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.

When I was taking constitutional law in law school, I had a professor who liked to say that what standard of review the Supreme Court applied to certain types of issues depended on whether or not the justices wanted to uphold or instead overturn the statute before them; a more cursory level of review guaranteed that it would be upheld, and a more searching standard of review would inevitably lead to the statute being struck down. Readers of this blog who are lawyers probably had constitutional law professors who said much the same thing (even then, it didn’t sound particularly original to me).

The concept of ambiguity can sometimes play much the same role in insurance coverage disputes. Courts sometimes invoke it as a handy, out of the blue lightning bolt to tilt the case in favor of the insured, often, frankly, without providing much intellectual support for concluding that the particular insurance policy term involved is in fact ambiguous. Better courts and judges don’t do this, but it happens enough to be a given risk that must be accounted for by any insurance company involved in insurance coverage litigation. Most jurisdictions have a variety of legal rules that buttress the ambiguity question, which in theory should make the interpretation of debated policy terms more complicated than the simple syllogism of ambiguity equals coverage.

What brings these thoughts to mind is that David Rossmiller has a nice post today on the ambiguity of the manner in which courts find ambiguity in insurance policies. Better still, David provides a link to an excellent article on the subject that presents a perfect example of a court subtly handling the ambiguity question in a manner that should be the norm, and never the exception. If you want to know more on the elastic concept of ambiguity and its role in insurance coverage litigation, his post and the article he links to are a fine place to start.

Well, the world of ERISA preemption, without Maryland’s Wal-Mart law to focus on anymore, turns its lonely eyes to Massachusetts’ universal health insurance statute, with the Boston Business Journal posting a front page article this week that says, in essence, it might be preempted but then again, maybe not.

Whether or not this statute is actually preempted is one of those questions on which I could credibly argue either way, so there is some room for debate here. However, Ed Zelinsky of Cardozo School of Law, who generally knows what he is talking about with regard to preemption, has concluded in one of the first, if not the first, detailed academic analysis of the question that the Massachusetts statute is in fact preempted. Zelinsky’s paper finds that:  

Major features of the new Massachusetts health law are ERISA-preempted as forbidden regulation of employer-provided health care.

This is a regrettable conclusion but one mandated by the ERISA Section 514 and the controlling case law. ERISA preempts the new law’s mandate requiring covered Massachusetts employers to sponsor medical plans for their employees and to make “fair and reasonable” contributions to such plans. ERISA also preempts the new law’s requirement that Massachusetts residents maintain “minimum creditable coverage” for health care as that requirement effectively mandates for Massachusetts employers the substantive medical coverage they must offer their employees…

As is often the case when law review papers cross my desk, credit is due the Workplace Prof blog for bringing Professor Zelinsky’s law review article to my attention.

I have written before, and frequently (such as here and here), about the coming boom in litigation against plan sponsors and fiduciaries over alleged excessive fees and other alleged malfeasance in the administration of 401(k) plans. One point I have tried to drive home in my posts, including here and here, is that the best defense to this litigation boomlet, possibly soon to be a boom, is a good offense, in the form of careful, regularly scheduled due diligence with regard to the funds offered in a plan and the fees charged for those funds.

This article, making the same points, by the lawyers at Littler Mendelson, crossed my inbox today. It provides a nice easy to digest overview of the issue, and recommends the same preemptive course of conduct, in the form of these recommendations for due diligence:  

What to Do? We believe that there are some actions that employers and plan fiduciaries can take to protect themselves:
•Continually monitor all plan and fund expenses and assure that they have negotiated the best deal for participants, but keeping in mind that fees are only one piece of the fiduciary puzzle; the others include risk, rate of return, and historical performance.
•Periodically review all aspects of the fund selection and monitoring, and document these efforts.
•Be sure that all plan expenses can be determined from documentation provided or made available to participants, and consider providing participants with a separate summary of those expenses.
•Review your service provider agreements, make sure you get legal counsel involved in negotiating those agreements. It is recommended that all 401(k) plan service provider agreements prohibit any undisclosed revenue sharing.
•Ask your plan service providers to provide you with a detailed written description of all plan fees – hard dollar and soft dollar.
•If you believe you may be vulnerable, consider having a legal audit performed on your 401(k) plan.  

Sound advice in my book, and one I – and others – have been recommending for awhile.

Well, here’s a curious thought. Do the electronic discovery amendments to the federal rules reach cell phone text messages? A recent article from BNA’s Digital Discovery and E-Evidence reporter put that thought in my head, and I am sure that the authors of that article have something to say on that point. As for me, well, if discovery obligations run that far, then its just more evidence, from where I sit, that courts really have to think about how far electronic discovery should be allowed to range, and should be prepared in any given case to set some limits, even if, horror of horrors to a litigator, it means that some otherwise relevant material might not be subject to discovery.

In the old days of paper discovery, it was acceptable to understand the limits of discovery as being limited only by the imagination of the party seeking discovery, and to allow discovery so long as only the most minimal requirement of relevance – that the documents sought might lead to admissible evidence – was satisfied. But as the example of cell phone text messages shows, with electronic communications and broad electronic dispersal of information, trying to run down every electronic communication or document that could even conceivably lead to admissible evidence is transparently a herculean task. And this is why, as I have said before, courts really need to start developing a jurisprudence of electronic discovery that requires real weighing of the costs to the producing party against the benefit to the requesting party before allowing broad electronic discovery, when the party from whom discovery is sought objects to the burden imposed on it.

I have written before about my thesis that 401(k) litigation, and the tendency of individuals to pursue such suits, may be driven in part by the psychology of retirement benefits and the uncertainty for employees as to whether they will be able to fund their retirement that these types of retirement savings vehicles create, particularly as opposed to pensions, which, on anecdotal evidence, seem to generate far less litigation than 401(k) plans. Along these lines, this article out of today’s New York Times about behavioral economics and the impact of consumer choice on 401(k) contributions caught my eye. The article compares retirement savings to research into the strange behavioral distortions that appear to underlie overeating, and discusses how the Pension Protection Act is written in a manner intended to remove certain behavioral distortions from the decision to make 401(k) contributions. Is there a linkage between the security of retirement and the tendency to sue over retirement benefits, and if so, can restructuring the benefit programs, such as in the manner pursued by the Pension Protection Act, reduce the extent of litigation over such benefits?

I certainly don’t pretend to know the answer, and I suspect academic research doesn’t provide an answer to this question at this point either. But the article sums up the research into consumer behavior as follows: “[w]hether it’s 401(k)’s or food, the way choices are presented to people — what the economist Richard Thaler calls ‘choice architecture’ — has a huge effect on the decisions they make.” If we are presenting 401(k)s to employees in a way that makes for retirement uncertainty and for doubt (or at least fears, founded or unfounded) as to the abilities and fidelity of those managing them, the question becomes whether we are creating a “choice architecture” that points people towards litigation, rather than away from it. If, on the other hand, we can create an environment of greater trust in the operation of those types of retirement vehicles, perhaps employees will tend away from trying to resolve concerns over retirement funding through the blunt instrument of litigation.

I have talked in other posts about the rights of plans and their administrators to recoup overpayments of benefits directly from the beneficiary, and of the creative lawyering that has been employed – although generally without much success – by overpaid plan participants in the hope of avoiding paying the funds back. The United States District Court for the District of Rhode Island has just issued a very interesting opinion involving this scenario, only this time involving an attempt to rely on the Americans with Disabilities Act to prevent the repayment; this tactic didn’t work either, except to the extent that a claim that the attempt to recoup the overpayment was retaliatory could survive a motion to dismiss. The case is Hatch v. Pitney Bowes, Inc.