The U.S. Supreme Court on Monday declined to review a Sixth Circuit ruling that blocked Tenneco Inc.’s attempt to force arbitration in a lawsuit accusing the company of mismanaging employee retirement plans under the Employee Retirement Income Security Act (ERISA).

Tenneco's Arbitration Efforts Rejected

The lawsuit, led by current and former employees of Tenneco and its subsidiary Driv Automotive Inc., alleges that the companies packed their 401(k) plans with underperforming investment options, costing participants millions in retirement savings. Tenneco argued that a 2021 plan amendment requiring arbitration for all disputes, including fiduciary breach claims, barred participants from pursuing litigation.

However, the Sixth Circuit ruled in August 2023 that the arbitration provision violated the Federal Arbitration Act’s effective vindication doctrine. This principle allows courts to reject arbitration agreements that undermine statutory remedies—in this case, ERISA’s provision allowing participants to seek plan-wide relief.

Supreme Court Denies Certiorari

In its petition for certiorari, Tenneco asked the justices to address whether ERISA participants have an "unwaivable statutory right" to represent the plan as a whole and seek remedies on behalf of other participants’ accounts. Tenneco also sought clarification on the application of the effective vindication doctrine in ERISA cases, as the Supreme Court has not previously addressed the issue.

The justices declined to take up the case, leaving the Sixth Circuit’s decision intact. This aligns with recent rulings from the Second, Seventh, and Tenth circuits rejecting arbitration provisions that conflict with ERISA’s protections.

Details of the Lawsuit

The lawsuit, filed in May 2022 and transferred to Michigan federal court in 2023, claims Tenneco and its subsidiaries failed to remove underperforming funds from their 401(k) investment options, breaching their fiduciary duties. Plaintiffs Tanika Parker and Andrew Farrier argue that the mismanagement caused substantial financial harm to plan participants.

Tenneco’s arbitration provision, introduced in 2021, attempted to limit participants’ ability to sue on behalf of the plan or lead class actions, but courts have consistently held that such provisions contravene ERISA’s statutory framework.

Broader Implications

The Supreme Court’s refusal to intervene underscores the judiciary's reluctance to limit ERISA participants’ rights to seek broad remedies in court. This decision may further solidify circuit court precedents rejecting arbitration clauses that attempt to curtail statutory protections under ERISA.