Ninth Circuit Enforces Forum Selection Clause in 401(k) Plan

Proskauer - Employee Benefits & Executive Compensation Blog

On April 1, 2021, the Ninth Circuit became the third circuit court to conclude that a forum-selection clause in an ERISA 401(k) plan is enforceable. The Ninth Circuit thus denied a petition for mandamus seeking to overturn a district court decision transferring an ERISA action from the Northern District of California to the District of Minnesota. In re Becker v. United States Dist. Court, No. 20-72805, __F.3d__ (9th Cir. Apr. 1, 2021).

The plaintiff in the Becker case is a former Wells Fargo employee and participant in the company’s 401(k) plan who brought a putative class action against Wells Fargo and others, alleging that defendants’ inclusion of certain Wells Fargo-affiliated plan investment alternatives breached their fiduciary duties of prudence and loyalty and violated ERISA’s prohibited transaction rules. Despite the plan’s forum-selection clause, which specifies the District of Minnesota as the exclusive venue for plan-related disputes, the plaintiff filed her complaint in the Northern District of California.

Proskauer moved to transfer the case to the District of Minnesota pursuant to the plan’s forum-selection clause. The district court granted the motion, reasoning that forum-selection clauses are presumptively valid and plaintiff did not meet her “heavy burden” to challenge this one. After the district court denied plaintiff’s request to stay the order, she petitioned the Ninth Circuit for a writ of mandamus compelling the district court to rescind its transfer order.

The Ninth Circuit denied the “extraordinary remedy” of mandamus, holding that the plan’s forum-selection clause was enforceable. The Court emphasized the presumptive validity of forum-selection clauses and reasoned that nothing in ERISA prohibits plans and participants from agreeing on a forum for litigating their disputes. The plaintiff had argued that, because ERISA’s venue provision enumerates three locations where a suit “may be brought,” any agreement to limit venue violates the text of ERISA and the statute’s express purpose of providing plan participants with “ready access to federal courts.” The Court rejected plaintiff’s argument and explained that while ERISA’s venue provision provides that an action “may be brought” in three specified locations, it did not prevent Wells Fargo and Becker from agreeing in advance to litigate in just one—the place where the plan is administered. Furthermore, the forum-selection clause promoted, rather than hindered, ERISA’s goal of providing ready access to the federal courts by encouraging uniformity and guaranteeing a federal forum. The Court also cited its recent decision enforcing an arbitration provision in a 401(k) plan in Dorman v. Schwab as demonstrating that plan participants can agree to a preferred forum through participation in a 401(k) plan. The plan’s forum-selection clause was therefore enforceable, and the district court did not clearly err in transferring the case.

The Proskauer team representing Wells Fargo includes partners Russell L. Hirschhorn, John E. Roberts, and Myron D. Rumeld, senior counsel Joseph Clark, and associates Tulio Chirinos and Kyle Hansen.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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