Over the past several months, there has been a flurry of federal appellate opinions questioning civil procedure norms in Employee Retirement Income Security Act benefits litigation.[1] A pair of brand new appellate decisions have also focused on the same issue, although not necessarily in a direction that harmonizes ERISA civil procedure with the Federal Rules of Civil Procedure.

One of those decisions, from the U.S. Court of Appeals for the Eighth Circuit on Nov. 30, addressed the use of summary judgment in ERISA litigation — Avenoso v. Reliance Standard Life Insurance Co.[2]

The other ruling, from the U.S. Court of Appeals for the Third Circuit in Noga v. Fulton Financial Corp. Employee Benefit Plan on Nov. 26,[3] dealt with the use of an administrative law framework in the adjudication of ERISA cases.

Both rulings are analyzed below.

Avenoso involved a dispute over disability benefits and resulted in an affirmance of a U.S. District Court for the District of Minnesota award for the plaintiff, although the Eighth Circuit found the district court erred in utilizing a summary judgment paradigm to adjudicate an ERISA claim. The error was deemed harmless, though.

Despite ostensibly applying Federal Rule of Civil Procedure 56,[4] the Eighth Circuit expressed concern that the district court made credibility findings and also resolved factual disputes as if the court “were ruling in a bench trial.”

The plaintiff defended the district court’s use of summary judgment by maintaining that “summary judgment is merely a vehicle for submitting the case to the district court for decision on the administrative record.” Indeed, several courts of appeals have endorsed the same rationale.[5]

However, the Eighth Circuit disagreed, ruling that the use of summary judgment is improper when the court applies the de novo standard of review.

The court did, however, suggest that summary judgment would be proper under a deferential standard of review, finding that such adjudications involved a purely legal inquiry into whether “a reasonable factfinder could reach a certain outcome.”

Despite the plaintiff’s objection that “insisting on ordinary summary-judgment procedures in this context is a mere formality that ‘would result in constant judicial inefficiency’ and make ‘district court proceedings nothing more than a practice round,'” the Eighth Circuit overruled that argument based on Rule 56’s requirement that courts may only grant summary judgment if there is an absence of any “genuine issue as to any material fact.”

The error was deemed harmless, though, because neither party had additional evidence for the court to consider.

The court’s decision is critical in its recognition that the Federal Rules of Civil Procedure do not apply differently to ERISA cases.

Disputes over health and disability benefits inherently involve profound factual disputes over the medical evidence, which precludes an award of summary judgment, especially in view of the U.S. Supreme Court’s 1986 admonition in Anderson v. Liberty Lobby Inc. that in ruling on summary judgment, “the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.”[6]

Thus, if the parties in an ERISA action want the court to resolve such disputes, as the Eighth Circuit made clear, Rule 56 is not the appropriate vehicle to utilize.

The court’s recognition that lower courts have been misusing summary judgment in deciding ERISA cases is therefore a critical advance on the road toward reestablishing consistency between ERISA civil procedure and ordinary federal civil procedure.

The Noga case also involved disability benefits and resulted in an affirmance by the Third Circuit of a U.S. District Court for the Eastern District of Pennsylvania ruling in favor of the claimant.

Both the district court and the court of appeals were skeptical of the opinions from the doctors hired by the insurance company, since those opinions were sought almost immediately after Noga’s entitlement to benefits had been recertified by the insurer and after Social Security disability benefits had been awarded.

The court upheld the district court’s determination because it agreed with the lower court that “procedural irregularities aligned closely with the insurance company’s structural conflict of interest” undermined the insurer’s determination.

A key issue raised by the defendant was the district court’s refusal to consider an affidavit that explained why the insurance company sought additional medical opinions. The Third Circuit upheld the evidentiary exclusion based on the ERISA record rule, which precludes a court from considering evidence outside of the claim record unless it is introduced in relation to bias or conflict of interest.

While the court found such a rule is appropriately utilized in ERISA litigation, the court conceded that the origin of the rule is somewhat convoluted since there is no statutory basis for it, unlike laws relating to administrative proceedings that mandate record reviews.[7]

The court noted as well that the ERISA statute is also silent about the standard of review of ERISA benefit cases, but the Supreme Court in Firestone Tire & Rubber Co. v. Bruch[8] resolved that issue in 1989. The Third Circuit further observed that the Supreme Court’s allowance of a deferential standard of review suggested a basis for limiting the evidence considered by courts adjudicating ERISA cases in situations where the plan administrator has discretionary authority.

The court further explained that the Supreme Court in Firestone Tire gave lower courts license to develop such a framework for adjudicating ERISA cases when it encouraged the development of a “federal common law of rights and obligations under ERISA-regulated plans.”[9]

Hence, the Third Circuit pronounced that “federal courts have imported several administrative-law principles into ERISA litigation,” which is the source of an association between “the arbitrary-and-capricious standard with a record-review requirement.”

Although the court acknowledged criticism of the use of administrative law principles in adjudicating ERISA cases,[10] it found such criticism unwarranted.

Based on its finding as to the propriety of a requirement limiting the evidence considered by a court hearing an ERISA case, the Third Circuit held the district court did not err in excluding the proffered affidavit, since the explanation offered by the defendant could have been, but was not, “contemporaneously memorialized in the claim file.”

The court thus concluded that the “ERISA administrative record may not be supplemented with post hoc explanations for procedural irregularities.”

The court’s justification for applying an administrative law framework to ERISA litigation rests on shaky grounds.

First, while the Supreme Court has encouraged the development of a federal common law in ERISA cases, it did so in Firestone in the context of applying trust law to ERISA claims, not as to establishing a procedural rule.

In other situations, the Supreme Court has criticized lower courts for using federal common law as a rationale for supplanting the Federal Rules of Civil Procedure.

ERISA Section 502(a) authorizes claimants to redress improper benefit denials by bringing a civil action, which is a term of art that brings such claims within the ambit of the Federal Rules of Civil Procedure rather than the Administrative Procedure Act.[11]

In Bank of Nova Scotia v. U.S., the Supreme Court in 1988 also described the Federal Rules of Civil Procedure

as binding as any statute duly enacted by Congress, and federal courts have no more discretion to disregard [a Rule’s] mandate than they do to disregard constitutional or statutory provisions.[12]

Consequently, courts have no power to fashion federal common law that would displace the application of the Federal Rules of Civil Procedure to all civil actions, as Rule 1 commands.

There is an even stronger reason to eschew the Third Circuit’s approach, though.

ERISA cases differ markedly from administrative proceedings, which have built-in safeguards to protect the rights of claimants. Such protections include the right to a hearing and the right to cross-examine witnesses.[13]

Although the ERISA law statutorily guarantees the right to a full and fair review,[14] and the regulations promulgated by the U.S. Department of Labor afford additional rights and protections to claimants,[15] what is glaringly missing from ERISA claims practice prior to their reaching court is the absence of a hearing before a neutral, unbiased fact-finder, as well as the opportunity to conduct cross-examination.

Although ERISA claim appeals lack either protection, courts treat the prelitigation claim appeal in ERISA cases as the equivalent of a Social Security hearing before an administrative law judge, and the administrative record the same as a record compiled by
an administrative agency.

Noga thus failed to take heed of the rising chorus of judicial voices that have been calling out the judicially created anomalies in ERISA civil procedure that are both extrastatutory and contrary to the Federal Rules of Civil Procedure.[16]

The court did not have to apply the whole-record rule. It could have just as easily found the proffered evidence was self-serving and given it no consideration.

The Third Circuit asked the right question in Noga when it raised the absence of statutory support for a quasi-administrative law scheme to adjudicate ERISA cases. Rather than rooting out the deviation, though, the court endorsed it.

Had the Third Circuit instead followed the path taken by judges in sister circuits who have questioned extrastatutory ERISA dogma, the needed process of repairing ERISA civil procedure would have been markedly advanced.

Mark D. DeBofsky is a shareholder at DeBofsky Law.

This article was first published by Law 360 on December 7, 2021.

[1] See, DeBofsky, “6th Circ. Ruling Offers Fresh Look at ERISA Exhaustion,” Law 360 (April 24, 2020); available at https://www.law360.com/articles/1264985; DeBofsky, “Benefits Ruling Raises Jury Trial Question for ERISA Cases,” Law 360 (September 24, 2021); available at https://www.law360.com/articles/1424015; DeBofsky, “5th Circ. Opinion is Right to Question ERISA Review Norms,” Law360 (October 5, 2021); available at https://www.law360.com/articles/1427033; DeBofsky, “6th Circ. ERISA Ruling Highlights Dubious Court Practices,” Law360 (November 16, 2021); available at https://www.law360.com/articles/1439402.

[2] Avenoso v. Reliance Standard Life Ins. Co., 2021 U.S.App.LEXIS 35264, 2021 WL 5570816 (8th Cir. November 30, 2021).

[3] Noga v. Fulton Financial Corp. Employee Benefit Plan, 2021 U.S.App.LEXIS 35082, 2021 WL 5540848 (3d Cir. November 26, 2021).

[4] Rule 56 provides that summary judgment shall be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”

[5] See, e.g., Doe v. Harvard Pilgrim Health Care, Inc., 974 F.3d 69, 72 (1st Cir. 2020) (holding that “a summary judgment motion in a lawsuit contesting the denial of benefits under ERISA is simply a vehicle for teeing up the case for decision on the administrative record” and thus “the district court … may weigh the facts” and “resolve conflicts in evidence”).

[6] Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

[7] See, e.g., e.g., 5 U.S.C. § 706 (requiring judicial review of agency action based on the “whole record”); 42 U.S.C. § 405(g) (requiring judicial review of Social Security benefit determinations based on a “transcript of the record including the evidence upon which the findings and decision complained of are based”).

[8] Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).

[9] 489 U.S. at 110, quoting Pilot Life Ins. Co. v. Dedeaux.

[10] Citing Mark D. DeBofsky, The Paradox of the Misuse of Administrative Law in ERISA Benefit Claims, 37 J. MARSHALL L. REV. 727, 730 (2004).

[11] 5 U.S.C. § 551, et al.

[12] Bank of Nova Scotia v. United States, 487 U.S. 250, 255, 101 L. Ed. 2d 228, 108 S. Ct. 2369 (1988). Also see, Moravian School Advisory Board of St. Thomas v. Rawlins, 33 V.I. 280, 70 F.3d 270, 274 (3d Cir. 1995) (holding that federal courts may not exercise their authority in a manner inconsistent with a rule or statute); G. Heileman Brewing Co. v. Joseph Oat Corp., 871 F.2d 648, 652 (7th Cir. 1989) (en banc) (finding that federal courts’ inherent powers should be exercised in a manner that is in harmony with the Federal Rules of Civil Procedure).

[13] In a seminal article on administrative law entitled “Some Kind of Hearing,” Judge Henry Friendly identified the elements necessary for a fair administrative hearing: 1) an unbiased tribunal; 2) notice of the proposed action and the grounds asserted for it; 3) an opportunity to present reasons why the proposed action should not be taken; 4) the right to call witnesses, including the right to cross-examine adverse witnesses; 5) the right to know the evidence at issue; 6) the right to have a decision based on the evidentiary record; 7) the right to counsel; 8) a record; 9) articulated reasons for the decision; 10) public attendance; and 11) judicial review. 122 U.Pa.L.Rev. 1267, 1279-95 (1975).

[14] 29 U.S.C. § 1133.

[15] 29 C.F.R. § 2560.503-1.

[16] Rule 43(a) of the Federal Rules of Civil Procedure requires that “witness’ testimony must be taken in open court.” Applying administrative procedures to ERISA claims abrogates that rule.

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