Can an ERISA Plan Force You to Sue in the Court They Choose?


 A federal judge found that a forum selection clause in an employer-sponsored life insurance plan was unenforceable, and thus a claimant who lived in southern Illinois could not be forced to litigate her case in Houston, Texas.

This has not been the opinion of a majority of the courts who have decided this issue.

However, in Harris v. BP Corp. N. Am. Inc., Chief Judge Ruben Castillo of the U.S. District Court for the Northern District of Illinois on July 8 ruled that “the forum-selection clause contravenes the strong public policy set forth in ERISA.”

While an employee of BP, Darlene Harris purchased a life insurance policy on her then-husband. The policy was an employee welfare benefit plan under ERISA. Harris and her husband divorced, and she notified BP accordingly, but BP continued to deduct policy premiums from her wages. Harris retired after seven years, and further continued to pay premiums for another 15 years after her retirement. After her ex-husband died, she filed a claim for life insurance benefits, and B.P. refused to pay her claim, saying that the coverage should have ended when she divorced.

Harris sued MetLife (the plan administrator) and BP under ERISA to seek recovery of the $100,000 life insurance policy.

BP moved to transfer the case to Harris County, Texas, pursuant to a forum selection clause in the plan. The court rejected this attempt, siding with the minority position—championed by the Department of Labor—that forum selection clauses are incompatible with the goals and policies underlying ERISA.

The majority of courts have held that forum selection clauses are consistent with Section 502(e)(2) of ERISA (which says an action may be brought in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found) although some district courts have found that forum-selection clauses can’t be enforced in ERISA cases.

In 2014, the U.S. Court of Appeals for the Sixth Circuit in Smith v. AEGON Cos. Pension Plan upheld a plan's forum selection clause, saying, among other things, that the DOL’s stated position against forum selection clauses was not entitled to judicial deference, the DOL had advanced this position only in two amicus briefs and never through formal rulemaking or interpretive guidance, and ERISA does not preclude forum selection clauses. The Supreme Court declined to review the case.

Mark D. DeBofsky of DeBofsky & Associates, P.C. in Chicago, represented Harris. DeBofsky told Bloomberg BNA July 27 that his firm rarely deals with forum selection clauses in the cases they handle because for insured plans, the insurers have to make themselves amenable to suit in all jurisdictions.

DeBofsky said “However, we are aware that such clauses have been problematic with respect to a number of self-funded plans. The problem with such clauses is that it can make a court challenge of a denied benefit claim practically impossible if a claimant in one state has to locate counsel elsewhere to litigate the dispute.  If there is a trial, there would also be travel and other expenses which could make the cost of litigation prohibitive.  We agree with Chief Judge Castillo’s analysis in relation to public policy and we anticipate that his opinion will be influential as more of these disputes arise in the wake of the 6th Cir. Smith v. Aegon case that went the other way, and which the Supreme Court declined to hear.  It is hard to tell whether Harris represents a ‘trend’ because there have been a number of contrary rulings; and until the Supreme Court finally steps in, this issue is likely to persist.”

Norman Stein, professor of law at Drexel University in Philadelphia, told Bloomberg BNA July 29 that this is part of the settlor/fiduciary problem (where a plan sponsor is acting as a settlor in designing a plan’s terms and thus does not fall under the fiduciary rules), and that it’s possible that the Supreme Court will take another case that deals with this doctrine and suggest that one way or another this whole thing is either correct or incorrect.

Stein said that enforcing the forum selection clause is clearly incorrect. “If anything seems to violate the expectation that Congress had in 1974 to make it easy for participants, you can’t be a nationwide company and limit venue,” he said.

See related story: BP Can't Dictate Forum in ERISA Benefits Lawsuit

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