Adapting to Glenn in the Second Circuit

I noticed in my statistics package for the blog that this past Thursday, Christmas Day, had the lowest readership of this blog in months. Come on people, ERISA is for everyday, not just workdays! And here’s why. The day before Christmas, the Second Circuit issued its ruling adjusting its case law on benefit determinations where a structural conflict of interest exists to accord with the Supreme Court’s recent ruling in MetLife v. Glenn. In a well reasoned and highly logical opinion, the court first acknowledged that its prior case law on the issue was no longer proper, in light of the Supreme Court’s ruling, because it had gone too far: the Second Circuit previously held that a structural conflict of interest meant that de novo review applied, even if the plan documents granted the administrator discretionary authority over benefit determinations, which normally invokes a deferential standard of court review. However, as the Second Circuit recognized, the Supreme Court’s ruling in Glenn meant that a structural conflict of interest could not be the basis for abandoning the deferential standard of review, but that, instead, it could only be considered as a factor to be weighed in applying the deferential standard to decide whether the administrator’s decision should be set aside as an abuse of discretion. Nothing controversial or particularly exciting there, as it reflects an accurate, almost verbatim reading of Glenn, although it is interesting to watch the way the Glenn decision, seen as one that broadens the protections available to plan participants, actually, in at least some instances such as this one in the Second Circuit, requires a lessening of the protections previously granted to participants in such jurisdictions in cases involving structural conflicts of interest. The Second Circuit previously allowed such a conflict to change the standard of review entirely, all the way back to a de novo review, which the Second Circuit, in its most recent ruling, now recognizes is not allowed under Glenn.

What is more interesting, though, is how the Second Circuit applied the new standard. By relying on the leeway the Supreme Court in Glenn granted courts to determine, based on the actual facts of the claim and the parties’ activities, how much weight to give to the conflict, the Second Circuit, in essence, applied what may as well have been de novo review to decide the case, only without putting such a label on it. Instead, accepting the Supreme Court’s invitation to review the actual facts of a particular case to decide how much weight to put on a conflict, the Second Circuit gave great weight - essentially outcome determinative weight - to the conflict, in a way that essentially mirrored de novo review.

The case is McCauley v. First Unum.