When I recommended in a recent pair of blog posts that insurers and plan sponsors should make it a universal practice to try excessive fee class actions to conclusion, I wasn’t being flippant. I have probably spent 25,000 hours over the past thirty years advising insurers on when to try cases to conclusion – or to instead settle, or to litigate a coverage or bad faith action, or the like – and another 25,000 hours litigating a broad range of ERISA disputes. So if there is anything to Malcolm Gladwell’s claim that it takes 10,000 hours to become an expert at something, I am more than sufficiently qualified to comment on whether an insurer should take an ERISA breach of fiduciary duty action to trial. As I explained in those posts (which you can find here and here), the dynamic underlying the rise in such suits, combined with the merits of many of the actions and the realities of how courts were handling them on dispositive motions, pointed towards favoring trials over settlements.

Lo and behold, it only took a few weeks for my views to be vindicated, when Yale University prevailed at trial last week on one of the most significant ERISA excessive fee class actions ever filed – a statement I do not believe is hyperbole when one considers the plaintiffs’ counsel, the bellwether nature of the action in relation to all of the other similar actions filed against prominent universities, the brand name of the defendant, the circuit and, yes as well, the publicity. It also should not be overlooked that this was not just a trial, but a jury trial, with the jury returning a verdict in favor of the plan sponsor rather than in favor of the university’s employees, despite the concerns voiced in some corners of the ERISA bar over having a jury, rather than a judge, decide the case.

I have a lot to say, both directly on the Yale jury verdict and on its relationship to my previously expressed views on the best way for plan sponsors and their insurers to respond to these types of claims, but the place to start is obviously with the decision itself. I won’t rehash it here but will instead refer you to reporting by others who have already done a terrific job with that undertaking, such as this piece by Bloomberg Law’s Jacklyn Wille (subscription may be required) and this extensive post by the Fid Guru blog’s Daniel Aronowitz. From my end, I am most interested in addressing certain ideas and topics that the jury verdict highlights, particularly as they relate to my prior recommendation that defendants and insurers should try these types of cases to conclusion.

First, there has been extensive discussion already in the media on the question of whether it mattered that there was a jury. Some corners of the ERISA defense bar had originally expressed a decided lack of enthusiasm over the Court’s decision to allow a jury to decide the action but I never shared that concern. The worry expressed by many observers was that a jury would by definition favor the plaintiffs but this concern was, to me, always overstated – and frankly, while I don’t know, I suspect it wasn’t a huge concern for the defense team in the Yale case itself, who I suspect, like most trial teams, considered the existence of a jury to be one of many variables (although an important one) to be accounted for in bringing the case to trial.

Most experienced trial lawyers have a nuanced view of the strengths and weaknesses of both juries and judges as decisionmakers at trial, and account for that in both their recommendations to their clients and in their trial strategy. Any decision to try a case, or for that matter to place a settlement value on a case, should account for those issues, but doing so has to involve much more than just factoring in the simple question of whether the case is being tried to the bench or instead to a jury. Years of close study of verdicts as part of my practice suggests to me that the Court’s decision to submit the Yale case to a jury was likely among the less significant factors affecting the outcome of the case – I suspect that it turned out to be much less important than the concrete facts of the case or the performance of particular witnesses, for instance.

This is all a long way of saying that you should not overstate the significance of the jury to the outcome of this case, or be misled by the role of the jury here into seeing the verdict as a one off rather than as evidence that trying these types of cases to judgment – as I have suggested in the past – is the right default approach for plan sponsors and their insurers. To me, this outcome – whether it had been after trial to the bench or instead to a jury – is one more fact showing that the best industry wide approach to these types of claims is to say “prove it” and force plaintiffs’ counsel to do so at trial, without regard to whether it will be tried to the bench or instead to a jury.

Second, I was struck by the extent to which the jury ruled in favor of the defendants on the basis of causation, having found – on their special questions – that the plaintiffs had proven a breach but not that the plaintiffs suffered any losses from that breach. Causation is an interesting issue in the context of jury trials, and many, many trial lawyers have walked into courtrooms with entire defenses built solely around causation issues, even to the extent of stipulating to liability so as to be able to focus the jury’s attention solely on the question of causation.

I recorded a podcast recently with Business Breaks’ Dante Healy and financial educator Doug Lutkus on causation as a defense in the context of excessive fee and similar breach of fiduciary duty claims, and discussed my view that plan sponsors should rely more heavily on causation defenses, in different guises, and less on arguments over whether a breach has actually occurred. There are a number of reasons for this, but one of them is that it moves the conversation – whether at summary judgment, at mediation or at trial- off of the question of whether the plan fiduciary could have done something better (i.e., committed a fiduciary breach) and onto the question of whether the plan fiduciary had done enough (i.e., whether the fiduciary’s conduct as a whole, including any fiduciary breaches, was good enough that no losses should be seen to have arisen from it). Certainly, the jury verdict in the Yale action drives home the value of focusing on this defense.

A third aspect that struck me about the jury verdict, and how it relates to my prior recommendation to try these types of cases if you are a defendant, was the relative complexity of the special questions form answered by the jury. Years ago, I adopted some of the tenets of behavioral economics and particularly choice architecture for constructing jury forms of this type, the idea being that you need to be aware of whether the design of the jury questions risks pointing the jury subtly in the direction of a particular resolution. The jury verdict form here certainly did the plaintiffs no favors in this regard, and also suggests to me that plaintiffs may well have put in too complicated a case involving too many claims. It reads almost as if plaintiffs put in the same case, and asked the jury to make the same determinations, as plaintiffs would have done had they been trying the case to the bench – and if I am right on that, then that may have been a significant error. It is a lot different to ask a judge and his or her clerks to spend months drafting complex statements of facts and rulings of law on multiple and highly complex claims than it is to ask a jury to effectively do the same work only through the tool of jury questions. Plaintiffs’ lawyers in excessive fee cases may want to think very hard about whether a jury is actually preferable to a bench trial in cases where they intend to put into evidence a multitude of different theories and claims; alternatively, if they still believe, after this verdict, that a jury is preferable, they may want to think about giving the jury a much simpler case than they would have tried to a judge.

All of this considered, where does this leave my prior recommendation that insurers and plan sponsors make it a practice to try these types of cases to verdict? Keep doing it, but now with more nuance. I explained before that the growth in the filing of these types of suits will not end as long as the class action bar continues to believe there is “gold in them thar hills” and that the easiest way for plan sponsors and their insurers to tamp down that belief is to universally force plaintiffs to try these types of cases to verdict. With the significant and widely publicized jury verdict in Yale now in the bank, there is no longer a need to try every action to verdict to send the message that a vigorous defense will be put up to any such filing – the Yale verdict has already done a lot of the work of communicating that recovering on these cases will not be easy.

Instead, the better approach for plan sponsors and insurers is to build on that win by cementing the idea that recovery on these cases is and will continue to be a hard road. This means evaluating all cases for settlement or trial solely on their merits, without regard to whether, given the very high costs of defending these types of claims, settlement would be cheaper than going to trial. If the merits of the case warrant settlement at a figure acceptable to the plaintiff class, then fine, proceed to settle. But if not, then try the case to conclusion, regardless of the costs and the risks. Do this every time, and before you know it, only the most meritorious cases, filed by the best plaintiffs’ shops, will be brought – likely eliminating at least half or more of the cases that would otherwise be filed and that, on current trends, are being filed.

And before my friends in the insurance industry object, I know this goes against many principles of the industry, particularly cost benefit analysis of particular claims. Why, after all, should an insurer pay to try a case that could be settled for much less than trying the case would cost – particularly when the settlement will remove the risk of having to pay off a large verdict if the trial goes south on the defense? Likewise, I am well aware that in many states, trying a case to conclusion when a reasonable settlement offer is on the table can raise a host of potential statutory or common law bad faith issues for insurers. I am deliberately leaving these issues for another day and perhaps, more importantly, for consideration by counsel for insurers on a case by case basis.

However, if you leave those issues aside and make the goal only to put an end to the ever increasing industry exposure to these types of claims, this approach is the right one – now more than ever with the backdrop of the decision in the Yale case.