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The Ninth Circuit Reverses Itself and Enforces ERISA Mandatory Arbitration Clause

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A three-judge panel of the Ninth Circuit recently decided that Charles Schwab Corp. can require a proposed class action to arbitrate its claim that Schwab breached its fiduciary duties by including Schwab-affiliated investment funds in the Plan, despite the funds’ poor performance, to generate fees for Schwab and its affiliates.  In doing so, the Ninth Circuit overturned its former decision in which it held that ERISA claims cannot be arbitrated.

Specifically, the Ninth Circuit panel determined that the Ninth Circuit’s 1984 opinion in Amaro v. Continental Can Co. should no longer be followed because of more recent precedent permitting ERISA claims to be arbitrated, including the U.S. Supreme Court’s 2013 decision in American Express Co. v. Italian Colors Restaurant.  Although the panel noted a three-judge panel may not generally overrule a decision of the full court, it determined that, if an intervening Supreme Court decision undermines an existing precedent of the Ninth Circuit and both cases are closely on point, the three-judge panel may overrule prior circuit authority.