Two more federal Circuit Courts have weighed in on whether mandatory arbitration provisions with class action waivers are enforceable under the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”). With recent rulings in Cedeno v. Sasson, 100 F.4th 386 (2d Cir. 2024) and Parker v Tenneco, 2024 WL 3873409 (6th Cir. Aug 1, 2024), the Second and Sixth Circuits now join the Third, Seventh, and Tenth Circuits in holding that arbitration provisions…
Most equity plans include a governing law provision that provides that the plan and the awards granted under the plan are governed by the law of the jurisdiction in which the issuer is incorporated. In addition, we typically recommend that companies include a venue provision in their award agreements providing that any dispute related to the plan or awards has to be litigated in a forum chosen by the issuer. For US-based issuers, this will usually be a federal or state court in the United States, where courts are more likely to enforce the provisions of the award agreements (which typically favor the issuer). The hope is that, by including such governing law and venue provisions, companies can defeat lawsuits brought by award recipients outside the United States on the basis that foreign courts (which are more likely to apply employee-friendly local employment laws) do not have jurisdiction. It is questionable if this argument always works (in fact, a UK court recently ruled that UK courts had jurisdiction despite a Massachusetts governing law and venue provision in the award agreement), but such venue provisions may at least have a deterrent effect in some cases.