Friday, March 21, 2008
The following is posted on this blog at the request of Prof. Melanie B. Leslie:
Professors Melanie B. Leslie (visiting Prof., Columbia Law), Stewart E. Sterk (Cardozo), James A. Wooten (Buffalo) and Maria Hylton (University of Boston) have drafted an amicus brief on behalf of trust law and ERISA law professors in support of respondent’s brief in the Supreme Court case Met Life v. Glenn. The case will be argued on April 23. The amicus brief will be sent to the printers on March 28th. The bulk of the brief addresses trust law issues. If are a trust or ERISA law academic and would like to consider signing on to the brief, please email Melanie Leslie at email@example.com to request a draft.
The specific questions raised in the case are 1) whether an insurance company that both determines eligibility for employee benefits and pays those benefits acts under a conflict of interest, and if so, 2) what weight should a court give that conflict when evaluating an employee’s claim that the plan administrator abused its discretion in denying the employee’s claim?
In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, (1989), the Supreme Court, citing trust law, held that beneficiaries of ERISA plans are generally entitled to de novo review of benefit denials by plan administrators. The Court then suggested, however, that a benefit plan might narrow the scope of judicial review by conferring on plan administrators “discretionary authority to determine eligibility for benefits.” The Court, citing the Restatement (Second) of Trusts, also noted that that “if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a ‘facto[r] in determining whether there is an abuse of discretion,’” Id. at 115.
Since Firestone, most employee benefit plans expressly grant discretion to the plan administrator to interpret the plan and determine eligibility for the payment of claims. This is true even when the administrator is the same entity that is responsible for paying the claims. The question that has plagued the circuit courts for nearly 20 years, creating an 11-circuit split of authority, is how a court should evaluate an employee’s claim that an administrator with a conflict of interest abused its discretion in denying the employee’s claim. In our view, much of the confusion is attributable to federal courts’ misunderstanding trust law, which they purport to apply.