Dive in Plaintiff Victories Not Seen in ERISA Cases

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By Jacklyn Wille

Parties who file civil lawsuits in federal court have seen their chances of winning drop dramatically since 1985, but lawsuits filed under ERISA have seen a much smaller change in outcome, according to new research.

Plaintiffs in civil lawsuits won nearly 70 percent of the cases that were decided by federal district courts in 1985, according to a June 27 research paper by University of Connecticut Law School professors Alexandra D. Lahav and Peter Siegelman. That “win rate” dropped dramatically between 1985 and 1995, landing at about 33 percent as of 2009, the paper says. The authors considered—and largely rejected—several possible explanations for this change, saying ultimately that more study is needed.

The change in plaintiff win rate was much less pronounced in cases filed under the Employee Retirement Income Security Act. According to the researchers, ERISA plaintiffs had an 84.2 percent chance of winning cases in 1985 and an 81.1 percent chance of victory in 2009. The number of ERISA cases studied—which included only those resolved by judicial action and not through settlement or voluntary dismissal—jumped from 1,477 cases terminated in 1985 to 3,019 cases terminated in 2009.

Win Rate Can Be Misleading

Michelle Roberts Bartolic, a partner with Roberts Bartolic LLP in Alameda, Calif., who represents individuals in disability benefits disputes, said the high plaintiff win rate in ERISA lawsuits shouldn’t be interpreted to mean that individuals who sue over denied benefits are often victorious.

“From the perspective of litigating benefit claims, plaintiffs—including plan participants—don’t actually do that well and they never really have,” Roberts Bartolic told Bloomberg BNA.

Roberts Bartolic pointed out that a significant percentage of ERISA cases involve multiemployer benefit funds suing employers over delinquent fund contributions. These cases, in which the benefit fund is the plaintiff, frequently result in default judgments, which would be coded as plaintiff wins, Roberts Bartolic said.

Robert Rachal, a defense-side ERISA attorney and partner with Holifield Janich Rachal & Associates in New Orleans, echoed this sentiment, saying that lawsuits over multiemployer fund contributions are like other collection actions, in that they often skew toward the plaintiff.

Indeed, a 2012 research paper found that just over half the ERISA cases filed between 2006 and 2010 involved claims for multiemployer benefit fund contributions. The paper was published in the ABA Journal of Labor & Employment Law by Sean M. Anderson of the University of Illinois College of Law.

Another factor potentially obscured by the plaintiff win rate is that ERISA-governed benefit plans are often plaintiffs in lawsuits seeking to recoup benefits previously paid, either to correct an error or to share in a personal injury settlement. Because plans and individual participants can be on “both sides of the ‘V’” in lawsuits over benefits, it would unwise to interpret the relatively high plaintiff win rate identified in this paper as a clear victory for individual plan participants, Charles F. Seemann III, an employee benefits litigator and a principal with Jackson Lewis P.C. in New Orleans, told Bloomberg BNA.

Changes in Plaintiffs’ Bar

Rachal also cited the “sophisticated ERISA plaintiffs’ bar” that has developed over the past few decades as a potential factor driving the win rate, along with plaintiffs and claims that are frequently sympathetic.

“Watching this area of the law since 1993 or so, what’s continued to develop and grow in the ERISA area is a really sophisticated plaintiffs’ bar that’s also very knowledgeable,” Rachal told Bloomberg BNA. “You couple that with their sympathetic plaintiffs, who are often longtime employees seeking retirement, health, or disability benefits. Judges tend to listen hard to their claims.”

If more high-quality litigators are gravitating toward ERISA work, it might be because changes in federal law have driven them away from other types of cases, including securities class actions. Seemann told Bloomberg BNA that the Private Securities Litigation Reform Act—a 1995 law making it harder to bring and sustain securities lawsuits—drove a number of plaintiff-side litigators away from securities and toward other areas of the law, including ERISA.

This could help explain both a plaintiff-friendly win rate and an increase in ERISA cases reaching adjudication, Seemann said.

What’s Ahead

The study doesn’t consider cases finalized after 2009, which means it fails to reflect legal changes that may make plaintiff victories even more likely in some cases, Roberts Bartolic said.

One change not clearly captured by this data set is the recent move by some states to adopt laws banning discretionary clauses in insurance contracts. These laws generally force courts to review an insurer’s decision denying benefits with more skepticism than would be used under the “abuse of discretion” standard that often applies in benefit denial cases. California’s ban on discretionary clauses went into effect in 2012, and other states have followed suit.

These changes give individuals challenging benefit denials a better chance of prevailing in court, Roberts Bartolic said. It’s possible that the plaintiff win rate identified by the researchers—81.1 percent in ERISA cases as of 2009—could be even higher today, given this effort to change the judicial standard of review in benefit denial cases, Roberts Bartolic said.

Words of Caution

Although the paper’s findings are eye-catching, several attorneys who spoke to Bloomberg BNA cautioned against reading too much into them.

“The category “ERISA” covers a lot of different actions—denial-of-benefits cases, excessive-fee cases, ESOP prudence cases, etc. Benefits cases can vary considerably in their underlying facts, and are themselves substantially different from fee or ESOP or other ERISA class cases,” Samuel Bonderoff, a plaintiff-side ERISA litigator and a partner with Zamansky in New York, told Bloomberg BNA in an email. “Therefore, regardless of the overall trend in win percentages for cases in this category, it would be very difficult to make any inferences or draw any conclusions about the causes of that trend (whatever its vector may be).”

For his part, Seemann suggested taking this research with a grain of salt.

“I’m skeptical of the idea that there could be a simple explanation for such a complex issue, both with respect to ERISA cases and federal court cases in general,” Seemann said. “There are many potential explanations for this data that don’t warrant suspicion or concern about problems in the federal justice system.”

The study is titled “The Curious Incident of the Falling Win Rate.”

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

For More Information

The paper is available at https://ssrn.com/abstract=2993423.

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