A New Firestone Drill: MetLife v. Glenn

Hopefully, the Supreme Court's MetLife decision will turn out to be a welcome clarification of the Firestone case, even if it generates some new uncertainty. Firestone left open the question of how much a conflict of interest in the administrator should affect the level of a court's deference to the administrator's decision. After Firestone, the lower courts went in all different directions on this question, ranging from engaging in a slippery-slope analysis, where there would be less deference, to a de novo approach, where the court would essentially ignore the administrator's decision altogether. MetLife now provides the answer, but in a way that does not provide certainty. Under MetLife, the standard continues to be the abuse-of-discretion standard. However, the degree and nature of any conflict of interest is taken into account as a factor in determining whether there has a been an abuse of discretion. Thus, the governing rules are clear, but the application of those rules may vary with the facts and circumstances of each case. The Court in MetLife recognizes the lack of certainty its decision brings, but asserts that the result is a workable one. As with the fallout from so many Supreme Court decisions, we'll have to wait and see. One interesting passage from the case may give a hint as to how lower courts will proceed. MetLife notes that a conflict may become less important to the analysis as active steps are taken to reduce potential bias and promote accuracy, for example by walling off claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decisionmaking regardless of who benefits. It will be interesting to see if players in the market seize upon steps like this to try to increase the extent to which internal decisionmaking will be entitled to deference in the post-MetLife world The fun never stops . . .

Andrew L. Oringer
White & Case LLP
Andrew.Oringer@whitecase.com

Comments

[Norman Stein]

Frank has it exactly right; I started to write a blog entry to that effect, but Frank's pithy comments preempt me. What Glenn does, I think, is immunize a district court's decision from review. So if you get a trial judge who leans toward business interests, the plan wins. If you get a judge who leans toward consumer interests, the claimant wins. And it will be hard for an appellate court to reverse in either case.

This is likely to help plaintiffs at the margins, since it is probably more common to pull a pro-business appellate panel that is reviewing a pro-claimant trial decision than the other way around. But basically what it means is that we have no real standards and will have little consistency in result.

I may still post my blog entry, because it has another point and I spent a bit of time on it. But I still have to spend a bit more time before it is ready to post.

[Jonathan M. Feigenbaum]

Sure the opinion seems to lack the clarity that both sides were looking for and the guidance that the lower courts need. However, Justice Scalia summarized the majority opinion and states what the majority really meant, “Notwithstanding the Court’s assurances to the contrary, ante, at 9,that is nothing but de novo review in sheep’s clothing.”
Following Justice Scalia's interpretation of the majority opinion requires de novo proceedings. Rather than engaging in deferential gymnastics (how much, or how little deference to grant to the conflicted fiduciary), Courts can now treat welfare benefits disputes like other litigation and be sure that justice is served.

Jonathan M. Feigenbaum
www.erisaattorneys.com

[scott macey]

I agree with Andrew's observations. Although offering an element of conceptual clarity, the decision hopelessly confuses how it should be applied in reality. Presumably, most employers who fund plans and retain claim and review responsibility will either develop steps and a process that they can demonstrate is not tainted by financial concerns/conflicts or outsource, at least, the appellate portion of the claim and review process. I agree with the concurring and dissenting opinions that some adverse affect of the conflict should initially have to be shown (although that is not the majority opinion)- in other words, that the decisionmaker was influenced in some way by the conflict. I also agree that MetLife's process in the case appears to be an abuse of discretion irrespective of the conflict, although the conflict may have indeed motivated the abusive decisions/actions (in other words, maybe MetLife would have viewed the SS decision and other doctor's opinion differently and given them greater weight (or at least some appropriate level of weight) if it was not responsible for paying the benefit).

[Frank Cummings]

Uncertainty? To put it mildly!

Consider the various degrees of pull that might have been unleashed in order to yank the rug out from under the “arbitrary and capricious” standard of review. The Court could have said that the conflict would have to be “THE determinative factor.” Or the Court could have said that the conflict would have to be “A determinative factor.” Or the Court could say, as it has done – twice already – that, if there is some conflict, then you “take it into consideration.” In other words, you’ll think about it? (That’s what a politician usually often tells a pleading lobbyist when unwilling to give a face-to-face “no” for an answer).

But after these verbal gymnastics, what have you got? If the judge, on review of the named fiduciary’s ruling, recites that the court took it all into consideration, and then the court gives some reason for upholding or reversing the fiduciary, then the COURT’s ruling should be upheld unless IT is arbitrary and capricious.

So have we simply moved the arbitrary and capricious standard up one appellate level? First you have the level #1 ruling by the claims handler under ERISA section 503(1) – not a fiduciary determination, and not entitled to deference. Second you get level #2 a ruling by the “appropriate named fiduciary” under 503(2) after “a full and fair review” – entitled to deference, but somewhat less deference if there is a conflict. How much less deference? You find out when the judge tells you. And when the judge tells you, then THAT decision will be upheld if the court tips its hat to the presence of the conflict and then says either “affirmed” or “reversed.”

The effect of all this will not be known until there are a sufficient number of post-Glenn rulings so that we can count them, and then we may learn the impact of the case, not logically, but statistically.

Frank C.