TEA and American Benefits Council Jointly File Amicus Brief In Support of Arbitration Agreement

WASHINGTON, March 14, 2022 /PRNewswire/ -- The ESOP Association and American Benefits Council jointly filed an amicus brief in the U.S. Court of Appeals for the Second Circuit in support of the belief that ESOP plans need, and have, the ability to require individual arbitration to resolve individual participant disputes.  A previous District Court ruling has the potential to eliminate individual arbitration, which would dramatically increase the litigation costs for companies with employee defined-contribution retirement plans, such as ESOPs and 401(k)s. 

The amicus brief was filed in the case of Cedeno v. Argent Trust Company, et al., United States Court of Appeals for the Second Circuit, which is an appeal of a decision from the Southern District of New York.

The brief argues several reasons a lower court ruling was incorrect and, if upheld, would effectively eliminate individualized arbitration of ERISA fiduciary-breach claims and may cause courts to question whether class actions are even required for such lawsuits.  When passing the Employee Retirement Income Security Act of 1974 ("ERISA"), Congress feared that the high cost of litigation would discourage employers from offering voluntary benefit programs like ESOPs and 401(k)s, and the lower court's decision would help realize those fears.    

James Bonham, President and CEO of The ESOP Association, said "This case is of direct and immediate importance to every ESOP in the nation and is quite possibly on a pathway to the US Supreme Court.  It is the role of The ESOP Association to weigh in on behalf of our membership to protect their interests – and that is exactly what we have done."

Arbitration procedures are generally easier to navigate than court procedures, and both claimant and company can benefit by avoiding the high costs of attorneys. Arbitration also has due process, oversight, and can be overruled by courts if they are deemed unfair. 

The amicus brief can be found on the ESOP Association's website.

About the ESOP Association
The ESOP Association is the largest organization in the world supporting employee-owned companies, the more than 10 million U.S. employees who participate in an ESOP, and the professionals who provide services to them. Headquartered at the International Employee Ownership Center in Washington, DC and operating as a 501(c)6 organization with the affiliated Employee Ownership Foundation, The ESOP Association conducts and funds academic research, provides more than 160 annual conferences and events attended by nearly 15,000 individuals, and advocates on behalf of employee owners and their businesses to federal and state lawmakers.

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SOURCE The ESOP Association