When it comes to claims of futility as an explanation for failing to exhaust administrative remedies in pursuing benefits under an ERISA governed plan, I have long summed up my feelings with a pithy rephrasing of Samuel Johnson’s famous line about patriotism, which I have turned into the somewhat flippant comment that “futility is the last refuge of the participant who is not entitled to benefits.” (I also like to use a similar line in insurance coverage litigation when lawyers for policyholders claim without factual support that an insurer has waived a policy term, noting – often to the court – that “waiver is the last refuge of the uninsured”). For those of you who are not especially familiar with the concept of administrative exhaustion in the context of ERISA litigation, ERISA governed plans are required to have certain internal structures for processing claims for benefits filed by participants and appeals by those participants of decisions to deny benefits under the plan. Only after those processes are concluded can a participant properly go into court and sue for benefits under the plan; if a participant goes to court without first having pursued those opportunities with the plan itself, then the participant’s claim is supposed to be dismissed for failure to exhaust the administrative remedies that were available to the participant within the plan itself.

The obligation on the part of participants to exhaust plan remedies before filing suit is stringently applied by the courts, and, naturally, in the way that physics teaches that for every action there is an equal and opposite reaction, lawyers representing participants have developed certain arguments around the application of that rule. One of those is the concept of futility, or the idea that a participant should not have to exhaust administrative remedies if the plan was clearly going to deny the requested benefits, thus making the pursuit of those administrative remedies a futile act. The law, it is said, does not require futile and wasteful action, and thus does not require a participant to pursue all avenues to collect benefits that a plan may grant if there is no question the plan administrator will never award those benefits.

Futile, in this circumstance, really means futile, however. It does not mean the plan administrator was unlikely to grant the benefits, nor does it mean that the participant believed it was futile to seek benefits. Instead, it means that the evidentiary record must establish to the satisfaction of the court that, in fact, there was no possibility the benefits would ever be awarded, no matter what information was provided to the plan and its administrator. Rob Hoskins, on his excellent ERISABoard.com, has a summary of a new decision out of the Southern District of West Virginia that emphasizes this exact point, with the Court finding that the participants did not submit enough evidence to allow the Court to actually find that benefits would not be awarded under any circumstances and that the failure to exhaust administrative remedies could not be excused away by claims of futility. This was the case even though at least one of the plaintiffs had allegedly been directly told that benefits would not be awarded even if a claim for benefits was submitted.

The case nicely highlights how high the bar is to prove futility in this context, and raises the question of what then would be enough to prove futility. Many lawyers often find that a hard question to answer, for the specific reason that most lawyers have never actually had a case in which the opportunity to recover benefits voluntarily from a plan was so futile that, in fact, futility could be proven for these purposes. When I say this, I do not mean to mock the lawyers themselves, but mean simply to point out how rare it is to see a circumstance in which the facts actually bear out a claim of futility in this context.

For myself, though, I can answer the question, and I usually do so by reference to a case I handled in which the plan administrator had used multiple ancillary proceedings and disputes to make clear that, under no circumstance, was the participant ever going to be paid the benefits in question. The ancillary disputes concerned related workplace agreements, including a non-competition provision, that perfectly paralleled the terms that had to be satisfied in the benefit plan for benefits to be awarded. Thus, as a factual matter, the decisions on the ancillary disputes pre-ordained what the decision would be from the plan administrator with regard to any claim for benefits under the ERISA governed plan in question. This fact pattern is what a valid claim of futility in response to a defense of failure to exhaust plan remedies looks like, and it illustrates how high the bar is to successfully press such a claim.