Supreme Court Seeks Government View In ERISA Case Involving Venue Selection

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By Jacklyn Wille

June 1 — For the third time this term, the U.S. Supreme Court has asked for the government's view in a case arising under the Employee Retirement Income Security Act.

This case asks the justices to decide whether an ERISA plan sponsor can limit the courts in which a participant or beneficiary can file suit by including a venue selection clause in the terms of its plan.

Although the Department of Labor has long argued that venue selection clauses are incompatible with ERISA, a split panel of judges on the U.S. Court of Appeals for the Sixth Circuit held last fall that such clauses are valid and enforceable.

The Sixth Circuit's majority opinion was noteworthy for its refusal to extend any deference to the position taken by the Department of Labor in two recent amicusbriefs.

Mark D. DeBofsky, a plaintiff-side ERISA attorney with DeBofsky & Associates PC in Chicago, called this case “a case the Supreme Court really should hear.”

Attorneys Emphasize Importance of Case 

Both plaintiff- and defense-side attorneys told Bloomberg BNA on June 1 that this case presented important issues warranting Supreme Court review.

Joshua Bachrach, a partner with Wilson Elser Moskowitz Edelman & Dicker LLP's Philadelphia office, said the case underscores the importance of national uniformity with respect to ERISA plans.

“I think it definitely affects the plans themselves in a very big way,” said Bachrach, who represents insurers and plan sponsors. “The Sixth Circuit pointed out that one of the goals of ERISA is uniformity of decision making and plan interpretation. If you have all the cases involving a single plan and how that plan should be interpreted decided by a single district, then there’s going to be a greater chance of uniformity than if they’re scattered across the country in different jurisdictions.”

Bachrach expressed approval of the Sixth Circuit's decision to enforce the plan's venue selection clause.

“I think this case is important for the plans so that they can have their terms interpreted uniformly, which is the most important part of ERISA,” he said. “The Sixth Circuit's decision allows that to happen.”

DeBofsky, who called the Sixth Circuit's decision “problematic,” emphasized ERISA's goal of enabling plan beneficiaries to “redress their statutory rights closer to where they live and where their attorney of choice may be found.”

“The enforcement of venue selection clauses can impose a huge hardship on claimants seeking to enforce their right to benefits,” DeBofsky said. “In this case, the designated venue was the federal court in Cedar Rapids, Iowa. Mr. Smith lived nowhere near that venue; and the burden of locating counsel and litigating his claim for benefits in Cedar Rapids meant that he would be effectively barred from challenging the benefit denial.”

DeBofsky also took issue with the Sixth Circuit's unwillingness to defer to the Department of Labor's stated position.

In DeBofsky's view, the Sixth Circuit's ruling “undermines the Department's enforcement powers and makes it harder for the Department to protect participants in employee benefit plans and their beneficiaries.”

DeBofsky and Bachrach are not involved in the instant dispute.

Increased Focus on ERISA?

This call for the government's opinion represents the third time the Supreme Court has sought government input on ERISA cases this term, and at least the sixth time in the past two years.

An invitation to the solicitor general typically signals the justices' interest in a particular topic and is thought to increase the likelihood that the court will ultimately hear the case.

In this series of ERISA cases, the court has closely followed the solicitor's recommendations.

In Tibble v. Edison Int'l, 2015 BL 152750 (U.S. 2015), the Supreme Court followed the solicitor's advice to grant review on one question presented—which involved ERISA's statute of limitations and the fiduciary duty to monitor plan investments—and decline review on another question involving the proper standard of judicial review.

The court was equally receptive to the solicitor's opinion in Fifth Third Bancorp v. Dudenhoeffer, 134 S.Ct. 2459, 58 EBC 1405 (U.S 2014). Once again, the court followed the solicitor's recommendation of reviewing the first question presented—involving the pro-fiduciary presumption of prudence applicable to plans that invest in employer stock—while declining to review a related question about whether plan fiduciaries can be liable for misstatements made in filings with the Securities and Exchange Commission.

The justices also listened to the solicitor's advice with respect to the scope of ERISA's equitable remedies provision. In 2014, the solicitor advised the court to pass on Thurber v. Aetna Life Ins. Co., U.S., No. 13-130, cert. denied 6/9/14, calling the case a “poor vehicle” for resolving the circuit split surrounding equitable tracing.

Two years later, the court selected another vehicle for addressing this issue, granting review in Montanile v. Bd. of Trs. of Nat'l Elevator Indus. Health Benefit Plan, U.S., No. 14-723, cert. granted 3/30/15. The court is expected to hear oral arguments in this case during its next term.

More recently, the Supreme Court requested government input on a case asking whether Vermont's statewide health claims database runs afoul of ERISA's broad power to preempt state laws (Gobeille v. Liberty Mut. Ins. Co., U.S., No. 14-818, invitation to file brief 12/15/14).

Last month, the solicitor advised the high court not to hear the case, reasoning that it would be better to wait for other federal courts to consider similar state databases before wading into the dispute.

Just last week, the solicitor advised the Supreme Court to deny review in a case asking how ERISA plan participants can demonstrate that a fiduciary's alleged misconduct caused losses to the relevant plan (RJR Pension Inv. Comm. v. Tatum, U.S., No. 14-656, amicus brief filed, 5/26/15). The Supreme Court had asked for the government's view in this case in March.

The Supreme Court has yet to announce whether it will hear the Gobeille or Tatum cases.

Despite this string of cases, Bachrach said the solicitor general's opinion on the Smith case ultimately may not determine whether the justices decide to hear the case. He said that while it “makes sense” for the court to seek out as many views on ERISA issues as possible—particular from the agency intimately involved in ERISA interpretation and regulation—there are still many instances in which the Supreme Court hasn't followed the solicitor's advice on whether to hear a particular case.

Venue Selection Clauses 

The instant case originated as a dispute over post-merger retirement benefits between a former Commonwealth General Corp. employee and the company's corporate successor, AEGON USA Inc.

The employee filed an action for benefits in his home state of Kentucky, but the U.S. District Court for the Western District of Kentucky dismissed the suit for improper venue in 2013.

In so ruling, the Kentucky federal court found that the AEGON pension plan's venue selection clause—which required any litigation to be brought in federal court in Cedar Rapids, Iowa—was valid and enforceable.

No Deference to DOL 

The Department of Labor filed an amicus brief urging the Sixth Circuit to reverse this ruling. In particular, the DOL argued that venue selection clauses in ERISA plans—which prohibit plan beneficiaries from filing lawsuits in courts other than those specifically approved by the plan—are inconsistent with ERISA's goal of providing participants and beneficiaries with access to the courts.

Although the three-judge panel hearing the case fractured on this question, the majority held that the department's position wasn't entitled to judicial deference. The majority took special notice of the fact that the DOL only advanced its position in two amicus briefs, rather than through official guidance such as interpretive bulletins.

On that point, the majority said the department wasn't “acting with the force of law” when it filed amicus briefs setting forth its position on venue selection clauses. Further, the majority found that the DOL had no more expertise in the area of venue selection clauses than a court did, meaning that one of the biggest policy rationales for agency deference was missing.

In the other case in which the DOL filed an amicus brief arguing against venue selection clauses, the U.S. Court of Appeals for the Tenth Circuit declined to address the department's arguments, deciding the case on other grounds (Mozingo v. Trend Personnel Servs., 504 Fed.Appx. 753 (10th Cir. 2012) (unpublished)).

Court Enforces Clause 

After declining to defer to the DOL's position on venue selection clauses, the majority went on to find that the clause involved in the instant case was valid and enforceable.

According to the majority, most courts have upheld venue selection clauses by reasoning that “if Congress had wanted to prevent private parties from waiving ERISA's venue provision, Congress could have specifically prohibited such action.”

Further, the majority said that it would be “illogical” for courts to enforce mandatory arbitration clauses—which they have done—while declining to enforce venue selection clauses.

Judge Eric L. Clay wrote a dissenting opinion in which he took issue with the venue selection clause in AEGON's plan. According to Clay, this clause “forbids Plaintiff from bringing a suit for benefits anywhere other than Cedar Rapids, Iowa—a venue that is located more than 500 miles away from Plaintiff's home and place of work, and with which Plaintiff has no connection.”

In Clay's view, this “restrictive clause” conflicts with ERISA's broad venue provision and undermines ERISA's public policy against imposing obstacles on beneficiaries seeking benefits.

The petition for Supreme Court review of the Smith case was filed by Matthew W.H. Wessler, Leah M. Nicholls and Jennifer Bennett of Public Justice PC, Washington, and Michael D. Grabhorn, Louisville, Ky. The petition asks whether ERISA's special venue provision and a plaintiff's choice of venue under that provision may be abrogated by a more restrictive venue-selection clause in an ERISA plan.

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

Text of the Sixth Circuit's opinion is at http://www.bloomberglaw.com/public/document/Smith_v_AEGON_Cos_Pension_Plan_No_135492_2014_BL_286668_6th_Cir_O.