Canfield v. SS&C Technologies Holdings, Inc.

Background

The opinion concerns related actions involving participants in DST Systems, Inc.’s 401(k) Profit Sharing Plan, plan fiduciaries, and related arbitrations in Missouri. The participants alleged that plan fiduciaries violated the Employee Retirement Income Security Act (ERISA) and caused losses to the plan and individual accounts. Many participants had signed arbitration agreements covering employment disputes, while some opted out. The arbitration agreements excluded claims concerning ERISA-related benefits provided under a company-sponsored benefit plan and prohibited covered employees from having claims asserted on their behalf in a class or representative action.

The plaintiffs in Canfield and Mendon were initially represented by The Klamann Law Firm and Kent, Beatty & Gordon, LLP. The Klamann group also represented three former members of the plan’s Advisory Committee. Because the plaintiffs sued the Advisory Committee and its individual members, the court previously found a concurrent conflict of interest and disqualified the Klamann group from representing the plaintiffs in the Canfield and Mendon federal actions. The court then requested additional briefing on whether the firm should also be disqualified from representing the Advisory Committee members in Missouri arbitrations.

Issue and arguments

The defendants moved to disqualify the Klamann group from the arbitration proceedings. The firm argued that this court lacked jurisdiction, meaning legal authority, to disqualify counsel in arbitrations that it had not ordered. The defendants argued that the court’s authority arose from its jurisdiction over the plan and from the firm’s appearance in the Canfield and Mendon cases.

The court discussed decisions recognizing that courts, rather than arbitrators, generally are better suited to decide attorney-disqualification issues. It also noted that a court may sometimes disqualify counsel in an arbitration occurring in another district, particularly when that court compelled the arbitration and retained authority to review aspects of the arbitration under the Federal Arbitration Act. But this court had not compelled the Missouri arbitrations.

Ruling and reasoning

The court did not resolve whether it had jurisdiction to disqualify the firm. Instead, it held that the question was more appropriately left to the Missouri federal courts. Only participants who opted out of the arbitration agreement had brought claims before this court, and the pleadings did not provide enough information to determine with certainty how the arbitration participants’ claims compared with the federal plaintiffs’ claims or when the Klamann group began the relevant arbitrations. The court found that information relevant to disqualification would be available to the court reviewing the arbitration agreements and awards.

The court rejected the defendants’ reliance on earlier Missouri decisions. It explained that the dismissal of one federal case under the first-filed rule did not show that the Western District of Missouri lacked authority over the arbitrations. It also explained that another case had been dismissed because the representative claims could not proceed under the arbitration agreement, not because the Missouri court lacked jurisdiction over arbitration proceedings.

Disposition

Judge Andrew L. Carter, Jr. denied defendants’ motion to disqualify counsel in the arbitration proceedings. The court stated that if the defendants believed disqualification was warranted in individual arbitrations, they had to raise the issue in a court authorized to oversee those proceedings.