Attorneys in Cincinnati Oh & N. KY | Blog

When Is It Too Late to Add a Forum Selection Clause?

Posted on Mon, Feb 25, 2013 @ 06:35 PM

by Jack B. HarrisonJack B. Harrison

Perhaps never.

Many ERISA benefit plan documents now include forum selection clauses in order to control where litigation involving the plan might occur.  These clauses usually designate the appropriate litigation forum for issues involving the plan as the judicial district where the plan is administered.  In a recent decision in Smith v. AEGON Cos. Pension Plan, the United States District Court for the Western District of Kentucky enforced a forum selection clause in a plan, even though the forum selection clause had been added to the plan documents after the person bringing suit had retired.

In Smith, the plaintiff had retired in 2000 and had been receiving benefits under the plan in question.  Subsequently, it was discovered that the plaintiff had been overpaid by the plan since retirement.  The plaintiff was told that there would be a reduction in his benefits to the correct amount and that the plan was seeking recovery of the amount of the overpayment.  Plaintiff then sued the plan in the Western District of Kentucky alleging that the plan’s decision to deny him the higher pension amount was arbitrary and capricious.  The plan then filed a motion to dismiss for improper venue, asserting that the plan documents contained a forum selection clause that required that litigation related to the plan be filed in Iowa.  Plaintiff argued that the forum selection clause was unenforceable as against him because it had been added to the plan documents in 2007, long after he had retired.

In analyzing the plan’s motion to dismiss, the Court identified three factors that are to be examined in determining whether a forum selection clause is enforceable: “(1) whether the clause was obtained by fraud, duress, or other unconscionable means; (2) whether the designated forum would ineffectively or unfairly handle the suit; and (3) whether the designated forum would be so seriously inconvenient such that requiring the plaintiff to bring the suit there would be unjust.”  In this case, the plaintiff did not claim that fraud was present in the inclusion of the forum selection clause, nor did he assert that a transfer to Iowa would so seriously inconvenience him as to be unjust or unreasonable.  Rather, plaintiff simply claimed that the clause was unenforceable because it had been added after his retirement.

The Court granted the plan’s motion to dismiss, explaining that an ERISA pension plan may be amended at any time, so long as the amendment does not reduce an accrued benefit.  The Court stated that the forum selection clause at issue here had no impact on plaintiff’s benefit amount under the plan.  The Court further held that the forum selection clause at issue was consistent with the ERISA venue provision, which provides that a claim related to a plan may be brought “in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found.”

The lesson from the Smith decision is that it may never be too late to amend plan documents to add important litigation related clauses, such as a forum selection clause or statute of limitation clause.  Such clauses as these allow employers to centralize and control litigation related to their plans and may result in greater uniformity regarding administration of the plan, in that all judicial decisions related to the plan occur in one judicial district.  Smith serves as a reminder that prudent employers, in consultation with their counsel, should regularly review plan documents to determine whether clauses such as these should be added.

Tags: ERISA, ERISA Benefit Plans, ERISA Pension Plans, Employee Benefits

Obama's Recent NLRB Recess Appointments Ruled Unconstitutional

Posted on Fri, Feb 22, 2013 @ 01:28 PM

by Jack B. HarrisonJack B. Harrison

On January 25, 2013, in Noel Canning v NLRB (Case No. 12-1115), the United States Court of Appeals for the District of Columbia Circuit issued an order striking President Obama's recess appointments to the National Labor Relations Board ("NLRB") as unconstitutional.  Historically, recess appointments have been made during Senate recess pursuant to the Recess Appointments Clause of the Constitution.  However, in this case, the three appointments to the NLRB at issue were made on January 4, 2012, after Congress began a new session on January 3 and while that new session continued.

The Court of Appeals held that because these appointments were not made during the intersession recess, but during a new session of the Congress, these appointments were invalid.  As a result, the Court held that because the Board lacked a quorum of three members when it issued its decision in Noel Canning, the decision was invalid, and the Court vacated the holding.

Why does this decision by the Court of Appeals matter?  It matters because it calls into question all NLRB decisions during the time in which President Obama's appointees were on the NLRB. For example, the following important NLRB decisions may be invalid and are certainly called into question by the Court of Appeals decision in Noel Canning:

  • Hispanics United of Buffalo, in which the NLRB held that the discharges of five employees regarding posts made on Facebook, violated the NLRA. The NLRB concluded that the Facebook posts and comments at issue were protected under the NLRA because they concerned job performance and the preparation of co-workers to defend against allegations of poor work performance.
  • Costco Wholesale Corp. and United Food and Commercial Workers Union, Local 371, in which the NLRB held that Costco's policy prohibiting employees from making statements that “damage the Company, defame any individual or damage any person's reputation”, violated the NLRA. The NLRB reasoned that the policy was overly broad, creating a potentially chilling effect on employee rights under the NLRA.
  • WKYC-TV, Inc., in which the NLRB held that a union dues check-off provision in a collective bargaining agreement, providing for the automatic deduction of union dues from unionized employees' paychecks, survives the expiration of a collective bargaining agreement.  This decision overruled fifty years of NLRB precedents.  
  • D.R.Horton, Inc., in which the NLRB held that requiring employees to sign arbitration agreements preventing them from joining together to pursue employment-related legal claims in any forum, whether in arbitration or in court, violated federal labor law.  The Board held that employees cannot be forced to waive a judicial forum or not bring class or collective claims in arbitration.
  • Banner Health System, in which the NLRB held it was a violation of the NLRA for an employer to have a policy that asked its employees involved in an investigation into an internal complaint to its human resources division to refrain from discussing that ongoing investigation with co-workers.  The NLRB held that the policy at issue was overbroad and violated employees' rights under Section 7 of the NLRA because it prevented employees from discussing discipline and investigations of discipline.

Responding to the decision, NLRB Chairman Mark Gaston Pearce stated: “The Board respectfully disagrees with today's decision and believes that the President's position in the matter will ultimately be upheld. It should be noted that this order applies to only one specific case, Noel Canning, and that similar questions have been raised in more than a dozen cases pending in other courts of appeals. In the meantime, the Board has important work to do. The parties who come to us seek and expect careful consideration and resolution of their cases, and for that reason, we will continue to perform our statutory duties and issue decisions.”

Employers should be aware of the potential impact of the Noel Canning decision.  However, as a matter of prudence, employers should act as if these and other decisions of the NLRB continue to stand and not assume any NLRB decision made during the period in question is automatically void.  The NLRB will appeal this decision to the Supreme Court and it will take months for the impact of this ruling to be clear.  We will closely follow any developments, including the likely appeal to the Supreme Court, and update as appropriate.