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.

Rising home insurance costs in beachfront areas is a trendy topic, and the Boston Globe weighed in on it yesterday, in this article discussing consumers on Cape Cod joining together to question the industry’s rate setting. The article’s lead (or lede, as I have learned from former newspaper reporter turned lawyer and blogger David Rossmiller) frames the topic of the article, pointing out that “a growing army of homeowners have watched as home insurers have left Cape Cod and remaining companies insist they must raise rates because of hurricane fears.” For those of you who are more interested in the substance of the criticisms across the country of rate setting and market departures by homeowners insurers in response to hurricane projections than in the joining together on the Cape of consumers to challenge it, David Rossmiller at the Insurance Coverage Blog has been covering this issue in great detail, with a focus on Florida and the Hurricane Katrina affected regions. That’s the place to go for more on this issue.

Well, my trial’s still ongoing, and I find myself short of time to really comment in any detail on the latest details in the always percolating and never quiet world of ERISA and insurance law. However, I do still find time to continue my own reading on the subject, and so I am able to pass along for your review items that I find particularly interesting. Head and shoulders above anything else on that list right now is this excellent analysis by Workplace Prof blog of the Supreme Court hearing in Beck v. Pace International Union, which concerns the issue of fiduciary obligations with regard to the distribution of a terminated plan’s assets. The analysis is timely, interesting, and probably, in a nutshell, all you need to know about this case until the time the Court actually issues an opinion on the case.

Today’s post is sort of a place holder, in a way. My associate Eric Brodie, who is my crack science guy, and I are starting a patent infringement trial this morning in federal court that is expected to last two or three weeks. As a result, I don’t know how much I will be posting for the next couple weeks, although I will try to post here and there, when I have a chance, and will certainly make a point to at least put up short posts drawing attention to new decisions that are handed down while I am on trial or to particularly interesting blog posts or articles published during that time; the posts will undoubtedly lack much discussion by me about those decisions and publications, although, if they merit it, I will return to them to provide comments in a couple of weeks, when I have more time.

Blog vendor Kevin O’Keefe at LexBlog likes to suggest that lawyers blog during the downtime in trials, and comment on what is going on at court, in the interest of showing – in his words – that you not only talk the talk, but also walk the walk. I don’t know whether I will do that during this trial, partly because I am not all that comfortable with blogging about an ongoing court proceeding in which I am involved; I am not sure I feel that it fits my obligations to either the client or to the court, but, if there is something interesting to comment on involving something other than the case I am actually trying, I might put something up from court, maybe over the midmorning break. We’ll have to see on that.

I have a bit of a lawyer geek’s fascination with the electronic discovery amendments to the federal rules of civil procedure; they exist at an interesting intersection of evidence, discovery, and business management issues, each of which alone is interesting to me but that in combination, as they are with regard to these amendments, become a fascinating, almost gordian, knot of issues. In earlier posts, I have talked about a couple of issues raised by them. The first is the need for the courts to develop rules governing electronic discovery that are more rigorous than traditional standards for paper discovery, and that take into account the far greater cost that broad electronic discovery can impose. The second concerned the importance for companies to act proactively, and establish strong computer information systems that keep information well organized and easily accessible in the normal course of business, allowing cost effective data collection, review and production when things turn extraordinary, namely into litigation.

I thought, on both of these points, I would pass along this article that I liked, which really drives home the point that the best solution to the potentially backbreaking cost problem of electronic discovery is proper electronic document management on a day in day out basis in the operation of the business itself, rather than just tackling that issue latter on, after a suit is filed and electronic discovery is sought.