Judge may lack power to review arbitration awards in 401(k) row -court

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  • Judge must rethink approval of 177 awards after U.S Supreme Court ruling
  • High court recently limited court review of arbitrator decisions

(Reuters) – A U.S. appeals court on Monday said a federal judge must reconsider her rulings upholding 177 individual arbitration awards against IT services company DST Systems Inc over a $400 million loss to its employee 401(k) plan.

A unanimous three-judge panel of the 8th U.S. Circuit Court of Appeals said that in light of a March U.S. Supreme Court ruling that limited federal court review of arbitrators’ decisions, the judge may not have had the power to take up petitions to confirm the awards totaling $12 million against DST.

The Supreme Court in Badgerow v. Walters said that because the Federal Arbitration Act (FAA) does not explicitly authorize federal courts to decide petitions to confirm or vacate arbitration awards, they do not generally have jurisdiction to do so.

A federal judge in Kansas City, Missouri had issued a series of rulings against DST several months before Badgerow was decided. The 8th Circuit sent the cases back to the judge on Monday, saying she must decide in each case whether she can assert jurisdiction on other grounds.

Under Badgerow, federal courts can still review arbitration awards if the opposing parties are residents of different states and the amount of money at stake exceeds $75,000. Otherwise, parties must seek to confirm or vacate arbitration awards in state court.

Lawyers for Kansas City-based DST did not immediately respond to requests for comment. Nor did lawyers for the plaintiffs.

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DST’s retirement plan suffered $400 million in losses in 2016 when stock in Valeant Pharmaceuticals International Inc, in which the plan was heavily invested, dropped dramatically following investigations into the company’s pricing practices, according to court filings.

DST and the administrator of its plan faced hundreds of lawsuits and arbitration proceedings alleging violations of the federal Employee Retirement Income Security Act of 1974 (ERISA). The companies denied wrongdoing.

As of April, 342 claims against DST had been heard in arbitration and 61 remained pending, according to court filings. Arbitrators ruled for the claimants in 214 cases.

The plaintiffs in Monday’s cases all moved in federal court to confirm arbitration awards ranging from $21,000 to $900,000 after DST argued that their claims should be added to a pending class action lawsuit in Manhattan federal court.

U.S. District Judge Nanette Laughrey in seven separate orders last year rejected DST’s challenges to the 177 awards, prompting appeals from the companies. The 8th Circuit vacated her rulings on Monday.

The panel included Circuit Judges James Loken, Morris Arnold and Jane Kelly.

The case is Hursh v. DST Systems Inc, 8th U.S. Circuit Court of Appeals, No. 21-3554.

For the plaintiffs: Kenneth McClain of Humphrey & Farrington and Andrew Schermerhorn of Klamann Law Firm

For DST: Lewis Clayton of Paul, Weiss, Rifkind, Wharton & Garrison

Our Standards: The Thomson Reuters Trust Principles.

Daniel Wiessner

Thomson Reuters

Dan Wiessner (@danwiessner) reports on labor and employment and immigration law, including litigation and policy making. He can be reached at

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