Miguel J. Chamorro

On December 15, 2025, the Eleventh Circuit Court of Appeals joined several circuit courts in refusing to enforce arbitration agreements that purport to waive plan-wide relief available under the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001, et seq. (“ERISA”). See Williams v. Shapiro, 2025 WL 3625999 (11th Cir. Dec. 15, 2025). The decision is significant because it illustrates the limits of arbitration agreements and it provides a salient example of when dicta—Supreme Court dicta—serves a key role in jurisprudence.

            Factual background of Williams.

At issue in Williams was an employee stock-ownership plan set up to help employees save for retirement. Such plans invest primarily in the company’s own stock. The plan at issue was an ERISA “defined contribution plan” (a pension plan that “provides for an individual account for each participant and for benefits based solely upon the amount contributed to the participant’s account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant’s account”). The employees contributed to the plan to accumulate allocated shares, and they then had the option to sell their shares upon retirement.

Things turned sour when the plan and its trustee sold the plan’s shares to an affiliate, amended the plan document by adding the controversial arbitration clauses at issue, and terminated the plan. The plan then distributed the proceeds from the stock sale to the plan participants. Some participants sued under ERISA and sought to represent a class of about 280 participants, alleging that various defendants unlawfully caused the plan’s shares to be redeemed by the company for $35.4 million less than fair-market value. Id. at *2. Among the relief sought by the participants was rescinding the stock purchase agreement and reforming the plan document to eliminate its arbitration clauses. The latter is not surprising because §§ 1109(a) and 1132(a)(2) of ERISA authorize plan participants to sue for plan-wide relief whereas the arbitration clauses specifically prohibited such relief and limited the participants to seeking relief on an individual basis. The defendants, not surprisingly, moved to compel arbitration under the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the “FAA”), based on those clauses. See id. at *2-3.

The district court denied the motion to compel arbitration, and invalidated the arbitration clauses because ERISA authorizes plan-wide relief, and the arbitration clauses specifically prohibit such relief. The district court held that the arbitration clauses could not stand because they prevented plan participants from effectively vindicating their rights under ERISA. And because the arbitration clauses were by their own terms non-severable, the court held that the plan’s arbitration procedure was entirely unenforceable. The Eleventh Circuit affirmed.   

            The Effective Vindication Doctrine and its application to arbitration agreements

            “[F]ederal statutory claims” are arbitrable “unless the FAA’s mandate has been overridden by a contrary congressional command [,]” CompuCredit Corp. v. Greenwood, 565 U.S. 95, 98 (2012), and the FAA “is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). But this precedent yields to the effective vindication doctrine: a doctrine that invalidates arbitration agreements that prospectively waive “a party’s right to pursue statutory remedies.” Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 235 (2013) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n.19 (1985)). See Viking River Cruises, Inc. v. Moriana, 596 U.S. 639, 653 (2022) (“the FAA does not require courts to enforce contractual waivers of substantive rights and remedies.”). The key question is whether “the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum.” Williams, at *3 (quoting Italian Colors, 570 U.S. at 235).

Because the arbitration clauses in Williams clearly invalidate plan-wide relief under ERISA, the effective vindication doctrine would render the clauses unenforceable. The defendants nevertheless opposed the application of the doctrine “because it is judge made and rooted in Supreme Court dicta.” Williams, at *4. Dicta or not, the argument failed. As noted by the Eleventh Circuit in Escobar v. Celebration Cruise Operator, Inc., 805 F.3d 1279, 1291 (2015), even though the effective vindication doctrine “originated as dictum in Mitsubishi Motors,” in Italian Colors (2013), “the Supreme Court acknowledged the effective vindication doctrine” and set out its parameters. To the Eleventh Circuit, therefore, it was ultimately immaterial that the Supreme Court had yet to apply the doctrine to invalidate a particular arbitration clause or that the doctrine could still even be considered dicta:

It is true that neither we nor the Supreme Court have applied the doctrine to strike down an otherwise enforceable arbitration provision. Yet whether we think judge-made doctrines are generally appropriate or wise is of little importance when the United States Supreme Court repeatedly acknowledges a doctrine’s existence. See Italian Colors, 570 U.S. at 235–36 (“[Our] cases have similarly asserted the existence of an ‘effective vindication’ exception but have similarly declined to apply it to invalidate the arbitration agreement at issue…. And we do so again here.”) (internal citations and footnote omitted)…. It seems to us, therefore, that the discussion of the doctrine in Italian Colors cannot be passed off as mere dicta.

Williams, at *4 (emphases added).

As emphasized by the Eleventh Circuit, even if the Supreme Court’s pronouncements on the effective vindication doctrine qualified as dicta, “dicta from the Supreme Court is not something to be lightly cast aside.” Peterson v. BMI Refractories, 124 F.3d 1386, 1392 n.4 (11th Cir. 1997). See also Schwab v. Crosby, 451 F.3d 1308, 1325 (11th Cir. 2006) (“[T]here is dicta and then there is dicta, and then there is Supreme Court dicta. This is not subordinate clause, negative pregnant, devoid-of-analysis, throw-away kind of dicta.”). Faced with the reality that “federal common law is interstitial but essential” because no legislation addresses every conceivable issue that may arise in litigation, see United States v. Little Lake Misere Land Co., 412 U.S. 580, 593 (1973) (“the inevitable incompleteness presented by all legislation means that interstitial federal lawmaking is a basic responsibility of the federal courts”), the Eleventh Circuit officially adopted the effective vindication doctrine. Williams, at *4.

            In good company.

            In adopting and not merely recognizing the existence of the effective vindication doctrine, the Eleventh Circuit joined six circuits that invalidated arbitration agreements that prevent plan participants from obtaining plan-wide relief under ERISA:

• Platt v. Sodexo, S.A., 148 F.4th 709, 721 (9th Cir. 2025) (“[Employee] argues that the arbitration provision violates the effective vindication doctrine by prohibiting him from bringing a § 502(a)(2) breach of fiduciary duty claim. We agree.”)
• Parker v. Tenneco, Inc., 114 F.4th 786, 798 (6th Cir. 2024) (“The individual arbitration provision thus eliminates the ability to proceed in a representative capacity on behalf of the Plans and obtain relief for losses to the Plans, which … are substantive statutory remedies provided by ERISA. The provision is therefore unenforceable as a prospective waiver of these statutory rights.”)
• Cedeno v. Sasson, 100 F.4th 386, 400-06 (2d Cir. 2024); State Farm Mut. Auto. Ins. Co. v. Tri-Borough NY Med. Prac. P.C., 120 F.4th 59, 91 (2d Cir. 2024) (“Bearing in mind a healthy regard for the federal policy in favor of enforcing valid arbitration agreements, we recognize that the effective vindication exception applies in rare cases where an arbitration agreement prevents parties from effectively vindicating their statutory rights.”)
• Henry ex rel. BSC Ventures Holdings, Inc. Emp. Stock Ownership Plan v. Wilmington Tr. NA, 72 F.4th 499, 508 (3d Cir. 2023) (“The class action waiver requires ESOP participants to waive their statutory right to pursue statutorily authorized remedies. It is therefore unenforceable even if it permits the Department of Labor to pursue those remedies on behalf of the ESOP’s participants.”)
• Harrison v. Envision Mgmt. Holding, Inc. Bd. of Dirs., 59 F.4th 1090, 1107 (10th Cir. 2023) (“[what] is problematic … is Section 21’s prohibition of any form of relief that would benefit anyone other than Harrison that directly conflicts with the statutory remedies available under 29 U.S.C. §§ 1109 and 1132(a)(2), (a)(3).”).
• Smith v. Bd. of Dirs. of Triad Mfg., Inc., 13 F.4th 613, 623 (7th Cir. 2021) (“the “effective vindication” exception may be rare, but it applies here.”)

In joining six sister courts, the Eleventh Circuit affirmed the district court’s ruling that the arbitration clauses of the plaintiff’s stock-ownership plan were unenforceable. It also held that the arbitration clauses were, by their own terms, non-severable, meaning that the remaining arbitration provisions could not survive. This compelled the conclusion that the plan’s arbitration procedure was entirely unenforceable and that the district court properly denied the defendants’ motion to compel arbitration, thus requiring the action to be litigated in district court.