I recently visited Monticello, a place, being a history buff, I had always meant to tour; suffice it to say, it did not disappoint. Among other things, it was an interesting reminder of an oft-forgotten point, namely that for many years, the American “frontier,” for all intents and purposes, is what is now modern day Pittsburgh or Chicago. I both think of and mention this because it reminds me of what I now consider the “new” frontier in ERISA litigation, but one that shouldn’t actually be new – the imposition of potential liability for errors in plan administration, as opposed to simply for failing to pay benefits or underpaying benefits or not funding benefits that were all otherwise covered under a plan’s terms. For many years, benefits that were instead lost, or never qualified for, because of communication or management errors on the part of plan administrators and sponsors often had a “sorry, but you are out of luck” aspect to them: there wasn’t any effective way to consistently target those problems and prevail in litigation for participants who had suffered from them. Sure, there were occasional wins for participants, driven by clever thinking on how to prosecute such claims, for instance by attacking the problem through the tool of reformation, but for the most part, doctrinal barriers – such as a begrudging reading of the scope of remedies authorized under ERISA itself, and legal fictions assigning greater knowledge and understanding of a plan to participants than all involved know they actually hold, and numerous others too tedious to list – made recovery based on those types of errors unlikely.
Meanwhile, though, in my experience, it is and has always been the case that administrative and other plan management errors deprive more participants of more benefits more often than anything else, and as I mentioned in an earlier post, one of the great developments in ERISA litigation is the development of remedies and judicial approaches that allow for the remediation of those problems. I should note that when I refer to this as a “great development,” I mean this point objectively, in terms of it creating remedies for issues that, in the past, could not be remediated by the courts; for decades, courts would depict these types of claims as provoking the sympathy of the court, but as nonetheless constituting a loss for which there was no judicial remedy available. I have nothing to say today on whether this change in the ERISA regime is a great development for plan sponsors, or in terms of creating an environment that encourages employers to provide benefits, but only in terms of this development plugging a hole in the system whereby certain types of losses simply could not previously be remediated.
This (relatively) new frontier we are witnessing involves courts finally recognizing, and revising fiduciary duty case law as needed to do so, that much of the management and administration of a plan is, in fact, fiduciary conduct, and that losses caused by errors in that type of activity can therefore be remedied by means of the equitable relief authorized under ERISA. The Eighth Circuit decision I discussed in an earlier blogpost is an excellent example of this trend in the case law, and one of my colleagues has written an excellent client alert on this decision. Another, slightly earlier example can be found in this decision in one of my cases, which maps out the parameters of fiduciary responsibility for errors in the operation of a plan, independent of whether or not benefits themselves were due under the express terms of the plan under the circumstances at issue; that case is discussed in detail in this Lawyers Weekly article.
Those two cases aren’t the only recent ones to this effect, and it would be interesting – but far beyond the scope of a blog post – to compare these types of cases to the manner in which similar circumstances were typically analyzed by courts ten years ago, or even more specifically, before the Supreme Court’s decision in Amara opened the door to litigators and courts rethinking their approaches to obtaining relief for operational errors. We will leave that discussion for another day, but with the final note that it is in the shift from those older cases to these newer ones that you see the rise of a new frontier, not just in litigation, but in the rights and protections open to participants.