Here is Darren Abernethy’s law review note on preemption of state fair share acts that mandate that employers provide certain levels of health insurance. His note, which I have discussed before, is very well done, and Darren has generously allowed me to share it here in full. As readers may recall from earlier posts, Darren discusses the fact that the Maryland Fair Share Act, which as he points out in his note targeted Wal-Mart, was found by the Fourth Circuit to be preempted, and Darren proposes ways to create statutes of this type that might avoid preemption. It’s a terrific note, and in particular his history of the preemption jurisprudence is an excellent tutorial on that particular issue, and I myself will be quick to cite it on that point when briefing the issue in the future.

One particular aspect of Darren’s note struck a chord with me, and provoked a somewhat chilling thought. In discussing ways to craft these types of legislation that might avoid the preemption problem, he recommends – in essence – that such legislation be broad based, which is the opposite, in many ways, of the Maryland Fair Share Act, which I have argued before can be seen almost as a punitive statute aimed at only one employer. We all know the old saying that bad facts make bad law (or is it hard cases make bad law?), and the question that arises is whether that is a fair understanding of the Fourth Circuit’s Fielder decision that found Maryland’s Fair Share Act to be preempted. The Maryland statute clearly aimed at only one employer and was drafted to avoid implicating favored large Maryland employers such as Johns Hopkins Hospital, and that aspect of the statute can be seen in the district court and Fourth Circuit rulings as at least influencing, and possibly animating, the holdings by those courts that the statute was preempted. Might things have come out differently in the district court and the Fourth Circuit absent that factor? The statute might still have been found to be preempted, but it seems to me that  those courts may at the least have been more open – even if still finding the act to be preempted – to nudging the law of preemption along in a way more favorable to these types of statutes had the courts been presented with a better and fairer looking attempt to mandate health insurance benefits. In essence, would the development of this area of the law be a little different if the leading court of appeals analysis of such a statute were, for example, of Massachusetts’ somewhat problematic but nonetheless broader health care reform act, than it will be given that the Fielder decision striking down the Maryland act now holds place of pride in that area of the law? Did the Maryland legislature, by putting one of the worst possible versions of such a statute before the courts, prevent the law from moving in a direction that might have helped such statutes avoid preemption?

I have written a fair amount about whether the Massachusetts Health Care Reform Act is preempted by ERISA, but not too much about the practicalities of complying with the act for as long as it remains unchallenged and unpreempted. This despite the fact that I have been asked a lot of questions about compliance by companies trying to understand their obligations under the act and who are trying to structure their operations to abide by it. An excellent website discussing the practicalities of the act and compliance crossed my desk the other day, maintained and made available by the Massachusetts Association of Health Underwriters (geez, there’s an association for everything these days). For those of you interested in the practicalities of the act, its an excellent resource. This link will take you right to it.

On Friday I feel free to deviate from the usual topics of this blog into the topics covered under the digressions category over on the left hand side of the blog. Today being Friday, that’s what I’m going to do, this time returning to an issue I have discussed before, the Supreme Court’s targeting last term of the law governing patent litigation and whether patent reform remains necessary – if it ever was – after the Court’s decisions. SCOTUSBlog has this post about the Michigan Law Review’s on-line companion and its collection of shorter pieces addressing exactly those questions. I have read most of the pieces, and in particular recommend Robert Armitage’s piece on the judiciary’s ability to respond to problems in this field of law without legislative reforms and Professor John Duffy’s piece on the impact of the Court’s treatment of the obviousness standard.

It’s a terrific collection, done just the way legal scholarship should be done to have relevance to the practicing bar and not just to other academics. Short, readable, accessible, and thought provoking. Exactly what I have argued before law reviews and law faculty must provide if they are to influence the development of the law, rather than just the heft of law reviews.

I have talked before on this blog about behavioral economics and choice architecture, which concerns the idea that how we structure retirement savings options will affect whether, and how successfully, people save for retirement. You can find a couple of my earlier posts on this issue here and here. In a provocative post – a phrase I don’t use lightly, as I suspect you, like me, are jaded from too many people in the blogosphere referring to every moderately interesting comment as “provocative”- Workplace Prof points out a potential, but not well-documented, problem with defined contribution plans as a model for retirement, which is that, at least anecdotally, African-Americans do not contribute to such plans at as a high a rate as do white employees. Now, two notes are important right off the bat. First, as the Prof points out, no industry wide study of this issue has ever been conducted, thus raising the question of whether this apparent problem is a real problem, or instead just something that a small sampling suggests exists. Second, even if evidence does bear out the existence of this problem, one should not jump to the conclusion that it means that all African-Americans participate in these plans at a lower rate than do whites. It may well be that, here, race is but a stalking horse for socio-economic status, and that the participation rates flow more directly from economic level than from race; it may well be the case that, in fact, African-Americans contribute at a comparable level as white employees when the comparison is controlled for educational status and/or salary. We just don’t know.

Either way, though, the Prof points out that the solution may be in the automatic enrollment provisions of the Pension Protection Act, which make participation in such plans a default. If this alone were to remedy such a problem, it would be a perfect example of choice architecture solving a problem: the mere structure of the retirement vehicle will have led to higher participation, the result that the authors of the Pension Protection Act presumably wanted to achieve.

I have written before about electronic discovery and the amendments to the federal rules governing that discovery, and my theme has often been that the courts need to develop a jurisprudence concerning electronic discovery that carefully weighs the expense of the discovery versus the need for it before granting extensive (and expensive) electronic discovery. In this article here, DLA Piper partner Browning Marean points out that the expense of electronic discovery can often be so burdensome that it forces settlement without regard to the merits of a case; as he puts it in a very clever turn of phrase, “the possibility of extortion by discovery is too real a prospect.” I have said it before and I will say it again: we are at the opening phases of the development of the law of evidence and discovery in this area, and the courts need to establish a body of precedent governing this type of discovery that prevents electronic discovery from having this effect.

At the same time, I have discussed as well on this blog the consensus that arbitration is a poor forum for most complex cases and is often not an improvement – in terms of costs, efficiency or outcome – over litigation. The electronic discovery amendments to the federal rules may be in the process of changing that. Unburdened by the federal rules themselves or the developing case law concerning electronic discovery, an arbitration panel is free to fashion much narrower electronic discovery and to impose much stricter controls over it than courts are currently tending to impose,
all on the thesis that a large part of an arbitration panel’s job is to effectuate arbitration’s promise of cost effective dispute resolution. As a result, as electronic discovery costs go up in federal court, the comparative cost advantage of arbitration – which has been disappearing over the years – increases, possibly changing the calculus for litigants over whether or not to agree to arbitration.

Well, that is probably overselling this post, but we couldn’t resist the play on the title of the much hyped, much overrated 1989 movie. Regardless, here is an interesting story, out of the soap opera meets 401(k) genre, concerning questions that have arisen over the administration of a prominent law firm’s 401(k) plan as a result of a particularly contentious divorce. At a minimum, it seems to be about just plain bad management of a plan, and at most about something a little worse. Either way, it illustrates the importance of scrupulous and professional management of company benefit plans, something that self-managed smaller plans often struggle to achieve.

Turns out that the key word in the accidental death and dismemberment insurance that many people get through their employers (and which is therefore an ERISA governed benefit) is “accidental.” The United States District Court for the District of Massachusetts has an interesting opinion out that details the applicable standards for determining whether a particular death is accidental for these purposes, and finding that an insured’s death after driving while intoxicated does not qualify. This issue comes up a lot, unfortunately, and I have talked about it before here and here. The newest decision out of Massachusetts on this topic, McGillivray v. Life Insurance Company of North America, is an interesting example of this type of case, and reflects two particular points: first, the continuing influence in this area of the law of the First Circuit’s 1990 decision in Wickman v. Northwestern National Ins. Co., which laid out the standards for determining if a particular death is accidental for these purposes; and second, that the weight of authority is running heavily towards a general rule that deaths arising from automobile accidents in which the employee was intoxicated simply do not constitute accidents for these purposes and are not covered.

In truth, it is fair to say that we have reached the point that (although the courts never come right out and say this) there is, in effect, essentially a rebuttable – and if that, just barely – presumption that an intoxicated employee who dies in a drunk driving accident is not covered under these policies. The standard test, crafted in the Wickman case, that courts apply to determine whether or not a particular death was an accident for these purposes, when applied to the typical facts of these type of cases, simply leads inexorably to a loss of coverage.

I remember being dressed down in a first year law school class on torts for suggesting – apparently contrary to the professor’s belief – that a particular rule of recovery should be shifted so as to sanction the driver who engages in the socially disapproved activity – such as intoxication – in favor of the other driver. Twenty years later, the courts seem to be saying the same thing I said, essentially taking the intoxicated driver out of the range of those who can be covered under accidental death and dismemberment policies.

The case, by the way, is also interesting for a number of other reasons that warrant giving it a quick read, including not least its analysis of whether statistical studies concerning the likely outcome of drunk driving should be considered and, if so, the weight to give them. Beyond that, this is another case that contradicts a particular chestnut held by many, which is the belief that the standard of review applied in ERISA cases is the be all and end all; I don’t hold with this thesis, and believe that the facts of the administrator’s handling of a particular claim are much more likely to dictate the outcome of a case, without regard to which particular standard of review a particular court applies to a case. In a footnote that I particularly enjoyed, the court commented that “In all candor, the Court must note that even if it were to apply a de novo standard rather than an ‘arbitrary and capricious’ standard, the Court, applying the Wickman test, would find that Mr. McGillivray’s death was not the result of an ‘accident.’"

This is actually a kind of fascinating, if someone odd, long term disability benefits case out of the United States District Court for the District of Massachusetts. It involves what otherwise would seem to be a remarkably unnoteworthy issue, namely the right of the plan administrator – an insurer who also administered the plan – to offset from the benefit amount the estimated value of social security benefits that the claimant would have received but for the fact that the claimant never applied for them. Seems pretty straightforward, except the court did not allow the insurer to do so, because the insurer did not provide the claimant with assistance in applying for social security benefits as provided for under the plan’s terms. The court found that the insurer could not simultaneously enforce the social security offset provision while not complying with its own obligations under the plan to assist the claimant in seeking social security, and the court proceeded to find that loss of the right to enforce the offset was an appropriate remedy for this violation of the plan terms. Offsets of this ilk are routine, and while claimants often complain about them and try to avoid them, they are normally enforced without any big uproar. Not so here, where the insurer managed to lose the right to the offset. What is more interesting is the reasoning of the magistrate judge (whose recommendations were affirmed and adopted by the district court), which, despite application of the arbitrary and capricious standard of review – which would normally grant the insurer great discretion in the interpretation of the plan terms in question – found that the insurer’s own interpretation of the relevant plan terms was simply too far removed from any sensible reading of the plan terms to be upheld. In a realm of the law where many critics feel that the simple fact of applying the arbitrary and capricious standard of review is outcome determinative in favor of the administrator (a sentiment I don’t agree with and a thesis frequently disproved by court rulings), this is a relatively unusual event. The case is McCormick v. Metropolitan Life, and you can find it here.

Brian King has an interesting post over at his ERISA Law Blog, concerning my recent suggestion that the Supreme Court was poised to shift the currents of the river that is the law of ERISA. Brian’s take? Ain’t happening, although in truth Brian’s point is a little more subtle than that, and is that the Supreme Court certainly isn’t about to make any big changes in the law of ERISA in a way that will be of great help to claimants. I can’t say I disagree. I do suspect, however, that the Court is about to wade into these issues and begin addressing some of the technical points that are in dispute at the lower courts, in a way that will affect the general contours of the law of ERISA. I think the Court just did that on a more dramatic level with patent law, and is looking at ERISA cases with the same skeptical eye. There are subtle points affecting such topics as 401(k) plans and the application of the arbitrary and capricious standard to certain issues that I think the Court may be about to address. But a wholesale rewriting of precedent in a way that loosens up the whole kit and kaboodle in a manner that makes it dramatically easier to sue plans and administrators? Well, no.

But I will say that, as an aside, one of the great pleasures of blogging is exactly this type of opportunity to consider multiple viewpoints on the same issue in real time (rather than have to wait a few years for a law review to issue a special edition collecting pieces on both sides of an issue).

I have talked, certainly more than once, about the fact that the law governing fiduciary obligations in the realm of retirement plans is evolving, and most recently I commented on how it looks as though the Supreme Court is poised to weigh in on the direction of this evolution in the case law. Some of the evolution of the law in this area, it seems, is being driven simply by numbers. Susan Mangiero, author of the blog Pension Risk Matters, pointed out in a recent interview that we are seeing somewhere around 250 to 300 new lawsuits filed per quarter involving the liabilities of pension fiduciaries, mostly involving private company plans. As numbers of suits go up, simple experience tells us the courts will face new issues, or old issues under new fact patterns, and will issue rulings that advance the ball on what the shape of the law should look like in this area as a result. But the evolution is also driven, I think, by another issue I have commented on before, which is that, with pensions being replaced by 401(k) plans in which the employee bears all the risk, plan participants are motivated by that change to protect themselves against poor practices and oversights by those in charge of their retirement investments. And experts on the subject of pension governance suggest that they have good reason to concern themselves with these issues: Susan Mangiero points out in the same interview that pension governance practices quite simply leave a lot to be desired.

If there has ever been a roadmap to the evolution of a particular body of law, its right here in this scenario: more suits plus questionable practices by the targets of the suits.