Schlichter
Sean E. Soyars [ARGUED]
Schlichter Bogard
100 South 4th Street, Suite 1200
St. Louis, MO 63102
       Counsel for Appellants

Jenya O. Godina
Meaghan M. VerGow [ARGUED]
O’Melveny & Myers
1625 Eye Street NW
Washington, DC 20006

Kevin Kraft
Catalina J. Vergara
O’Melveny & Myers
400 South Hope Street, 18th Floor
Los Angeles, CA 90071
       Counsel for Appellee NFP Retirement, Inc.

                     _______________

                              2
                  OPINION OF THE COURT
                      _______________

MATEY, Circuit Judge.
       Beth Berkelhammer and Naomi Ruiz participated in the
ADP TotalSource Retirement Savings Plan (“Plan”), an
investment portfolio managed by NFP Retirement, Inc.
(“NFP”). Displeased with NFP’s performance, they filed suit
under § 502(a)(2) of the Employment Retirement Income
Security Act of 1974 (“ERISA”) not for their own losses, but
derivatively on behalf of the Plan. The Plan’s contract with
NFP contained an agreement to arbitrate disputes between the
two entities. Berkelhammer and Ruiz say that since they did
not personally agree to arbitrate, the arbitration provision does
not reach their claims. The District Court disagreed, holding
that Berkelhammer and Ruiz stand in the Plan’s contractual
shoes and must accept the terms of the Plan’s contract. We
agree and will affirm.
                                I.
      The claims brought by Berkelhammer and Ruiz
(“Appellants”) focus on the Plan’s management. ADP
TotalSource, a fiduciary of the Plan, 1 created a committee to

       1
          Under ERISA, a plan’s governing written instrument
must “provide for one or more named fiduciaries who . . . have
authority to control and manage the operation and
administration of the plan.” 29 U.S.C. § 1102(a)(1). “[A]
fiduciary shall discharge his duties with respect to a plan solely
in the interest of the participants and beneficiaries,” acting with
reasonable care to diversify investments, defray reasonable
administrative expenses, and “minimize the risk of large
losses.” Id. § 1104(a)(1). ERISA permits a fiduciary to employ

                                3
handle administration. That committee entered into an
Investment Advisory Agreement (“IAA”) with NFP to obtain
NFP’s advice on the Plan’s investment strategies. In the IAA,
the Plan and NFP agreed to arbitrate a wide array of claims, 2
and that arbitration clause is the focus of this dispute.
        The short story: Appellants, individually and as
representatives of a class of participants and beneficiaries, sued
ADP TotalSource, the administrative committee, and NFP on
behalf of the Plan, alleging breaches of fiduciary duties and
violations of ERISA. NFP responded with a motion to compel
arbitration, which the District Court granted, reasoning that
although Appellants had not personally consented to the
arbitration clause in the IAA, the Plan had. Since Appellants
sued on the Plan’s behalf, the District Court held that
arbitration was required. 3

others to “render advice with regard to any responsibility such
fiduciary has under the plan.” Id. § 1102(c)(2).
       2
           The IAA provides that “[a]ll disputes and
controversies relating to the interpretation, construction,
performance, or breach of” the agreement will be submitted to
mediation and, if that fails, arbitration. App. 308. That
provision also states that “[f]inal resolution of any dispute
through arbitration may include any remedy or relief that the
arbitrator deems just and equitable.” App. 308.
       3
        The District Court had jurisdiction under 28 U.S.C.
§ 1331 and 29 U.S.C. § 1132(e)(1), and we have jurisdiction
under 28 U.S.C. § 1291. “We review the District Court’s order
compelling arbitration de novo.” See Singh v. Uber Techs. Inc.,
939 F.3d 210, 217 (3d Cir. 2019). There are “two possible
standards under which a motion to compel arbitration could be
decided—the motion to dismiss standard or the summary

                                4
                                 II.
        The Federal Arbitration Act provides that “[a] written
provision . . . to settle by arbitration a controversy . . . shall be
valid, irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract.” 9
U.S.C. § 2. That statute places arbitration agreements “upon
the same footing as other contracts, . . . [making] ‘arbitration
agreements as enforceable as other contracts.’” White v.
Samsung Elecs. Am., Inc., 61 F.4th 334, 338–39 (3d Cir. 2023)
(citation omitted). As a result, “a court must hold a party to its
arbitration contract just as the court would to any other kind.” 4
Morgan v. Sundance, Inc., 142 S. Ct. 1708, 1713 (2022). That
Congressional command focuses our analysis on whether
Appellants have a binding agreement to arbitrate under the
IAA.

judgment standard.” Id. at 216. If an arbitration agreement’s
existence is not apparent from the pleadings, the summary
judgment standard applies and “the party opposing arbitration
is given ‘the benefit of all reasonable doubts and inferences that
may arise.’” Kaneff v. Del. Title Loans, Inc., 587 F.3d 616, 620
(3d Cir. 2009) (citation omitted). Because Appellants raise
“additional facts sufficient to place the agreement” in dispute,
we apply the summary judgment standard here. Guidotti v.
Legal Helpers Debt Resol., L.L.C., 716 F.3d 764, 776 (3d Cir.
2013).
       4
         The obligation to treat arbitration contracts like any
other contract is no different under ERISA. See Pritzker v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1122
(3d Cir. 1993) (“ERISA claims are subject to compulsory
arbitration under the FAA and in accordance with the terms of
a valid arbitration agreement.”).

                                 5
         Consent is the key, as “a court may submit to arbitration
only those disputes . . . that the parties have agreed to submit.”
Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287, 302
(2010) (citation omitted). Indeed, it is consent that allows
arbitrators to decide cases at all because arbitrators “derive
their powers from the parties’ agreement to forgo the legal
process and submit their disputes to private dispute resolution.”
Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1416 (2019)
(citation omitted). So we usually ask “two threshold questions.
First, is there a valid arbitration agreement between the parties?
And second, does the dispute fall with[in] the language of that
agreement?” Abdurahman v. Prospect CCMC LLC, 42 F.4th
156, 159 (3d Cir. 2022) (citation omitted) (alteration in
original). Or, simpler, whether there is a contract and what it
says. Both are answered using “traditional principles of
contract and agency law.” Bel-Ray Co. v. Chemrite (Pty) Ltd.,
181 F.3d 435, 444 (3d Cir. 1999) (citations omitted).
        Neither question is much disputed here. The IAA is a
contract that calls for arbitrating the sort of claims pressed by
Appellants. Instead, this appeal asks who is a party to the IAA
and whose consent—Appellants’ or the Plan’s—is needed for
arbitration. The answers turn on the claims Appellants assert
and the ordinary meaning of ERISA.

A.     ERISA Fiduciary Claims Give the Plan the Power of
       Consent
        Begin, as courts have long done, with the text of the
statute, reading the words as “generally . . . understood in their
usual and most known signification” “to interpret the will of
the legislat[ure].” 1 William Blackstone, Commentaries *59
(George Sharswood ed., 1893). See also United States v.
Fisher, 6 U.S. (2 Cranch) 358, 385 (1805) (Marshall, C.J.)

                                6
(“That these words, taken in their natural and usual sense,
would embrace the case before the court, seems not to be
controverted.”); Brown v. Barry, 3 U.S. (3 Dall.) 365, 367
(1797) (Ellsworth, C.J.) (“[T]he intention of the Legislature,
when discovered, must prevail.”).
       Section 502 of ERISA authorizes “a participant,
beneficiary or fiduciary” to bring a civil action against a
fiduciary “for appropriate relief under section 1109,” 29 U.S.C.
§ 1132(a)(2), which imposes personal liability on a fiduciary
“who breaches any of the responsibilities, obligations, or
duties” it owes the plan, 29 U.S.C. § 1109(a). 5 This is one of
several causes of action that Congress created to enforce the
“minimum standards” established to “assur[e] the equitable
character of [employee benefit] plans and their financial
soundness.” Employee Retirement Income Security Act of
1974, Pub. L. No. 93-406, § 2(a), 88 Stat. 829, 832–33 (1974).
ERISA also provides plan participants and beneficiaries
“appropriate remedies, sanctions, and ready access to the
Federal courts,” id. § 2(b), 88 Stat. at 833, to file a complaint
on the plan’s behalf. But only for complaints filed on behalf of
the plan.
      So while § 502(a)(2) authorizes “recovery for fiduciary
breaches that impair the value of plan assets in a participant’s

       5
        Appellants also sued under § 502(a)(3), 29 U.S.C. §
1132(a)(3), but “relief is not ‘appropriate’ under § 502(a)(3) if
another provision [of ERISA] offers an adequate remedy,”
LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248, 258
(2008) (Roberts, C.J., concurring in part and concurring in the
judgment) (citing Varity Corp. v. Howe, 516 U.S. 489, 515
(1996)). As Appellants themselves recognized in their
complaint, § 502(a)(2) provides such an adequate remedy.

                               7
individual account,” it “does not provide a remedy for
individual injuries distinct from plan injuries.” LaRue v.
DeWolff, Boberg & Assocs., 552 U.S. 248, 256 (2008). Instead,
civil actions under § 502(a)(2) “for breach of fiduciary duty
[are] brought in a representative capacity on behalf of the plan
as a whole” to “protect contractually defined benefits.” Mass.
Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142 n.9, 148 (1985);
In re Schering Plough Corp. ERISA Litig., 589 F.3d 585, 594
(3d Cir. 2009) (“Section 502(a)(2) claims are, by their nature,
plan claims.” (citing Graden v. Conexant Sys. Inc., 496 F.3d
291, 295 (3d Cir. 2007))). Unsurprising, because it is the
plan—and not the individual claimant—to whom the breaching
fiduciary owes its duty. See 29 U.S.C. § 1104 (a fiduciary must
“discharge [its] duties with respect to a plan solely in the
interest of the participants and beneficiaries”); see also Russell,
473 U.S. at 140. If the claimants are successful, “the plan takes
legal title to any recovery, which then inures to the benefit of
its participants and beneficiaries.” Graden, 496 F.3d at 295. All
pointing to the plan, not the participants, as the relevant
contracting party. Cf. In re Schering Plough Corp. ERISA
Litig., 589 F.3d at 594–95 (noting that a plan alone, and not an
individual participant, has the power to release claims related
to plan agreements).
        Cases confirm that reading. Take Hawkins v. Cintas
Corp., where individuals brought an ERISA suit against their
former employer, its investment policy committee, and board
of directors, alleging breaches of fiduciary duties. 32 F.4th 625
(6th Cir. 2022). Must the plan arbitrate that claim? No, because
the individual plaintiffs, not the plan, signed the arbitration
agreement. And since “[t]he weight of authority and the nature
of § 502(a)(2) claims suggest that these claims belong to the
plan, not to individual [p]laintiffs,” the court ruled that “the
arbitration provisions in [the plaintiffs’] individual

                                8
employment agreements—which only establish the
[p]laintiffs’ consent to arbitration, not the plan’s—d[id] not
mandate that the[] claims be arbitrated.” Id. at 627. So too
Munro v. University of Southern California, 896 F.3d 1088
(9th Cir. 2018). There, like in Hawkins, the individual plaintiffs
consented to arbitration, but the plans they sued on behalf of
had not. Id. at 1090–91. Similar facts bred a similar outcome:
“Because the parties consented only to arbitrate claims brought
on their own behalf, and because the [e]mployees’ present
claims [we]re brought on behalf of the [p]lans,” the court
concluded that the dispute fell “outside the scope of the
agreements.” Id. at 1092. Both follow the best meaning of
§ 502(a)(2) to hold that the presence or absence of the
individual claimants’ consent to arbitration is irrelevant; what
counts is the contract created by the plan.
       That proposition holds here. Whereas in Munro and
Hawkins the plaintiffs had agreed to arbitrate and the plans had
not, here the Plan agreed to arbitrate, not Appellants. The
difference in direction does not change the result: the Plan’s
agreement to arbitrate is what matters, and that agreement
applies to Appellants’ claims on the Plan’s behalf. See Russell,
473 U.S. at 142 n.9; Graden, 496 F.3d at 295.
                              ***
       Because Appellants’ claims belong to the Plan, the
Plan’s consent to arbitrate controls. So we will affirm the
District Court’s judgment.

                                9