Metlife v. Glenn--Summary of June 19, 2008 decision --On Erisa

By 7-2 margin (opinion by Breyer; dissent by Scaliamas), the Court affirmed the Sixth Circuit and held that a conflict of interest in an ERISA plan administrator's dual role of both evaluating and paying benefit claims must be weighed as a factor by the reviewing court, but that this "factor-weighing" does not replace the deferential standard (by, say, a de novo standard of review) which the Court's precedents say is appropriate in these cases. To unpack the meaning of this long sentence, we need to review some of the facts of this case as well as the argument of the Court. The bolded words are taken from the Syllabus of the Court's decision.

Background Facts

"Petitioner Metropolitan Life Insurance Company (MetLife) is an administrator and the insurer of Sears, Roebuck & Company's long-term disability insurance plan, which is governed by the Employee Retirement Income Security Act of 1974 (ERISA). The plan gives MetLife (as administrator) discretionary authority to determine the validity of an employee's benefits claim and provides that MetLife (as insurer) will pay the claims. Respondent Wanda Glenn, a Sears employee, was granted an initial 24 months of benefits under the plan following a diagnosis of a heart disorder. MetLife encouraged her to apply for, and she began receiving, Social Security disability benefits based on an agency determination that she could do no work. But when MetLife itself had to determine whether she could work, in order to establish eligibility for extended plan benefits, it found her capable of doing sedentary work and denied her the benefits. Glenn sought federal-court review under ERISA, see 29 U.S.C. § 1132(a)(1)(B), but the District Court denied relief. In reversing, the Sixth Circuit used a deferential standard of review and considered it a conflict of interest that MetLife both determined an employee's eligibility for benefits and paid the benefits out of its own pocket. Based on a combination of this conflict and other circumstances, it set aside MetLife's benefits denial."

Legal Analysis

With these facts in mind, how did the Court proceed? Important for its deliberation was the Firestone case from 1989.

"Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80, sets out four principles as to the appropriate standard of judicial review under § 1132(a)(1)(B): (1) A court should be “guided by principles of trust law,” analogizing a plan administrator to a trustee and considering a benefit determination a fiduciary act, id., at 111-113, 109 S.Ct. 948; (2) trust law principles require de novo review unless a benefits plan provides otherwise, id., at 115, 109 S.Ct. 948; (3) where the plan so provides, by granting “the administrator or fiduciary discretionary authority to determine eligibility,” “a deferential standard of review [is] appropriate,” id., at 111, 115, 109 S.Ct. 948; and (4) if the administrator or fiduciary having discretion “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, 109 S.Ct. 948."

In a nutshell, the principles are: (1) use of trust law; (2) a de novo standard of review unless the benefits plan provides otherwise; (3) if the benefit plan so provides, then a deferential standard is operative (why would any benefits plan not so provide?); (4) if there is a conflict of interest, that conflict should be one factor in determining whether the plan administrator abused its discretion in making its benefits determination.

The Court then explored in more detail the conflict of interest principle, since it was implicated in this case:

"A plan administrator's dual role of both evaluating and paying benefits claims creates the kind of conflict of interest referred to in Firestone. That conclusion is clear where it is the employer itself that both funds the plan and evaluates the claim, but a conflict also exists where, as here, the plan administrator is an insurance company. For one thing, the employer's own conflict may extend to its selection of an insurance company to administer its plan. For another, ERISA imposeshigher-than-marketplace quality standards on insurers, requiring a plan administrator to “discharge [its] duties” in respect to discretionary claims processing “solely in the interests of the [plan's] participants and beneficiaries,” 29 U.S.C. § 1104(a)(1); underscoring the particular importance of accurate claims processing by insisting that administrators “provide a ‘full and fair review’ of claim denials,” Firestone, supra, at 113, 109 S.Ct. 948; and supplementing marketplace and regulatory controls with judicial review of individual claim denials, see § 1132(a)(1)(B). Finally, a legal rule that treats insurers and employers alike in respect to the existence of a conflict can nonetheless take account of different circumstances by treating the circumstances as diminishing the conflict's significance or severity in individual cases."

What is the significance of the conflict of interest factor? Read on:

"The significance of the conflict of interest factor will depend upon the circumstances of the particular case. Firestone's “weighed as a ‘factor’ ” language, 489 U.S., at 115, 109 S.Ct. 948, does not imply a change in the standard of review, say, from deferential to de novo. Nor should this Court overturn Firestone by adopting a rule that could bring about near universal de novo review of most ERISA plan claims denials. And it is not necessary or desirable for courts to create special burden-of-proof rules, or other special procedural or evidentiary rules, focused narrowly upon the evaluator/payor conflict. Firestone means what the word “factor” implies, namely, that judges reviewing a benefit denial's lawfulness may take account of several different considerations, conflict of interest being one. This kind of review is no stranger to the judicial system. Both trust law and administrative law ask judges to determine lawfulness by taking account of several different, often case-specific, factors, reaching a result by weighing all together. Any one factor will act as a tiebreaker when the others are closely balanced. Here, the Sixth Circuit gave the conflict some weight, but focused more heavily on other factors: that MetLife had encouraged Glenn to argue to the Social Security Administration that she could do no work, received the bulk of the benefits of her success in doing so (being entitled to receive an offset from her retroactive Social Security award), and then ignored the agency's finding in concluding that she could do sedentary work; and that MetLife had emphasized one medical report favoring denial of benefits, had deemphasized other reports suggesting a contrary conclusion, and had failed to provide its independent vocational and medical experts with all of the relevant evidence. These serious concerns, taken together with some degree of conflicting interests on MetLife's part, led the court to set aside MetLife's discretionary decision. There is nothing improper in the way this review was conducted. Finally, the Firestone standard's elucidation does not consist of detailed instructions, because there “are no talismanic words that can avoid the process of judgment.” Universal Camera Corp. v. NLRB, 340 U.S. 474, 489, 71 S.Ct. 456, 95 L.Ed. 456."

This "facts and circumstances"-type of review is one that certain Justices don't like--hence the dissent. But it is ultimately the test that the majority adopted. Therefore, conflicts of interest are not illegal or bad; they just need to be taken into consideration in making decisions regarding a plan administrator's decision to award benefits. Not really a big or earth-shattering decision...

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