The common law of ERISA is rife with odd decisions that likely made sense when issued, but, like opening Pandora’s box, led to unintended, unanticipated and arguably wrong rules of law when applied further down the road in additional cases. Heck, there are entire bodies of scholarship arguing that the very existence of a central element of all ERISA litigation and law – arbitrary and capricious review – was a poorly thought-out response to one case that hardened into a defining aspect of the entire ERISA legal regime (see here and here, for example). I have personally long thought, at least until the Supreme Court loosened up the rules for equitable relief under ERISA in Amara, that the entire body of case law on this subject was tying up the courts in knots for no reason other than the fact that the Supreme Court started down the wrong road with equitable relief at the outset, leading to decades of tortured decisions that sought to operate within the confines created by those rules.
Here’s another good one. Exhaustion of administrative remedies is a necessity for litigating denial of benefit claims under ERISA in, to my knowledge, every circuit. But what about if a participant wants to bring a breach of fiduciary duty claim involving stock valuation in an ESOP transaction? Does she first have to exhaust all administrative remedies? Apparently, in the 11th Circuit, she does – much to the chagrin of current members of that Court.
I have to assume there was a reason that the 11th Circuit first created the rule that a participant must exhaust administrative remedies before pursuing a breach of fiduciary duty claim, and it probably seemed like a good idea at the time. But it doesn’t appear to be now, and it isn’t consistent with the body of law from other circuits, and it doesn’t fit with any of the rationales normally provided for the existence of the administrative exhaustion requirement in the first place.
In any event, it’s a great read and a great story, which you can find here. It’s doubly interesting to me because it comes back to one of the most interesting issues to me in ERISA litigation, which is the propriety of stock valuations in private company ESOP transactions. I have litigated this issue and studied such valuations multiple times for other matters, and there is a lot of room for funny business in this area of the law. Given that, somehow it seems fitting that it would also be the soil for a dispute over an odd line of authority concerning administrative exhaustion under ERISA.