Halo v. Yale, the Second Circuit, Hamilton and Sideways Challenges to the Scope of Discretionary Review

In the musical Hamilton, everyone from Aaron Burr to Hamilton’s wife, Eliza, asks why Hamilton always “writes like he’s running out of time,” and the lyrics assign various pop psychology rationales to his urgency. This morning, though, after listening to the soundtrack again, I realized the real reason – he’s a lawyer! He’s always on deadline and running out of time!

Me too, which is why I haven’t had time to post regularly lately, but, between all the briefing and court hearings, I have been reading everything that has crossed my desk, making note of a number of recent decisions that I wanted to comment on. Interestingly though, the luxury of waiting to write on them – not of my choosing, but nonetheless – has allowed time for a theme to emerge, and it is this: we are seeing a series of cases coming out of major courts that are aggressively pushing back against the unbridled assertion of broad discretion by plan administrators operating under a grant of discretion. For years, commentators have argued that the breadth of discretionary review was excessive, and even many judges, while broadly applying that scope of review, have commented in dicta that the extent of that scope should be revisited by higher tribunals or Congress. I myself have, time and again, while winning cases on behalf of administrators, fiduciaries and sponsors, had the experience of judges ruling in favor of my clients noting at the same time that their figurative hands were figuratively tied by circuit and Supreme Court jurisprudence, and on occasion commenting that the claimant’s complaints in that regard were more properly addressed to Congress than to a district court judge.

But, to continue the Hamilton references, for every action there is an equal and opposite reaction. In Hamilton, Thomas Jefferson uses this law of physics to explain the breaking up into factions of George Washington’s cabinet. Here, though, I think it holds true as well as an explanation for a series of recent decisions that have placed some checks on the freedom of action of plan administrators operating under grants of discretion. Over time, in reaction to the evidentiary and substantive benefits granted to plans and their administrators by discretionary review, and in response to clever arguments made over the course of years by lawyers for participants seeking to undermine discretionary review, courts have begun developing doctrines that reign in, to a certain degree, the advantages granted to administrators by a discretionary grant. For the most part, these are not direct restrictions on the exercise of discretion itself, but instead consist of challenges to the applicability at all of discretion, such as in the form of decisions holding plan administrators to strict compliance with technical requirements of claims handling upon pain of losing the benefits granted them by discretionary review.

An excellent example of this phenomenon is the Second Circuit’s recent decision in Halo v. Yale Health Plan, Dir. of Benefits & Records Yale University, which addressed the impact on discretionary review of an administrator’s failure to strictly comply with the claims handling regulations of the Department of Labor, and which held that non-compliance could forfeit a grant of discretion. The Court held that “when denying a claim for benefits, a plan's failure to comply with the Department of Labor's claims-procedure regulation, 29 C.F.R. § 2560.503–1, will result in that claim being reviewed de novo in federal court, unless the plan has otherwise established procedures in full conformity with the regulation and can show that its failure to comply with the claims-procedure regulation in the processing of a particular claim was inadvertent and harmless. Moreover, the plan ‘bears the burden of proof on this issue since the party claiming deferential review should prove the predicate that justifies it.’”

This theme – of sideways, rather than frontal, attacks on the application of discretionary review – has cropped up in a number of recent decisions. With any luck, if I don’t run out of time, I will comment on those decisions and how they fit in this theme in upcoming posts.

Post A Comment / Question






Remember personal info?