More from the Academy on ERISA Standards of Review and the Conflicted Decision Maker

Allright, here’s another law review article, this time out of the Oklahoma Law Review by way of Workplace Prof, complaining about the standards of review currently applied by the courts to ERISA benefit denial cases. Although I haven’t yet read it - I just finished Langbein’s on the same topic, and I’m not ready to delve into another article on the same subject just yet -the article proceeds as follows:

Part II below provides background analysis of the ERISA standard of review controversy. This Part illustrates the continuing failure of the circuit courts to produce a consistent and just claims process in employee benefit cases where courts defer to self-interested plan administrators. The analysis begins with Firestone and its pronouncement that trust law should guide review of challenged benefit claim denials.

Next, Part II argues that the lower courts have struggled to tease a clear message from Firestone's "opaque" standard of review analysis. In particular, this Part explores the Tenth Circuit Court of Appeals's attempt in Fought to cure this wounded process, and we describe the unfortunate failure of the Tenth Circuit to discover a trust law-based antidote to Firestone.

Finally, Part III of this comment works within the parameters of Firestone to re-introduce the historic trust law-based solution to the problem of self- dealing fiduciaries: the no-further-inquiry rule. Here the article capitalizes on prolific trust law and ERISA scholar Professor John H. Langbein's recent examination of the no-further-inquiry rule. Professor Langbein's analysis is adapted to support a thesis that he did not reach, by applying his discussion of the no-further-inquiry rule to ERISA benefit cases. This Part describes how the summary adjudicative process, invented by contemporary ERISA courts under the guise of deferential review, mimics the archaic circumstances existing in courts of equity that spawned the no-further-inquiry rule.

Finally, Part IV concludes that ERISA courts should apply the no-further-inquiry rule to irrebuttably counter the mischief that courts have historically presumed attach to the actions of self-dealing fiduciaries. Ultimately, by application of the no-further-inquiry rule in ERISA benefit claims, courts can, and should, return federal Article III trial judges to their role as neutral, de novo referees in plan participant claims for benefits due under ERISA.

There is an assumption, as one can see from this, in the academic literature that self-interested fiduciaries are up to no good, can’t be trusted, and won’t be caught by the current standards of review applied by the courts. Poppycock I said, in essence, here. But this emphasis on an academic and hypothetical level as to whether the applicable standards of review are appropriate raises an interesting real world question: namely, how often would court decisions reached in cases decided under the arbitrary and capricious standard (a level of review that law school faculty appear to uniformly find fault with when applied by a conflicted decision maker) be different if the court had instead applied the de novo standard of review (which the academy seems to uniformly prefer)? I wouldn’t mind seeing an article that took fifty denied benefit cases and presented the findings of such a review. With courts applying an ever more searching scope of review when applying the arbitrary and capricious standard of review than they may have done in the past, I don’t see that high a percentage of cases, either in my own practice or in the reported decisions, that would end up with a different result under one standard of review than under the other. The litigation over the case, including the extent of discovery and the expense, might change, but I am skeptical whether the outcome would be different if you changed the standard of review.

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