Geez, I hope it isn’t something I said. Some of you may remember that a little while back, in a post discussing why I blog predominately on ERISA and insurance issues but only occasionally on intellectual property issues, I mentioned that there were a lot of terrific intellectual property blogs already out there, mentioning in particular William Patry’s copyright blog. Mr. Patry responded by quitting blogging.

I don’t really think I had anything to do with that, because he gave his primary reason for stopping, and it is one that is telling. He explained that:

my final reason for closing the blog [is] my fear that the blog was becoming too negative in tone. I regard myself as a centrist. I believe very much that in proper doses copyright is essential for certain classes of works, especially commercial movies, commercial sound recordings, and commercial books, the core copyright industries. I accept that the level of proper doses will vary from person to person and that my recommended dose may be lower (or higher) than others. But in my view, and that of my cherished brother Sir Hugh Laddie, we are well past the healthy dose stage and into the serious illness stage. Much like the U.S. economy, things are getting worse, not better. Copyright law has abandoned its reason for being: to encourage learning and the creation of new works. Instead, its principal functions now are to preserve existing failed business models, to suppress new business models and technologies, and to obtain, if possible, enormous windfall profits from activity that not only causes no harm, but which is beneficial to copyright owners.

What is interesting about this is I think that anyone who works on copyright or other intellectual property cases and who looks at things with clear eyes -rather than on the old mantra of where you stand depends on where you sit – knows there is some deep truth to what he is saying, and it is interesting in and of itself for that reason. But it becomes even more interesting when you tie it back in to this blog, and my prior discussions of my skepticism about the patenting of ERISA strategies, which, much like Patry’s comments about copyright, seems to me -as I discussed here– to serve only to lock down for one party the opportunity to pursue a specific business/ERISA related strategy, without any accompanying benefits to the public as a whole, such as encouraging innovation in the field, etc. Maybe I am just ERISA-centric, and I see everything as circling back to that topic, but that’s what I thought of when I read Patry’s post resigning from the blogosphere.

Here is an entertaining history of retirement in a nutshell, at least up to the new world we inhabit today, in which defined contribution plans govern and employees bear all the risk. What is interesting to note is that this conventional version of the story basically ends with the – effectively, in any event – death of pensions. The world of retirement and the law that governs it in the new world of defined contribution plans is the story we see playing out in the rulings, such as this one and this one, that are beginning to open up liability for those who are responsible for the operation of defined contribution plans; how and where that evolutionary line proceeds is the gazillion dollar question for all those who may end up with fiduciary liability for any errors that occur as this process plays out.

Now this is neat. Here is something that, at least to insurance coverage people, is actually pretty cool. In a world in which most published articles in the legal realm take place on a somewhat airy level, we don’t see enough pieces that provide practical information that is useful in dealing with the nitty gritty aspects of day to day work, particularly concerning those aspects of business life that require making practical use of legal standards and controlling principles. In the world of insurance, one of the most important points at which legal principles and day to day practicalities collide is in the position letters, such as reservation of rights letters, that insurers issue in response to notices received from insureds concerning claims made against them. This article here surveys the key issues that impact issuing those types of letters.

While I don’t necessarily agree with each and every point – many are subject to judgment calls – in the article, most are right on the money, and it certainly surveys the majority of the key issues that at least have to be considered in preparing a reservation of rights letter.

There were a lot of things on my desk I could post about today, but I am going to take the easy – and self-promoting – way out, and pass along this article from Massachusetts Lawyers Weekly on the W.R. Grace decision out of the First Circuit on the question of standing in ERISA cases, which I blogged about last week. I am quoted extensively in the article.

I thought I would pass along a couple of things of interest that I read this week, before next week starts up with its own events. Taking up where my comments on the status of extra-administrative record discovery in the aftermath of MetLife v. Glenn left off, Roy Harmon has this post on a Ninth Circuit decision pointing out that MetLife v. Glenn in fact expands the availability of such discovery. Meanwhile, Michael Fox (no, not that Michael Fox; see e.g. Reilly, “Hey, what’s-your-name! I love you”), really one of the founding fathers of employment law blogging, has nice things to say about the Boston ERISA and Insurance Litigation blog, along with a useful list of blogs worth reading that cover the employment law field. And finally for today, the WorkPlace Prof passes along an entertaining essay on the three competing decisions in the LaRue case, which provides a humorous take on an issue that I talked about here, concerning the differing approaches of each opinion to the problems raised by the LaRue case.

That’s plenty to read on Friday.

Judge Gertner of the United States District Court for the District of Massachusetts has an interesting, if brief, ruling that is just out granting a motion to dismiss a severance pay claim under an ERISA governed plan. What caught my eye about it relates back to this post I wrote a few weeks ago, in which I pointed out the need, in litigation planning and counseling concerning ERISA plans, to resist putting undue emphasis on representations that are inconsistent with the actual terms of a plan, because the courts are likely to ignore such statements and to instead simply enforce what is written in the plan documents. The court’s opinion is another example of the trend in the case law in this direction. Although the court was not delving too deeply into this particular issue, the court noted that “in more recent cases, the First Circuit has held that courts should not look beyond the express terms of an ERISA-regulated plan unless the disputed term is ambiguous,” and that “[i]n ERISA cases . . . the central issue must always be what the plan promised . . . and whether the plan delivered." As I said before, any litigation strategy for an ERISA benefits case has to start with the terms of the plan, and not with extrinsic statements or evidence related to the plan’s terms or interpretation. The case is Walsh v. Bank of America Corporate Severance Program.

Very interesting case out of the First Circuit the other day on the question of whether former employees satisfy ERISA standing requirements with regard to defined contribution plans. Short answer is they do, but the Court’s analysis and discussion is an interesting open field run across a range of issues that are both explicit and implicit to any consideration of this question. One particular point, basically noted in a footnote, was of particular interest to me. I have discussed frequently in past posts my thesis that much of the evolution in ERISA law is and will continue to be driven by the economic effect on employees of the replacement of the pension system by 401(k) plans; this is partly because employees have become the persons at risk from investment mistakes, which they generally were not – barring complete failure of the employer and its pension plan – when employees were instead covered by pensions. In an interesting footnote, the Court addresses the distinction between the two types of benefits, and hints at the impact of that difference on employees:

Under a defined benefit plan, participants are typically promised a fixed level of retirement income, computed on the basis of a formula contained in the plan documents. See 29 U.S.C. §1002(35). The formula generally accounts for an employee’s years of service and compensation level at retirement. Graden, 496 F.3d at 297 n.10. In contrast with a defined contribution plan, where the amount of benefits is directly related to the investment income earned in an individual account, the investment performance of the portfolio held by a defined benefit plan has no effect on the level of benefits to which a participant is entitled, provided that the plan remains solvent. See LaRue,128 S. Ct. at 1025 ("Misconduct by the administrators of a defined benefit plan will not affect an individual’s entitlement to a defined benefit unless it creates or enhances the risk of default by the entire plan.").

The case is Kerr et al. v. W.R. Grace, et al.

Apparently none, at least according to the first ruling on this question I have seen out of a court in the First Circuit. In a ruling by a magistrate judge, the United States District Court for the District of Maine has concluded that MetLife v. Glenn does not change the rules in the First Circuit governing the extent to which – if at all – a party is allowed to conduct discovery beyond the administrative record itself in a denied benefits case governed by the arbitrary and capricious standard of review. The court found that MetLife is not a discovery ruling, and posits only that, on a case by case basis, a structural conflict of interest may be determined to impact the outcome. The court found that as a result, whether to allow discovery into any prejudice caused by the conflict of interest is likewise to be determined on a case by case basis, and to only be allowed upon a showing by the claimant that discovery into the subject is justified under the circumstances of the particular case at bar; the court specifically found that discovery beyond the administrative record was not allowed in general and as of right, simply because of MetLife. Interestingly, the court found that this is entirely consistent with the existing standards in the First Circuit governing when discovery beyond the administrative record can be allowed- standards which have existed since long before MetLife was decided – and the court is correct on this.

However, to the extent that the case may suggest that a bulwark can be maintained against the expansion of discovery in ERISA cases involving structural conflict of interests, I doubt it should be read in that way, or that the judge intended that. First, certainly MetLife, to mean anything, will over time have to be interpreted as allowing discovery to some extent into whether the conflict played a role, what role it played, and whether it should factor into the court’s review (and if so, in what manner). Otherwise, the decision really doesn’t grant claimants any significant opportunity to prove that the type of conflict at issue in MetLife should affect the outcome of a particular case. Second, the real question, and upcoming battleground, then, is what impact MetLife should be interpreted to have with regard to discovery. The answer, I think, is in line with the magistrate judge’s reasoning and matches up, as the judge suggested, perfectly with current First Circuit law on extra-administrative record discovery, which generally posits that a claimant has to show some really good reason to warrant such discovery. This standard would apply perfectly to cases involving structural conflicts of interest, by requiring that claimants establish a valid reason (perhaps based on discrepancies in the administrative record, or other facts that would at least imply that the conflicted status may have played a role in the benefit determination) that justifies further discovery into the effect of the conflict and justifies a particular scope of discovery. This would be consistent with MetLife, while simultaneously preventing denial of benefit cases from being transformed into the type of overpriced discovery heavy cases that, one, burden much of the rest of civil litigation, and, two, courts have long sought to prevent ERISA cases from being transformed into.

I could write all day on the interplay of ERISA discovery, current standards governing it, and MetLife, but for now, I’d best stop there. If time allows, perhaps I will return to the topic in still more detail in another post.

Many, many people object to ERISA preemption, viewing it as some sort of nasty trick that defendants use to avoid liability in ERISA related cases. Do a quick search for ERISA and preemption on Google Blog and you will find that out pretty quick. But to me, they misunderstand preemption, which was a legitimate policy choice by the Congress that passed ERISA to maintain one consistent federal policy and body of law for purposes of employee benefits. It is worth noting that, some thirty years, countless judicial decisions enforcing preemption, and even more countless numbers of critics later, Congress still has never acted to change that – to, in effect, preempt preemption. Stories like this one here, about the funding problems with Massachusetts’ much lauded – and legally questionable under preemption standards – pay or play law validate Congress’ decision in this regard, as it demonstrates the sheer impossibility of executing effective major change in any significant area of employee benefit law – in this instance with regard to health insurance and health care – on a state by state level. As the article discusses, Massachusetts finds itself unable to fund the universal health care initiative it passed, to much self-congratulation, recently, and is now forced to change the financing structure that it originally relied upon and which was the basis for the law’s enaction and lack of preemption challenge; as I have discussed in the past on this blog, the Massachusetts act, unlike pay or play statutes and ordinances in virtually every other instance, has not been challenged in court as preempted simply because the direct financial burden on the business community was, as enacted, minimal, but I have predicted before that: (1) the statute will inevitably result in an increase of the costs passed onto the business community; and (2) a preemption challenge will come not long after that occurs. As the article reflects, the first one of those events is knocking at the door right now; the second one won’t be long behind it.

Rob Hoskins over at the always interesting ERISABoard has an interesting story about a Second Circuit decision that essentially says “too bad” to a plan participant’s waiver/estoppel theory seeking benefits. The story is consistent with what seems to be a trend in which courts frequently fall back to the terms of the actual plan to decide a dispute, and seem unwilling to allow extrinsic, often but not always verbal, representations to participants to vary or even trump the written terms of the plan documents themselves. My own practice when it comes to participants who have been told one thing by a company representative and want to litigate the benefits they are entitled to as a result is to generally say that, yes, we can make that argument, but we will be a lot better off relying on the plan terms themselves and not on any sort of representation that might be to the contrary. It’s a platitude, to a certain extent, I know, but if you start from that premise, you will more often than not get the right strategy when mapping out litigation in cases in which representations were made that may have been contrary to the plan terms. To paraphrase that old handyman saw of “measure twice, cut once,” the way to think about these types of problems is plan terms first, estoppel claims second.