The crafters of the 1974 ERISA statute intended participants to have the broadest range of access to federal court, including a special venue statute and national service of process. Under ERISA, venue is proper in “the district where the plan is administered, where the breach took place, or where defendant resides or may be found.” 29 U.S.C. § 1132(e)(2). But a 2-1 decision in the Sixth Circuit – four decades after ERISA’s passage – threatens that accomplishment, holding that a plan choice-of-forum clause that limited venue to a single district in Iowa five hundred miles from the plan participant could be enforced.
Smith v. Aegon Companies Pension Plan, No. 13-5492 (6th Cir. Oct. 14, 2014): Smith, who worked in the Louisville, Kentucky area, had a dispute about an alleged overpayment of his pension under the Voluntary Employee Retention & Retirement Program (VERRP), a claim potentially worth $153,283.25. The plan included a forum selection clause providing that “A participant or Beneficiary [sic] shall only bring an action in connection with the Plan in Federal District Court in Cedar Rapids, Iowa.”
When Smith brought suit in Kentucky, the plan moved to dismiss based on the clause. The district court granted the motion, and Smith – supported by the U.S. Department of Labor – appealed.
The Sixth Circuit panel majority affirms that decision. It commences by holding that it owes no deference to the Secretary of Labor’s interpretation of the venue provision as precluding a choice-of-forum clause. “[T]he Secretary is no more expert than this Court is in determining whether a statute proscribes venue selection,” the panel majority holds, and “the Secretary’s interpretation of ERISA has been expressed only once previously, in one other circuit-court amicus brief.”
Turning to the law itself, the panel majority holds the clause to be “presumptively valid and enforceable.” It rejects the argument of possible future abuse by a plan sponsor – such as lodging exclusive venue in Hawai’i or Alaska – because such exotic venue clauses may not be enforced (a “party may always challenge the reasonableness of a forum selection clause”).
The panel majority also cites various district court opinions that had previously held that ERISA does not of its own force preclude forum selection clauses. The opinion rejects arguments that various provisions of the act conflict with such clauses: “ready access to the Federal courts” (29 U.S.C. § 1001(b)); the ban on provisions purporting to relieve fiduciaries of their statutory duties (id. § 1110(a)); and the special venue provision. The panel majority also analogizes to mandatory pre-dispute arbitration agreements, which are widely accepted under ERISA, and themselves constitute a “forum selection” of sorts.
As a final twist of the knife, the panel majority affirms the district court’s discretionary decision to dismiss the case rather than transfer to Iowa.
In dissent, Judge Clay would hold that the venue “restrictive clause not only conflicts with the broad venue provision set forth in [29 U.S.C. § 1132(e)] of ERISA, but also undermines the very purpose of ERISA and contravenes the strong public policy evinced by the statute.” He rejects the analogy to arbitration on the ground that “We enforce arbitration agreements with regard to federal statutory claims not based on some general policy favoring forum selection clauses, but because that is what the Federal Arbitration Act, 9 U.S.C. §§ 2, 3, requires.”
Were this opinion – the first published guidance on the issue at the circuit level – to take root, participants and beneficiaries with relatively small claims might be compelled (as a practical matter) to retain out-of-state counsel to represent them. It seems a doubtful, oppressive and surely-imbalanced decision purely designed to insulate plans from liability. Rehearing en banc seems a plausible next step for the plaintiff.