S.D.N.Y. Voids ERISA Plan's Arbitration Provision

A district court in New York recently refused to enforce an arbitration provision in an ERISA fiduciary breach lawsuit challenging the valuation of an Employee Stock Ownership Plan ("ESOP"). The ruling in Lloyd v. Argent, No. 22-cv-4129, 2022 U.S. Dist. LEXIS 219964 (S.D.N.Y. Dec. 6, 2022), exposes the continued uncertainty as to the enforceability of arbitration provisions when applied to ERISA fiduciary breach claims.

Plaintiffs in the case were former employees and participants in the defendants' ESOP. They alleged that, in 2016, defendants caused the ESOP to purchase shares of the employer's stock at an inflated price. In the years following the acquisition, the stock price plummeted for reasons plaintiffs state were foreseeable at the time of the acquisition. Defendants moved to dismiss on various grounds, and also to compel arbitration, based on arbitration provisions contained in the plan document. Among other things, the arbitration provisions disallowed