Judge Stephanie Davis, who was nominated by President Biden to the Sixth Circuit court of appeals, wrote a unanimous opinion that reversed a lower court and authorized a former worker to go forward with a case against the corporation he worked for because it seriously harmed a retirement plan that applies to him. The October 2024 district court decision was in Fleming v Kellogg Company.
What happened in this case?
Bradley Fleming worked as an accountant for 13 years for Kellogg Company, a global food manufacturing and selling corporation. He participated in Kellogg’s 401(k) retirement plan, under which employees contributed part of their pre-tax earnings that was then matched by the corporation and invested and held in a trust. Retired employees receive benefits from individual accounts in the trust.
Fleming filed a lawsuit against Kellogg under ERISA (the federal Employee Retirement Income Security Act), contending that over a four-year period, the plan’s fiduciaries paid recordkeeping and administrative expenses “that were four times higher” than such fees paid by comparable plans. He maintained that the result was to damage his account and those of other employees and cost the plan and its participants over $7.4 million. His complaint requested plan-wide relief, including appointment of an independent fiduciary to manage the plan, as well as an order directing Kellogg to “restore all losses” to the plan and to “disgorge any profits” it obtained.
Kellogg filed a motion to dismiss the case and to compel arbitration pursuant to a clause in the plan document. The lower court agreed. Fleming appealed to the Sixth Circuit.
How did Judge Davis and the Sixth Circuit rule and why is it important?
Judge Davis wrote a unanimous opinion that reversed the court ruling below. The Sixth Circuit sent the case back to the lower court so that Fleming can proceed with his claim against Kellogg.
Judge Davis carefully analyzed the record in the case, the ERISA law, the Federal Arbitration Act, and relevant precedent. She explained that the key question was whether the “effective vindication” doctrine recognized by the Supreme Court operated to prevent application of the arbitration clause if a prospective litigant like Fleming cannot vindicate his statutory rights, in this case under ERISA, using arbitration. Davis found that the answer to this question was clearly yes.
Specifically, she went on, Kellogg’s arbitration clause “precludes” representative actions benefitting the entire plan like the one brought by Fleming under ERISA. Bur ERISA provides that claims like Fleming’s can only be brought on behalf of the plan. Therefore, she wrote, the clause clearly “infringes on Fleming’s ability to effectively vindicate his ERISA claims.” The result, she concluded, is that the arbitration clause “is invalid and unenforceable.”
Judge Davis’ opinion is obviously important to Bradley Fleming, who can now proceed to seek relief for Kellogg’s wrongdoing on behalf of himself and the pension plan’s other beneficiaries. It also sets an important precedent concerning other cases involving ERISA rights and company arbitration clauses, particularly in the Sixth Circuit, which includes Michigan, Ohio, Kentucky, and Tennessee. In addition, the decision serves as a reminder of the importance of promptly confirming fair-minded judges to our federal courts.