Wednesday, November 29, 2006

Second Circuit on Discretionary Firestone Language and SPDs

Scales_12 Ross Runkel in his most recent Employment Law Memo has a write-up on an interesting ERISA denial of benefits claim case out of the Second Circuit. 

In Tocker v. Phillip Morris, No. 04-5904 (2nd Cir. Nov. 22, 2006), the court considered a situation in which the company failed to place the necessary discretionary Firestone language into its plan's summary plan description (SPD), but nevertheless sought and received arbitrary and capricious review of a plan administrators benefit determination (involving the calculation of pension credits) based on discretionary language in other ERISA plan documents.

The court said that the absence of the Firestone language in the SPD was not fatal as long as the appropriate language could be found in other plan documents.

Ross describes the court's analysis thusly:

The court held that "[t]he arbitrary and capricious standard of review is warranted where the plan documents provide for discretionary authority, the summary plan description does not contain any conflicting language, and the applicable statutes and regulations do not require that the SPD contain provisions addressing the issue." The court noted that "those of our sister circuits to have considered the issue have reached the same conclusion [more particularly, the 8th, 9th, and 11th Circuits]." Since the trial court correctly applied the appropriate standard of review, the court affirmed as to the pension credit claim.

I have to say that I disagree with the court's conclusion.  The SPD is meant to provide information to plan participants and beneficiaries in lay terms about their benefits and the procedures for obtaining those benefits.  An individual should not have to dig through complicated plan documents to discover the appropriate judicial review standard once his or her benefit claim has been denied.  They should only have to look in the SPD and if the appropriate language is not in there, they should be able to rely on the more favorable judicial review standard.


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Here is an interesting post concerning a decision last week from the Second Circuit on the impact - there is apparently none in that circuit, given this post and the Second Circuit decision, Tocker v. Phillip Morris Companies, discussed in... [Read More]

Tracked on Dec 4, 2006 7:20:04 AM


Given the requirement for "likely prejudice", coupled with the view that the standard of judicial review "simply fixes the procedure to be followed after a denial has occurred", it seems unlikely that focus on participant reliance will ever be availing. If that were not enough, the Court put the final nail in the coffin by its view that any prejudice is erased by the boilerplate language reserving right to “change, modify, or discontinue ··· without notice” the benefits explained in the booklet.

Posted by: Roy Harmon | Nov 30, 2006 7:12:45 AM

See article in the Autumn 1999 "Benefits Law Journal" about applying Firestone to SPDs.

Posted by: robert s. melson | Dec 19, 2006 3:07:17 PM

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