I just read that commercial arbitration isn’t a panacea. Hmm, where have I seen that before? Oh, I know, I wrote it here, and here, and here. Anyway, if you want to read it all again, how arbitration poses special risks and problems that may well outweigh its benefits, here’s the latest to that effect.

I don’t know how many people with an interest in ERISA litigation share my interest as well in patent and other intellectual property litigation, although I know from experience that I am not the only lawyer who practices in both areas. Either way, for anyone who has been following the issue of the Supreme Court’s recent decision in KSR on the standards for proving that an invention was too obvious to be patented, this article here is as good an overview of the topic as I have come across. Its everything you need to know in a readable nutshell, which is not an easy trick when you are starting out with a complex subject that is founded on decades of jurisprudence on a particular issue.

And to tie the discussion back in more closely to the ostensible subject matter of this blog, here is Suzanne Wynn’s recent post pointing out the possibility of patenting particular approaches to solving ERISA problems; for those of you, who like me, might find the possibility of this occurring troubling, the new rules on proving obviousness might go far to precluding the patenting of such solutions to common problems in the ERISA field.

The First Circuit issued an opinion in the case of Morales-Alejandro v. Medical Card System on Wednesday. The case, which involved a challenge to a denial of long term disability benefits, is noteworthy for two aspects. The first is that the case reaffirms this circuit’s reluctance to allow discovery beyond production of the administrative record in denial of benefits cases prosecuted under ERISA. The court pointed out that, in this circuit anyway, “ERISA cases are generally decided on the administrative record without discovery, and some very good reason is needed to overcome the presumption that the record on review is limited to the record before the administrator."

The second issue of note is that the court addressed the role of summary plan descriptions in ERISA plans and related litigation, and described the role they should play in a litigated dispute over benefits. In particular, the court declared:  

ERISA imposes an important requirement on plan administrators and insurers to communicate accurately with plan participants and beneficiaries. See Bard, 471 F.3d at 244-45. Part of the communication requirement is that the SPD provide certain information "written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." 29 U.S.C. § 1022(a). Section 1022(b) specifies the information to be included in the summary. When the terms, language, or provisions of the SPD conflict with the plan, the language that the claimant reasonably relied on in making and proving his claim will govern the claim process. Bard, 471 F.3d at 245. The burden is on the claimant to show reasonable reliance and resulting prejudice. Id.

 

I have written before about the question of whether we are creating a more litigious environment by switching employees from defined benefit plans to defined contribution plans, and we all generally know that companies are overwhelmingly shifting employees from the former to the latter. Those of you in the retirement industry certainly already are aware of studies actually documenting that change and establishing that, in fact and not just anecdotally, pensions are going by the wayside and 401(k) plans are replacing them across the board. For the rest of us, Suzanne Wynn has this study, from Watson Wyatt, documenting that this change has, in fact, occurred over the past twenty years.

I received a pitch for an interesting seminar on the interrelationship of the federal rules governing expert discovery, the retention of experts in litigation, and the work product doctrine. The issue addressed by the seminar has to do with the fact that expert discovery under the federal rules at this point is very broad, and can result in disclosure to the opposing side of what would otherwise be privileged communications and documents detailing the strategies and thoughts of the attorney retaining the expert. This problem flows from changes to the federal rules governing discovery that make discoverable the documents and information considered by the expert in reaching an opinion in the case.

A significant body of case law, most of it at the federal district court level, now stands for the proposition that all information provided to such an expert is fair game for discovery, even if, absent disclosure to the expert, it would have been protected from discovery as privileged. The majority of the courts that have considered the issue have concluded that the current version of the federal expert discovery rule requires that any material that is reviewed by an expert witness must be disclosed, whether or not it would otherwise be protected from disclosure to an adversary by the work product doctrine or the attorney -client privilege. See Zheng v. Liberty Apparel Co., 2004 U.S. Dist. LEXIS 15026 (S.D.N.Y. Aug. 3, 2004). It has been held that the applicable federal rule requires the “disclosure of all information, whether privileged or not, that a testifying expert generates, reviews, reflects upon, reads, and/or uses in connection with the formulation of his opinions, even if the testifying expert ultimately rejects the information.” Synthes Spine Co., L.P. v. Walden, 232 F.R.D. 460, 464 (E.D. Pa. Dec. 21, 2005). This includes disclosing notes created by an expert witness in the capacity of an expert witness, even if the notes contain information that would have otherwise fallen under the protection of the attorney-client privilege or the work product doctrine. Id. at 464-65 (reasoning that notes authored by expert could contain information that bears on the credibility of the expert, his report, and his trial testimony).

The law in the First Circuit, where this blog has its metaphorical home, is consistent with this rule. In fact, courts in this circuit were out ahead of the curve on this issue. Years before the bulk of authority on this issue was decided, the federal district court for Massachusetts issued its ruling in Suskind v. Home Depot Corp., 2001 U.S. Dist. LEXIS 1349 (D. Mass. January 2, 2001), which holds to this effect and has been repeatedly cited by other courts as an example of the majority rule that requires disclosure of materials considered or created by an expert.

The scope of the obligation to disclose is broad. Information supplied to or reviewed by an expert, in connection with his opinion, is discoverable regardless of whether the expert actually relied upon the information in preparing his expert report. In re Pioneer Hi-Bred Int’l, Inc., 238 F. 3d 1370 (Fed. Cir. 2001). Even more importantly for purposes of the subject of this post, documents considered by a party’s expert are discoverable even if they were supplied to the expert by a party’s attorney. Suskind, 2001 U.S. Dist. LEXIS 1349 (D. Mass. January 2, 2001) (holding that attorney-work product materials considered by an expert are discoverable).

The end result of all of this, and the problem addressed by the seminar, is that it can become difficult to work with an expert, and to inform the expert, without exposing confidential material and information, including quite possibly the entire theory of the case, to discovery. While a relevant problem in all areas of federal litigation, and one that a good lawyer needs to work around in handling experts, this issue is particularly significant in insurance bad faith litigation, one of the topics of this blog.  This is because in that area, much more so than others, the theories of the case and the issues to be addressed with an expert are much more amorphous (imaginative rather than fact based, some defense lawyers would say) than they are in other types of cases, making it much harder to discuss an expert’s likely opinion without first disclosing the theory of the case to the expert.

There are ways around this problem, and the simple fact of the matter is that it is the job of a good litigator to know how to do it. Perhaps even more so, it is the job of a good litigator to know how to exploit errors in this regard that an adversary may make, which may open up an otherwise foreclosed area of discovery.

This is an interesting paper, that comes to us via Workplace Prof, and which provokes further thought on the issue of the litigation boom involving 401(k) plans. The paper finds that pension plans outperform mutual funds, and attributes that differential to costs buried within mutual funds, as well as to the size of pension funds, which allows them to negotiate better deals on cost and related issues than would otherwise be the case. If you think about it, exactly that type of action is likewise what is expected of the fiduciaries of 401(k) plans, that they will assert themselves so as to avoid performance being affected by unreasonable fees or by other asset management decisions (such as overloading with company stock). One can think of lawsuits by participants against company 401(k) plans as being, at heart, driven by the failure of plans and their fiduciaries to live up to that high standard. Lawsuits involving excessive fees paid by 401(k) plans are in essence claims for failing to do what this article shows pension plans routinely doing: protecting participants against excessive costs impacting the plans’ returns.

I have been meaning to mention this for some time now, but other things always come up. So before the week takes me on to other issues that I want to post about, I thought I would take a moment and recommend to you Suzanne Wynn’s Pension Protection Act blog, which I have been reading for awhile now. In particular, Suzanne has taken on the burden of launching and hosting a weekly Carnival of Employee Benefits, which surveys posts on ERISA, pension and related issues from the preceding week.

If I am a little obsessed with the topic of electronic discovery, I apologize, although I can explain it. Computer storage and manipulation of information is now the standard operating procedure for insurance companies, financial companies, third party administrators, and others involved with ERISA plans and insurance policies. As a result, the unique discovery issues raised by computerized data is very important in litigating cases in the areas covered by this blog, and has become an important, and frequent, issue in my own practice. Beyond that, though, is the fact that we are engaged in actually watching – and participating when possible in – the creation of a new body of important jurisprudence, concerning how courts will handle electronic discovery; this is something that doesn’t happen everyday.

And so I was very interested in this article, which discusses the development of the case law on electronic discovery at the federal district court level. The article points out that there are approximately fifty district court decisions to date that constitute the operative body of law on this subject, and that they provide “de facto national standards for e-discovery disputes.” The author then discusses two particular decisions in great detail, which in combination provide an excellent overview of how courts are handling the issue of electronic discovery.

We have talked a fair amount on this blog about “choice architecture” and how the new structure of the retirement system, with its move from pensions to 401(k) plans, may be affecting behavior in unintended ways, such as by encouraging litigation. At his blog, the RiskProf has an excellent post on another negative behavioral change that the transition to defined contribution plans, such as 401(k)s, may be inadvertently creating: namely, a disincentive for older workers to retire, driven by the uncertainty in these types of retirement plans as to whether the worker actually can fund a decades long retirement. In the RiskProf’s personal case, involving the graying of university faculties, he presents the argument in his post that combining this dynamic with tenure is likely to lead to an aging university faculty population hanging on well past its prime. I suspect I made enough faculty members angry with my post on the increasing irrelevance of law review articles, so I won’t stick my two cents in on this issue and will instead let the RiskProf’s post speak for itself.

It’s a truism that insurance greases the skids for the entire economy; as a risk sharing mechanism, it allows businesses and individuals to move forward knowing they won’t bear the entire cost if something goes wrong. David Rossmiller’s ongoing coverage at his blog of the response of coastal states to a decrease in available homeowners coverage post-Katrina can be understood along these lines as the story of what happens when the availability of risk sharing of this nature is severely reduced. Another good example is here, in this story out of the New York Times today, of baseball teams’ decisions to obtain insurance covering them against the risk of a high priced player becoming disabled during the season; the insurance reimburses the team for some part of the contract still owed by the team to the player. Interestingly, much the same way homeowners insurance has become more expensive and less accessible in coastal areas because of recent hurricane losses, professional baseball teams have run into the same pricing and availability problem with regard to this type of disability coverage because of large losses recently paid out by insurers on certain former players who were unable to finish out their contracts. I guess both stories, the one in the Times and the one David has been extensively covering at his blog, evidence the same thing: the never ending tension between insurers’ recent loss history and the market’s appetite for ever more insurance, only at a price the consumer is willing to pay.