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Citing the strong federal policy favoring arbitration, a federal court in California enforced an arbitration agreement in a contract governed by ERISA.
In Cleveland v. Oracle Corp., No. C 06-7826 MHP, 2007 WL 915414 (N.D. Cal. Mar. 23, 2007), Cleveland and other former senior-level executives (employees) brought claims against Oracle, alleging breach of a plan relating to the employees' jobs in the event that control of the company changed. Oracle brought a motion to compel arbitration of the claims, pursuant to an arbitration clause in the plan.
The employees argued that the arbitration agreement should not be enforced because it did not provide for all the types of relief that would be available to them in court. Specifically, the employees claimed that the arbitration agreement in the plan "(1) denies . . . equitable relief available under ERISA,(2) prohibits an arbitrator from awarding attorneys' fees and (3) requires an arbitrator to employ a more deferential standard of review than allowed in the Ninth Circuit."
The Court held that none of these reasons prevented enforcement of the arbitration agreement. First, although the agreement limited the types of relief that an arbitrator could award, the Court read these limits as applying only to monetary relief – not limits on equitable relief.
Second, the employees did not cite to any authority "specifically holding that the right to attorneys' fees is necessary to enforce an ERISA-governed contract." Additionally, the Ninth Circuit has indicated the Federal Arbitration Act's policy favoring arbitration allows enforcement of arbitration agreements, even if the arbitration agreements are inconsistent with provisions of ERISA, such as those allowing awards of attorneys' fees.
Third, the Court held that the "arbitrary and capricious" standard of review only applied to court interpretations of the party's plan, and did not preclude courts from engaging in de novo review of statutory interpretations of ERISA.
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