Issue Exhaustion and ERISA

Sticking with my theme of ERISA today, the Ninth Circuit has a decision of first impression concerning issue exhaustion and ERISA in the denial of benefits context.  In Vaught v. Scottsdale Healthcare (9th Cir 09/29/2008), the Ninth Circuit declined to impose an "issue exhaustion" requirement under ERISA.

Ross Runkel provides the details:

Vaught sued his healthcare plan under the Employee Retirement Income Security Act (ERISA), asserting (among other things) a claim challenging the plan’s decision denying his claim for benefits.  The trial court granted summary judgment in favor of the plan.  The 9th Circuit reversed as to that claim.

In court, Vaught asserted a theory that he had not presented during the course of the plan’s internal appeal procedure.  The plan argued that Vaught failed to exhaust his administrative remedies with respect to that theory and was therefore barred from relying on it in court.  The court rejected that argument, declining to impose an “issue exhaustion” requirement under ERISA.  The court noted that “[n]o ERISA statute precludes courts from hearing objections not previously raised to the Plan, nor does any ERISA statute or regulation require claimants to identify all issues they wish to have considered on appeal.”

The DISSENT argued that “the majority allows an ERISA claimant to engage in a court-sanctioned game of Texas Hold ‘Em against a Plan playing with all of its cards face up.”

I am with the majority on this one.  Absent textual or legislative historical direction that all theories must be exhausted at the internal appeal level, it does not seem this type of claim should be forbidden.  Also, considering the high hurdles that ERISA plaintiffs have to negotiated in these 502(a)(1)(B) cases, an additional procedural obstacle seems inconsistent with the primary purpose of ERISA, which is to protect and secure employees and their beneficiaries' benefits.

PS