ERISA Defined-Benefit Standing Limits and Non-Arbitrability of § 502(a)(2) Representative Claims Under Effective Vindication

1. Introduction

Duke v. Luxottica U.S. Holdings Corp. arises from the administration of the Luxottica Group Pension Plan, a defined benefit plan governed by the Employee Retirement Income Security Act (ERISA). Janet Duke, a retired participant, alleges the Plan’s fiduciaries used “unreasonably outdated actuarial assumptions” (a 7% interest rate and 1971 mortality tables) to convert her single life annuity (SLA) into a joint and survivor annuity (JSA), reducing her monthly benefit and violating ERISA’s “actuarial equivalent” requirements.

Duke sought two tracks of relief: (i) plan-level relief under ERISA § 502(a)(2) (plan reformation and monetary repayment to the Plan via loss restoration/disgorgement), and (ii) individual participant relief under ERISA § 502(a)(3). Luxottica invoked an employment-era Dispute Resolution Agreement with an individual-arbitration requirement and a class/representative action waiver. The district court compelled arbitration of the § 502(a)(3) claim, but allowed the § 502(a)(2) representative litigation to proceed in court under the “effective vindication” doctrine; it also denied a stay pending arbitration.

The Second Circuit’s decision addresses (1) the scope of appellate review in an FAA interlocutory appeal, (2) Article III standing for different forms of § 502(a)(2) relief in the defined benefit context after Thole, (3) whether individual arbitration may be compelled for a § 502(a)(2) representative action, and (4) whether the FAA mandates staying non-arbitrable litigation pending arbitration.

2. Summary of the Opinion

3. Analysis

3.1. Precedents Cited

A. Interlocutory appellate jurisdiction and review of standing in FAA appeals

• Swint v. Chambers Cnty. Comm'n: The court begins from Swint’s general rule that interlocutory review is limited to the appealable order and does not automatically sweep in other rulings. The Second Circuit nonetheless reads an order denying arbitration/stay under 9 U.S.C. § 16(a)(1)(A)-(B) to include the district court’s determination that it has subject-matter jurisdiction (including standing) to “litigate rather than stay or arbitrate.” As a backstop, the panel invokes “inextricably intertwined” pendent appellate jurisdiction (also rooted in Swint).
• Merritt v. Shuttle, Inc., San Filippo v. United Bhd. of Carpenters & Joiners of Am., In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liability Litig., and U.S. Cath. Conf. v. Abortion Rights Mobilization, Inc.: These decisions provide the analogy: in various interlocutory postures (injunctions, immunities, contempt), appellate courts routinely assess subject-matter jurisdiction because it goes to the district court’s power to issue the appealed rulings.
• Doe v. Trump Corp. (quoting Klay v. United Healthgroup, Inc.): Used for the proposition that a district court must determine whether a case or controversy exists to entertain a motion to compel arbitration.
• Adams v. Suozzi: Cited as prior Second Circuit practice reviewing subject-matter jurisdiction in a § 16(a)(1) appeal, even if not previously analyzed through Swint.
• Circuit split discussion: Hines v. Stamos, Nettles v. Midland Funding LLC, Benchmark Ins. Co. v. SUNZ Ins. Co., and Namisnak v. Uber Techs., Inc. support jurisdictional review; O'Hanlon v. Uber Techs., Inc. and Schnatter v. 247 Grp., LLC represent a narrower approach that the Second Circuit declines to follow.
• Freeman v. Complex Computing Co., Inc., Milligan v. CCC Info. Servs. Inc., and Atlantica Holdings v. Sovereign Wealth Fund Samruk-Kazyna JSC: These frame pendent appellate jurisdiction as discretionary and “exceptional,” but appropriate where standing is tightly bound to arbitrability under effective vindication.

B. Article III standing and ERISA, especially for defined benefit plans

• Lujan v. Defs. of Wildlife and Spokeo, Inc. v. Robbins: Supply the injury, traceability, and redressability framework applied to each claim and each form of relief.
• TransUnion LLC v. Ramirez: The key reminder that “standing is not dispensed in gross,” requiring standing for each form of relief (the court relies on this to separate standing for reformation from standing for money to the plan).
• Thole v. U.S. Bank N.A.: The central ERISA standing precedent. The panel applies Thole’s logic that defined benefit participants have “no equitable or property interest” in plan assets and do not benefit from a replenishment of plan funds unless they plausibly face a substantial risk of nonpayment. Importantly, the Second Circuit uses Thole not to eliminate Duke’s standing entirely, but to parse which remedies would actually redress her injury.
• Tyler v. Hennepin County: Cited for the notion that reduced benefits constitute a “classic pocketbook injury.”
• Steel Co. v. Citizens for a Better Env. and Soule v. Conn. Ass'n of Schools, Inc.: Used to distinguish merits from jurisdiction: a possibly unavailable remedy does not defeat standing unless it is wholly insubstantial/foreclosed. At the same time, Steel Co. is also used to insist on redressability for each remedy sought (no “bootstrapping”).
• Larson v. Valente: Quoted on the concept that redress must relieve a “discrete injury.”

C. ERISA § 502(a)(2) remedial scope and “plan injury” versus “individual injury”

• Mass. Mut. Life Ins. Co. v. Russell and LaRue v. DeWolff, Boberg & Assocs., Inc.: The court traces § 502(a)(2)’s focus on plan relief. Russell emphasized protection of the plan, while LaRue clarified that a § 502(a)(2) action may benefit even a single participant so long as it remedies a plan-level injury (not purely individual harm).
• L.I. Head Start Child Dev. Servs., Inc. v. Econ. Opportunity Comm'n of Nassau Cnty., Inc.: Cited for the principle that it is “of no moment” if plan recovery ultimately benefits participants; the doctrinal question is whether relief inures to the plan.
• Varity Corp. v. Howe: Used to mark the division of labor: § 502(a)(3) addresses individual equitable relief when § 502(a)(2) is not the right vehicle.
• Cedeno v. Sasson and Cooper v. Ruane Cunniff & Goldfarb Inc.: Provide Second Circuit statements that § 502(a)(2) is inherently representational and tied to plan injury/remedy. These cases become pivotal in the arbitration analysis.
• Coan v. Kaufman: Reinforces that § 502(a)(2) claims must be brought in a representative capacity.

D. Arbitration: FAA policy, effective vindication, and representative-capacity limits

• Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp.: Supplies the “liberal federal policy favoring arbitration agreements,” which is then limited by effective vindication.
• Am. Exp. Co. v. Ital. Colors Rest.: The court uses this as the canonical definition of effective vindication: arbitration clauses are unenforceable when they are a “prospective waiver” of statutory remedies.
• Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.: Cited (via Cedeno) for preserving the right to pursue statutory remedies even in arbitration frameworks.
• Cedeno v. Sasson: Directly controls: individual-arbitration requirements that eliminate a plaintiff’s ability to pursue a representative § 502(a)(2) action are barred by effective vindication, because the claim is “inherently representational.”
• State Farm Mut. Auto. Ins. Co. v. Tri-Borough NY Med. Prac. P.C.: Cited for the concept that arbitration terms may not “materially interfere” with statutory relief.
• Estle v. Int'l Bus. Machs. Corp. and Viking River Cruises, Inc. v. Moriana: Appellants invoked Supreme Court hostility to “free-floating” collective action rights. The panel distinguishes class/collective procedure waivers from waivers that prevent suit in a representational capacity on behalf of an “absent principal”—a distinction Cedeno drew from Viking River.

E. FAA stays: mandatory only as to arbitrable issues; discretion otherwise

• Smith v. Spizzirri: Confirms FAA § 3 stays are mandatory for issues referable to arbitration.
• Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., Chang v. Lin, and Genesco, Inc. v. T. Kakiuchi & Co., Ltd. (citing NPS Commc'ns v. Cont'l Grp., Inc.): Establish that nonarbitrable claims may proceed and docket management is discretionary even if claims share facts; stays may be appropriate where arbitrable claims predominate, but are not compelled.
• McCowan v. Sears, Roebuck & Co.: Appellants leaned on this for mandatory-stay logic. The panel narrows it to its indispensable-party/derivative-claim context, refusing to read it as expanding § 3 to all overlapping factual/legal “issues.”
• Rodriguez de Quijas v. Shearson/Am. Exp., Inc.: Mentioned only as the later case that overruled Chang on other grounds (not on the stay-discretion point).
• Garcia Pinach v. Bondi: Used to emphasize the panel cannot overrule binding Second Circuit precedents on the scope of discretionary stays.

3.2. Legal Reasoning

A. A notable procedural holding: standing is reviewable in a § 16(a)(1) FAA interlocutory appeal

The court expands (or at least clarifies) the practical scope of 9 U.S.C. § 16(a)(1) review: when a district court denies a motion to compel arbitration or a motion to stay, that “order” includes the predicate determination that the district court has subject-matter jurisdiction to proceed—explicitly including Article III standing. The panel offers two independent routes:

• Intrinsic-to-the-order reasoning: a denial of arbitration/stay assumes the court has power to adjudicate the dispute; thus, jurisdiction (including standing) is part of what is being reviewed.
• Pendent appellate jurisdiction: even if standing were not automatically included, it is “inextricably intertwined” with the effective-vindication analysis because that doctrine turns on what statutory remedies a plaintiff may pursue.

This matters beyond ERISA: it offers defendants (and courts) a route to litigate threshold standing disputes immediately in FAA interlocutory appeals, rather than waiting for final judgment.

B. Standing is “remedy-specific”: reformation survives; money-to-plan fails

The panel carefully separates Duke’s requested § 502(a)(2) remedies, consistent with TransUnion LLC v. Ramirez.

1) Plan reformation (standing exists)

Duke’s injury in fact is straightforward: underpaid benefits are a pocketbook injury. Traceability is plausible: she alleges the underpayment results from outdated actuarial conversion assumptions. Redressability exists because an order reforming the Plan’s assumptions would increase her benefits going forward (and possibly support recalculation). Appellants’ principal counter—“§ 502(a)(2) can’t provide that remedy”—is treated as a merits question under Soule v. Conn. Ass'n of Schools, Inc. and Steel Co. v. Citizens for a Better Env..

Critically, the court accepts (for standing purposes) Duke’s articulation of a plan injury that § 502(a)(2) might remedy: systemic ERISA noncompliance and potential tax consequences jeopardizing the Plan’s favorable status. The panel emphasizes that whether this theory fits within § 502(a)(2)’s remedial scope is not decided here; it is “properly reserved for the merits.” Thus, standing turns on Duke’s personal redressable injury (underpayment), while § 502(a)(2)’s “plan injury” requirement is treated as a merits-bound limitation not resolved at this interlocutory stage.

2) Monetary payments to the Plan (no standing)

The court reverses on Duke’s standing to seek loss restoration/disgorgement paid to the Plan. This is where Thole v. U.S. Bank N.A. is determinative: in a defined benefit plan, participants do not have a property interest in plan assets; plan shortfalls are the employer’s problem, and plan surpluses revert to the employer. Because Duke’s alleged underpayment is driven by the conversion formula rather than a lack of plan funding, replenishing plan coffers does not redress her injury. The panel rejects “work in tandem” arguments because Duke would be made whole by reformation regardless of whether money is paid to the Plan, and would not be made whole by money to the Plan if reformation fails.

The upshot is a refined application of Thole: even when a defined benefit participant alleges she personally was underpaid, she still may lack standing for certain plan-level monetary remedies if those remedies do not redress the underpayment. The opinion thereby distinguishes “injury exists” from “this particular form of relief redresses it.”

C. Effective vindication blocks mandatory individual arbitration of § 502(a)(2) representative claims

Once the panel recognizes that Duke can pursue at least one § 502(a)(2) remedy (plan reformation), it applies Cedeno v. Sasson to hold that she cannot be compelled into individual arbitration of that claim. The reasoning is structural: § 502(a)(2) claims are “inherently representational,” brought on behalf of the plan as an “absent principal.” A clause demanding that such a claim be brought only individually operates as a prospective waiver of the statutory remedy itself, triggering the effective-vindication doctrine as described in Am. Exp. Co. v. Ital. Colors Rest..

The panel also rejects attempts to limit Cedeno to defined contribution contexts. Even in a defined benefit plan, the claim remains representational when it seeks relief to the plan (here, reforming plan terms to cure systemic ERISA noncompliance). And the court distinguishes Supreme Court hostility toward class/collective procedures (Estle, Viking River Cruises, Inc. v. Moriana) from forbidding representative-capacity litigation on behalf of an absent principal, which Cedeno treated as qualitatively different.

D. FAA § 3 does not mandate staying non-arbitrable § 502(a)(2) litigation

The panel reads 9 U.S.C. § 3 to require a stay only for “issue[s] referable to arbitration,” meaning the claims actually ordered to arbitration. It declines a broader reading under which any overlap of factual or legal “issues” would mandate staying nonarbitrable claims.

Under Chang v. Lin and Genesco, Inc. v. T. Kakiuchi & Co., Ltd., the decision whether to stay nonarbitrable claims is discretionary docket management. McCowan v. Sears, Roebuck & Co. is confined to its context where a mandatory stay as to an indispensable party effectively prevented the derivative claim from proceeding—rather than creating a general overlap-based mandate.

3.3. Impact

• ERISA litigation strategy (defined benefit plans): Plaintiffs may preserve § 502(a)(2) standing for forward-looking plan reformation even where Thole blocks standing for plan-directed money damages. Defendants, conversely, gain a strong standing argument against “money to the plan” remedies absent a plausible nonpayment risk theory.
• Arbitration agreements and ERISA: Employers and plan sponsors cannot reliably use individual-arbitration/class-waiver provisions to force § 502(a)(2) representative fiduciary-breach claims into individual arbitration in the Second Circuit, given Cedeno v. Sasson as applied here. Drafting may shift toward (i) narrowing ERISA coverage, (ii) targeting § 502(a)(3) individual claims, or (iii) attempting plan-document-based arbitration regimes—though this decision suggests representational-capacity waivers remain vulnerable under effective vindication.
• FAA appellate practice: The opinion’s jurisdictional holding will likely be cited to expand review of standing (and potentially other subject-matter jurisdiction questions) in § 16(a)(1) interlocutory appeals, increasing early-stage appellate litigation over threshold jurisdiction.
• Stays pending arbitration: Litigants should not assume nonarbitrable ERISA plan-level claims will be stayed merely because related individual claims are arbitrated; they must show discretionary stay factors (overlap, prejudice, predominance), not a perceived statutory mandate.

4. Complex Concepts Simplified

5. Conclusion

Duke v. Luxottica U.S. Holdings Corp. strengthens three interrelated principles in the Second Circuit. First, in an interlocutory FAA appeal, the court may review Article III standing because it goes to the district court’s power to deny arbitration or a stay. Second, post-Thole, a defined benefit participant may have standing to seek § 502(a)(2) plan reformation (at least where it could redress her underpayment), yet lack standing to pursue plan-directed monetary remedies that do not redress her injury. Third, applying Cedeno v. Sasson, the court holds that effective vindication bars forcing § 502(a)(2) representative claims into individual arbitration, and it rejects an expansive reading of FAA § 3 that would automatically stay nonarbitrable plan litigation pending arbitration of individual claims.