FRANKLIN v. DUKE UNIVERSITY 10 (2024)

ORDER

The plaintiff, Joy Franklin, has filed a putative class action claiming that in calculating pensions due and owing under the Employees’ Retirement Plan of Duke University, the defendants shortchanged the Plan and Duke retirees by millions of dollars in violation of the Employee Retirement Income Security Act. Ms. Franklin has clearly alleged facts tending to show that she has been injured by the conduct she seeks to challenge on behalf of the Plan, and she thus has standing to bring claims under 29 U.S.C. § 1132(a)(2) on behalf of the Plan. The provision in the Plan purportedly requiring arbitration of her individual § 1132(a)(3) claims is not enforceable because the Plan unilaterally added a new arbitration provision and there was no agreement to arbitrate as required by the Federal Arbitration Act.

The defendants’ motion to dismiss the § 1132(a)(2) claims for lack of subject matter jurisdiction and to compel arbitration of the § 1132(a)(3) claims will be denied. The motion to dismiss for failure to state a claim remains under advisement, and an order will be entered as time permits.

I. Plaintiff's Claims

According to the complaint, participants in the Plan receive pension benefits in the form of an annuity. Doc. 1 at ¶ 6. The default benefit for married participants is a Joint and Survivor Annuity, or JSA, which provides the retiree with a monthly annuity for her life and, when she dies, a contingent annuity for the life of her spouse or beneficiary. Id. at ¶¶ 6–7. The monthly amount received by the participant under a JSA and similar Qualified Joint and Survivor Annuity, or QJSA, is lower than the amount received by someone receiving a Single Life Annuity, since the Plan must account for paying benefits for two lives rather than one. Id. at ¶¶ 8–9. Ms. Franklin receives her benefits under a QJSA. Id. at ¶ 25.

According to the complaint, the defendants used outdated and unreasonable actuarial equivalency formulas in violation of ERISA's actuarial equivalence requirement. Id. at ¶¶ 102–04. These outdated and unreasonable formulas used in calculating benefits allowed Duke to retain money it should have contributed to the Plan. Id. at ¶ 120. It also resulted in reduced payments by millions of dollars to as many as 7,500 Plan participants. Id. at ¶¶ 1, 88–89, 101. The use of the outdated and unreasonable formulas reduced Ms. Franklin's monthly benefit by $64.32 and the present value of her benefits by approximately $10,309. Id. at ¶ 85.

Ms. Franklin contends that this conduct violates ERISA in three specific ways:

1) it violates ERISA's actuarial equivalence requirement, id. at ¶¶ 100–07,

2) it violates ERISA's anti-forfeiture rules, id. at ¶¶ 108–15, and

3) it breaches the defendants’ fiduciary duties. Id. at ¶¶ 116–30.

For each of the three violations, Ms. Franklins brings a claim under both 29 U.S.C. § 1132(a)(2) on behalf of the Plan and under § 1132(a)(3) individually and on behalf of a putative class. Section 1132(a)(2) authorizes a benefit plan participant to bring a civil action on behalf of a plan against a fiduciary who violates his duties, and it imposes liability on such fiduciary to restore losses to the plan resulting from breaches and to return profits from the use of plan assets. See 29 U.S.C. §§ 1109(a), 1132(a)(2). Under § 1132(a)(2), a court may also impose other equitable or remedial relief it determines to be appropriate, including removal of a fiduciary. See §§ 1109(a), 1132(a)(2).

Section 1132(a)(3) authorizes a plan participant to bring a civil action in her own capacity for “any act or practice which violates any provision of this subchapter.” § 1132(a)(3). Upon proof of a violation, she may seek to enjoin the violative acts or practices, § 1132(a)(3)(A), along with “other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.” § 1132(a)(3)(B).

Ms. Franklin seeks “all available and appropriate remedies,” id. at ¶¶ 107, 115, 128, and mentions the relief available under both §§ 1132(a)(2) and (3). Id. at ¶¶ 105–07; 113–15; 127–29. She explicitly asks for declaratory judgments that the defendants violated ERISA's actuarial equivalence requirements and anti-forfeiture provision and that they breached their fiduciary duties, Doc. 1 at pp. 44–45 ¶¶ B–E, declaratory and injunctive relief to enjoin the defendants from further violating these duties and to require them to pay “fully ERISA-compliant benefits in the future,” id. at pp. 45–46 ¶¶ G, K, restitution of all amounts kept in the Plan but that defendants were obliged to pay to Ms. Franklin and other class members, id. at p. 45 ¶ I, and relief and restoration to the Plan for its losses. Id. at p. 46 ¶ K. Among other things, Ms. Franklin, on behalf of the Plan, seeks “payment to the Plan of the amounts owed to Class Members caused by fiduciary breach so that those amounts owed can be provided to Plan participants.” Id. Ms. Franklin does not expressly identify the statutory provision authorizing each form of relief, so it is unclear whether she seeks a particular form of relief under §§ 1132(a)(2) or (3) or both. See id. at ¶¶ 105–07; 113–15; 127–29.

II. The Motion to Dismiss for Lack of Standing

The United States Constitution limits federal courts to deciding “cases” or “controversies.” U.S. Const. art. III, § 2; see also TransUnion LLC v. Ramirez, 594 U.S. 413, 423 (2021). This limitation requires, among other things, that plaintiffs establish their standing to sue. See California v. Texas, 593 U.S. 659, 668 (2021). To establish Article III standing, a “plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016); see also TransUnion, 594 U.S. at 423; Disability Rts. S.C. v. McMaster, 24 F.4th 893, 899 (4th Cir. 2022).

When a case is at the pleading stage, the plaintiff must “clearly ․ allege facts demonstrating” standing. Spokeo, 578 U.S. at 338. In assessing whether a plaintiff has standing to sue, a court “accepts as valid the merits of her legal claims.” FEC v. Cruz, 596 U.S. 289, 298 (2022) (cleaned up). A court “must look to the facts at the time the complaint was filed.” Wild Va. v. Council on Env't Quality, 56 F.4th 281, 293 (4th Cir. 2022). If a plaintiff does not establish standing, a federal court cannot exercise subject matter jurisdiction over the plaintiff's claims. See Ali v. Hogan, 26 F.4th 587, 595 (4th Cir. 2022). The plaintiff “must demonstrate standing for each claim” and “for each form of relief” she seeks. TransUnion, 594 U.S. at 431.

A. Section 1132(a)(3) Claims

It is undisputed that Ms. Franklin has standing to bring claims under § 1132(a)(3). See Doc. 16 at 8–9. She brings these claims on behalf of herself and asserts that she has been injured by a monetary reduction in her benefits. See Doc. 1 at ¶¶ 16, 85. This is sufficient to show injury in fact fairly traceable to the challenged conduct of the defendant and thus she has established constitutional standing.¹

B. Section 1132(a)(2) Claims

Section 1132(a)(2) permits a plan participant to bring a derivative claim on a plan's behalf for breach of fiduciary duty. See §§ 1109(a), 1132(a)(2); see also LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248, 254 (2008). To establish Article III standing to bring such claims on behalf of a plan, the participant “must have suffered an injury in fact,” Thole v. U.S. Bank N.A., 140 S. Ct. 1615, 1620 (2020) (quoting Hollingsworth v. Perry, 570 U.S. 693, 708 (2013)), and her alleged injury must be “causally related to the conduct she seeks to challenge on behalf of the [p]lan.” Peters v. Aetna Inc., 2 F.4th 199, 221 (4th Cir. 2021).

Ms. Franklin alleges that the use of outdated and unreasonable actuarial equivalency formulas has harmed and is harming her personally by reducing her monthly benefit by $64.32. See Doc. 1 at ¶¶ 16, 85. Among other things, she seeks disgorgement of any benefits Duke received from use of the Plan's assets or violations of ERISA, id. at pp. 45–46 ¶¶ H, K, and to require the defendants to pay “fully ERISA-compliant benefits in the future.” Id. at p. 46 ¶ K; see also id. at p. 45 ¶ G (seeking an order requiring defendants to pay future benefits in accordance with ERISA).

These clearly alleged facts show Ms. Franklin has suffered an injury in fact – reduced monetary benefits – and that this monetary harm is causally related to the conduct she seeks to challenge on behalf of the entire Plan – the use of outdated and unreasonable actuarial equivalency formulas. See id. at ¶ 104; Peters, 2 F.4th at 221. If she is successful, she will obtain an injunction requiring the defendant fiduciaries to recalculate benefits, see, e.g., Doc. 1 at ¶ 18, the Plan will benefit, see, e.g., id. at pp. 45–46 ¶¶ H, J, K, and her monthly benefit will increase, see, e.g., id. at ¶ 85, further strengthening the causal link. Because Ms. Franklin has clearly alleged both injury in fact and an injury causally related to the conduct she seeks to challenge on behalf of the Plan, she has standing to pursue her § 1132(a)(2) claims on behalf of the Plan.

The defendants contend that Ms. Franklin lacks standing to bring a § 1132(a)(2) claim because she is a participant in a defined-benefit plan with fixed payments and that the relief she seeks on behalf of the Plan would have no impact on her benefits. See Doc. 16 at 8–9. They rely on the Supreme Court's decision in Thole, where the Court said “[o]f decisive importance to this case, the plaintiffs’ retirement plan is a defined-benefit plan,” under which “retirees receive a fixed payment each month.” 140 S. Ct. at 1618.

As the defendants say, this is a case, like Thole, involving defined benefits. See Doc. 16 at 8. But unlike in Thole, where the plaintiffs lacked standing because “the outcome of this suit would not affect [plaintiffs’] future benefit payments,” 140 S. Ct. at 1619, here Ms. Franklin alleges facts tending to show that the outcome will affect her personally in the future. In Thole, the plaintiffs asked the Court to require the defendant to repay past monetary losses to the plan, but those proceeds would not have necessarily passed through the plan to the participants. See id. at 1618–19. In contrast, one form of relief sought here is a prospective remedy to reform the Plan's benefit calculations, Doc. 1 at pp. 45–46 ¶¶ G, K, and that change, if obtained, will result in monetary benefits passing automatically from the Plan to Ms. Franklin in the future.

The defendants also rely on the statement in Varity Corp. v. Howe that § 1132(a)(2) “does not provide a remedy for individual beneficiaries.” 516 U.S. 489, 515 (1996) (citing Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 144 (1985)); see Doc. 16 at 8. That is so; the remedy for a § 1132(a)(2) claim inures to the benefit of the plan. See Russell, 473 U.S. at 140. But that is exactly what Ms. Franklin seeks here in her § 1132(a)(2) claim: a requirement that the defendants bring the Plan into compliance with ERISA's actuarial equivalence requirement so it can pay “fully ERISA-complaint benefits in the future,” Doc. 1 at pp. 45–46 ¶¶ G, K, and that the defendants restore losses to the Plan. Id. at p. 46 ¶ K. Neither Russell nor Varity Corps were about ERISA's actuarial equivalence requirements, and they neither address nor prohibit § 1132(a)(2) claims seeking reformation of a plan when such a change would also benefit the plaintiff individually in the future.

Finally, the defendants’ reliance on Duke v. Luxottica U.S. Holdings Corp., No. 21-CV-6072, 2023 WL 6385389 (E.D.N.Y. Sept. 30, 2023), is misplaced. There, the plaintiff brought a § 1132(a)(2) claim on behalf of a plan against plan administrators for violating ERISA's actuarial equivalence requirement. The court held that the plaintiff did not have standing because she could not “show that any recovery to the [p]lan, such as an increase in its assets, would affect her benefits.” Id. at *6. But the court did not address whether the plaintiff in that case alleged that her injury was casually related to the conduct she challenged on behalf of the plan. See id.² To the extent that case says that it is impossible to show standing in a § 1132(a)(2) claim arising out of a defined benefit plan, the Court respectfully disagrees.

The injury in fact suffered by Ms. Franklin from the defendants’ use of outdated and unreasonable formulas is causally related to the conduct she seeks to challenge on behalf of the entire Plan. The defendants’ motion to dismiss her § 1132(a)(2) claim for lack of standing will be denied.

III. The Motion to Compel Arbitration

No party contends that the Plan's arbitration provision applies to Ms. Franklin's § 1132(a)(2) claims, just discussed.³ But the defendants do contend that the Plan's arbitration provisions apply to her § 1132(a)(3) claims and that she should be compelled to raise them in arbitration.

It is undisputed that the Plan now contains an arbitration provision that covers the § 1132(a)(3) causes of action. It is also undisputed that Ms. Franklin never agreed to that arbitration provision. The issue is whether to apply the statutory requirement in the Federal Arbitration Act that there must be an agreement to arbitrate before arbitration is required or whether that requirement is superseded by the general rule that ERISA plans can be unilaterally amended.

A. Undisputed Facts

More than 60 years ago, Duke established the Plan to “help provide [Duke retirees] with lifetime income when [they] retire.” Doc. 1 at ¶ 52. Ms. Franklin is a former Duke employee, and she is a participant in the Plan. Id. at ¶ 25. Her Plan benefits began on March 1, 2018. Id. at ¶¶ 25, 85.

Article 10.01 of the Plan, as amended and restated through July 1, 2014, allows the Board to amend the Plan at any time, with certain exceptions not relevant here. Doc. 16-1 at 2, 79 (“The Board of Trustees reserves the right at any time and from time to time, and retroactively if deemed necessary or appropriate ․ to modify or amend in whole or in part any or all of the provisions of the Plan.”). The Board “has delegated to the Office of Counsel the authority from time to time to approve and adopt amendments to the Plan to the extent such amendments are, in the opinion of the Office of Counsel, ․ necessary or advisable to improve the administration of the Plan.” Id. at 79. These changes do not have to be approved by the Board, but the General Counsel must report such amendments to the Board at least annually. Id. Nowhere does the Plan require notice to or approval by Plan participants of such amendments.

Citing delegated authority under Article 10, Duke's General Counsel amended the Plan on March 25, 2021, to include an arbitration provision in Section 6.10, effective April 1, 2021. Id. at 118–19. This new provision states, in relevant part:

Any claim, dispute, or breach arising out of or in any way related to the Plan including, but not limited to, any civil action following a denial of a claim after review, breach of fiduciary duty, or prohibited transitions, shall be settled exclusively by final binding arbitration ․

Id. at 118. The Plan was amended in accordance with its terms and was effective when Ms. Franklin filed this suit. Id. at 79.⁴

Ms. Franklin was not notified of the change to the Plan requiring arbitration. See Doc. 21-1 at ¶ 8. She did not agree to arbitrate her claims against the Plan. See id. at ¶ 7. There is no evidence that she could opt in or out of the arbitration provision, and there is no evidence showing that she implicitly agreed to the addition of that provision. Additional undisputed facts will be set forth as needed for resolution of the issue.

B. General Principles

It is the general rule that ERISA plan sponsors can unilaterally amend those plans at any time, if the plan so allows and the plan's requirements for such changes are followed. See, e.g., Plotnick v. Comput. Scis. Corp. Deferred Comp. Plan for Key Execs., 875 F.3d 160, 167 (4th Cir. 2017). It is also the general rule that a litigant cannot be compelled to arbitrate a claim absent an agreement to arbitrate and that the unilateral addition of an arbitration agreement by one party is not enforceable. See, e.g., Mey v. DIRECTV, LLC, 971 F.3d 284, 288–89 (4th Cir. 2020).

So, which rule applies here? The parties point to no Fourth Circuit decision, published or unpublished, nor has the Court located such a case. And there is surprisingly little guidance from other courts.

C. Discussion

Under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1–16, a litigant can obtain an order to compel arbitration if it proves that:

(1) a dispute exists between the parties; (2) the dispute falls within the scope of a written, valid agreement that includes an arbitration provision; (3) the parties’ agreement relates to interstate or foreign commerce; and (4) the opposing party has failed or refused to arbitrate the dispute at hand.

Amos v. Amazon Logistics, Inc., 74 F.4th 591, 595 (4th Cir. 2023). The FAA reflects a “liberal federal policy favoring arbitration agreements” as a means of settling disputes. Epic Sys. Corp. v. Lewis, 584 U.S. 497, 505–06 (2018) (quoting Moses H. Cone Mem 7 Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). It “requires courts to enforce covered arbitration agreements according to their terms.” Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1412 (2019). Once a litigant establishes the existence of an arbitration agreement and one party's failure to comply, the FAA mandates that “the court shall make an order directing the parties to proceed with the arbitration.” § 4; see also Adkins v. Lab. Ready, Inc., 303 F.3d 496, 500 (4th Cir. 2002).

But “[a]rbitration is a matter of contract.” Mey, 971 F.3d at 288. District courts must “engage in a limited review to ensure that [a] dispute is arbitrable—i.e., that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement.” Murray, 289 F.3d at 302; see also Mystic Retreat Med Spa & Weight Loss Ctr., PLLC v. Ascentium Cap., LLC, No. 21-CV-515, 2023 WL 362814, at *5 (M.D.N.C. Jan. 23, 2023) (“A court may order arbitration of a dispute only where it is satisfied that the parties entered into an agreement to arbitrate it.”).

Agreements to arbitrate claims alleging a violation of a federal statute are enforceable absent a “contrary congressional command.” Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 233 (2013). ERISA claims are “generally arbitrable.” Smith v. Bd. of Dirs. of Triad Mfg., Inc., 13 F.4th 613, 620 (7th Cir. 2021) (“Joining every other circuit to consider the issue, we recognize that ERISA claims are generally arbitrable” and collecting cases).⁵

The FAA “requires that the district court – rather than an arbitrator – decide whether the parties have formed an agreement to arbitrate.” Berkeley Cnty. Sch. Dist. v. Hub Int'l Ltd., 944 F.3d 225, 234 (4th Cir. 2019). Because the issue of whether an arbitration agreement has been formed is an issue of contract law, courts apply the “ordinary state-law principles that govern the formation of contracts in reviewing a challenge under § 4” of the FAA. Id. at 236 (internal quotation marks omitted); see also First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995).

Under North Carolina contract law, just like under the FAA, “the party seeking arbitration must show that the parties mutually agreed to arbitrate their disputes.” JRM, Inc. v. HJH Cos., Inc., 287 N.C. App. 592, 596, 883 S.E.2d 217, 220 (2023) (cleaned up). And when a party reserves “an unlimited right to determine the nature or extent of his performance,” the contractual promise to arbitrate is illusory. Wellington-Sears & Co. v. Dize Awning & Tent Co., 196 N.C. 748, 147 S.E. 13, 15 (1929). Following this principle, a party may not rely on such provisions in a contract “to unilaterally add completely new terms that were outside the universe of the subjects addressed in the original ․ agreement.” Sears Roebuck and Co. v. Avery, 163 N.C. App. 207, 221-22, 593 S.E.2d 424, 434 (2004) (holding that Sears could not add an arbitration clause to credit card agreement because it “was a wholly new term”).

Here, there is no evidence that Ms. Franklin agreed to arbitrate her 29 U.S.C. § 1132(a)(3) claims. She denies such agreement, see Doc. 21-1 at ¶ 7, and Duke's evidence shows only its own unilateral change to the Plan adding an arbitration provision, which is a far cry from mutual agreement. See Doc. 16-1 at 118–19. Moreover, since the Plan gives Duke an unlimited right to amend the Plan to add an arbitration provision, the faux agreement is illusory and unenforceable. It could hardly be clearer that this is not an enforceable agreement to arbitrate under the FAA and under North Carolina law.

The defendants contend that such agreement is not required in the ERISA context, noting that “[e]mployers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans.” Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78 (1995). The amendment here, the defendants say, is enforceable because it was made “in accordance with the Plan's plain text,” including any “requirements and limitations.” Plotnick, 875 F.3d at 167; Curtiss-Wright Corp., 514 U.S. at 78. Citing Heimeshoff v. Hartford Life & Accident Ins., 571 U.S. 99, 108 (2013) and U.S. Airways, Inc. v. McCutchen, 569 U.S. 88, 101 (2013), the defendants maintain that employers have “large leeway to design [employee benefit plans] as they see fit” and that those design choices “are enforced as contracts, for and against plan participants.” Doc. 24 at 1–2.

But the Supreme Court authority the defendants cite says that plans are “generally free” to amend, not that they are “always free” to amend plans. Curtiss-Wright, 514 U.S. at 78. Neither Curtiss-Wright nor the two cases in which the Supreme Court addressed administrators’ freedom to design plans involved arbitration provisions or the FAA, and Heimeshoff and McCutchen did not involve unilateral amendments. See id. at 78 (whether plan's amendment procedure met ERISA statutory requirements); Heimeshoff, 571 U.S. at 106–07 (contractual limitations provision); McCutchen, 569 U.S. at 101 (reimbursement provision). In none of the three cases did the provisions or amendments result in a denial to participants of ready access to the federal courts, see Curtiss-Wright Corp., 514 U.S. at 85–86; Heimeshoff, 571 U.S. at 116; McCutchen, 569 U.S. at 106, which is a congressional purpose set forth in ERISA. See 29 U.S.C. § 1001(b).

Moreover, in Heimeshoff and McCutchen, where ERISA was silent about the plan administrators’ specific design choices, the Court looked to the general law governing the type of provision at issue to determine whether it was enforceable. See Heimeshoff, 571 U.S. at 108–09 (noting that contracts with shortened limitations provisions are ordinarily enforced as written); McCutchen, 569 U.S. at 94–96 (surveying equitable remedies outside of ERISA context to determine whether plan reimbursement provision is a form of equitable relief available under ERISA). For instance, in Heimeshoff, the Court looked for “appropriate guidance in precedent confronting whether to enforce the terms of a contractual limitations provision” and determined, based on that case law, that such provisions are valid if they are of reasonable length and there is no controlling statute to the contrary. 571 U.S. at 106–07.

Here, the defendants have pointed to no provision in ERISA that explicitly or implicitly overrides the FAA, and the FAA expressly provides that arbitration is enforceable only if there is an agreement between the parties to arbitrate. See 9 U.S.C. § 2. The defendants do not explain how allowing the Plan administrators to unilaterally add or modify arbitration provisions comports with Congress’ stated statutory policy goal in ERISA to protect “the interests of participants in employee benefit plans ․ by providing ․ ready access to the Federal courts.” See 29 U.S.C. § 1001(b); see also Varity Corp., 516 U.S. at 513. Nor have they explained why such one-sided non-agreements to arbitrate should be enforced against participants when the Plan would always be able to avoid arbitration if it wanted by simply unilaterally amending the Plan again.⁶

Citing Dorman v. Charles Schwab Corp., 780 F. App'x 510, 512–13 (9th Cir. 2019) and Holmes v. Baptist Health S. Fla., No. 21-CV-22986, 2022 WL 180638, at *4 (S.D. Fla. Jan. 20, 2022), the defendants maintain that “[p]articipants are bound by plan arbitration provisions, even those added by unilateral amendment.” Doc. 24 at 2. But those cases involved arbitration of § 1132(a)(2) claims brought on behalf of a plan, see Dorman, 780 F. App'x at 513; Complaint, Holmes, No. 21-CV-22986, Doc. 1 at ¶ 1 (S.D. Fla. Aug. 17, 2021), not individual claims under § 1132(a)(3) as here, and they were decided based on consent by a plan to arbitrate. As noted by the Holmes court, “the relevant inquiry is not whether individual participants agreed to the arbitration agreement but whether the [p]lan agreed to arbitrate.” 2022 WL 180638, at *4; see Dorman, 780 F. App'x at 514. Perhaps it makes sense to find that when a plan has consented to arbitration, claims brought to benefit that plan should be arbitrated. But that is not the case here, where the Plan excludes § 1132(a)(2) claims from arbitration, see note 3 supra, and where the issue is whether Ms. Franklin must arbitrate her own individual claims under § 1132(a)(3). The relevant inquiry in this situation has nothing to do with whether the Plan agreed to arbitrate and everything to do with whether Ms. Franklin so agreed.

The decision in Platt v. Sodexo, S.A., No. 22-CV-2211, 2023 WL 4832660 (C.D. Cal. July 25, 2023) is more on point and more persuasive. There the plaintiff brought claims “on behalf of himself and all similarly situated plan participants and beneficiaries,” id. at *2, under §§ 1132(a)(2) and (3), see Complaint, Platt, No. 22-CV-2211, Doc. 1 at ¶¶ 56, 63, 72 (C.D. Cal. Dec. 8, 2022), just like Ms. Franklin. The court reasoned that ERISA gives plan administrators flexibility to design and implement the “content of welfare-benefit plans,” Platt, 2023 WL 4832660, at *4 (citing Metro. Life Ins. Co. v. Massachusetts, 471 U.S. 724, 732 (1985)), and because an arbitration agreement does not concern the content of such plans, “the power to unilaterally modify ERISA plans does not extend to arbitration agreements.” Id.

Section 2 of the FAA expressly provides that arbitration is enforceable only where there is an agreement between the parties to arbitrate, see 9 U.S.C. § 2, and Ms. Franklin did not agree to the Plan amendment adding the agreement to arbitrate. Even if that were not so, North Carolina law is clear that an unlimited right to determine the nature or extent of one's contractual promise to arbitrate is illusory, see Wellington-Sears, 196 N.C. at 748, and since the Plan has such an unlimited right, it is illusory and unenforceable. Nothing in ERISA shows an intent to exempt arbitration provisions in employee benefit plans like Duke's from the requirements of the FAA. The motion to compel Ms. Franklin's 29 U.S.C. § 1132(a)(3) claims to arbitration will be denied.

It is ORDERED that the defendants’ motion to dismiss the § 1132(a)(2) claims for lack of subject matter jurisdiction and to compel arbitration of the § 1132(a)(3) claims, Doc. 15, is DENIED. The defendants’ motion to dismiss for failure to state a claim remains under advisement.

FOOTNOTES

1.   Ms. Franklin's argument that the defendants have “waive[d] any argument that Plaintiff lacks standing under § 1132(a)(3)” is incorrect. Doc. 21 at 13–14. Standing is a requirement for subject matter jurisdiction, and it cannot be waived. See, e.g., Brickwood Contractors, Inc. v. Datanet Eng'g, Inc., 369 F.3d 385, 390 (4th Cir. 2004). Courts have an independent duty to raise standing, and it can be raised at any point, even during appeal. See Fed. R. Civ. P. 12(h)(3); Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986) (“[E]very federal appellate court has a special obligation to ‘satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under review,’ even though the parties are prepared to concede it.”).

2.   A motion for reconsideration is now pending before that court, where the plaintiff says that “the Court overlooked that the Complaint seeks remedies other than loss restoration” and notes that the plaintiff “seeks reformation of the [p]lan” that would allow her to receive greater pension payments in the future. Memorandum of Law in Support of Motion for Reconsideration, Duke, No. 21-CV-6072, Doc. 60-1 at 2 (E.D.N.Y. Oct. 16, 2023).

3.   The Plan provides that “insofar as any claims, disputes, or breaches are permitted by a court of competent jurisdiction to proceed on a ․ representative action basis, they must do so only in a court of competent jurisdiction and not in arbitration.” Doc. 16-1 at 119. During the February 2, 2024, hearing, the parties agreed that an § 1132(a)(2) claim proceeds on a “representative action basis” and that the Plan's arbitration provision does not apply to any § 1132(a)(2) claims on behalf of the Plan.

4.   The Plan's amendment procedure contains two limitations: first, the Office of the Counsel must determine that the amendment is “necessary, proper or advisable to comply with any judicial decision or any law, regulation, or ruling enacted or promulgated by any federal or state governmental authority or are necessary or advisable to improve the administration of the Plan,” and second, “the Office of Counsel shall advise the Board of Trustees of any such amendments made to the Plan at least annually.” Doc. 16-1 at 79. The text of the amendment here states that Duke “deems it advisable to amend the Plan in certain respects.” Id. at 118.

5.   There are potential exceptions not relevant to the issue here. See generally Smith, 13 F.4th at 621 (discussing the “effective vindication” exception).

6.   The Court does not mean to imply that arbitration provisions contained in benefit plans from the start or added in ways indicating participant consent are invalid.

CATHERINE C. EAGLES, UNITED STATES DISTRICT JUDGE