Seventh Circuit Upholds Forum Selection Clauses in Employee Benefits Plans
In Mathias v. Caterpillar, Inc., the United States Court of Appeals for the Seventh Circuit upheld a forum selection clause requiring a participant in a benefits plan governed by the Employee Retirement Income Security Act (“ERISA”) to bring suit in the Central District of Illinois. The plaintiff had brought suit in federal court in Pennsylvania, invoking ERISA’s venue provision, which, inter alia, allows suit to be brought in any district in which the defendant is found. The Court, however, ruled that ERISA’s venue provision was subject to the benefits plan’s forum selection clause. The decision is of obvious significance to employers who would prefer to avoid being subject to ERISA-based suits in multiple jurisdictions.
Background
Mathias, who had been employed at a Caterpillar facility in York, Pennsylvania, began receiving health insurance benefits in 1997 under the company’s long term disability plan. When he chose to retire in 2012 retroactive to 2009 his change in status mandated an increase in his insurance premiums, which Caterpillar mistakenly failed to implement. In 2013, the company realized its mistake and notified Mathias that he owed more than $9,500 in past-due premiums. When Mathias did not pay that amount, Caterpillar terminated his benefits.
Mathias sued Caterpillar and the relevant health plans in federal court in the Eastern District of Pennsylvania. The plan documents required that suit be brought in federal court in the Central District of Illinois. The federal judge in Pennsylvania enforced the forum section clause and transferred the case to that district. After the federal judge in Illinois denied Mathias’ motion to transfer the case back to Pennsylvania, Mathias sought review in the Seventh Circuit by way of a writ of mandamus. The Secretary of Labor appeared before the Seventh Circuit as amicus curiae in support of Mathias.
The Seventh Circuit’s Decision
The Seventh Circuit began its analysis by noting that, although under the federal transfer of venue statute, 28 U.S.C. § 1404(a), the plaintiff’s choice of forum is entitled to deference, “[t]he calculus changes … when the parties’ contract contains a valid forum-selection clause ….” Because a forum-selection clause reflects the parties’ “legitimate expectations and furthers vital interests of the justice system … a valid forum-selection clause should be given controlling weight in all but the most exceptional cases.” (Internal quotations and citations omitted.) The Court also noted that it has long been settled that an otherwise valid forum selection clause is enforceable even in the absence of arms-length negotiations. And, although a benefits plan is a special type of contract, it is, nonetheless, a contract subject to the foregoing principles. Accordingly, in the Court’s judgment, the forum selection clause in Caterpillar’s benefits plans was enforceable unless invalidated by ERISA.
Thus, the Court turned to ERISA’s venue provision, which provides: “Where an action under this subchapter is brought in a district court of the United States, it 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 ….” 29 U.S.C. § 1132(e)(2). Mathias and the Secretary of Labor argued that ERISA’s broad beneficiary-protection purpose requires this language to be interpreted to confer on plan beneficiaries a statutory right to choose any of the venues listed in the statute without regard to a forum-selection clause contained in the governing plan documents. The Court, however, rejected this argument, reasoning that ERISA’s venue’s provision is written in permissive terms and that nothing in the provision’s text expressly invalidates forum-selection clauses in employee-benefits plans. The Court agreed with the Sixth Circuit Court of Appeals’ rationale in Smith v. Aegon Companies Pension Plan, decided in 2014, that “plan language limiting litigation to a single federal district promotes uniformity in decisions interpreting the plan, thus reducing administrative costs for plan sponsors and beneficiaries alike.” Finally, the Seventh Circuit reasoned that “the forum-selection clause in the Caterpillar plan funnels litigation to a venue listed in § 1132(e)(2) and so has simply settled on one of the various statutory options,” a choice well within the “significant leeway” given to sponsoring employers in the design of benefits plans.
Conclusion
Benefits plan sponsors with employees in multiple jurisdictions should consider including a forum selection clause in their plans. Such clauses can help reduce litigation expense, promote convenience, and foster consistent judicial interpretation of the employer’s plans.
For answers to any questions regarding this blog or with regard to benefit plans generally, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.