Wednesday, April 23, 2008

Glenn ERISA Case Oral Argument Transcript Analysis

4united_states_supreme_court_1129_2The Supreme Court heard oral argument this morning in the ERISA enforcement case of Metlife v. Glenn. The case concerns the issue highlighted here before about structural conflicts of interest (dual-role insurers) in ERISA denial of benefits case under Section 502(a)(1)(B). 

Here are some thoughts and highlights based on my reading of the Glenn oral argument transcript:

1.  Metlife counsel, Ms. Posner, challenges that there is a "conflict in actuality" in these dual insurer situations. Justice Scalia helpfully clarifies her point:

MS POSNER: [T]hese terms to designate in actuality a conflicted fiduciary is one that has been infected or the decision was infected by the conflict.

JUSTICE SCALIA: No. That's, that's a conflicted fiduciary who allows the conflict to warp its judgment. But the conflict exists whether you, whether you give it effect or not.

They like the same opera, but Justice Ginsburg ain't buying it: "Let me follow up on Justice Scalia's question because I think your brief really goes astray on that . . . .I've always understood that the term 'conflicting interests' means just that; you have conflicting interests. It doesn't mean that you necessarily slide over into misconduct. And I think that if you would keep that separation in mind, is there a conflicting interest? Yes, there is."

2.  Ms. Posner seems unable to give a satisfying answer to Chief Justice Roberts or anyone else on what seems to be the heart of the matter in Glenn:

How does the review differ as a functional matter? He says he looks at it and says, well, normally that would be within the discretion, but I've got to remember he's got a conflict, so I'm going to determine that this particular procedure should be covered because of the conflict.

Justice Scalia comes to Posner's rescue again, pleading with her seemingly to get their her argument straight:

But you're saying it doesn't make any difference. You say you should take it into account, but if it was a reasoned decision, which is the test whether or not he's a fiduciary, if it's a reasoned decision the fact that he's a fiduciary makes no difference, right? Isn't that what you're saying?

Unbelievably, she says, "No, Your Honor . . . .it must be a factor that's weighed with the other factors."

Later, Justice Alito tries to help her: "JUSTICE ALITO: Could I just get this clear? I thought your position in your brief was that there has to be a demonstration that the conflict had an effect on the decision before there is any departure from the standard abuse of discretion - MS. POSNER: That's correct, Justice Alito. JUSTICE ALITO: -- the standard of review."  One gets the sense in reading over this part of the transcript that Ms. Posner is having a difficult time articulating her client's view while at the same time satisfying the Firestone abuse of discretion standard and the friendly (read: conservative) Justices questions on the matter. 

Justice Souter, for one, is exasperated with her inability to follow his hypothetical and give a simple answer as to the current impact of Firestone. Justice Ginsburg gangs up: "That's the question that Justice Souter posed, and you seem not to want to face up to it and answer it." Ouch.

3.  Finally, a last ditch effort again by Chief Justice Roberts: "Now, which is right: Justice Souter's case in which the conflict tips the scales, no matter what the reason is; or Justice Alito's case where the conflict plays a role in the decision process? MS. POSNER: We believe that it's the Justice Alito hypothetical, where it does play a role."  Hooray! Finally, the answer four Justices were looking for.  In sum, Ms. Posner's less than stellar performance can be encompassed by this response: "MS. POSNER: No -- yes, Justice Alito, and I think you hit the nail on the head there." [Sigh].

4. Justice Stevens has another issue with MetLife's position: "[I]t's hard for me to understand how you're going to prove an insurance company's particular claim adjustment was really motivated by a conflict of interest rather than thinking the claim wasn't valid." Indeed, why should plaintiffs put to the proof in these cases when employers have the best access to such information.  In such instances, shouldn't the burden be placed on them to justify their benefits decision?

5. Counsel for Glenn, Rosenkranz of Rumsfeld v. FAIR fame and the Solomon Amendment, tries to makes some heads and tails of all this ERISA mumbo-jumbo. Justice Ginsburg asked for a proposed standard and she gets a three-pronged one:

I would say three things to the district courts. Number one, this is not just some form of
arbitrary and capricious agency review with just a little bit more bite. This is reasonableness review under trust law, which is very, very different. Number two, the judicial eye is peeled, as this Court said in Rush, for conflict of interest. Kick the tires. Here are seven, eight, nine illustrations of the sorts of things that lower courts should be on the lookout for as they are trying to discern whether the conflict tainted the result. Number three, if -- if you are at the outer bounds of reasonableness for an unconflicted trustee, you can contract that zone of reasonableness because you don't -- when -- when an unconflicted trustee is right at the outer edge, there is no reason to suspect his motive.

The Assistant to the Solicitor, arguing on the same side as Glenn, puts it this way: "an administrator's discretionary decisions should be reviewed for reasonableness where the conflict of interest is considered as a factor," and "I think the problem with this inquiry is that reasonableness does not have mathematical standards. It's a determination that the court needs to make weighing all of the facts and circumstances."

6. Classic moment at the beginning of Rosenkranz' s argument:

MR. ROSENKRANZ: . . . .There's no reason for this Court to overrode its well-reasoned and
unanimous conclusion [in Firestone] which
MR. ROSENKRANZ: It was dictum, Your Honor, but it was very well-considered dictum because -- (Laughter.)

This case looks like it is going the way of most remedy cases - a debate between the literalist and remedialists on the court.  The literalists (Roberts, Alito, Scalia, and Thomas) think that the statutory provision is clear and there shouldn't be a separate standard of review for conflicts. The remedialists (Stevens, Souter, Breyer, and Ginsburg) believe that the common law of trust must inform the meaning of ERISA's remedial sections because that is where ERISA derives from.

So as always, the question is whether Kennedy is a literalist or remedialist.  In most cases decided under ERISA in his tenure, he has been on the literalist side, but this case might provide the limits of where he is willing to push a literalist interpretation given the clear conflicts in these cases.

Here goes nothing: 4-1-4 remedialists with a controlling concurrence by Kennedy.  He seems to want to provide for a compromise by providing for certain procedural mechanisms an employer can take (a la Faragher and Ellerth) to avoid liability:

JUSTICE KENNEDY: Suppose that the insurance company shows or may be required to show, at least by the burden of production, that it has established firewalls, very careful procedures, written regulations that claims administrators are not to consult with the people that set policy and prices. Does that suffice to permit, simply, abuse of discretion review?  MR. ROSENKRANZ: No, Your Honor. It would be a factor -
JUSTICE KENNEDY: So that there is nothing the fiduciary can do in order to avoid intrusive -
highly -- a high degree of scrutiny in review of every close case?
MR. ROSENKRANZ: Well, Your Honor, first, just to be clear, we are talking about still a
deferential standard. It's just not as deferential as it would otherwise be. Absolutely. An insurer can come in and say, look, we've created all these procedures; they have mitigated the conflict, but it can never get -
JUSTICE KENNEDY: So that all insurance company claims adjustors have less deferential review than independent claims administrators?
MR. ROSENKRANZ: Yes, Your Honor, unless the insurance company comes in and can demonstrate in a case that we've never heard of
JUSTICE KENNEDY: You want us to institute 22 an industrywide rule differentiating insurance companies . . . .

And so on. But Kennedy is looking for a workable compromise and he might just go the sexual harassment affirmative defense route we see with supervisor liability issues in hostile environment claims.  The test might read: (1) Did the employer act reasonably in setting up policies to shied itself from conflict and (2) did the employee act unreasonably in not following these procedures or otherwise avoiding harm.


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» Some Thoughts on the Oral Argument in MetLife v. Glenn from Boston ERISA Law Blog
I had a chance over the weekend after a busy few days to ruminate on the oral argument in MetLife v. Glenn, a transcript of which you can find here; you can find Workplace Profs review of the argument here... [Read More]

Tracked on Apr 28, 2008 7:27:03 AM


If the textualist are true to their philosophy, they will abandon Firestone and look to the statute. There is nothing in the text of ERISA stating that benefit claims should be treated disparately from all other federal court litigation; the statute does not say that the Federal Rules of Civil Procedure do not apply or that the determination by the courts should be akin to review of agency decisions. As a “comprehensive reticulated statute” the courts should not create standards of review that Congress did not provide.

The idea that employers are contracting for discretionary review is a fiction. Insurers write the language into the insurance polices (so called plans). Employers don’t understand the language nor do most insurance brokers that sell the insurance policies. I suggest that you ask your friendly insurance broker to price, for example, a long term disability plan. Ask how much the plan will cost with discretionary language and how much without. The likely response will be, “What’s discretionary language?”

Posted by: Jonathan M. Feigenbaum | Apr 24, 2008 5:00:22 AM

I agree with Jonathan Feigenbaum's comment. In addition, I would also add the the courts should not preserved a judge-made discretionary review doctrined by addition additions judge-made conditions to the claim review regulations that the DOL, not the courts, have delegated authorithy to promulgate. Especially, the courts should not do so when no one asked them to, and it is so clear that neither plan sponsrs nor participants will be be happy with any such result.

Neither the textualists nor the remedialists seem to be at all keen on adopting the Abatie-like solution that Glenn and the U.S. contend for.

Posted by: Les Baker | Apr 24, 2008 6:24:26 PM

My question is this. What happened to the "Savings Clause"? There is an entire body of state insurance law that impacts on the claims process. These laws would seem to meet the Kentucky Ass'n of Heath Plans v. Miller test and as pointed out in Rush v. Prudential when saved state insurance law comes in conflict with a grant of discretion the saved state insurance law wins. Applying this saved state insurance law wholesale it would seem to eliminate any discretion. i.e. How can an insurance company be given the right to interpert an exclusion broadly when all state insurance law says it must be given a narrow interpretation? The exact opposite regarding a grant of coverage.

Posted by: Joe Clark | May 5, 2008 1:52:01 PM


The savings clause only applies to preemption issues under Section 514, in which a state law, like an insurance law, is inconsistent with the ERISA framework.

In this case, the plaintiff alleged a Section 502(a)(1)(B) claim under ERISA, so not preemption issue is presented. If the question had been whether a state law can provide a different internal appeals process (the Rush Prudential vs. Moran case) or different standard of review for denial of benefit claims, then there would be a preemption issue and the Savings Clause might be implicated.

Posted by: Paul Secunda | May 5, 2008 3:22:20 PM

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