I suspect that no one understands as well as an ERISA litigator the extent to which the rules governing judicial decision making either determine the outcome of a dispute or, at a minimum, dictate a specific and limited range of potential outcomes as well as establish the respective odds of each. In the context of denial of benefit claims under ERISA, there is simply no question that the determination of the standard of review for the dispute – whether it is discretionary review or instead de novo review – effectively dictates either the outcome of the case or the odds of any of a limited number of potential outcomes occurring. In fact, whether evaluating the strength of a potential case as a plaintiff’s lawyer for a participant or the strength of the defense as counsel to a plan administrator, the standard of review to be applied by the court is the first issue considered.

When the Supreme Court suggests in Loper Bright Enterprises v. Raimondo that it is simply resetting the rules of the road, or in the hackneyed metaphor, establishing the strike zone for calling balls and strikes, by replacing Chevron deference with a different decision making hermeneutic, ERISA litigators know that they are doing a lot more than that, and instead are altering outcomes in future regulatory disputes in predictable ways, simply by changing the rules for judicial decision making.

In the context of ERISA, I generally don’t believe uncertainty is beneficial to participants, plan sponsors or plan fiduciaries, and the increased questioning of the validity of regulatory initiatives that will be ushered in by the new approach to testing regulations doesn’t benefit any of those three groups. As I discussed in Robert Steyer’s article in Pension & Investments titled “The Litigation Floodgates Are Expected To Open. How The Supreme Court’s Chevron Deference Ruling Expands Judges’ Roles” over the long holiday weekend:

Replacing regulators’ expertise in highly technical matters with judges who lack such expertise is “not a recipe for predictability,” said Stephen Rosenberg, a partner with The Wagner Law Group.

“From here out, essentially any complex regulatory action or detailed, complicated body of rules is and will be only tentative, subject to whatever any particular judge believes is appropriate, in terms of whether the statutory language allows for the action or regulation,” Rosenberg said.

I expanded on this view in Robert’s subsequent article, “Defined Contribution Is Rife With Legal And Management Challenges. Post-Chevron, It Could Get Worse,” when I explained:

The Supreme Court’s majority opinion said scrapping the Chevron deference would create more predictability for businesses because they wouldn’t be whipsawed by the changing policies of changing political administrations — an assertion that ERISA attorney Stephen Rosenberg said is misguided.

“The implicit and explicit suggestion that doing away with it will improve the ability of regulated actors to understand their responsibilities and project out what their legal obligations are, seems to me to be wildly inaccurate in the context of entities operating under ERISA,” said Rosenberg, a partner in the Wagner Law Group.

“Predictability, uniformity and consistency are a tremendous boon to the regulated entities that make up the ERISA marketplace,” Rosenberg said.

“That is going to be a lot harder to do if, as is now going to be the case, the meaning or enforceability of a given regulatory initiative is always in doubt and its long-term viability can never be assumed,” he said. “I don’t personally see the unpredictability that will be ushered in by the court’s decision as any type of a boon to any of the players in the ERISA universe.”

There are plenty of regulations and agency action that are poorly conceived, and quite often unlikely to be what Congress actually would have intended if it had, collectively, ever actually formed an opinion (it’s kind of a ridiculous legal fiction to act as though Congress formed some form of “intent” with regard to a particular regulatory approach to the operational details of the legislation it enacts). Either way, though, the uncertainty of this new approach isn’t the best fit for the operational realities of ERISA plans.

One of the more interesting things to me about the demise of Chevron deference in the context of ERISA is it’s impact on the private attorney general aspect of ERISA, where so much of the change in standards for fiduciary conduct is driven not by governmental action, but instead by the class action bar (and the settlements and court rulings that the suits they file trigger). Does decreasing the ability of the Department of Labor to regulate the conduct of ERISA plans and their fiduciaries just increase the already outsized significance in this area of the class action bar? Time will tell, but you can tell by the fact that I ask the question, what I think the answer will likely turn out to be.

This is a fascinating story of risk management and the commodification of ERISA class action litigation. It’s the story of a $2.45 million settlement of a class action concerning the alleged use of outdated mortality tables in a pension plan. For many years, including by me in this blog, ERISA lawyers and commentators have been warning that class action risks and exposures were going to migrate downstream, from large dollar value cases against large plans, to smaller exposures, smaller plans and smaller recoveries. This is a perfect example – the cases that dominated ERISA exposure a decade ago concerning excessive fees, church plan status and the like involved potential recoveries so large they warranted no holds barred litigation on both sides of the aisle. As this settlement shows, however, those days are long since past and most ERISA class action litigation now involves either smaller stakes or routinized, commoditized litigation, similar to other areas of class action and/or commercial litigation. Employers, plan sponsors and plan fiduciaries should keep that in mind, particularly with regard to risk management. They should, for instance, plan for this change in building out their insurance programs. For example, if most cases, even class actions, arising from their retirement plans can now be expected to be of relatively small value, rather than of bet the company valuations, what should their policy limits, deductibles or retentions, and terms concerning control of defense and settlement decisions look like? And to what extent should they save, or instead spend, premium dollars, to get certain terms in this regard? The answers to this are grist for another day.

At this point in my career, I have litigated just about every type of ERISA claim I can think of, from denied benefit claims to deferred compensation/top hat claims to class actions. I have even made new law in the still developing area of equitable relief under ERISA. I got my start in ERISA litigation decades ago, though, as a long term disability (“LTD” to the cognoscenti) defense lawyer representing one of the major insurers providing disability benefits to employers. The private insurance disability benefit system, where the insurer first processes an administrative claim and appeal, and then any denial of the benefit is litigated in court, typically under deferential review, operates very well with regard to objectively clear causes of disability, such as a clearly diagnosed and precisely diagnosable disease. But it tends to run into problems, leading to more and more litigation, when more subjective disabling conditions are at issue. For many years, this dynamic showed itself in particular with regard to claims for LTD benefits arising from fibromyalgia and chronic fatigue syndrome, but over time, as the judicial treatment of disability claims based on these causes became more nuanced and sophisticated, the handling of these types of claims became more routine, both within disability insurance carriers and within the courts.

I was reminded of this by this editorial in the Washington Post (subscription likely required) concerning the potential future uptick in disability claims arising from diagnoses of long covid. While the article is targeted at the question of its impact on social security disability payments, it of course raises the same issue with regard to LTD insurance and claims. For me, it raised the question of how insurers and the courts will respond to a substantial increase in such claims, simply given that past history has shown that LTD claims arising from a diagnosis with a great deal of room for subjective interpretation can be complicated for insurers to decide and for courts to resolve. My own brief research into the question found only one published decision to date concerning a claim for LTD coverage based on long covid, and I cannot say that I have seen such decisions referenced in the ERISA reporting that typically crosses my desk. In fact, Chicago plaintiff lawyer Mark DeBofsky’s recent blog post on the subject addresses the details of making such claims but, by the absence of any reference to case law on the subject, suggests to me we are still aways from such claims making their way through the court system.

When I was a very junior (probably first year) lawyer, one of the founding deans of the modern policyholder practice, Jerry Oshinsky, when he found out I was working on the concept of partial equitable subrogation in the context of insurance losses, laughed and said he considered the entire subject to be “black magic,” more driven by the projected outcome than by the case law. I have thought about that comment often in many contexts related to insurance law doctrines over the years, probably none so much as with regard to the follow the fortunes doctrine in reinsurance. A while back, I tried a reinsurance case in state court that involved a relatively recent environmental loss that triggered policies, with corresponding reinsurance, from decades ago, but the reinsurance contract had long since been lost, leading to a trial akin to one involving a lost policy. The court eventually simply used the follow the fortunes doctrine to resolve the entire matter, after a week long trial, under circumstances where it almost certainly should not have had that impact. The phrase “follow the fortunes,” though, was enough, almost as if it had the force of “black magic,” to render all of the evidence at trial, other than the testimony that the contract must have included such a clause, meaningless.

I mention this because I really enjoyed longtime reinsurance lawyer Robert Hall’s paper on whether follow the fortunes clauses should be implied into the language of reinsurance contracts, which you can find here. That’s effectively what the trial court did in my case a few years back, and then from there used the doctrine to decide the entire dispute. Black magic indeed.

I wanted to pass along this advisory from Davis Wright Tremaine which argues for legislative action to, in essence, raise the bar that plaintiffs have to hurdle to prosecute an ERISA excessive fee class action. What I like most about it is the authors do not simply complain and ask for legislative intervention, but instead detail a specific legislated presumption of prudence that could be enacted for this purpose. There is a lot I could and would like to say on this matter, but for today I want to limit myself to one point, although I may come back and discuss this topic more in future posts.

Davis Wright Tremaine’s advisory picks up on a common complaint at this point with regard to excessive fee cases against ERISA governed plans, particularly after the trustees of Boston College demonstrated, at summary judgment, an arguably prudent process in Sellers but nonetheless either will have to settle or try the action because questions of fact existed precluding summary judgment: that in cases where the plan sponsor demonstrably acted reasonably well but not necessarily perfectly, the cases risk being nothing more than a tax on insurers and plan sponsors. I talked about this here and here, and in particular, the Fid Guru Blog addressed this point from the perspective of insurers and plan sponsors here. The problem with this point of view, though, is that it leaves out the fact that there are cases with substantive merit – in my mind, not as many today as there used to be now that plan sponsors, vendors and their advisors have dramatically upped their games in response to the lessons from the earliest suits, settlements and rulings, but there certainly were and remain meritorious cases. To simply universally declare that such cases should not be allowed is to ignore this reality. Davis Wright Tremaine’s advisory strikes at the sweet spot for reducing such cases while still leaving room for the meritorious ones to proceed, by proposing a reasonable presumption or safe harbor that would – depending on how, once enacted, it is applied by the courts – make it harder to prosecute the types of cases that, in essence, serve as nothing more than taxes on plans and their sponsors.

The Department of Labor’s regulation governing ERISA claims and administrative appeals provides a comprehensive structure for the claim process required of all ERISA plans. While there is plenty of room within the context of the regulation for a particular plan to contain its own essentially bespoke claims process, the regulation imposes the broader outline with which all such processes must comply. Another way I like to put this is by comparison to a jazz quartet – the composition provides the general framework within which the individual player can improvise before coming back to the general harmony of the group as a whole. The Department’s claim regulation works the same way – every claim process must align with certain overall requirements, but within those requirements are plenty of opportunities for a plan administrator to go off on a solo and craft its own approach to claims while still complying with the regulatory requirements.

I will be discussing this theme on Thursday, June 6th, as part of the webinar I am presenting for Lorman on the handling of disability claims under the Department of Labor’s claim regulations. If you would like to attend, reach out before you sign up and I will forward discount information to you.

I did not intend to return, yet again, to the summary judgment opinion in Sellers as gist for a blog post. Something about it that I haven’t touched on yet, however, keeps overlapping with other developments which caught my attention because of their relationship to long standing interests of mine related to trial work, discovery, the rules of civil procedure and the costs of litigation – in particular, how do we continue to decide matters by trial when the costs of discovery have made it too burdensome to even get to that stage. Many commentators, and almost every lawyer I speak to about the subject, have noted the epilogue in the Sellers summary judgment opinion, concerning the relationship between the vanishing trial, the costs of litigation and whether summary judgment filings are appropriate in many cases. I personally read the epilogue as part of a long running, and thoughtful, critique I have heard and read over the years by the particular judge as to the costs of discovery and the decline of trials as the preferred form of adjudication.

There is clearly a linkage between the scope and expense of discovery, on the one hand, and the statistically established dying of the jury trial. Some of this scope and cost are structural and arise from the expense of some of its tools, including electronic discovery. Another part of it, though, clearly stems from the fear of many lawyers that they will miss something that might have been useful at trial if they are judicious in their use of discovery. Concerned about being criticized after the fact if this happens, many lawyers engage, inevitably, in wide ranging, “turn over every rock” discovery, even when any lawyer who has ever tried a case – and any client who has ever paid one to do so – knows that only some fraction of the information and documents uncovered during discovery will ever be offered at trial (or even if not proffered into evidence, made use of for any reason). I am not unsympathetic to this concern on the part of many lawyers and it is not illegitimate. I once won a two week trial that I might have lost if plaintiff’s counsel had pursued a particular line of inquiry with a certain witness, but he never did because he hadn’t uncovered it during discovery.

There are antidotes to this problem and ways to vaccinate against it but that discussion would make for too long an article for a mere blog post, although I have written on some aspects of this problem before on this blog. On a similar topic but in greater depth, I also once wrote an article, after having successfully tried a patent infringement case on behalf of a start up with a small budget and prevailed over a much larger and better capitalized foe, on the exact subject of how to try a patent case without bankrupting the client, which you can find here.

But beyond those practicalities, one of the biggest issues with regard to the costs of litigation and its impact on the statistical dearth of jury trials is the billable hour and the inability of many lawyers – and sometimes clients as well – to see past it. Personally, I would never recommend a client take a case to trial unless I believed in it enough that I would be willing to also have skin in the game myself. Under a billable hour model, though, the lawyer trying the case never truly does. Alternative fee arrangements of some form or another, however, change this dynamic and are the best way to align the client and the lawyer’s interests in going to trial as well as the cost burdens of doing so. More than that, if properly structured to cover the entire litigation process, they can alleviate the distorting effect for clients and the litigation process of the vast expense and burden of discovery.

I could talk about this subject in depth and for a long time. For now though, I just wanted to note that two different prominent big firm lawyers recently referenced the role of alternative fee arrangements in making litigation both more reasonable for clients and often times, if they win, more profitable for lawyers than does a billable hour model. Tony Froio of Robins Kaplan (with whom I had dinner years ago and who offered even then, sage advice that I still quote) referenced in a recent interview in Above the Law that his firm’s commitment to “alternative fee arrangements . . . provide[s] clients with access to trial opportunities that may otherwise be unattainable.” Meanwhile, Bloomberg Law columnist David Lat conducted a long interview with the chair of Latham’s litigation and trial department, in which they discussed the growth of contingency fee litigation as part of Latham’s practice and in the big law world as a whole. Of particular note, Lat expounded on his view that technological developments are likely to increase the importance of alternative fee agreements, explaining that:

The rise of AI will have major implications for law firms—and their revenue models. For starters, I predict the efficiency gains it will eventually create will make billing by the hour increasingly less lucrative, and ultimately less sustainable, for Big Law.

On the litigation side, one possible way to address this problem is by relying more on contingency fees. This ties a law firm’s income on a matter not to the number of hours billed, but to the outcome—which is often something clients prefer.

Creative fee agreements, and a willingness to think through their use in a given case, are the best road to making trials and discovery financially manageable for clients and are really the key to an affordable and effective trial practice for many firms and their clients.

Growing up in Baltimore in the Seventies (you can take the boy out of Baltimore but you can’t take the Orioles out of the boy – go Birds!), I developed a love of horse racing, back in the heyday of Pimlico racetrack and the Preakness. I still remember watching Secretariat run the second leg of the Triple Crown there and the pre-race hype about Seattle Slew a few years later. Horse racing is a lot like lawyering – it has its problems, but it can be a beautiful thing to watch when it’s done right, as it was this past Saturday at the Kentucky Derby.

Among its other virtues, horse racing is a wonderful source of metaphors, and it long ago gave rise to one of lawyering’s most useful sayings: there are horses for courses. I was thinking about that, and the fact that not every horse could have taken Mystik Dan’s remarkable inside run to a win in the Kentucky Derby, while still musing on the summary judgment ruling in Sellers v. Trustees of Boston College, about which I wrote last week.

As has been widely discussed, including by me, Sellers gave rise to a summary judgment ruling that acknowledged the extensive work done by the plan’s fiduciaries to address fee and investment concerns, but found that the work wasn’t enough to warrant a grant of summary judgment in favor of the plan’s fiduciaries. I think it was Nevin Adams who wrote that not all judges would have reached that conclusion, and in this I think he is right. Another judge might have very well granted summary judgment outright to the defendants on the evidence submitted in the summary judgment proceedings, but the judge hearing the action reasonably and defensibly concluded that the record presented just enough of a factual dispute to require trial. This, of course, is where a different horse running this same course might have resulted in a different outcome: another judge might well have found that the defendants had proven a sufficient level of fiduciary due care to justify granting summary judgment for the defendants. To me, this is a question of the philosophy of a given judge, and how much room for interpretation a particular judge thinks Rule 56 grants to the court.

But here’s the rub for me substantively. As I wrote last week, the fairest way to understand the decision seems to be that the evidence presented a scenario in which the defendants should prevail but the standards governing factual issues in summary judgment proceedings appear to preclude entering such an order short of trial. Taking this approach to the breach of fiduciary duty claims in Sellers, however, requires a view of fiduciary duties that is debatable and that I am not convinced the case law requires. In short – and as a number of commentators have noted – the defendants presented extensive evidence in the summary judgment proceedings showing due care in addressing the fee and recordkeeper issues challenged by the plaintiffs. The Court, though, concluded that the expert testimony and evidence proffered by the plaintiffs suggested that it was open to argument whether defendants should have done still more in that regard, and that therefore a fact finder after a trial, rather than a judge at summary judgment, would have to decide whether fiduciary breaches occurred.

The problem with this from where I sit, however, is that it treats fiduciary prudence as infinite, as something that can always be challenged in court as having been insufficient no matter how much was done, and I am not convinced that a proper conception of fiduciary obligations or the case law itself aligns with that view. At some point, a fiduciary has engaged in more than enough prudence to satisfy the statutory obligation, regardless of whether a plaintiff, or his or her expert, can point to more that supposedly could or should have been done. Like almost everything in life, there is always more that could be done, but that alone shouldn’t preclude finding that a fiduciary did, in fact, enough.

It is worth thinking in this regard about how far we have come with regard to fiduciary prudence and the conduct of plan administrators. I have long credited plaintiffs’ lawyers with having raised the bar spectacularly with regard to the care and feeding of participants that is provided by plan fiduciaries. I have long argued that the private attorney general model is both alive in this context and has worked well in improving retirement plan performance and retirement outcomes for participants. We are long past the days when, as a speaker on fiduciary practices, I would warn against what I called the “golf course RFP,” which was basically a plan sponsor giving the contracts for pension and 401(k) plans to a golfing buddy while standing on the 14th green. Today, as opposed to then, I don’t think any serious business executive would ever consider hiring a recordkeeper or another vendor without a full investigation, an RFP or some form of competitive bidding.

To take this a step further, the summary judgment ruling in Sellers recognizes the extensive work actually conducted by the plan’s fiduciaries with regard to recordkeeping and investment selection issues. Several years ago, when I was speaking at an ERISA conference, one speaker, who was in-house counsel to the plan fiduciaries at a large company, explained that the biggest issue he faced was setting the agenda for quarterly meetings of the plan’s fiduciaries, as they would only meet for an hour or two once a quarter. He explained that if the issue was important enough, he would slot it in for 20 minutes on the agenda. I recall thinking at the time what great deposition testimony that would be for plaintiffs’ counsel if his employer were ever sued for breach of fiduciary duty, because how much less fiduciary prudence could there be than limiting the extent of investigation and consideration based simply on the length of time available at a meeting. Now contrast that to the extensive work credited to the fiduciaries in Sellers by the summary judgment ruling: the two courses of conduct have as much in common as a Yankees fan does with a Red Sox fan.

Given this, it is worth noting that the extensive fiduciary prudence that the summary judgment record recognized was engaged in by the fiduciaries in Sellers might be more than was required of the fiduciaries, even if, as the plaintiffs in that case claim, there was still more that could have been done. If so, then it would have been both fair and legally appropriate to hold that summary judgment, despite the factual issues asserted by the plaintiffs, could and should be granted to the defendants. Summary judgment is only barred by a genuine issue of material fact, not by any dispute of fact. If the Court in Sellers were to have held, as I believe the law could allow, that the fiduciaries had been required to reach a certain level of prudence but not to satisfy an infinite one, the Court could have also reasonably held that the fiduciaries in Sellers, on the record set out in the summary judgment ruling, had reached and passed that level, rendering the factual disputes raised by the plaintiffs immaterial and justifying the entry of summary judgment in favor of the defendants – and all of this without changing the facts presented by all sides even one bit, and by instead just recognizing that at some point, a fiduciary exceeds the level of care that he or she is legally obligated to render.

And thus the real question raised for me by the otherwise substantively excellent summary judgment opinion in Sellers is this: does the law really require an almost infinite possible level of care by ERISA plan fiduciaries to an extent that only a fact finder, after hearing every bit of evidence at trial, can determine what the required level of care is? Or does it demand only a certain level of care, one that is sufficiently quantifiable that a court, passing on it on summary judgment, can declare whether or not it was reached? I would suggest that if it is the former, and not the latter, it may be time to reexamine the question.

I suspect every client I have ever represented in litigation can testify that I am overly fond of the old saying if you have the facts, argue the facts; if you have the law, argue the law; and if you have neither, jump up and down and scream. In my view, most of the time, you are better off having the facts on your side then either the law or a good scream. This is because it is a relatively rare case where the controlling legal principles are so clear and unambiguous that a good lawyer, holding a good poker hand of facts, cannot get around a body of law running against his or her client.

I couldn’t help but think of this point after reading Judge Young’s summary judgment ruling in the excessive fee case brought against Boston College, Sellers v. Trustees of Boston College, as well as some of the commentary already written on the decision. (By the way, given that the opinion runs to 126 pages, you may prefer the commentaries to the source material, and if so I am partial to the two published recently by Nevin Adams and Daniel Aronowitz, which you can find here and here). There is an extremely good argument to be made that Boston College demonstrated in its motion papers a level of prudence factually sufficient to defeat the excessive fee claim, but the court essentially found that they did so in the wrong forum: at summary judgment, and not at trial. Judge Young’s opinion recognizes that a fact dispute alone, if material, is enough to preclude summary judgment and requires a trial even if, as frankly appears to have been the case here, the defendant has proven it is likely to prevail.

Having read the opinion and some of the commentary, I don’t disagree with the premise that a fact finder could easily rule in Boston College’s favor on the excessive fee claim on the evidence presented by it in the summary judgment proceedings. But the plaintiffs met their burden of showing a credible factual dispute for trial as to the prudence of the defendants, one that precluded summary judgment unless the court was going to actually decide the factual disputes, which it cannot properly do at summary judgment under the federal rules. While the rules and case law interpreting them allow the court some leeway in passing on the likelihood of success in a case at the motion to dismiss stage, the same is not true with regard to summary judgment. On summary judgment, the question of the likelihood of success at the end of the day is not technically relevant, and instead the case must proceed to trial unless undisputed facts clearly preclude one party or the other from possible success at trial.

In breach of fiduciary duty cases, that can be a hard bar to reach. The standards are so fact sensitive, the underlying conduct often so opaque, and the room for dispute so broad, that establishing at summary judgment that the plaintiff cannot, under any circumstance, prevail at trial is often a bridge too far. To me, this is why so often you see courts enter partial summary judgment in favor of defendants in breach of fiduciary duty cases, but not outright wins, with the court often leaving in place just a small sliver of the original claims for trial. The standard to obtain summary judgment is so hard to meet in the context of such claims that disproving the entirety of a plaintiff’s case at summary judgment is unlikely, but disproving a significant chunk of it is more realistic.

There is nothing wrong with that outcome, by the way. It can often be enough to frame the case and the exposure so that an appropriate settlement is possible and, if not, to give the parties a chance to focus at trial on only what truly remains in dispute. For many parties and in many cases, that is nearly as productive an outcome from summary judgment proceedings as an outright win would have been.

Many years ago, back when we were closer to the tipping point where 401(k) plans replaced pensions for the majority of employees, there was a great deal of discussion about whether employees could possibly be financially ready to retire at age 65 absent pensions. I argued at the time that the discussion was wrong and that the age 65 attribution for this analysis was archaic and distorted the conversation. I was correct about that, and the realities of the interaction between retirement funding and pushing retirement dates back a decade are now a mainstream topic, as this excellent article from the BBC, which in turn is responding to BlackRock CEO Larry Fink’s much discussed commentary on the subject, shows.

However, my past comments on this issue were criticized by some commentators as possibly being true for professional and managerial workers but as ignoring the fact that extending working life another decade or so for people with physically demanding jobs may be unrealistic. I have come over the years to think those critics were correct. While John Kerry may be able to say with a straight face these days that, with regard to his work, “80 is the new 60,” I highly doubt it is for the painter working out in the hall of my office building right now.

I mention this now only because, while the BBC article is an excellent discussion and demonstrates a renewed focus on this issue, it too assumes that most people work at desk or similar jobs that are not too physically demanding for someone to continue working at into their late sixties and early seventies. I would now suggest that critics of my views from a decade or more ago on this subject were correct when they argued that the solution to retirement readiness for people with physically demanding jobs cannot simply be the advice “work another ten years.”