Erisa for Dummies: Does Metlife Simplify and Clarify?

• Publication year: 2010

Georgia State University Law Review

Volume 26 . „

Article 3

Issue 4 Summer 2010

3-21-2012

ERISA For Dummies: Does Metlife Simplify and Clarify?

Rosanne Marie Cross

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Recommended Citation

Cross, Rosanne Marie (2009) "ERISA For Dummies: Does Metlife Simplify and Clarify?," Georgia State University Law Review: Vol. 26: Iss. 4, Article 3.

Available at: http://digitalarchive.gsu.edu/gsulr/vol26/iss4/3

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ERISA FOR DUMMIES: DOES METLIFE SIMPLIFY

AND CLARIFY?

Rosanne Marie Cross*

Introduction

After reviewing the Employee Retirement Income Security Act (ERISA), one might dream of a Dummies reference¹ with clear guidelines to simplify application of this befuddling set of rules. Despite nearly twenty years of requests for simplification and clarification,² Justice Scalia described the recent Court case Metropolitan Life Insurance Co. v. Glenn as "painfully opaque, despite its promise of elucidation," failing to simplify or clarify ERISA denial of benefits appeals involving an insurer caught in a conflict of interest.³

Metropolitan Life Insurance Co. v. Glenn was not the Supreme Court's first encounter with an insurer's conflict of interest created by ERISA. In Firestone Tire & Rubber Co. v. Bruch, the Court recognized the possibility of a conflict of interest created by an insurer acting as both the administrator and the payer of a benefit plan.⁴ According to Firestone, circuit courts should apply a

* Rosanne Marie Cross graduated from the Georgia State University College of Law in May 2010 where she was a Student Writing and Symposium Associate Editor. Ms. Cross completed her undergraduate degree in the Classics at Emory University.

1. One can find a Dummies resource for almost any topic. Dummies.com, Making Everything Easier, http://dummies.com (last visited Apr. 12,2010).

2. See Reply Brief for Petitioners at 1, Metro. Life Ins. Co. v. Glenn (Metlife), 128 S. Ct. 2343 (2008) (No. 06-923), 2007 WL 858651 (stating that the conflict amongst the circuits is "wide, deep and mature"). See generally Court Stays the Course on ERISA, health care collector, Sept. 2008, at 6, adapted from Foley & Lardner LLP, Supreme Court Stays the ERISA Course in MetLife v. Glenn, legal News Alert, July 15, 2008, http://www.foley.com/abc.aspx?Publication=5169 [hereinafter Court Stays ERISA Course} (emphasizing the "long-awaited opinion in Metropolitan Life Ins. v. Glenn").

3. Metlife, 128 S. Ct. at 2358 (Scalia, J., dissenting).

4. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). A fiduciary's conflict of interest "is a common feature of ERISA plans." Metlife, 128 S. Ct. at 2353 (Roberts, C.J., concurring in part and concurring in judgment). The Metlife "majority acknowledges that the 'lion's share of ERISA plan claims denials' are made by administrators that both evaluate and pay claims." Id. (quoting majority opinion).

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deferential standard of review instead of de novo review when a "benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan."⁵ However, Firestone failed to specify a standard of review for cases involving a fiduciary conflict of interest by stating only that "[the] conflict must be weighed as a 'facto[r] in determining whether there is an abuse of discretion.'"⁶ Unsurprisingly, the federal circuit courts have struggled to adjust⁷ the seemingly straightforward deferential standard of review to denial of benefits claims involving a

q

conflict of interest and a grant of discretionary authority. Since the 1989 Firestone decision,⁹ the circuit courts have established three adjustments¹⁰ to the deferential standard of review dictated by Firestone in cases involving a fiduciary's possible or actual¹¹ conflict of interest and a grant of discretionary authority.¹²

5. Firestone, 489 U.S. at 115. After Firestone, nearly every ERISA plan was amended to "grant full discretion to determine eligibility and/or to interpret plan provisions." Kathryn J. Kennedy, Judicial Standard of Review in ERISA Benefit Claim Cases, 50 AM. U. L. REV. 1083, 1131 (2001). Assuming such language was present in the plan, the reviewing court should affirm the administrator's decision unless the decision was "arbitrary, capricious, or made in bad faith," a highly deferential standard of review. Id. The confusion surrounding Firestone and Metlife arises from a plan that grants discretionary authority and also involves an administrator conflict of interest, thus placing the plan under a highly deferential standard of review. See generally Metlife, 128 S. Ct. 2343. Uncomfortable with granting deference to an administrator who is operating under a conflict of interest, the courts have adjusted the deferential standard. See discussion infra Part I.

6. Firestone, 489 U.S. at 115 (quoting Restatement (Second) of Trusts § 187 cmt. d (1959)).

7. Kennedy, supra note 5, at 1146 ("As a result of Justice O'Connor's admonishment in Firestone to consider conflict of interest as a factor in the application of a more deferential trust law type of standard of review, all the circuits have attempted to adjust or modify ERISA's deferential standard of review in conflict of interest contexts.").

8. See generally Ann K. Wooster, Annotation, Judicial Review of Denial of Disability Benefits Under Employee Benefit Plan Governed by Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. § 1132(a)(1)(B)—Fiduciary Conflict of Interest—Post-Firestone Cases, 18 A.L.R. fed. 2D 607 (2006) [hereinafter Fiduciary Conflict of Interest—Post-Firestone Cases] (elaborating on the circuits' standards of review and decisions applying the consideration of a fiduciary's conflict of interest).

9. Id.

10. Kennedy, supra note 5, at 1153-62 (noting three adjustments to the standard of review).

11. Although the Court established that conflict of interest is a factor in determining whether there was an abuse of discretion, the Court failed to specify if it was necessary that the conflict was actual or if it was sufficient that the conflict was possible. Firestone, 489 U.S. at 115. The Court also declined to explain how the circuits must determine the existence of a conflict of interest. Id.

12. The confusion about the number of adjustments made to the Firestone standard by the circuits differs even for those compiling in secondary sources the options that circuits may take when faced with a conflict of interest. See generally Kevin Walker Beatty, Commentary, A Decade of Confusion: The Standard of Review for ERISA Benefit Denial Claims as Established by Firestone, 51 Ala. L. REV. 733, 744—47 (2000) (noting only two adjustments to the standard of review, the "sliding scale" and the

2010] ERISA FOR DUMMIES 1337

Resolution of the circuit split has long been desired.¹³ This Note ultimately concludes that Metlife, at its best, did not provide resolution to the circuit split and, at its worst, aggravated the already apparent division amongst the circuit courts.¹⁴ Part I discusses the three interpretations of the Firestone standard adopted by the circuit courts. ¹⁵ Also addressed will be what Metlife says and, more importantly, does not say by declining to deliver a "detailed set of instructions"¹⁶ in an effort to clarify the confusion.¹⁷ Part II then analyzes whether the Court's holding in Metlife invalidates any of those adjustments.¹⁸ Finally, Part III concludes with the recommendation that the circuit courts go beyond the application of the Metlife decision by relying on the principles of trust law, even to the extent that they are not specifically incorporated into the Metlife holding, in an effort to save time, preserve judicial resources, and establish clarification for ERISA claimants and administrators.¹⁹

I. Background

A. ERISA: Finding Protection for the Employee Under Federal Law

With ERISA,²⁰ Congress intended to protect beneficiaries of employer-provided insurance policies by implementing standards of

"presumptively void" tests); Fiduciary Conflict of Interest-Post-Firestone Cases, supra note 8, at 607 (2006) (dividing the adjustment of the Firestone standard in conflict of interest cases into six categories). This Note addresses the three general adjustments to the Firestone standard noted in Kennedy, supra note 5, at 1153-62.

13. Brief for the United States as Amicus Curiae at 12, Metro. Life Ins. Co. v. Glenn (Metlife), 128 S. Ct. 2343 (2008) (No. 06-923), 2007 WL 4613628 (stating that the question of how a conflict of interest affects judicial review of ERISA denial of benefits claims is one that has "bedeviled the federal courts" and has "salience in every circuit"). One commentator predicted eight years before Metlife that the confusion would lead to substantial change. Beatty, supra note 12, at 750—51 (predicting that the Firestone standard "is likely to be amended in some fashion, if not totally reworked altogether" because of the "confusion among the circuit courts" and "the perception that the standard chills uniformity of jurisprudence, one of ERISA's primary goals").

14. See discussion infra Part III.

15. See discussion infra Part LA.

16. Metlife, 128 S. Ct. at 2352.

17. See discussion infra Part I.

18. See discussion infra Part II.

19. See discussion infra Part VI.

20. 29 U.S.C. §§ 1001-1461 (2000 & Supp. V 2005).

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disclosure, reporting, and conduct for fiduciaries,²¹ and by creating predictable standards to encourage employers to provide benefit plans to their employees.²² ERISA...