Theresa Hursh v. DST Systems, Inc

54 F.4th 561
CourtCourt of Appeals for the Eighth Circuit
DecidedNovember 28, 2022
Docket21-3554
StatusPublished
Cited by3 cases

This text of 54 F.4th 561 (Theresa Hursh v. DST Systems, Inc) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Theresa Hursh v. DST Systems, Inc, 54 F.4th 561 (8th Cir. 2022).

Opinion

United States Court of Appeals For the Eighth Circuit ___________________________

Nos. 21-3554+ ___________________________

Theresa Hursh

lllllllllllllllllllllPlaintiff - Appellee

v.

DST Systems, Inc.

lllllllllllllllllllllDefendant - Appellant ____________

Appeals from United States District Court for the Western District of Missouri - Kansas City ____________

Submitted: June 14, 2022 Filed: November 28, 2022 ____________

Before LOKEN, ARNOLD, and KELLY, Circuit Judges. ____________

LOKEN, Circuit Judge.

Plaintiffs in these 177 consolidated appeals1 were participants in a 401(k) Profit Sharing Plan (the “Plan”) provided to employees by DST Systems, Inc. (“DST”), a financial and healthcare services company based in Kansas City, Missouri. See 29

1 Appendix A to this opinion lists the 176 separate appeals that have been consolidated with this appeal. U.S.C. § 1322. At the time in question, DST was the Plan’s sponsor, administrator, and a designated fiduciary. Ruane Cunniff & Goldfarb Inc. (“Ruane”) was a Plan fiduciary involved in managing the Plan’s investments. When a stock in which the Plan was heavily invested dropped from $258 per share in 2015 to $15 per share in 2016, the Plan suffered nearly $400M in losses. Substantial litigation ensued, including class action lawsuits in the Western District of Missouri and the Southern District of New York alleging breaches of fiduciary duty by DST and by Ruane in managing the defined-contribution Plan. See 29 U.S.C. §§ 1132(a)(2), 1322.

At DST’s urging, the Missouri actions resulted in more than 554 individual arbitration proceedings between participants and defendants under DST’s employee Arbitration Agreement.2 Meanwhile, in August 2021, the Southern District of New York certified a Rule 23(b)(1) mandatory class that includes the Missouri arbitration claimants in a parallel action filed in that court by other Plan participants alleging DST and Ruane breached fiduciary duties to the Plan. Ferguson v. Ruane Cuniff & Goldfarb Inc., 2021 WL 3667979, at *1 (S.D.N.Y Aug. 17, 2021). DST supported the motion for class certification in Ferguson and ceased participating in Missouri arbitration proceedings when the class was certified.3 The many claimants who received awards from the arbitration panel began filing individual actions to confirm

2 As of April 2022, 342 claims had been tried; the arbitration panel ruled in favor of 214 claimants, and 61 claimants were awaiting panel decisions. 3 In March 2021, in another action by Plan participants in the Southern District of New York claiming breach of fiduciary duty, the Second Circuit reversed a decision compelling arbitration under the DST Arbitration Agreement, ruling that the Agreement covered employment-related disputes, not Plan-related disputes. Cooper v. Ruane Cunniff & Goldfarb Inc., 990 F.3d 173, 183-84 (2d Cir. 2021). In an earlier decision not at issue on this appeal, the district court held, to the contrary, that breach of fiduciary claims are within the scope of the Arbitration Agreement. Ducharme v. Defendants Sys., Inc., No. 4:17-cv-00022, 2017 WL 7795123 (W.D. Mo. June 23, 2017).

-2- their awards under Section 9 of the Federal Arbitration Act (FAA) in the Western District of Missouri. See 9 U.S.C. § 9. On November 18, 2021, the plaintiffs in Ferguson obtained a preliminary injunction, enjoining all members of the Rule 23(b)(1) class from “instituting new actions or litigating in arbitration or other proceedings against the DST Defendants matters arising out of or relating to the facts or transactions alleged in the Ferguson amended complaint.”

Between October and December 2021, the district court issued seven largely identical orders confirming the arbitration awards to 177 claimants and granting their requests for substantial costs and attorneys’ fees. Defendants appealed, raising numerous issues. We consolidated the 177 appeals for briefing and argument. On March 31, 2022, with briefing not yet completed, the Supreme Court issued its decision in Badgerow v. Walters, 596 U.S. ---, 142 S. Ct. 1310 (2022), dramatically limiting federal jurisdiction to confirm or vacate arbitration awards under Sections 9-10 of the FAA. We vacate each of the district court’s confirmation orders and remand for further consideration of the court’s subject matter jurisdiction as defined in Badgerow.

I. Jurisdiction Issues.

The FAA “bestow[s] no federal jurisdiction.” Hall St. Associates, L.L.C. v. Mattel, Inc. 552 U.S. 576, 581 (2008). However, before Badgerow, most circuit courts held that district courts have subject matter jurisdiction over applications to confirm or to vacate arbitration awards under Sections 9 and 10 of the FAA under the “look-through” principle the Supreme Court applied to Section 4 applications to compel arbitration in Vaden v. Discover Bank, 556 U.S. 49 (2009). The Supreme Court held otherwise in Badgerow. Unlike Section 4, the Court explained, the text of Sections 9 and 10 provides no “statutory basis for look-through jurisdiction,” and “federal district courts may not exercise jurisdiction absent a statutory basis.” 142 S. Ct. at 1318 (quotation omitted). An applicant seeking federal court confirmation of

-3- an arbitration award must establish an “independent jurisdictional basis [on] the face of the application itself.” Id. at 1316. “If she cannot, the action belongs in state court.” Id. Therefore, if the parties to a Section 9 action are not diverse, and if “the application concerns the contractual rights provided in the arbitration agreement, generally governed by state law,” the district court lacks subject matter jurisdiction, even if the claims underlying the award “originated in the arbitration of a federal-law dispute.” Id. at 1321.

We turn, therefore, to the face of Plaintiffs’ Section 9 applications. Paragraph 3 of lead plaintiff Theresa Hursh’s Motion To Confirm Arbitration Award alleges: “Jurisdiction is proper pursuant to 9 U.S.C. § 9 and 28 U.S.C. § 1332(a)(2).” The district court’s pre-Badgerow confirmation order, after noting the Western District of Missouri had already confirmed at least five DST arbitration awards, simply stated, “DST does not -- and cannot reasonably -- suggest that this Court lacks jurisdiction over the parties before it.” The court did not state whether it was exercising federal question or diversity subject matter jurisdiction.

The Plaintiffs’ assertion of jurisdiction “pursuant to 9 U.S.C. § 9,” though not further explained, was obviously the assertion of federal question jurisdiction under the “look-through” principle rejected in Badgerow. That does not foreclose this issue, because Badgerow recognized that a Section 9 application may show an “independent basis” of federal question jurisdiction under 28 U.S.C. § 1331 “if it alleges that federal law (beyond Section 9 or 10 itself) entitles the applicant to relief.” 142 S. Ct. at 1316.

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