Shafer v. Morgan Stanley

Background

This putative class action concerns Morgan Stanley’s deferred-compensation program for financial analysts. The plaintiffs allege that Morgan Stanley, Morgan Stanley Smith Barney LLC, the Morgan Stanley Compensation Management Development and Succession Committee, and unidentified defendants violated the Employee Retirement Income Security Act of 1974 (ERISA) by applying a “cancellation rule” to the program.

The amended complaint alleges that the program is an “employee benefit pension plan” under ERISA because it defers income until the end of covered employment or later. The plaintiffs point to situations in which financial analysts whose employment ends because of disability, involuntary termination, retirement, full career retirement, or government service termination allegedly receive deferred compensation on the scheduled distribution date after leaving Morgan Stanley.

Arbitration issue

The defendants moved to compel arbitration and stay the proceedings. The plaintiffs opposed that motion, maintaining that the deferred-compensation program is an ERISA plan and that they brought their claims in a representative capacity on behalf of the plan. They argued that the plan itself never agreed to arbitrate the claims.

Court’s action

The court stated that the parties’ briefing did not adequately address whether the deferred-compensation program is an ERISA plan. It ordered the parties to submit letters by September 20, 2023, addressing whether the alleged payments after employment ends demonstrate that the program is an ERISA plan. The court identified several authorities for the parties to discuss.

This order does not state a ruling on the motion to compel arbitration, the request to stay proceedings, or the program’s ERISA status.