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Insurable Interests - Insights on Insurance Law

Seventh Circuit holds forum-selection clauses are enforceable within employee benefit plans

Disability insurance claim formIn In re Mathias, the U.S. Court of Appeals for the Seventh Circuit held that ERISA does not invalidate forum-selection clauses in employee benefit plans.

Mathias was an employee of Caterpillar, Inc., working out of a plant in York, Pennsylvania. After experiencing some health issues, Mathias began receiving disability payments from Caterpillar’s disability plan. Ultimately, Mathias retired from Caterpillar, but the disability plan failed to re-categorize him from an active employee to a retiree. Caterpillar failed to recognize this mistake for almost four years, which had serious consequences for Mathias: He now owed more than $9,500 in past-due premiums.

Mathias sued Caterpillar in the U.S. District Court for the Eastern District of Pennsylvania. But Caterpillar’s disability plan contained a forum-selection clause, mandating that disputes be brought in the U.S. District Court for the Central District of Illinois. Caterpillar moved to transfer the case to that court, which the Pennsylvania court granted. Once in Illinois, Mathias moved to transfer the case back to Pennsylvania, which the court denied, leading to this appeal.

Mathias argued that ERISA’s venue provisions prohibit forum-selection clauses in employee benefit plans. Those provisions state that a participant may bring a claim for benefits 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).

Noting that this issue had not been resolved in this circuit, the court rejected Mathias’ argument, stating that while ERISA’s venue provisions state that claims “may be brought” in various potential jurisdictions, that language is entirely permissive, and does not expressly prohibit forum-selection clauses. The court also found persuasive the fact that the ERISA statute is generally designed to enforce the language and terms of written benefit plans, which is merely a matter of contract.

The court stated that its decision, which requires all litigation involving Caterpillar’s plan to be resolved by a single district court, “promotes uniformity” in the interpretation of that plan, reducing administrative costs for the plan sponsor and participants alike. The court was not concerned that forum-selection clauses restrict the number of jurisdictions where claims could be filed, potentially running afoul of the general policy in ERISA of maintaining access to federal courts. The court found that forum-selection clauses simply funnel litigation to a single court, which is not inconsistent with ERISA’s larger policy concerns.

Benefit plans, and their sponsors, may rely on Mathias as authority that forum-selection clauses are enforceable within this circuit. Of course, before a plan elects to identify a particular court for resolution of disputes, careful consideration should be paid to that court’s judges, procedures and governing law.

Our firm represents plans and plan sponsors in district courts around the country. If you’d like to discuss forum-selection clauses, or a particular jurisdiction, please feel free to contact Todd Smith at tsmith@gklaw.com.

August 21, 2017

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