Sixth Circuit Invalidates Arbitration Clause in ERISA Plan: A Vindication of Rights

In a significant development for arbitration law and employee benefits litigation, the United States Court of Appeals for the Sixth Circuit recently held that an arbitration agreement embedded in an ERISA plan was unenforceable. The decision in Fleming v. Kellogg Co., 2024 WL 4534677 (6th Cir. Oct. 21, 2024) , adds to the growing body of case law addressing the tension between arbitration agreements and federal statutory rights—specifically under the Employee Retirement Income Security Act of 1974 (ERISA).

The ruling is grounded in the effective vindication doctrine, a well-established legal principle that limits the enforceability of arbitration provisions when they obstruct a party’s ability to enforce their statutory rights. Here, the court found that the arbitration agreement improperly prohibited plan participants from serving in a representative capacity, thereby preventing them from asserting breach of fiduciary duty claims central to ERISA’s purpose.

The Case: Fleming v. Kellogg Co.

At the heart of the dispute was whether Kellogg’s ERISA plan could require participants to arbitrate claims individually and foreclose their ability to serve in a representative role on behalf of the plan. The plaintiff, Fleming, brought suit alleging that plan fiduciaries breached their duties under ERISA—a statute specifically designed to protect employee retirement benefits and provide remedies for mismanagement.

Kellogg sought to compel arbitration based on a clause in the plan document, which required all disputes to be arbitrated on an individual basis. Critically, the clause barred any participant from asserting claims in a representative capacity. In the ERISA context, this is significant because fiduciary breach claims are often brought derivatively—on behalf of the plan, not just the individual participant.

The Sixth Circuit rejected Kellogg’s motion to compel arbitration, holding that the arbitration clause conflicted with ERISA’s enforcement scheme.

The Effective Vindication Doctrine: A Safeguard for Statutory Rights

The effective vindication doctrine is a federal principle designed to ensure that arbitration agreements do not undermine the ability of individuals to enforce substantive rights granted by statute. First articulated by the U.S. Supreme Court in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, the doctrine holds that arbitration agreements are enforceable under the Federal Arbitration Act (FAA)—but only to the extent that they do not eliminate or substantially impair a party’s ability to pursue their legal rights.

In Fleming, the court found that barring representative actions in ERISA arbitrations had precisely that effect. Because fiduciary breach claims under ERISA are often brought by participants on behalf of the plan, prohibiting representative capacity renders those claims practically unenforceable. In the court’s view, this restriction crossed the line from procedural limitation to substantive extinguishment of a statutory right.

The opinion reinforces the idea that arbitration cannot be used to rewrite the substantive rights conferred by federal law.

ERISA’s Enforcement Scheme: Plan-Wide Relief Matters

One of the unique features of ERISA is its structure for enforcing fiduciary duties. Participants and beneficiaries are not merely seeking personal damages—they are often acting on behalf of the entire plan, particularly when challenging systemic investment mismanagement or self-dealing by fiduciaries.

The Sixth Circuit recognized this nuance, observing that individual arbitration would frustrate ERISA’s representative enforcement mechanism. In other words, allowing companies to silo fiduciary breach claims into private, individualized arbitration proceedings could result in widespread misconduct going unchecked—because no one would be permitted to bring claims on behalf of the plan as a whole.

The court concluded that such a limitation was incompatible with the core purposes of ERISA and could not be enforced under the FAA.

Consistency Across Circuits—With One Notable Exception

The Sixth Circuit’s decision brings it into alignment with a growing consensus among federal appellate courts. The Second, Third, and Seventh Circuits have similarly ruled that ERISA does not permit plan sponsors to use arbitration clauses to eliminate participants’ ability to bring representative claims.

In contrast, the Ninth Circuit has taken a different approach, generally upholding broader arbitration provisions in ERISA plans. That divergence may eventually prompt further review by the U.S. Supreme Court, particularly if a clear circuit split deepens over the coming years.

For now, however, the Fleming decision reflects the prevailing judicial view that arbitration must not be used as a mechanism to shield fiduciaries from accountability under federal law.

Practical Implications for Employers and Plan Sponsors

Organizations that sponsor ERISA-covered plans should closely examine their arbitration provisions. While arbitration remains a useful tool for resolving disputes efficiently, the Fleming decision underscores that those clauses cannot strip away substantive statutory rights.

Considerations for plan sponsors include:

• Avoiding absolute bans on representative or derivative actions

• Reviewing clauses for compliance with current federal circuit guidance

• Balancing the desire for arbitration with the need to preserve participants' rights

• Consulting with ERISA and dispute resolution counsel to reassess risk exposure

The risks of overreaching in an arbitration clause are not theoretical. As Fleming illustrates, an unenforceable clause not only fails to prevent litigation but can also generate precedent that limits the use of arbitration altogether.

Broader ADR Lessons: Clarity, Fairness, and Fit Matter

Beyond ERISA, the Fleming case illustrates a broader truth: arbitration agreements must be crafted with attention to the nature of the rights being adjudicated. Whether in employment agreements, consumer contracts, or benefit plans, the enforceability of arbitration provisions often turns on how they interact with substantive legal protections.

Courts will continue to honor the FAA’s strong pro-arbitration policy—but only when the arbitration process provides a meaningful opportunity to vindicate legal rights. Efforts to limit remedies, restrict access, or narrow procedural tools too sharply are likely to face judicial resistance.

Unlocking Solutions for Complex Statutory Disputes

As arbitration law evolves, especially in statutory contexts like ERISA, employers, attorneys, and plan administrators will need experienced, neutral voices to guide disputes forward without compromising fairness or enforceability.

At Nationwide ADR, the focus is not only on resolving disputes—but on doing so in a way that upholds legal integrity, avoids procedural pitfalls, and delivers real solutions. With deep experience in arbitration involving complex statutory and fiduciary issues, Nationwide ADR provides mediation and arbitration services designed to withstand scrutiny and promote durable resolution.

Whether the issue is contractual or statutory, institutional or individual, the goal remains clear: Unlocking Solutions for Demanding Cases.

To learn more about arbitration services tailored to statutory claims and fiduciary disputes, visit NationwideADR.com.