Langbein On Deferential Review Under ERISA

Thanks to Mark DeBofsky for bringing to my attention a law review article recently published in the Northwest University Law Review by John H. Langbein. You can find it at this link and I’ve also placed it in the website library so you can access it here. Langbein’s article is as concise yet thorough a discussion I’ve seen regarding the Supreme Court’s error in allowing plan administrators to insert self-serving boilerplate language in plan documents to trigger an extremely deferential “arbitrary and capricious” standard of review. It is must reading. As Prof. Langbein notes, the abuses of ERISA insureds by UnumProvident in recent years makes clear that an arbitrary and capricious standard of review, together with a lack of meaningful remedies under ERISA, invites insurers to engage in bad behavior.

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Don Levit 11/17/2008 01:47 PM

Brian: Thanks so much for posting this article. John Langbein has been very helpful to me each time I have contacted him. While he is acknowledged in many court cases as an ERISA expert, I have found him to be very willing to engage me in various questions and comments, and to want to continue learning from a position of humility and wonder. I found these excerpts to be very compelling: "Because the normal private trust is essentially a gift, trust law exhibits great deference to the wishes of the transferor. In ERISA, by contrast, Congress imposed trust law concepts for regulatory purposes, to restrict rather than to promote the autonomy of the employer over its employee benefit plans. This fundamental difference of purpose should lead the Court to restrict the power of an ERISA plan sponsor to alter the standard of judicial review." "Under ERISA's duty of loyalty, the decisionmaker must interpret and apply terms solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits to participants and their beneficiaries. Judge Posner is therefore confusing a contract counterparty who is allowed to act selfishly, with an ERISA fiduciary, who is forbidden to." By allowing those with final authority over benefit claims to use the arbitrary and capricious standard, it seems to me that the courts have watered down the duties of a fiduciary. How would they be defined then, according to ERISA: a pseudo-fiduciary? It seems to me that the settlor duties have been mixed in with those of a fiduciary. If the welfare plan becomes too costly, the employer can always amend the plan, or even terminate it. It seems like the courts are too sensitive to employers even establishing welfare plans, without this pseudo-fiduciary title. Don Levit

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