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Eighth Circuit Vacates 177 Arbitration Awards Against DST Systems Due to Lack of Subject Matter Jurisdiction

In Hursh v. DST Sys., Inc., No. 21-3554+, __F.4th__, 2022 WL 17246315 (8th Cir. Nov. 28, 2022), the Eighth Circuit considered 177 consolidated appeals brought by Plaintiffs who were participants in a 401(k) Profit Sharing Plan (the “Plan”) provided to employees by DST Systems, Inc. (“DST”), who sought to confirm arbitration awards under Section 9 of the Federal Arbitration Act (FAA). A court in the Western District of Missouri confirmed the awards and their request for costs and attorneys’ fees. After Defendants appealed, the U.S. Supreme Court decided Badgerow v. Walters, 596 U.S. ––––, 142 S. Ct. 1310, 212 L.Ed.2d 355 (2022), which dramatically limited federal jurisdiction to confirm or vacate arbitration awards under Sections 9-10 of the FAA. The Eighth Circuit vacated each of the district court’s confirmation orders and remanded for further consideration of the court’s subject matter jurisdiction as defined in Badgerow.

Plaintiffs, relying on Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308, 312, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005), argued that the district court had federal question jurisdiction because their Section 9 motions to confirm and DST’s motions to vacate implicated significant federal issues, including a dispute resolution relating to an ERISA Plan. The court disagreed. The motions to confirm the awards did not assert an independent basis for federal jurisdiction. The question is whether a state-law claim necessarily raises a federal issue which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities. Plaintiffs sought relief under the DST Arbitration Agreement, which is part of their employment contracts that specifically excludes claims for “ERISA-related benefits.” The court found that this is not state contract law that relates to DST’s ERISA Plan. The court explained:

“Although the arbitration awards at issue were based upon breach of DST’s fiduciary duties under ERISA, without a look-through to this underlying ERISA controversy that is foreclosed by Badgerow, Plaintiffs’ Section 9 applications only concern “the contractual rights provided in the arbitration agreement, generally governed by state law.” Badgerow, 142 S. Ct. at 1321. If that were enough to establish an ‘independent basis’ for federal question jurisdiction, this Grable exception would swallow the Badgerow rule.” The court concluded that the district court lacks federal question subject matter jurisdiction under the FAA or 28 U.S.C. § 1331. Due to certain factual uncertainties supporting diversity jurisdiction, the court remanded the consolidated cases for a determination of whether the court has subject matter diversity jurisdiction under 28 U.S.C. § 1332(a) in each case.

The post Eighth Circuit Vacates 177 Arbitration Awards Against DST Systems Due to Lack of Subject Matter Jurisdiction appeared first on Roberts Disability Law, P.C..

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