Attorneys Reflect on 40 Years of ERISA's Biggest Court Rulings

For the special report, ERISA @40, Jacklyn Wille of Bloomberg BNA invited attorneys who represent plan participants, plan sponsors and industry groups to reflect on some of the most significant court decisions decided under ERISA over the past 40 years. Each was asked, “How did this case change the landscape of ERISA litigation, plan design or plan administration?” 

1. Mass. Mutual Life Ins. Co. v. Russell         

Massachusetts Mutual Life Insurance Co. v. Russell sent participants down the rabbit hole to time travel to the days of yore to figure out whether Congress really meant to make it harder for participants to get relief after ERISA was passed. Not only did Russell limit remedies, but it also muddied the waters as to what was the proper section of ERISA to sue under for relief. Forty years and 9 Supreme Court cases later (depending on how you count), participants are still litigating what they can sue and ask for. So much for a simple system for protecting participants.          

— Mary Ellen Signorille, senior attorney at AARP Foundation Litigation, Washington, discussing Mass. Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 6 EBC 1733 (U.S. 1985)          

2. Fort Halifax Packing Co., Inc. v. Coyne          

The Fort Halifax case was a preemption case involving a challenge to a Maine statute that required employers who shut down operations to pay a one-time severance benefit.  The court held that ERISA did not preempt the Maine statute because it ‘neither established nor required an employer to maintain a plan' and, therefore, does not ‘relate to' an employee benefit plan. The court's decision provided important guidance on the types of state laws that could trigger ERISA preemption, however, the most significant part of the court's opinion was that it established a definition of what constitutes an employee benefit plan.  The court held that an employee benefit plan requires an ‘ongoing administrative scheme,' and ‘to do little more than write a check hardly constitutes the operation of a benefit plan.' The court's decision caught a lot of employers by surprise because many had severance policies and executive agreements that were never previously thought to be covered by ERISA.  The court's definition of employee benefit plan in Fort Halifax has had a huge and lasting impact on how employers draft and administer their employee benefit plans.           

— Jonathan G. Rose, partner at Alston &  Bird LLP, Washington, discussing Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 8 EBC 1729 (U.S. 1987)           

3. Firestone Tire &  Rubber Co. v. Bruch       

Approximately 15 years after the enactment of ERISA, the Supreme Court clarified the standards for courts to apply in evaluating participant benefit claim lawsuits. The court held that, consistent with traditional trust law, courts should apply a de novo review standard unless the plan provides broad discretionary authority for the administrator or other fiduciary to resolve benefit disputes, interpret the plan, and clarify ambiguities. If the discretionary language is included and the administrator or fiduciary was operating in accordance with it, the plan decision should be upheld by a court unless the decision is considered arbitrary and capricious or unreasonable or the administrator or fiduciary was operating under a material conflict of interest that affected the decision. This is commonly known as the   Firestone deference standard (i.e., deference to the decision or interpretation of the administrator or other fiduciary). Since the 1989 decision, most plans have been amended to include the discretionary language in order to assure application of the deferential standard. The Firestone case was a landmark decision for both plaintiffs and defendants in benefit claim cases, has significantly affected the process and outcome of litigation, and has probably resulted in the early dismissal of many cases. A current case (Tibble v. Edison) seeking certiorari before the Supreme Court is requesting the court to determine whether the Firestonedeference standard applies to non-claim matters (i.e. not a 502(a)(1)(B) claim), including decisions by administrators and fiduciaries involving fiduciary matters, interpretations and decisions.          

— Scott J. Macey, president and CEO of ERISA Industry Committee, Washington, discussing Firestone Tire &  Rubber Co. v. Bruch, 489 U.S. 101, 10 EBC 1873 (U.S. 1989)         

4. Mertens v. Hewitt Assocs. 

The Supreme Court's decision in Mertens regarding the ‘equitable remedies' available under ERISA Section 502(a)(3) rendered ERISA's fiduciary duty provisions toothless in cases not involving losses to employee benefit plans themselves. Under Justice Scalia's reading of selected portions of certain treatises (which came to be called ‘the sacred texts' by practitioners), no monetary relief was available under Section 502(a)(3). While monetary remedies remained available to employee benefit plans under Section 502(a)(2), plan fiduciaries were free to, among other things, lie to plan participants so long as the plan suffered no losses. See, e.g., Farr v. U.S. West, 151 F.3d 908 (9th Cir. 1998). Fortunately, in its more recent opinion in CIGNA Corp. v. Amara, the Supreme Court stepped away from the cramped analysis of Mertens. As a result, the scope of equitable remedies against a breaching fiduciary is broadening, and even monetary relief in the form of ‘surcharge' may be available. 

— Jeffrey Lewis, shareholder and founding partner of Lewis, Feinberg, Lee, Renaker &  Jackson PC, Oakland, Calif., discussing Mertens v. Hewitt Assocs., 508 U.S. 248, 16 EBC 2169 (U.S. 1993) 

5. Curtiss-Wright Corp. v. Schoonejongen 

In Curtiss-Wright Corp. v. Schoonejongen, the Supreme Court underscored the critical importance of following plan amendment procedures.  Reviewing the lower courts' determination that a plan amendment ending post-retirement health benefits was invalid because the plan did not include an amendment procedure, the Court held that the simple reference to the employer's authority in that regard was sufficient.  More specifically, the Court opined that, in such circumstances, application of state corporate law would control and, that said, the corporation's actions were sufficient to modify the plan terms, even in the absence of specific plan requirements.  Subsequent lower court opinions have invalidated plan amendments, based on Curtiss-Wright, for failing to abide the plan's terms.  All should remember that, before looking to amend the plan, the relevant provisions should be carefully reviewed and, where the provisions are too onerous, they should be jettisoned in favor of a less stringent approach, so that the principle set forth in Curtiss-Wright can be invoked (if litigation should ensue).

— Brian T. Ortelere, partner at Morgan, Lewis &  Bockius LLP, Philadelphia, discussing Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 18 EBC 2841 (U.S. 1995)

6. Varity Corp v. Howe   

How Varity Corp. v. Howe changed the landscape of ERISA litigation is captured in the following Haiku:          

ERISA provides
Fiduciary breaches
Relief for just one

Varity’s holding that ERISA authorizes individualized equitable relief caused by plan administrators' breaches of fiduciary duty expanded the theories of liability available to ERISA plaintiffs on the one hand, but on the other hand limited the available causes of action by (arguably) foreclosing the availability of appropriate equitable relief in circumstances where ERISA provided for (in)adequate relief of a beneficiary's injury.  Varity’s specter continues to emerge in litigation presenting concurrent Section 502(a)(1)(B) and 502(a)(3) claims involving plan benefits.  Some courts have dismissed the 502(a)(3) claim where a plaintiff has alleged a cognizable Section 502(a)(1)(B) claim, while others have permitted both to move forward if the type of equitable redress sought under 502(a)(3) is not available under 502(a)(1)(B).  Until the Supremes state explicitly that both claims can never be brought together, plaintiff's attorneys will always try to marry the two.

— Michelle L. Roberts, partner at Springer &  Roberts LLP, Oakland, Calif., discussing Varity Corp. v. Howe, 516 U.S. 489, 19 EBC 2761 (U.S. 1996)

7. Great-West Life &  Annuity Ins. Co. v. Knudson 

In Great-West Life & Annuity v. Knudson, the Court once again underscored the distinction between equitable remedies, which are authorized by ERISA, and legal ones, which are not. In doing so, the Court admonished lower courts to reject ‘lawyerly inventiveness' attempting to pass off monetary awards as equitable ones. Some courts interpreted Great West as requiring remarkably counter-intuitive outcomes–for example, dismissal of a claim based on clearly established fiduciary misrepresentation, simply because the district judge could not discern any ‘equitable’ remedy.  In my view, these interpretations eventually led a majority of the Court—in CIGNA Corp. v. Amara—to detour into identifying potential ERISA remedies in a case where there was no remedies issue before the Court. The interpretation of ERISA's remedial authorization remains a critically important issue in ERISA litigation today.

— Charles F. Seemann III, shareholder at Jackson Lewis PC, New Orleans, discussing Great-West Life &  Annuity Ins. Co. v. Knudson, 534 U.S. 204, 27 EBC 1065 (U.S. 2002) (6 PBD, 1/9/02)

Excerpted from a story that ran in Pension & Benefits Daily (9/9/2014).