Monthly Archives: July 2008

CBS fraudulently covers up McCain’s appalling ignorance

John “Walnuts” McCain wants to be our next president based largely on his claim of being the right man to handle the Iraq war. Never mind that doesn’t know the difference between Sunni and Shiite Muslims. Forget his recent reference to the nonexistent Iraq-Pakistan border. (The “Iraq-Pakistan border”, if you want to call it that, is a whole country known as Iran.) He’s the right guy. He’s a foreign policy expert. Just ask him.

And with major “news organizations” like CBS committing outright fraud to back him up, how can McCain fail to get the message across? The Keith Olbermann video of the fraud is available here.

Katie Couric was questioning McCain about “the surge” and Barack Obama’s views thereon. Couric asked:

Senator McCain, Senator Obama says, while the increased number of US troops contributed to increased security in Iraq, he also credits the Sunni awakening and the Shiite government going after militias. And says that there might have been improved security even without the surge. What’s your response to that?

McCain answered:

I don’t know how you respond to something that is as — such a false depiction of what actually happened. Colonel McFarlane [phonetic] was contacted by one of the major Sunni sheiks. Because of the surge we were able to go out and protect that sheik and others. And it began the Anbar awakening.

Absolutely wrong. The so-called Anbar Awakening began in the summer of 2006, long before the infamous “surge.”

But McCain’s spectacular ignorance is no impediment when you have friends like CBS. Here’s the answer they showed their viewers:

Senator Obama has indicated by his failure to acknowledge the success of the surge that he would rather loss a war then loss a campaign.

Which is a vacuous Rebitchlifuck blabbering point clipped from an entirely different part of the interview.

Couric took over as anchor of the CBS Evening News after Dan Rather left in disgrace over a story on George W. Bush’s horrifically dubious National Guard record. The story was accurate enough, but relied in part on documents of dubious authenticity. Turns out that CBS never tried to authenticate the documents, its public statements to the contrary notwithstanding. The right wing machine screamed bloody murder, calling the documents forgeries (never established) and demanding Rather’s head on a platter.

Surely our conservative brethren will give Couric the same treatment for this far more egregious breach of journalistic ethics, right?

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Oops.

By now everyone knows about Kennedy v. Louisiana, 554 U.S. ____ (2008), a case decided late last term in which the Supreme Court ruled 5-4 that a state violates the Eighth Amendment’s prohibition against cruel and unusual punishment by imposing capital punishment for the non-homicide crime of child rape. The decision was based in part on what the majority described as “a national consensus against capital punishment for the crime of child rape”. That in turn was based on the “fact” that only six states have authorized execution as a punishment for child rape and the federal government had not.

Yesterday the state of Louisiana filed a Petition for Rehearing (pdf, 18 pages). Why does the state think it has a snowball’s chance in hell at relief the Court virtually never grants? Well, it seems that the federal government does in fact sanction capital punishment for the crime of child rape. The provision at issue was buried deep — Section 552(b) — within the federal National Defense Authorizations Act of 2006 and authorizes the death penalty for rape of a child in cases governed by the Uniform Code of Military Justice. In September 2007 the president signed Executive Order 13,447 implementing the child-rape death penalty provision via amendment to the Manual for Courts-Marshal.

Louisiana’s petition contains a big fat mea culpa along the lines of “We suck for not finding that statute and bringing it to the Court’s attention earlier, and we apologize deeply for sucking so much.” Despite the suckery, though, Louisiana insists that Section 552(b) warrants a rehearing because a key “fact” on which the Court based its decision isn’t a fact at all.

But the state needn’t be so hard on itself. The list of people who dropped the ball on Section 552(b) is lengthy and illustrious. It includes the state’s lawyers, the attorneys for Patrick Kennedy, the Solicitor General of the United States, AND nine justices of the U.S. Supreme Court along with their law clerks, the cream of nation’s law schools.

And that was just at the federal level. A bunch of highfalootin’ legal talent missed Section 552(b) when Kennedy was pending before the Supreme Court of Louisiana as well.

One guy who didn’t miss it was Dwight Sullivan, a Marine Corps Reserve colonel currently working for the Air Force as a civilian criminal defense lawyer handling death penalty appeals. A military justice aficionado, he blogged about the mistake just a few days after the decision.

So what happens now? According to Supreme Court Rule 44, there’s no oral argument on petitions for rehearing. Kennedy’s lawyers don’t get a chance to respond unless the Court expressly asks for a response. A simple majority of justices can grant the petition, but only on request of a justice who concurred in the original decision. In other words, the petition will be denied automatically unless one of the justices in the majority agrees that a rehearing is warranted.

This is a rather big embarrassment for everyone involved, including and perhaps especially the Court itself. In the end, though, that’s all it’ll amount to. Prediction: the petition is denied and majority simply issues an amended opinion briefly describing Section 552(b) and why it doesn’t affect the outcome.

“We report. You decide.”

So says the always popular, rarely accurate Fox News.

Okay, that being the case, check out the July 16 edition of Lis on Law, authored by blow-dried blonde cupcake Lis Wiehl. There’s not much at all to the piece itself. It’s uncommonly silly flotsam about the common law tort of intentional infliction of emotional distress and its potential application to “bridezillas” who force their poor, long-suffering bridesmaids to endure all sorts of psychological horror.

The interesting statement, the one that now requires us to “decide,” appears in the second sentence of the final paragraph. There Ms. Wiehl tells us that the New York Court of Appeals is “the second highest court” in the state.

Aligned against Ms. Wiehl are the Court itself, which claims to be “New York State’s highest court”, and the long running television series Law and Order, from which we learn that New York’s highest court is indeed called the Court of Appeals. The show also tells us that trial courts are called “Supreme Court” and intermediate appellate courts are called the “Appellate Division” of the Supreme Court.

So then, Fox News has reported and we must decide. Is the New York Court of Appeals the highest or second highest court in that state? At issue is bragging rights, and maybe some hoity toity law stuff too, so get your votes in now!

H/T – The extraordinarily observant Wash Park Prophet, who apparently reads articles all the way to the end (even articles in the Opinion section of Fox News’ website)

You know what’s REALLY a racket?

Right wing screaming heads who’ll say anything — regardless of how preposterous, offensive or harmful — to make a goddamn buck, that’s what.

Take these choice July 16, 2008 comments from syndicated radio screamer Michael Savage, for instance. After gibbering about how “minorities” turned asthma into a “money racket”, Savage got to the money shot:

Now, the illness du jour is autism. You know what autism is? I’ll tell you what autism is. In 99 percent of the cases, it’s a brat who hasn’t been told to cut the act out. That’s what autism is.

What do you mean they scream and they’re silent? They don’t have a father around to tell them, “Don’t act like a moron. You’ll get nowhere in life. Stop acting like a putz. Straighten up. Act like a man. Don’t sit there crying and screaming, idiot.”

. . . Stop with the sensitivity training. You’re turning your son into a girl, and you’re turning your nation into a nation of losers and beaten men. That’s why we have the politicians we have.

You know who REALLY didn’t have a father around to tell him not to act like a fucking douchebag moron, screaming and crying like an idiot? Michael Savage, that’s who.

Our friend Zach over at Blogging Blue, himself the father of an autistic child, verbally slaps Mr. Savage about the head and shoulders here. People like Michael Savage almost make you want to call a constitutional convention for the purpose of reconsidering certain portions of the First Amendment. But Zach reminds us that real cure for false, evil speech is truth.

FDA staffers rat out FDA

This could prove interesting:

Thoreau-FDA.com is composed of and/or descriptive of current and ex-US Food and Drug Administration (US FDA) staff who have succeeded, in resisting their upper management’s wrongful directives and requests that put public health at avoidable risk.  When unchecked, these wrongful directives/requests cause drug review outcomes to be misrepresented as carefully considered objective “science based” assessments, when they are, in fact, pre-determined. Click here to read Articles. These wrongful requests or directives by the US FDA’s upper managers are specifically called, undocumented top-down approve directives or requests.  Some US FDA staff resist such wrongful directives and requests by disobeying them.   This is called Civil Servant Disobedience.

Part of the problem, the past and present Food and Drug Administration staffers tell us, “is the abuse of FDA staff, who do their jobs by making publicly known, the existence of harmful and deadly products already approved for, and in, the market.” To paraphrase Gene Hackman in the movie Crimson Tide, these folks seem to have a serious weed up their asses and a legitimate gripe, a formidable combination.

Such issues are all the more important in light of the burgeoning trend in the federal courts to find that FDA regulations preempt state tort law. If the FDA isn’t doing its job and doing it well, we’re at the mercy of unscrupulous for-profit drug and medical device manufacturers.

We’ll be keeping a close eye on Thoreau-FDA.com and reporting on any interesting new content.

H/T – TortDeform

Another heartwarming tale of ERISA-based corporate welfare

This story is a bit ripe, but it’s also a below-the-fold item that you might not have heard about.

Once upon a time there was a man named Thomas Amschwand who worked for a company called Spherion Corporation. Thomas was married to a woman named Melissa and all was right with the world until he was diagnosed with cancer.

Thomas took a medical leave from his job to wage what would ultimately prove an unsuccessful fight against the cancer. During the earlier stages of his leave Thomas took comfort in the fact that Melissa was the beneficiary of some $426,000 in life insurance coverage that Thomas purchased through his employer.

While Thomas was on leave, Spherion switched life insurance providers from Prudential to Aetna. Unbeknownst to Thomas, Aetna had a coverage condition known as the active work rule. The policy provided in relevant part as follows:

If the employee is ill or injured and away from work on the date any of his or her Employee Coverage (or any increase in such coverage) would become effective, the effective date of coverage (or increase) will be held up until the date he or she goes back to work for one full day.

The rule applied with full force to Thomas, who was “ill . . . and away from work on the date . . . his . . . Coverage” through Aetna would become effective, so he would need to “go[] back to work for one full day” before having coverage.

Aetna courteously agreed to waive the active work rule for Spherion employees who weren’t working because of a medical condition that predated the life insurance switchover. For reasons no one knows, and Spherion refused to explain, Thomas Amschwand slipped through the cracks. Thanks to what Melissa Amschwand and her attorney believe was a monumental pooch screw on Spherion’s part, Thomas never got a waiver of the active work rule.

Thomas knew full well of the Prudential-to-Aetna change and did everything humanly possible to ensure that his life insurance coverage would carry on. The guy knew he was dying and wanted his spouse taken care of. He religiously paid all the premiums. He repeatedly contacted Spherion seeking assurances that he was covered. Spherion repeatedly said that yes, Thomas did in fact have his life insurance coverage. Never did a Spherion representative tell him about Aetna’s active work rule.

Thomas also made repeated requests for written documentation of the terms of the new life insurance coverage. That’s pretty damn significant, seeing as how the active work rule figured prominently in the Summary that Aetna prepared for distribution to Spherion employees. Again, Spherion repeatedly fucked up — and violated federal law — by failing to provide the requested documentation. On some occasions Spherion flat out bullshitted, claiming that Aetna had yet to prepare the documentation Thomas was after. Other times it simply ignored his requests.

Thomas died in February 2001, and soon thereafter Melissa filed a claim with Aetna for life insurance benefits. At that point she found out about the active work rule and the fact that Thomas never received a waiver. Absent compliance with the rule, Thomas had no coverage and his wife got nothing.

After failing at every level of Aetna’s internal appeals process, Melissa filed suit against Spherion in federal district court for breach of fiduciary duty. Primarily, she sought damages in the amount of the life insurance coverage that she would have gotten had Thomas complied with the active work rule or received the waiver.

And so, once again we wade into the filthy, stinking tidal pool that is the federal Employee Retirement Income Security Act of 1974 (“ERISA”). My previous ERISA tirades appear here, here and here. Today’s rant focuses on the measure of damages recoverable under the statute. Or, more accurately, the damages that aren’t recoverable.

As usual, ERISA appears to giveth when in fact it actually taketh the fuck away pretty goddamn hard. ERISA governs pretty much all employee benefit plans, not just retirement income plans. The law provides that anyone who “exercises any discretionary authority or discretionary control respecting management of such plan” or “has any discretionary authority or discretionary responsibility in the administration of such plan” is a fiduciary. 29 U.S.C. § 1002(21)(A)(i, iii). That’s a big deal for a couple of reasons.

First, although it used an insurance company to fund its employee life insurance plan, Spherion retained substantial control over its management and administration. Thus, it was a fiduciary.

Second, fiduciaries owe plan participants and beneficiaries like the Amschwands certain legal duties, including an obligation to exercise their authority “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims[.]” 29 U.S.C. § 1104(a)(1)(B). Plan administrators like Spherion must also comply with a beneficiary’s request for information that ERISA requires the administrator to provide. 29 U.S.C. § 1132(c)(1)(B).

This case looks like the slam dunk of all slam dunks. Intentionally or through striking incompetence, Spherion repeatedly bollixed things. It failed to get Mr. Amschwand the active work rule waiver that Aetna offered, repeatedly told Thomas that he was covered when in fact he wasn’t and failed time and time again to honor Thomas’ request for the plan summary information that ERISA requires administrators to provide on demand.

Well, yeah, liability may well be a no-brainer, but what damages can you recover? Under the law of pretty much all states, you can sue a fiduciary for breach of fiduciary duty and recover the full measure of your damages, i.e., whatever sum of money is necessary to make you whole for the damages resulting from the fiduciary’s breaches. Trouble is, ERISA broadly preempt state law as to employee benefits plans. Unless the target defendant is an insurance company and the state law is an insurance regulation, chances are good that state law doesn’t apply at all.

So it was with Spherion, whose activities were well within ERISA’s preemptive scope. Thus, the nature and extent of Melissa’s recovery is governed exclusively by ERISA itself.

The remedies provision of ERISA is 29 U.S.C. § 1132. The statute goes on ad nauseam, so you’d think there’s all sorts of relief available. Well, that just ain’t so. The basic provision allows a plan beneficiary or participant “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan[.]” That does Melissa no good at all. She clearly wasn’t entitled to benefits under the Aetna policy, and the quoted language says jack shit about recovery from plan administrators.

A beneficiary can also sue for “the relief provided for in subsection (c) of this section[.]” This one did help Melissa some, as Subsection (c) gives courts discretion to make a plan administrator pay the beneficiary up to $100 per day for violating its duty to provide plan summary information on request. Spherion’s conduct was sufficiently egregious that the Court exercised its discretion to make it pay the full $100 per day. The judge was also angered enough to grant Melissa a discretionary award of attorney fees pursuant to Subsection (g)(1). At least the lawyers got paid.

But the real damages in this case was the $426,000 in life insurance benefits that Melissa would have gotten but for Spherion’s fuckuppery. Is that recoverable? According to the trial court and the U.S. Court of Appeals for the Fifth Circuit, the answer to that question is a big, fat, resounding no.

The relevant provision of § 1132 is subsection (a)(3), which says that a plan participant, beneficiary or fiduciary may sue “ to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan” or for “other appropriate equitable relief[.]” The issue, of course, is what “other appropriate equitable relief” means and whether or not it includes make-whole damages of the sort Ms. Amschwand was looking for.

The term “equitable relief” dates back to days of yore when there were two separate court systems existing side by side, courts of law and courts of equity. I won’t burden you with a lengthy discussion of the distinctions. First, I simply don’t know the history well enough. Second, what I do know is insufferable boring. For present purposes, suffice it to say that money damages was a remedy generally reserved to courts of law. Courts of equity, by and large, were limited to granting “equitable” relief, for instance ordering the specific performance of a contract or enjoining a particular act. Nowadays courts are merged into a single system at the federal level and in almost all states. Those unified courts have authority to grant both legal and equitable relief.

But ERISA limits courts to awarding the benefits authorized under the plan or “other appropriate equitable relief.” For Melissa Amschwand to get what she was after, she would have to convince a court that full money damages qualifies as “equitable relief.”

It doesn’t sound as daunting as you might think. Back in the day, courts of equity often granted “legal” remedies in the exercise of their equitable powers. In actions by a trust beneficiary against a trustee, courts of equity regularly awarded the prevailing beneficiary money damages because that was the only way to “do equity.” So “equitable relief” in ERISA doesn’t necessarily foreclose make-whole money damages after all, does it?

Not so fast, goddammit. Everyone remain calm. Antonin Scalia is about to save the day for corporate America.

In Mertens v. Hewitt Associates, 508 U.S. 248 (1993), Justice Scalia got four of his colleagues to sign onto an analysis in which “appropriate equitable relief” doesn’t actually refer to all relief that courts of equity could grant. The phrase referred only to relief that courts of equity “traditionally” granted such as restitution, injunctions, writs of mandamus and such. If Congress meant to allow the full range of legal-type relief that courts of equity could grant, then its use of the term “equitable” would be superfluous, and that would be bad.

If that sounds kinda stupid, it’s only because it IS kinda stupid. The sort of strained, contrived analysis evidenced in Mertens is what you get when you let a predetermined result dictate the course of your reasoning. Here, the preordained result is “Money damages bad. Very bad.”

The next big cases interpreting the statutory phrase “appropriate equitable relief” were Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 234 (2001) and Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 336 (2006). Those cases didn’t involve lawsuits against ERISA fiduciaries. They involved workers injured in accidents caused by the negligence of third-party tortfeasors. The workers’ employee benefits plans paid accident-related medical expenses. When the workers recovered money from the tortfeasors’ liability insurers, the plan administrator demanded repayment from the settlement proceeds pursuant to the subrogation/reimbursement provisions in the plan documents. The workers told the administrators to go fuck themselves and litigation ensued. The issue was whether the “appropriate equitable relief” language of subsection (a)(3) authorized a court to award money damages to a fiduciary against a plan beneficiary on a subrogation claim.

The answer Great-West and Sereboff provide is, “it depends.” In both cases the plan administrator argued that it was seeking equitable relief in the form of “equitable restitution.” The administrator in Sereboff was allowed to recover while the administrator in Great-West wasn’t. The rule that emerge from the two cases is that a subro claim can properly be classified as “equitable” — an “equitable lien established by agreement,” whatever that means — and is enforceable under ERISA so long as the administrator is seeking reimbursement from an identifiable fund that is still in the plan beneficiary’s possession, as opposed to seeking reimbursement from the beneficiary’s general assets. In Great-West the plan administrator sued the beneficiary/tort claimant, but by that time the beneficiary had already placed the proceeds of the settlement into a special needs trust. Presumably, the administrator would have won had it made the trust a co-defendant, but it only sued the subrogor and was seeking recovery from his general assets. In Sereboff the beneficiary/tort claimant still had possession of the settlement funds. Thus, the plan administrator could seek recovery from the “identifiable fund” in which the administrator had an equitable lien.

The Fifth Circuit applied the same sort of analysis to this case. Amschwand v. Spherion Corp., 505 F.3d 342 (5th Cir. 2007) (pdf, 12 pages). Melissa’s lawyer argued that the fact that this case was a lawsuit against a fiduciary for breach of fiduciary duty made all the difference in the world. In actions such as this courts of equity had full authority to award money damages. In the end, Mertens and its progeny only say that extracontractual damages are unavailable in lawsuits against non-fiduciaries. The Fifth Circuit, like all but one of the other federal courts of appeals (the Seventh Circuit), rejected the proposed distinction and ruled that Melissa’s case sought wholly “legal” relief. She was seeking recovery not from some identifiable fund in which she had a lien but instead from Spherion’s general corporate assets. Since ERISA doesn’t authorize recovery of money damages, Melissa could not recover from Spherion the money she would have received in life insurance proceeds had Spherion not fucked up so badly and so often.

That doesn’t mean Melissa got nothing. “Restitution” is a traditional equitable remedy, and Spherion obviously recognized that. It gave Melissa a refund of the life insurance premiums that Thomas paid for the time he had no coverage. Spherion obviously realized the gravity of its incompetence, but the premium refunds weren’t even enough to cover Mr. Amschwand’s funeral.

Having nothing to lose, Melissa petitioned the U.S. Supreme Court for review. The Court seemed interested early on when it invited the Solicitor General’s office to file a brief on the government’s behalf. Even the Bush Administration Justice Department sided with Melissa. The Solicitor General argued in its invitation brief for a broad reading of “appropriate equitable relief” that would have allowed Ms. Amschwand to pursue her claim.

It wasn’t to be. One of the Court’s last official acts before closing up shop at the end of June was denying Melissa’s request for review.

When you hear members of Congress talking about a “patients’ bill of rights,” they’re likely referencing a federal bill designed to amend ERISA by making full money damages available to claimants, at least in the health insurance context. It’s abundantly clear that the courts don’t want to do that, even though the law supports it. Thus, we’re stuck relying on our elected representatives.

When the Democrats took over both houses of Congress I had high hopes for substantial amendments to Section 1132 that would allow recovery of make-whole damages in all employee benefits cases. President Pencilcock would have vetoed the measure, but at least he would have been stuck explaining why he hates the notion of personal responsibility as applied to corporate “persons.”

But no. The present Democratic Congress has set records for fecklessness and complicity with a criminal administration that it’ll be difficult if not impossible to match. The odds of getting the much needed amendments to ERISA are pretty much nil.

So brace yourself, folks. If your employer-provided health insurance plan denies you or your family member a diagnostic test that you’re clearly entitled to receive under the terms of your plan, and permanent debilitating injury or death results from delayed diagnosis of a readily treatable illness, you can still sue. Trouble is, your recovery will be limited to what the plan should have paid to begin with. That’s what qualifies as fair in the strange little world that is the United States of America these days.

Colorado GOP loses registrant lead

The Republican Party no longer has the highest number of registered voters here in Colorado. So who’s the new leader? Democrats? Hell no, buddeh! That’s crazy talk. This is, after all, Colorado.

The leading voter registration status is now “Unaffiliated”, as it was from 1978 to 1990. According to the Rocky Mountain News:

2008 Unaffiliated 1,021,979 34.19%

Republican 1,020,433 34.14%

Democrat 932,603 31.2%

Republicans have lost some 42,000 registered voters in 2006, whereas Democrats have picked up about 32,000. Looks like George W. Bush may have done a bit of good after all, however unintentionally.

Right wing religious nuts unite behind McCain

So perhaps you’ve been thinking that John “Walnuts” McCain isn’t religiously insane enough to garner substantial support among the extreme Christian right. Forget it. Unhand your Johnson, Skippy, and breathe deep the odious stench of reality.

One hundred fairly well known wingnut Christian extremists met in Denver, CO on July 1 and “agreed to unify behind the Arizona senator for president.” Although the wingers aren’t deliriously happy with Walnuts, they’re convinced that he’ll be far more supportive of the Christian right agenda than presumptive Democratic nominee Barack Obama.

Attendees included Mat Staver, dean of Falwell-founded Liberty Law School (who arranged the meeting), Phyllis Schalfly, Wendy Wright, Tim and Bev LaHaye, David Barton, Phil Burress, Kelly Shackelford, Don Hodel and representatives of Focus on the Family and the American Family Association.

The group also endorsed a Declaration of American Values (pdf, 1 page). Clicking on that link is for the strong of stomach only. It’s mostly just heinous, but it has amusing components as well, particularly adherence to the laughable view that Jesus was some sort of supply-siding free marketeer.

MetLife v. Glenn, or How SCOTUS saved judicial review in ERISA cases

Imagine you’re a rich, powerful insurance company. A Fortune 500 corporation selects you to both fund and administer a disability insurance program for its employees. In other words, you evaluate claims and pay benefits.

You insert into the written plan documents a provision stating that you have sole and absolute discretion to interpret the terms of the benefit plan and to determine eligibility for benefits. Such a provision would be laughably unenforceable (or unenforceably laughable) in any sane world, but standard precepts of sanity simply don’t apply here. You’re funding and administering an employee benefit plan. Hence, your policy is governed by the federal Employee Retirement Income Security Act of 1974 (“ERISA”), previous discussed here and here.

29 U.S.C. § 1132(a)(1)(B) authorizes a plan participant or beneficiary to file suit in federal court “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan”, but doesn’t specify what standard of review the court should use in assessing the insurer’s denial of a claim. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), the U.S. Supreme Court borrowed heavily from the common law of trusts and held that courts must review an ERISA-governed claim denial de novo, i.e., with no deference or presumption of correctness whatsoever, unless the plan confers discretion on the insurer to interpret the policy’s terms and determine eligibility for benefits. Where the policy contains the magic language, the court’s review is limited to determining whether the claim denial was “arbitrary and capricious” or an “abuse of discretion.” As anyone who’s handled an ERISA case knows, “arbitrary and capricious” review adds up to “the insurance company wins pretty much every goddamned time.”

After Firestone, insured plans and self-funded plans alike scrambled to insert the magic language in their governing documents. The Firestone Court noted in dicta that where “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 ‘factor in determining whether there is an abuse of discretion.’ ” 489 U.S. at 115 (quoting Restatement (Second) of Trusts § 187, cmt. d (1957)). The Court didn’t address what qualifies as a “conflict of interest” or exactly how such a conflict affected the standard of review.

And now we come at long last to Metropolitan Life Ins. Co. v. Glenn, the subject of this here entry. Wanda Glenn, an employee of Sears, Roebuck & Co., was diagnosed with severe dilated cardiomyopathy, a highly debilitating heart ailment featuring symptoms such as extreme fatigue and shortness of breath. Sears had a long-term disability insurance plan for its employees. MetLife was both the insurer and the administrator of the plan.

The plan provided for an initial twenty-four months of disability benefits if the employee could establish inability to “perform the material duties of [her] own job.” After her diagnosis in April 2000, Ms. Glenn applied for the initial benefits, and MetLife approved the claim.

Now the shenanigans begin in earnest. MetLife referred Ms. Glenn to a lawyer for filing a federal Social Security disability benefits claim. As discussed here, certain private long-term disability insurers have their tit stuck in the proverbial wringer for insisting that their insureds file for Social Security disability benefits even though the insureds have little or no chance of meeting the Social Security Administration’s stringent criteria for a disability award. Not so in Ms. Glenn’s case. The SSA ruled that Ms. Glenn’s sickness prevented her from doing her own job and “from performing any jobs [for which she could qualify] existing in significant numbers in the national economy.” See 20 C.F.R. § 404.1520(g). An ALJ awarded her permanent disability benefits retroactive to the date of her diagnosis.

And what benefit did Ms. Glenn get from successfully pursuing a Social Security disability claim? Not much, of course. Seventy-five percent of the back benefits went to MetLife, and the remaining twenty-five percent went to the lawyers to which MetLife referred Ms. Glenn.

To keep receiving benefits under the MetLife plan after twenty-four months, Ms. Glenn would have to meet a stricter standard akin to the SSA standard; she would need to show that her disease made her unable to do both her own job and “the material duties of any gainful occupation for which” she was “reasonably qualified.” MetLife denied payment of any extended benefits and cut off Ms. Glenn after twenty four months, claiming that she was capable of doing full-time sedentary work.

At this point Glenn no doubt would have liked to go straight to court. Well, no can do. ERISA plans and policies always include provisions for at least one level of “appeal” within the insurance company itself. Within a set period of time, you have to lodge a formal written “appeal” with the very plan administrator that denied your claim in the first place. Shockingly enough, the “appeals” committees invariably conclude that the initial decision maker was absolutely correct in denying the claim.

Are such “appeal” requirements enforceable in court? Goddamn jolly well right, they are. If you file suit before pursuing all the “appeals” that the plan requires, the court will dismiss your case for failure to exhaust your “administrative remedies.”

Ms. Glenn toed the line, meeting all the appeals requirements imposed by MetLife. Those exercises in futility complete, she filed suit against MetLife in federal court per § 1132(a)(1)(B) to recover the long-term disability benefits she thought she was entitled to receive. The trial court threw out the case, and Glenn appealed to the U.S. Court of Appeals for the Sixth Circuit.

The court of appeals reversed the trial judge and remanded the case with instructions to reinstate Ms. Glenn’s long-term disability benefits retroactive to the termination date. Glenn v. MetLife, 461 F.3d 660 (6th Cir. 2006) (pdf, 14 pages). The court recognized that MetLife’s policy contained the language necessary to trigger “arbitrary and capricious” review and that the denial of benefits must be upheld “if it is the result of a deliberate, principled reasoning process and if it is supported by substantial evidence.” The appellate court nonetheless disagreed with the trial court’s decision for a number of reasons.

First, the fact that MetLife both determined eligibility for benefits and paid those benefits created a conflict of interest for Firestone purposes. The trial court acknowledged the conflict, but didn’t appear to give it any weight.

Second, the trial court gave insufficient consideration to the Social Security Administration’s award of disability benefits. MetLife insisted that Glenn file for federal benefits, referred her to a law firm, and deducted the government benefits from Glenn’s payments under the plan, actually demanding a $13,000 refund from Glenn of plan benefits previously paid. Despite all that, MetLife terminated Glenn’s benefits without giving any consideration at all to the SSA’s finding of total disability.

Third, MetLife viewed the opinions of Ms. Glenn’s treating cardiologist in a way that could most charitably be described as selective. MetLife focused heavily on a single report suggesting that Ms. Glenn was fit for sedentary working while ignoring multiple, later-prepared reports clearly stating that Glenn was wholly unfit for any sort of full-time work.

Fourth, MetLife cherry-picked the medical records it sent to the physician it selected to conduct an “independent” review of the case. MetLife sent the reviewing physician records that were favorable to Metlife but left out records that were favorable to Ms. Glenn.

Fifth, MetLife gave no consideration to the documented role that stress played in aggravating Ms. Glenn’s heart condition. Those factors, viewed as a whole, rendered MetLife’s decision to terminate Glenn’s disability benefits arbitrary and capricious.

MetLife filed a petition for certiorari with SCOTUS, which agreed to decide the case. The decision came on June 19, 2008. The Court affirmed the Sixth Circuit, resulting in Ms. Glenn getting her MetLife disability benefits. Metropolitan Life Ins. Co. v. Glenn, 554 U.S. ____ (2008).

All nine justices agreed that a conflict of interest exists where the third-party insurance company that pays benefits is also charged with determining eligibility. As Justice Scalia wrote in his dissenting opinion, “A third-party insurance company that administers an ERISA-governed disability plan and that pays for benefits out of its own coffers profits with each benefits claim it rejects.” The real battle was over how the existence of this conflict affects judicial review.

Three justices — Roberts, Scalia and Thomas — bought MetLife’s claim that the subject conflict of interest should not affect the “arbitrary and capricious” standard of review at all unless the claimant can prove that the conflict actually affected the decision. Had a majority of the Court accepted this horseshit, conflicts of interest would have become totally irrelevant. Completely lost in this discussion is the fact that there’s generally no discovery allowed in ERISA cases; courts base their review entirely on the “administrative record,” meaning the documentation in the plan administrator’s file. So long as the insurer refrains from placing in its denial letters statements such as “The Board of Directors has instructed us to deny more claims such as yours to increase our company’s profit margin,” there’s no way in the world for a claimant to prove that the conflict of interest actually affected the decision.

In a concurring opinion, Chief Justice Roberts wrote that the court of appeals shouldn’t have considered the conflict at all since there was no evidence that the conflict played a part in MetLife’s decision to terminate benefits. However, Robert’s concurred in the majority’s disposition of the case because the remaining evidence (disregarding the SSA’s findings, cherry picking medical records, etc.) was sufficient by itself to support the Sixth Circuit’s finding that MetLife abused its discretion.

Joined by Justice Thomas, Scalia dissented. Absent proof that the conflict of interest actually affected the outcome, the conflict must be given no weight at all and the plan administrator’s denial of benefits is subject to review for “reasonableness” only. Scalia and Thomas would have vacated the Sixth Circuits’ decision and remanded for a consideration of “reasonableness . . . without regard to the existence of a conflict of interest.”

The majority consisted of Justice Breyer, who wrote the majority opinion, and Justices Stevens, Souter, Ginsburg and Alito. Rather than opting for a hard and fast, one-size-fits-all rule, the majority held that the significance of a conflict of interest depends on the specific facts and circumstances of a particular case. The standard of review remains the same: “arbitrary and capricious” where the plan contains the magic language. The fact that the same company that makes payments also decides eligibility is but one consideration in the abuse-of-discretion calculus:

We believe that Firestone means what the word “factor” implies, namely, that when judges review the lawfulness of benefit denials, they will often take account of several different considerations of which a conflict of interest is one. This kind of review is no stranger to the judicial system. Not only trust law, but also administrative law, can ask judges to determine lawfulness by taking account of several different, often case-specific, factors, reaching a result by weighing all together.

The Court also said that it is neither “necessary or desirable for courts to create special burden-of-proof rules, or other special procedural or evidentiary rules, focused narrowly upon the evaluator/payor conflict.” That seems to wipe out the Tenth Circuit’s approach to conflict of interest cases, under which (1) the existence of a conflict shifts the burden of proof to the insurer to show by “substantial evidence” (more than a scintilla, but less than a preponderance) the reasonableness of its decision, and (2) where the conflict is sufficiently serious, the insurer’s burden of proof rises to preponderance of the evidence. Fought v. UNUM Life Ins. Co., 357 F.3d 1173 (10th Cir. 2004).

In this case, the SCOTUS majority held, the Court of Appeals did nothing wrong. The appellate court considered MetLife’s conflict of interest as one of many factors supporting its determination that MetLife abused its discretion in terminating Glenn’s benefits. That’s exactly what Firestone required.

That leaves only Justice Kennedy. He agreed completely with the majority’s analysis of the conflict of interest issue. However, he disagreed with the majority’s disposition of the case. The majority said in dicta that a conflict “should prove less important (perhaps to the vanishing point) where the administrator has taken active steps to reduce potential bias and to promote accuracy, for example, by walling off claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decisionmaking irrespective of whom the inaccuracy benefits.” Kennedy treats that dicta the holding of the case. The Sixth Circuit considered the existence of a conflict, but didn’t assess “whether MetLife employed structural safeguards to avoid conflicts of interest[.]” Kennedy insisted that fairness to MetLife mandates a remand on which MetLife should be allowed to show that had “structural safeguards” to minimize the effects of the conflict.

All in all, this is a very good decision. Pleasantly surprising is the fact that Justice Alito voted with the majority. I’d considered him a slam-dunk to side with the insurance company. Employee-favoring ERISA decisions are few and far between these days. That fact alone renders Glenn cause for celebration. More than that, the Supreme Court has categorically rejected the insurance industry’s position that conflicts of interest are irrelevant absent proof of actual effect on the claim decision. The “arbitrary and capricious” standard of review is still a formidable obstacle, and Congress should amend ERISA to provide for de novo review in every case. That’s not going to happen, though, so a Glenn-type approach that allows consideration of all relevant factors is about the best we can hope for.