FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MICHAEL F. DORMAN, individually No. 18-15281
as a participant in the SCHWAB PLAN
RETIREMENT SAVINGS AND D.C. No.
INVESTMENT PLAN and on behalf of a 4:17-cv-00285-
class of all those similarly situated, CW
Plaintiff-Appellee,
v. OPINION
THE CHARLES SCHWAB
CORPORATION; CHARLES SCHWAB &
CO., INC.; SCHWAB RETIREMENT
PLAN SERVICES, INC.; CHARLES
SCHWAB BANK; CHARLES SCHWAB
INVESTMENT MANAGEMENT, INC.;
WALTER W. BETTINGER III;
CHARLES R. SCHWAB; JOSEPH R.
MARTINETTO; MARTHA TUMA; JAY
ALLEN; DAVE CALLAHAN; JOHN C.
CLARK,
Defendants-Appellants.
Appeal from the United States District Court
for the Northern District of California
Claudia Wilken, District Judge, Presiding
Argued and Submitted June 14, 2019
San Francisco, California
2 DORMAN V. CHARLES SCHWAB CORP.
Filed August 20, 2019
Before: Ronald M. Gould and Sandra S. Ikuta, Circuit
Judges, and Benita Y. Pearson, * District Judge.
Opinion by Judge Pearson
SUMMARY **
ERISA / Arbitration
The panel reversed the district court’s order denying
defendants’ motion to compel arbitration of claims and
remanded in a class action suit brought by a former
participant in an ERISA retirement plan, alleging that
defendants violated ERISA and breached their fiduciary
duties by including certain investment funds in the plan.
The panel concluded that Amaro v. Continental Can Co.,
724 F.2d 747 (9th Cir. 1984), which held that ERISA claims
are not arbitrable, is no longer good law in light of
intervening Supreme Court case law, including American
Express Co. v. Italian Colors Restaurant, 570 U.S. 228
(2013).
*
The Honorable Benita Y. Pearson, United States District Judge for
the Northern District of Ohio, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
DORMAN V. CHARLES SCHWAB CORP. 3
The panel addressed other issues in a concurrently filed
memorandum disposition.
COUNSEL
Howard Shapiro (argued), Stacey C.S. Cerrone, and Tulio D.
Chirinos, Proskauer Rose LLP, New Orleans, Louisiana;
Myron D. Rumeld, Proskauer Rose LLP, New York, New
York; John E. Roberts, Proskauer Rose LLP, Boston,
Massachusetts; for Defendants-Appellants.
James Bloom (argued), Todd M. Schneider, and Kyle G.
Bates, Schneider Wallace Cottrell Konecky Wotkyns LLP,
Emeryville, California; Todd S. Collins, Eric Lechtzin,
Shanon J. Carson, and Ellen T. Noteware, Berger Montague
PC, Philadelphia, Pennsylvania; for Plaintiff-Appellee.
OPINION
PEARSON, District Judge:
Defendants appeal the district court’s denial of their
motion to compel individual arbitration in an ERISA action
filed by Michael Dorman, a former participant in the Schwab
Retirement Savings and Investment Plan (the “Plan”).
Dorman participated in a defined contribution 401(k)
retirement plan through his employment with Charles
Schwab & Co., Inc. (“Schwab”). In 2017, Dorman filed a
class action suit in district court alleging that Defendants
violated ERISA and breached their fiduciary duties by
including Schwab-affiliated investment funds in the Plan—
despite the funds’ poor performance—to generate fees for
Schwab and its affiliates. Defendants moved to compel
4 DORMAN V. CHARLES SCHWAB CORP.
arbitration pursuant to an arbitration agreement in the Plan.
The district court denied the motion, and this interlocutory
appeal followed.
On appeal, Defendants contend that the district court
erred by not enforcing the Plan’s arbitration agreement. We
address these arguments in a concurrently filed
memorandum disposition. But before we can reach the
parties’ specific contentions, we must first address the
threshold question of whether ERISA claims can be subject
to mandatory arbitration. In so doing, we must revisit our
holding in Amaro v. Continental Can Co., 724 F.2d 747 (9th
Cir. 1984), in which we held that ERISA claims were not
arbitrable. In light of intervening Supreme Court case law,
including American Express Co. v. Italian Colors
Restaurant, 570 U.S. 228 (2013), we conclude that our
holding in Amaro is no longer good law.
I
Michael Dorman was employed at Schwab from
February 17, 2009, until October 8, 2015. Through his
employment, Dorman joined the Plan in 2009, and he
voluntarily contributed to his retirement account through
payroll deductions until he left his employment with
Schwab. Dorman withdrew his full account balance on
December 18, 2015, and ceased participating in the Plan. 1
In this defined contribution 401(k) retirement plan, Plan
participants are given the choice to allocate their earnings
among a menu of investment funds, and they may alter their
1
In a separate memorandum filed concurrently with this opinion,
we address Defendants’ challenges to the district court’s denial of their
motions to compel individual arbitration and for leave to move for
reconsideration and reverse.
DORMAN V. CHARLES SCHWAB CORP. 5
investment allocations at any time. During the relevant
period, the Plan offered as many as 17 different funds in
which participants could choose to invest, including both
Schwab-affiliated and unaffiliated funds.
In December 2014, the Plan was amended to add an
arbitration provision. That provision took effect on
January 1, 2015, nine months before Dorman ended his
employment at Schwab and nearly a year before he
terminated his participation in the Plan. The Plan document
states that “[a]ny claim, dispute or breach arising out of or in
any way related to the Plan shall be settled by binding
arbitration . . . .” The arbitration provision includes a waiver
of class or collective action that requires individual
arbitrations, even if absent the waiver Dorman could have
represented the interests of other Plan participants. It states
that any arbitration would be conducted “on an individual
basis only, and not on a class, collective or representative
basis,” and that Plan participants waive the right to be part
of any class action. If that waiver of collective action were
to be held unenforceable, the arbitration provision mandates
that “any claim on a class, collective or representative basis
shall be filed and adjudicated in a court of competent
jurisdiction, and not in arbitration.”
In 2014, Dorman was promoted to financial consultant,
and he enrolled in the Schwab Investor Financial Consultant
Compensation Plan (the “Compensation Plan”). By
enrolling in the Compensation Plan, Dorman agreed to
arbitrate “[a]ny controversy, dispute, or claim arising out of
or relating to [his] employment . . . .” By its terms, the
arbitration provision encompassed claims that arise out of
“federal, state, or local law.” The arbitration agreement
carved out “claims for benefits” under the Plan and provided
that such “claims for benefits” would be resolved pursuant
6 DORMAN V. CHARLES SCHWAB CORP.
to the procedures prescribed by the Plan. The Compensation
Plan further contains a “Class Action Waiver.”
In June 2017, Dorman filed his First Amended Class
Action Complaint against Defendants, asserting claims
under § 502(a)(2) and (3) of the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C.
§ 1132(a)(2) and (3), and seeking plan-wide relief on behalf
of a class comprising all participants in, and beneficiaries of,
the Plan at any time within six years of the filing of the
Complaint. The Complaint alleges that various Defendants
breached their fiduciary duties of loyalty and prudence and
violated ERISA’s prohibited transaction rules by selecting
for inclusion in the Plan investment funds that are affiliated
with Schwab. According to the Complaint, the Schwab-
affiliated funds performed poorly but were kept in the Plan
solely to generate fees for Schwab and its affiliates. The
Complaint also alleges that members of the Board of
Directors of Charles Schwab & Co. breached their duty to
monitor the Plan fiduciaries who selected the investment
funds for inclusion in the Plan. The Complaint further
asserts claims for co-fiduciary breach and knowing
participation in a breach against various Defendants.
In response to the Complaint, Defendants moved to
compel individual arbitration of the asserted claims pursuant
to the arbitration agreements in the Plan and the
Compensation Plan.
On January 18, 2018, the district court denied
Defendants’ motion, holding that neither agreement required
the claims asserted in the Complaint to be arbitrated. In the
district court’s view, neither of the two arbitration provisions
applied to the claims in the Complaint. The district court
erroneously held that the arbitration provision in the Plan
document was inapplicable because the provision was
DORMAN V. CHARLES SCHWAB CORP. 7
enacted after Dorman’s participation in the Plan ended, and
it thus did not bind him. With respect to the Compensation
Plan’s arbitration agreement, the district court concluded
that “it is not clear” that the asserted ERISA claims arose out
of Dorman’s employment at Schwab as required by that
agreement. It also held that the claims were “claims for
benefits” that were expressly carved out of the arbitration
agreement in the Compensation Plan.
As an alternative basis for denying Defendants’ motion,
the district court held that even if the claims asserted in the
Complaint did fall within the scope of one or more of the
arbitration agreements, the agreements would be
unenforceable on two grounds. According to the district
court, Dorman’s claims were brought “on behalf of the
Plan”—not on his own behalf—and without the Plan’s
consent he “cannot waive rights that belong to the Plan, such
as the right to file this action in court.” (citing Bowles v.
Reade, 198 F.3d 752, 760 (9th Cir. 1999) (holding that a plan
participant cannot settle an ERISA § 502(a)(2) claim without
the plan’s consent). The district court acknowledged that the
Plan did consent to arbitration “by virtue of its Plan
Document’s arbitration provision,” but it erroneously held
that consent invalid because the Plan fiduciaries added the
arbitration provision to the Plan document after they were
sued. 2 The district court cited Johnson v. Couturier,
572 F.3d 1067 (9th Cir. 2009), which held that plan
2
After filing their Notice of Appeal, Defendants sought leave to file
a motion for partial reconsideration of the district court’s order.
Defendants asked the district court to reconsider its ruling that the Plan
document’s arbitration provision did not take effect until after Dorman
ceased participating in the Plan. Defendants submitted evidence that the
arbitration provision took effect while Dorman was still a Plan
participant; however, the district court denied leave to move for
reconsideration.
8 DORMAN V. CHARLES SCHWAB CORP.
fiduciaries cannot insulate themselves from fiduciary
responsibility by amending a plan document. Id. at 1080. In
the district court’s view, allowing Plan fiduciaries to amend
the Plan document to consent to arbitration would “in a
sense, be allowing the fox to guard the henhouse.” (quoting
Munro v. Univ. of S. Cal., No. CV 16-6191-VAP (CFEx),
2017 WL 1654075, at *6 (C.D. Cal. Mar. 23, 2017)).
Finally, the district court held that this court’s decision
in Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir.
2016), reversed by Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612,
1621 (2018), further precludes arbitration. According to the
district court, Morris holds that class-action waivers that are
required as a condition of employment violate the National
Labor Relations Act (“NLRA”) and are, therefore,
unenforceable. This interlocutory appeal followed.
II
Over 35 years ago, in Amaro v. Continental Can Co. we
wrote that ERISA mandated “minimum standards [for]
assuring the equitable character of [ERISA] plans” that
could not be satisfied by arbitral proceedings. 724 F.2d
at 752. We reasoned that “[a]rbitrators, many of whom are
not lawyers, lack the competence of courts to interpret and
apply statutes as Congress intended.” Id. at 750 (internal
citation omitted). In Comer v. Micor, Inc., 436 F.3d 1098
(9th Cir. 2006), we acknowledged in dicta that our past
“expressed skepticism about the arbitrability of ERISA
claims . . . seem[ed] to have been put to rest by the Supreme
Court’s opinions.” Id. at 1100 (citing Shearson/Am. Express
Inc. v. McMahon, 482 U.S. 220, 226(1987)).
Since Amaro, the Supreme Court has ruled that
arbitrators are competent to interpret and apply federal
statutes. See, e.g., Am. Express Co., 570 U.S. at 233 (holding
DORMAN V. CHARLES SCHWAB CORP. 9
that there is nothing unfair about arbitration—even
arbitration on an individual basis—as long as individuals can
vindicate their statutory rights in the arbitral forum).
Recently, in Munro v. Univ. of S. Cal., 896 F.3d 1088 (9th
Cir. 2018), we noted that “there is considerable force” to the
argument that Amaro has been overruled. Id. at 1094 n.1.3
We agree.
Generally, a three-judge panel may not overrule a prior
decision of the court. Miller v. Gammie, 335 F.3d 889, 899
(9th Cir. 2003) (en banc). If, however, “an intervening
Supreme Court decision undermines an existing precedent
of the Ninth Circuit, and both cases are closely on point[,]”
the three-judge panel may then overrule prior circuit
authority. Id. The issue decided by the higher court need
not be identical. Id. at 900. The appropriate test is whether
the higher court “undercut the theory or reasoning
underlying the prior circuit precedent in such a way that the
cases are clearly irreconcilable.” Id.
“[W]here the reasoning or theory of our prior circuit
authority is clearly irreconcilable with the reasoning or
theory of intervening higher authority, a three-judge panel
should consider itself bound by the later and controlling
authority, and should reject the prior circuit opinion as
having been effectively overruled.” Miller, 335 F.3d at 893.
The holding in American Express Co. that federal statutory
claims are generally arbitrable and arbitrators can
competently interpret and apply federal statutes, 570 U.S.
at 233, constitutes intervening Supreme Court authority that
3
Even before Munro, we had begun to question the force of Amaro.
See Comer at 1101(“Curiously, however, we have echoed the doubts
expressed in Amaro without taking account of the intervening Supreme
Court cases.” (collecting cases)).
10 DORMAN V. CHARLES SCHWAB CORP.
is irreconcilable with Amaro. Amaro, therefore, is no longer
binding precedent.
REVERSED and REMANDED.