Consistent with established principles of trust law, we hold that a denial of benefits challenged under 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan. . . . Thus, for purposes of actions under 1132(a)(1)(B), the de novo standard of review applies regardless of whether the plan at issue is funded or unfunded and regardless of whether the administrator or fiduciary is operating under a possible or actual conflict of interest. Because we do not rest our decision on the concern for impartiality that guided the Court of Appeals, see 828 F.2d, at 143-146, we need not distinguish between types of plans or focus on the motivations of plan administrators and fiduciaries. Of course, if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a “facto[r] in determining whether there is an abuse of discretion.” Restatement (Second) of Trusts 187, Comment d (1959).
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) (emphasis added)
That portentous parting comment in Part III of the Court’s Firestone opinion sowed the contentious seed from which almost two decades of litigation have reaped the proverbial whirlwind. Oral argument in MetLife v. Glenn yesterday raises the question of whether the Court is now prepared to plow the crop under and begin again.
“Dictum“, interjects Justice Scalia, as counsel for the respondent (Ms. Glenn) opens his remarks with reference to the Firestone comment about factor-weighing where there is a conflict of interest.
JUSTICE SCALIA: What I don’t like about the dictum is I don’t know what it means.
Nevertheless, Justice Scalia almost ruefully acknowledged the Court had set off the series of events that brought the issue before the Court with the Firestone comment, stating:
I know that we’re responsible for this because we said it in Firestone. We said that a conflict of interest should be weighed as a factor. If that means anything, it seems to me it means that sometimes that weight will make the difference.
But how much weight to give the factor of conflict and at what stage should it be considered? This issue proved a difficult one for counsel to resolve to the Court’s satisfaction. For example, Justice Scalia asked MetLife’s counsel:
So a perfectly reasonable decision becomes unreasonable simply because you have a conflict? . . . Is that what you mean by give it some weight? . . . So a perfectly reasonable decision becomes unreasonable simply because you have a conflict?
Pages 13 – 14
Then came the Scylla and Charybdis of hypotheticals, one by Justice Souter and the other from Justice Alito:
Okay, let’s assume — let’s assume that I’m reviewing it, and I . . don’t find it as clear as you do, and I’m on the fence. Being on the fence, may I take into consideration the fact that there was a conflict of interest?
MS. POSNER: You — I think under Firestone you have to take that into account.
JUSTICE SOUTER: And therefore I will say, okay, I wouldn’t know for sure how to go in this case, but I see the conflict of interest and that’s enough to make me say more probably than not there was a reflection of the self-interest of the provider, rather than the interest of the — of the insured here; and, therefore, I’m going to find that the — that the conflict did disadvantage the person insured. That would be, I take it on your view, a reasonable application of Firestone.
MS. POSNER: Again, depending upon how these things weigh.
JUSTICE SOUTER: Well, I just told you.
Justice Ginsburg drove the point home here:
[ERISA] certainly says you can be both the plan administrator and the payor, but all it says is that that’s permissible. But it also provides for review of those decisions, judicial review in court. And here is, say, a district court is looking at it and says: I don’t understand why the company didn’t look at the doctor’s explanation and put such heavy weight on a checkmark. And I also don’t understand the suggestion that she is totally disabled to the government and then saying, well, she’s really not, in this very close time frame. So it might be okay and it might not. I am in equipoise about this case, not the terms of the plan but the decision that was made to deny her benefits. So which way do I call it? That’s the question that Justice Souter posed, and you seem not to want to face up to it and answer it.
Justice Roberts summed up the two hypotheticals as the central issue to the case:
CHIEF JUSTICE ROBERTS: Counsel, Justice Souter’s question and Justice Alito’s question highlight for me what I think is the central issue. Justice Souter had asked you whether the conflict comes into play, you know, when it’s a tie. And you’re right on the fence, and you say, well, the conflict’s a factor, so it tips over in the employee’s favor.
Justice Alito’s question asked you whether 16 or not the conflict has to play a role in the decision. I don’t know how that would be, but let’s say, for example, the insurance company is doing well and so they say, well, we allow coverage for this procedure. All of a sudden, the insurance company looks like it’s not doing so well, it’s not going to meet the quarterly targets or whatever, so it says, well, we’re no longer going to allow coverage for that procedure. In other words, it is the conflict itself that affects which way it comes out.
Now, which is right: Justice Souter’s case in which the conflict tips the scales, no matter what the reason is; or Justice Alito’s case where the conflict plays a role in the decision process?
Ms. Posner opted for Justice Alito’s hypothetical.
But this created more problems. How would a plan participant know whether the conflict played a role in the decision or not?
Justice Alito: And how is the Court going to know whether conflicting interests played a role in the outcome of a particular benefits determination without looking at the merits of the case unless there is going to be a lot of discovery about internal processes at MetLife and how you treat the people who — who gets promoted among the benefits administrators and all of that? And that’s what I don’t understand about that position.
It appears that counsel for the petitioner ultimately opted for Justice Alito’s hypothetical as well, though not unequivocally.
I won’t venture a guess as to how the Court will rule, but I do not see where argument did much to clarify the issue. If Judge Alito’s hypothetical were influential, one could see how a claimant’s might gain more opportunity to discovery as a means of garnering evidence of conflict. The comments on balance seem to converge on a reasonableness standard as the most workable solution in claims review and a general inclination toward eschewal of formalized gradations of the review standard.