Hewlett-Packard v. Jebian - Amicus Invitation (Petition)

Docket number: 
No. 03-1202
Supreme Court Term: 
2004 Term
Court Level: 
Supreme Court


No. 03-1202

In the Supreme Court of the United States

Hewlett-Packard Company Employee Benefits Organization Income Protection Plan, petitioner

v.

Donald Jebian

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

Paul D. Clement
Acting Solicitor General
Counsel of Record
Edwin S. Kneedler
Deputy Solicitor General
Kannon K. Shanmugam
Assistant to the Solicitor
General
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

Howard M. Radzely
Solicitor
Allen H. Feldman
Associate Deputy Solicitor
Ellen L. Beard
Attorney
Department of Labor
Washington, D.C. 20210

QUESTION PRESENTED

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), this Court held that the denial of employee benefits by an administrator under the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1001 et seq., was entitled to deference when the plan conferred discretion on the administrator to determine eligibility for benefits. Under 29 C.F.R. 2560.503-1(h)(4) (2000), a claim for benefits is "deemed denied on review," thereby enabling the claimant to bring suit, if the specified fiduciary (here, the claims administrator) failed to review an initial decision to deny benefits within a certain period. The question presented is as follows:

Whether an administrator's decision to deny benefits on appeal is entitled to deference when the claim for benefits had been "deemed denied on review" under 29 C.F.R. 2560.503- 1(h)(4) (2000).

In the Supreme Court of the United States

No. 03-1202

Hewlett-Packard Company Employee Benefits Organization Income Protection Plan, petitioner

v.

Donald Jebian

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

This brief is filed in response to the Court's invitation to the Acting Solicitor General to express the views of the United States. The position of the United States is that fur ther review of this case is not warranted.

STATEMENT

1.The Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq., regulates employee welfare and pension benefit plans, including disability plans. 29 U.S.C. 1001(a), 1002(1). ERISA requires every covered employee benefit plan to provide a two-stage process for the evaluation of employees' benefit claims. At the first stage, if the plan denies the claim, it must "provide adequate notice in writing * * *, setting forth the specific reasons for such de nial." 29 U.S.C. 1133(1). At the second stage, the plan must "afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim." 29 U.S.C. 1133(2). A claimant may file suit to recover benefits due under the terms of the plan. 29 U.S.C. 1132(a)(1)(B). Courts have uniformly held that the claimant must exhaust his administrative remedies with the plan be fore filing suit. See, e.g., Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 418 & n.4 (6th Cir. 1998) (listing cases).

Pursuant to statutory mandate, see 29 U.S.C. 1133, the Secretary of Labor has promulgated regulations governing the two-stage claims process. Under the prior version of the regulations, which governs this case, a plan was required to notify a claimant of its initial decision within a reasonable period of time, not to exceed 90 days absent special circum stances (and 180 days in any event) from the filing of the claim. 29 C.F.R. 2560.503-1(e)(1) and (3) (2000). If notice of the denial was not provided within that period, the claim was "deemed denied," and the claimant was permitted to proceed to the appeal stage. 29 C.F.R. 2560.503-1(e)(2) (2000). At that stage, the specified fiduciary was required to make a decision within 60 days, unless special circumstances required an ex tension of time for processing, but in that event no later than 120 days after receipt of the request for review. 29 C.F.R. 2560.503-1(h)(1)(i) (2000). If an extension of time was neces sary because of special circumstances, the administrator was required to furnish written notice to the beneficiary prior to commencement of the extension. 29 C.F.R. 2560.503-1(h)(2) (2000). If the fiduciary failed to furnish its decision to the claimant within the period allowed, the claim was "deemed denied on review." 29 C.F.R. 2560.503-1(h)(4) (2000).1

2.Petitioner is an ERISA-covered plan with an inde pendent claims administrator. Pet. App. 3a. The plan con tained procedural requirements, including "deemed denied" provisions, that were consistent with the regulations then in effect. Id. at 136a-142a. Although the plan did not give the claims administrator discretion in making initial claims deci sions, id. at 136a-139a, it did confer discretion on the adminis trator in making decisions on appeal, including "the authority to determine eligibility for benefits and to construe the terms of the Plan," id. at 139a.

Respondent was a participant in the plan. In February 1998, respondent applied for long-term disability benefits because of back and shoulder pain. Pet. App. 2a-4a. On Au gust 3, 1998, the claims administrator denied the application. Id. at 4a. On August 18, 1998, respondent informed the claims administrator in writing of his intent to appeal, and he formally submitted his appeal (together with new medical evidence) on November 11, 1998. Id. at 34a-35a. On March 15, 1999, some 119 days after receiving the formal appeal, the claims administrator wrote to respondent, addressing respon dent's objections to the initial decision but leaving the appeal open to consider further medical evidence. Id. at 5a. On June 11, 1999, the claims administrator again wrote to respondent, indicating that the appeal remained open pending the receipt of additional documentation. Id. at 6a. On September 29, 1999, respondent filed suit in federal district court, seeking to recover benefits under 29 U.S.C. 1132(a)(1)(B). Pet. App. 7a. On November 5, 1999, the claims administrator notified re spondent that his appeal had been denied, and provided a detailed explanation for the denial. Id. at 7a, 36a.

3.Both parties then moved for summary judgment in the district court. Petitioner contended that the claims adminis trator's decision to deny benefits on review was entitled to deference under Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), in which this Court held that an administra tor's decision to deny benefits was entitled to deference when the plan conferred discretion on the administrator to deter mine benefit eligibility. Respondent contended that, once his administrative appeal was "deemed denied" because the ad ministrator had failed to issue a timely decision, the adminis trator was divested of any discretion in deciding the appeal, the denial was thus not entitled to deference, and the suit for benefits should be decided de novo by the district court. The district court agreed with petitioner on the standard of review and granted summary judgment to petitioner on the merits. Pet. App. 31a-41a, 44a-46a.

4. a. The court of appeals reversed and remanded. Pet. App. 1a-30a. The court held that, where the applicable plan and regulatory language provide that a claim is "deemed de nied" on review after the expiration of a given time period, "there is no opportunity for the exercise of discretion and the denial is usually to be reviewed de novo." Id. at 7a. Accord ing to the court, "[w]hile deference may be due to a plan ad ministrator that is engaged in a good faith attempt to comply with its deadlines when they lapse, this is not such a case." Ibid. The court noted that the claims administrator failed to provide written notice that additional time was required within the initial 60-day period for review; failed to provide any form of written notice until one day before the expiration of the extended 120-day period; and failed to specify, in that written notice, what additional information was required. Id. at 8a.

In concluding that the appropriate standard of review in this case is de novo, the court of appeals relied on this Court's decision in Firestone Tire, which held that an administrator's decision was entitled to deference only when the plan con ferred discretion on the administrator. Pet. App. 9a. Accord ing to the court, "[w]e are just as bound by the Plan language deeming denial in the event that time limits are exceeded as we are bound by the Plan language that grants discretion to the Plan administrator." Ibid. The court thus concluded that "[d]ecisions made outside the boundaries of conferred discre tion are not exercises of discretion, the substance of the deci sions notwithstanding." Ibid. The court reasoned that such a rule is consistent with the general rule applicable to judicial review of federal agency decisions, id. at 9a-10a, and with the rule that deference is not owed to a decision to deny benefits under an ERISA plan when the decision was made by an en tity other than the one authorized to do so in the plan, id. at 10a.

Finally, the court of appeals reiterated that, "[a]bsent unusual circumstances, an administrator engaged in a genu ine, productive, ongoing dialogue that substantially complies with a plan's and the regulations' timelines should remain entitled to whatever discretion the plan documentation gives it." Pet. App. 15a. But because the claims administrator here had failed to engage in such an "ongoing, good faith ex change," the court concluded, de novo review was appropriate. Ibid. After reviewing the evidence, the court found a genuine issue of fact concerning whether respondent is disabled, and it remanded the case to the district court to decide that issue de novo. Id. at 16a-20a.2

b.Judge Tashima dissented. Pet. App. 21a-30a. In his view, de novo review was not required simply because of a procedural irregularity in the administrator's handling of a claim. Id. at 21a-25a. Judge Tashima also stated that, even under the majority's rule, de novo review was not appropriate in this case because "[t]he facts indicate * * * that [the claims administrator] was attempting to engage in a meaning ful exchange of information with [respondent]." Id. at 29a.

DISCUSSION

The petition for a writ of certiorari should be denied. The court of appeals' decision to conduct de novo review of respon dent's benefits claim in the particular circumstances of this case was reasonable. Although there is some divergence among circuits on the question whether the decision of an administrator with discretionary authority is entitled to defer ence when the claim for benefits was "deemed denied on re view" under the Secretary's prior regulations, the cases impli cated in that circuit conflict can largely be reconciled. Equally important, since the events at issue in this case, the Secretary of Labor has promulgated new regulations that, inter alia, eliminate the regulatory "deemed denied" direc tive. Because the analysis may differ under the new regula tions, this case presents a question of limited and diminishing importance. Accordingly, further review is not warranted.

A.Although The Courts of Appeals Have Taken Varied Ap proaches To The Standard Of Judicial Review For "Deemed Denied" Claims, There Is Not A Clear And Current Split Warranting This Court's Review.

1.This Court has twice addressed the standard of judi cial review in suits for ERISA benefits under 29 U.S.C. 1132(a)(1)(B). In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), the Court stated the general rule that a denial of benefits under ERISA 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." Id. at 115. The Court began by noting that Section 1132(a)(1)(B) does not prescribe a particular standard of review. 489 U.S. at 109. The Court therefore determined that the appropriate stan dard of review should be "guided by principles of trust law," under which de novo review is the default rule. Id. at 111-112. However, the Court reasoned that a deferential standard of review is appropriate when "a trustee exercises discretionary powers." Id. at 111. Applying that rule in the ERISA con text, the Court concluded that the denial of benefits should be subject to deferential review when the benefit plan confers discretion on the administrator. Id. at 115.

More recently, in Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002), the Court held that ERISA did not pre empt a state statute that required a health maintenance orga nization furnishing health benefits to an ERISA-covered plan to provide a medical service if a reviewing physician con cluded that the service was medically necessary. Id. at 386- 387. In so concluding, the Court briefly revisited its discus sion in Firestone Tire of the appropriate standard of review. After reiterating the rule of Firestone Tire, id. at 384, the Court again noted that nothing in ERISA itself expressly speaks to the standard of judicial review for benefit claims, and that there is no requirement derived from ERISA that "even indirectly" compels a lenient standard of review, id. at 385.

Taken together, Firestone Tire and Rush Prudential es tablish the following principles: (1) nothing in ERISA entitles plans to deferential review in all cases, Rush Prudential, 536 U.S. at 385; (2) de novo review of benefit claims is the "gen eral or default rule" under ordinary principles of trust law, id. at 385-387; and (3) deferential review is appropriate when an administrator "exercises discretionary powers," Firestone Tire, 489 U.S. at 111.3

2.Petitioner does not contend that the decision below conflicts with any decision of this Court. Instead, petitioner contends (Pet. 11-17; Reply Br. 4-8) that there is a circuit conflict warranting this Court's intervention on the appropri ate standard of review in cases in which the underlying claim for benefits was "deemed denied on review" under the Secre tary's prior regulations. Petitioner overstates the extent of divergence in the courts of appeals.

a.A number of circuits that have addressed the issue, including the Ninth Circuit in the decision below, have held that an administrator's decision in a "deemed denied" case may be entitled to deference depending on the extent to which the administrator complied with ERISA's procedural require ments. In a decision followed by the Ninth Circuit in this case (Pet. App. 14a-15a), the Tenth Circuit held that, "when sub stantial violations of ERISA deadlines result in the claim's being automatically deemed denied on review, the district court must review the denial de novo." Gilbertson v. Allied Signal, Inc., 328 F.3d 625, 631 (2003). On the other hand, when there was "an ongoing, good faith exchange of informa tion between the administrator and the claimant," "inconse quential violations of the deadlines or other procedural irreg ularities would not entitle the claimant to de novo review." Id. at 635. The Tenth Circuit ultimately concluded that the ad ministrator in that case was not in substantial compliance because it had failed to participate in a "meaningful dialogue" with the claimant, and in fact had never issued a decision on appeal. Id. at 636.

By contrast, in a subsequent decision, the Tenth Circuit held that a claims administrator was in substantial compli ance, and its decision was entitled to deference on judicial review, when the claimant had presented no relevant new evidence on appeal and the administrator had denied the ap peal only 27 days late. Finley v. Hewlett-Packard Co. Em ployee Benefits Org. Income Protection Plan, 379 F.3d 1168, 1172, 1174 (2004). Indeed, the Ninth Circuit itself-relying both on the Tenth Circuit's decision in Gilbertson and on its own decision in the instant case-has since applied a deferen tial standard of review in a case in which the administrator missed the regulatory deadline but had engaged in good-faith communication with the claimant. LaMantia v. Voluntary Plan Adm'rs, Inc., 401 F.3d 1114, 1122-1124 (2005).4

More recently, the Second Circuit held that the de novo standard should be applied in a case in which the administra tor did not render a decision before the "deemed denied" deadline. Nichols v. Prudential Ins. Co., 406 F.3d 98 (2005). In so doing, the Second Circuit specifically left open the ques tion whether deferential review would be appropriate where there was substantial compliance with the regulatory dead line, as the Ninth and Tenth Circuits had suggested, because there was no substantial compliance in that case. Id. at 109- 110.

While not expressly adopting a "substantial compliance" standard, the Eighth Circuit has taken a similarly context- dependent approach. In McGarrah v. Hartford Life Insur ance Co., 234 F.3d 1026 (8th Cir. 2000), the court held that the failure of an administrator to respond to a claimant's request for review was insufficient, by itself, to subject the administra tor's initial decision to de novo review. Id. at 1031. Instead, the court reasoned, an administrator's decision would be sub ject to de novo review only if any procedural irregularity "raise[d] * * * 'serious doubts as to whether the result reached was the product of an arbitrary decision or the plan administrator's whim.'" Ibid. (quoting Buttram v. Central States, S.E. & S.W. Areas Health & Welfare Fund, 76 F.3d 896, 900 (8th Cir. 1996)). The court concluded that the claim ant had failed to meet that standard because the administra tor had made a thorough investigation and adequately ex plained the reasons for the termination of disability benefits in its initial decision, and because the claimant had presented no new medical evidence on appeal. Ibid. Applying the same standard, the Eighth Circuit subsequently reached the oppo site result in a case in which the claimant had presented sub stantial new evidence on appeal, including reports from five doctors. Seman v. FMC Corp. Retirement Plan for Hourly Employees, 334 F.3d 728, 733 (8th Cir. 2003).5

Finally, the Third Circuit applied a de novo standard of review in Gritzer v. CBS, Inc., 275 F.3d 291 (2002), where the plan administrator had not issued even an initial decision by the time the claimants had filed suit and did not do so until nearly five months later. See id. at 294-295. In those circum stances, the Third Circuit agreed with the claimants that "there simply is no analysis or 'reasoning' to which the Court may defer under the arbitrary and capricious standard." Id. at 296 (internal quotation marks omitted). Applying the trust principles on which this Court relied in Firestone Tire, the Third Circuit reasoned that, "[w]here a trustee fails to act or to exercise his or her discretion, de novo review is appropriate because the trustee has forfeited the privilege to apply his or her discretion; it is the trustee's analysis, not his or her right to use discretion or a mere arbitrary denial, to which a court should defer." Ibid. The result reached by the Third Circuit in Gritzer is fully consistent with the decisions of the Ninth Circuit and the other circuits discussed above, and its decision does not appear to foreclose a deferential standard of review where there was substantial compliance with the regulatory deadlines.

b.Two circuits, the Fifth and Sixth, have applied a defer ential standard of review, seemingly without qualification, to an administrator's initial decision where the administrator failed to issue a decision on appeal. The Sixth Circuit, how ever, addressed the issue 17 years ago, even before this Court's decision in Firestone Tire, in which the Court made clear that de novo review, not deferential review, is the de fault rule. Daniel v. Eaton Corp., 839 F.2d 263, 267 (6th Cir.), cert. denied, 488 U.S. 826 (1988). Since Firestone Tire, the Sixth Circuit has recognized that "there is undeniable logic in the view that a plan administrator should forfeit deferential review by failing to exercise its discretion in a timely man ner," but ultimately found it unnecessary to resolve that ques tion in the case before it. University Hospitals v. Emerson Elec. Co., 202 F.3d 839, 846 n.3 (6th Cir. 2000). As the court of appeals in this case observed (Pet. App. 13a), the issue thus appears to be open in the Sixth Circuit. At the very least, to the extent the Sixth Circuit's decision in Daniel retains force, the Sixth Circuit may well reconsider Daniel if confronted with the issue in the future, in light of this Court's intervening decision in Firestone Tire and its own subsequent pronounce ment in University Hospitals.

The Fifth Circuit, in a 1993 decision, held that a deferen tial standard of review was applicable to an administrator's factual determinations in a "deemed denied" case, stating that "the standard of review is no different whether the claim is actually denied or is deemed denied." Southern Farm Bu reau Life Ins. Co. v. Moore, 993 F.2d 98, 101 (1993). As an other court of appeals has noted, however, the Fifth Circuit "provided no explanation or authority for this statement." Gilbertson, 328 F.3d at 633. Because the Fifth Circuit's anal ysis in Southern Farm Bureau was so cursory, and because its decision in that case preceded all of the decisions from other circuits that have since provided for de novo review in appropriate circumstances, the Fifth Circuit may well revisit the issue, and elaborate on its analysis, if presented with the issue in another case. Indeed, the Fifth Circuit specifically noted in Southern Farm Bureau that the claimant in that case had presented no authority for de novo review, 993 F.2d at 101 n.6-a state of affairs that has now greatly changed.

c.In short, there is no clear and current conflict among the circuits warranting this Court's review on the standard- of-review issue presented here. To the contrary, in recent cases considering the issue, there is an emerging consensus that deferential review is appropriate under the Secretary's prior regulations where the administrator substantially com plied with the applicable deadlines, but that de novo review is appropriate where it did not.

B.The Decision Below Is Correct

Consistent with the prevailing view in the cases just dis cussed, the court of appeals reasonably determined that de novo review was appropriate in the particular circumstances of this case.6

1.Principles of trust law support the rule allowing de novo review in appropriate "deemed denied" cases. When ERISA itself and the Secretary's implementing regulations are silent, this Court has looked to trust-law principles in order to "develop a 'federal common law of rights and obliga tions under ERISA-regulated plans.'" Firestone Tire, 489 U.S. at 110 (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987)). Applying those principles in Firestone Tire, this Court recognized a default rule that an administrator's decision to deny benefits under ERISA was reviewed de novo, but that more deferential review was warranted when the administrator was "exercis[ing] discretionary powers." Id. at 111.

When an ERISA administrator having discretion under the plan fails to issue a decision on review at all, or fails to comply substantially with the mandatory deadlines and the claim is therefore "deemed denied," the administrator has failed to act within the scope of the discretion conferred by the plan. That is so because the administrator's discretion is necessarily limited by the governing regulations as well as by the terms of the plan itself, which in this case incorporated the regulations' deadlines and "deemed denied" language. Pet. App. 140a-141a; 29 U.S.C. 1104(a)(1)(D), 1133; cf. Re statement (Second) of Trusts § 187 cmt. a (1959) ("The exer cise of a power is discretionary except to the extent to which its exercise is required by the terms of the trust or by the principles of law applicable to the duties of trustees.").

It is, in fact, well established under the law of trusts that, "even where a trustee has discretion whether or not to make any payments to a particular beneficiary, the court will inter pose if the trustee, arbitrarily or without knowledge of or inquiry into relevant circumstances, fails to exercise that dis cretion." Restatement (Third) of Trusts § 50 cmt. b (2003); accord Restatement (Second) of Trusts § 187 cmt. h (1959); 3 Austin W. Scott & William F. Fratcher, The Law of Trusts § 187.3, at 40-44 (4th ed. 1988) (Scott & Fratcher). Under those circumstances, a court is free to take new evidence, make its own judgment about the benefits due, and order pay ment by the trustee or remand the matter to the trustee with instructions, as it sees fit. Restatement (Third), supra, § 50 cmt. b; 3 Scott & Fratcher § 187.1, at 27-32; Colton v. Colton, 127 U.S. 300, 322 (1898). Applying those principles in the ERISA context, if an administrator failed to comply substan tially with mandatory deadlines under governing regulations and plan terms that deem a claim to be denied in the event of such a failure, the administrator has not acted within the scope of its discretion, and the default rule of de novo review is appropriate.

b.Application of the default rule in these circumstances creates an incentive for plan administrators to comply with the processing deadlines under the Secretary's regulations. Although the Secretary's earlier regulations governing review of claims for disability benefits did not purport to specify a standard of review for claims "deemed denied on review," they did make clear that the deadlines for the processing of benefit claims were mandatory. Thus, the regulations speci fied that the initial notice of denial "shall be furnished to the claimant within a reasonable period of time," not to exceed 180 days from the filing of the claim. 29 C.F.R. 2560.503- 1(e)(1) and (3) (2000) (emphasis added). If notice of the denial was not provided within that period, the claim "shall be deemed denied," and the claimant "shall be permitted to pro ceed" to the appeal stage. 29 C.F.R. 2560.503-1(e)(2) (2000) (emphases added). At the appeal stage, in turn, the regula tions provided that a decision "shall be made promptly," and in no event more than 120 days from the filing of the request for review. 29 C.F.R. 2560.503-1(h)(1)(i) (2000) (emphasis added). Finally, if the fiduciary failed to furnish its decision to the claimant within that period, the claim "shall be deemed denied on review." 29 C.F.R. 2560.503-1(h)(4) (2000) (empha sis added).

In promulgating those provisions immediately after ERISA's enactment, the Secretary of Labor recognized that they were vital to the ERISA claims-resolution process. In fact, although those regulations as originally proposed con tained time limits only for decisions on review, see 39 Fed. Reg. 42,243 (1974), the final regulations contained time limits for initial decisions as well, in response to comments that such time limits were necessary to "induce plans to process the initial claim promptly" and to "eliminate unreasonable delays in responding to claims," 42 Fed. Reg. 27,427 (1977). That interest in inducing plans to process claims promptly supports de novo review in appropriate cases in which the plan admin istrator failed substantially to comply with the mandatory deadlines.

c.In this case, the court of appeals reasonably concluded that, "while deference may be due to a plan administrator that is engaged in a good faith attempt to comply with its deadlines when they lapse, this is not such a case." Pet. App. 7a. After petitioner denied respondent's claim at the initial stage, re spondent appealed and submitted new medical evidence to support his claim. Id. at 34a-35a. Petitioner failed to provide the required written notice that additional time was required within the initial 60-day period for review; failed to provide any form of written notice until one day before the expiration of the extended 120-day period; and failed to specify, in that written notice, what additional information was required. Moreover, petitioner did not issue a decision until a year after the appeal was filed, ten months after it was "deemed denied" under the relevant regulation (and the express terms of the plan), and more than a month after respondent filed suit in federal district court. Id. at 5a-6a, 141a-142a. In those cir cumstances, de novo review was appropriate.

C.The Question Presented Is Of Limited And Diminishing Importance In Light Of Regulatory Changes

Finally, even if there were a sufficient circuit conflict on the appropriate standard of review in cases in which the un derlying claim for benefits was "deemed denied on review" under the former regulations, and even if the decision below were erroneous in applying a de novo standard, further re view would not be warranted because the Secretary of Labor has promulgated new regulations that abolish the regulatory concept of a deemed denial and may otherwise affect the standard-of-review issue.

1.In 2000, the Secretary replaced the former regulations governing claims procedures applicable here with comprehen sive new regulations applicable to all claims filed on or after January 1, 2002. 29 C.F.R. 2560.503-1.7 The new regulations differ in several material respects from those at issue in this case. Perhaps most important, the new regulations no longer provide that a claim will be "deemed denied on review" if the decision on review is not made within a specified period, 29 C.F.R. 2560.503-1(h)(4) (2000), and thus eliminate the "deemed denied" directive on which the Ninth Circuit and other courts specifically relied in declining to afford deference to an administrator's decision.8

Instead, the new regulations dispense with the exhaustion requirement and allow a claimant to proceed directly to fed eral court in the event of a broader range of procedural viola tions, including violations of newly adopted requirements contained elsewhere in the regulations. 29 C.F.R. 2560.503- 1(l). Under the relevant provision, when a plan has failed to "establish or follow claims procedures consistent with the requirements of [the regulations]," a claimant is "deemed to have exhausted the administrative remedies available under the plan," and may file suit "on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim." Ibid. That provi sion allows such a claimant to proceed directly to court with out waiting for a denial of his claim, whether "deemed" or actual. If a claimant invokes that provision and the court agrees that the plan has failed to provide a reasonable claims procedure, the court might then conclude that the default rule of de novo consideration is triggered as a corollary. The ap propriate manner of review in various scenarios that could arise under that provision should be determined in concrete cases as they are presented in the future.

Beyond the elimination of the "deemed denied" provision, the new regulations contain other features that may affect the appropriate standard of review. First, the regulations, while modestly shortening the time for deciding disability claims, 29 C.F.R. 2560.503-1(f)(3) and (i)(3), contain new and more flexi ble tolling provisions that enable an administrator to extend the governing time limits in cases in which the administrator requires additional information from the claimant, 29 C.F.R. 2560.503-1(f)(4) and (i)(4). Those provisions were specifically intended to "provide plans with the flexibility necessary to handle all claims appropriately, whether such claims are easy or difficult, complete when filed or needing more informa tion." 65 Fed. Reg. 70,250 (2000). The availability of those tolling provisions addresses petitioner's concern (Pet. 22-24) that a rule under which noncompliance with rigid deadlines automatically triggers de novo review would penalize the plan if its administrator needed (or if the claimant wanted to sub mit) additional information. See, e.g., Pet. App. 29a (Tashima, J., dissenting); Gilbertson, 328 F.3d at 634-635.9

Second, the new regulations provide more detailed proce dural requirements for an administrator's review of an initial denial of a disability claim. The regulations specify that plan decisions on review (1) may not "afford deference to the initial adverse benefit determination," 29 C.F.R. 2560.503-1(h)(3)(ii) and (h)(4); (2) must be made by a fiduciary who is "neither the individual who made the adverse benefit determination [ini tially], nor the subordinate of such individual," 29 C.F.R. 2560.503-1(h)(3)(ii) and (h)(4); and (3) must, in a case requir ing a medical judgment, include consultation with a health care professional who has "appropriate training and experi ence in the field of medicine involved in the medical judg ment" and who was not consulted in connection with the initial decision, 29 C.F.R. 2560.503-1(h)(3)(iii), (h)(3)(v), and (h)(4). Those provisions were designed to increase the independence and integrity of the appeal process. 65 Fed. Reg. at 70,252- 70,253. Those new requirements attach enhanced significance to appeals, and may affect the propriety of judicial deference to a plan's initial decision on the theory that the claimant was not prejudiced by the absence of a full and fair review on ap peal. See, e.g., Finley, 379 F.3d at 1175; McGarrah, 234 F.3d at 1031.10

2.Because the analysis under the new regulations may well differ from the analysis under the regulations applicable to this case, a decision in this case would affect only the shrinking number of extant claims filed before the effective date of the new regulations-January 1, 2002, or, for health- benefit claims, January 1, 2003. According to Department of Labor estimates published in conjunction with the new regu lations, approximately 1.4 million disability claims were filed annually as of 2000. 65 Fed. Reg. at 70,263. Only approxi mately 25,000 of those claims were denied (much less "deemed denied") on review, and the great majority of those claimants presumably did not seek judicial review. Ibid.11 Moreover, although ERISA specifies no uniform limitations period for judicial review of benefit claims under 29 U.S.C. 1132(a)(1)(B), judicial review with respect to disability claims filed before January 1, 2002, is as a practical matter likely to be substan tially complete in the near future. The question of the appro priate standard of judicial review of benefit claims that were "deemed denied" under the prior regulations therefore is of limited and diminishing importance. For that reason, as well as the reasons given in Points A and B above, this case does not warrant the Court's review.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

Paul D. Clement
Acting Solicitor General
Edwin S. Kneedler
Deputy Solicitor General
Kannon K. Shanmugam
Assistant to the Solicitor
General

Howard M. Radzely
Solicitor
Allen H. Feldman
Associate Deputy Solicitor
Ellen L. Beard
Attorney
Department of Labor

MAY 2005

 

1 As explained below, the Secretary promulgated new regulations in 2000 that delete the "deemed denied" provision and impose new and more flexible deadlines. See pp. 16-20, infra.

2 The court of appeals held that, in applying a de novo standard of review, the district court could consider evidence outside the administrative record. Pet. App. 19a. Petitioner does not expressly challenge that holding in the petition.

3 In Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134 (1985), the Court held that a claimant could not recover extracontractual dam ages from a plan fiduciary on account of the fiduciary's untimely processing of the underlying claim. Id. at 148. Although the Court did not address the stan dard of judicial review applicable in cases in which a claim was "deemed denied on review" under the version of the claims regulations then in effect, the Court did note that the regulations "enable[d] a claimant to bring a civil action to have the merits of his application determined, just as he may bring an action to challenge an outright denial of benefits." Id. at 144.

4In LaMantia, the Ninth Circuit also relied on the fact that it was the claimant who sought an extension to file additional documents, which caused the decision to be rendered beyond the "deemed denied" deadline. 401 F.3d at 1123-1124. The court noted that, by allowing more information to be filed after the deadline and then rendering a decision on the merits, the administrator was exercising discretion under the plan. Id. at 1123. If an administrator's decision were subject to de novo review in those circumstances, the court explained, there would be no incentive for an administrator to allow extensions for the benefit of claimants. Id. at 1124. Because the "deemed denied" provision of the prior regulations was for the claimant's benefit, and because the standard of review in suits for benefits under Section 1132(a)(1)(B) derives from trust principles developed in equity, the Ninth Circuit appropriately attached signifi cance to the claimant's role in causing the delay.

Petitioner contends (Pet. 16 n.7; Reply Br. 6) that the Ninth Circuit in the instant case "paid lip service to the Tenth Circuit's 'substantial compliance' approach" and "in reality" applied a uniform de novo standard of review. That assertion is incorrect and belied by the Ninth Circuit's subsequent decision in LaMantia. The question whether the Ninth Circuit correctly applied its context-dependent rule in the circumstances of this case does not warrant this Court's review.

5 To the extent that the Eighth and Tenth Circuits have suggested that an administrator's initial decision for review may be entitled to deference when the claimant failed to provide new evidence or raise new issues at the appeal stage and the claim was deemed denied on appeal, that theory would not be available here, because petitioner's plan conferred discretion on the claims administrator only at the appeal stage and not at the initial stage. Compare Pet. App. 136a-139a (initial stage) with Pet. App. 139a-142a (appeal stage).

6 Contrary to the assertions of both parties (Pet. 21 n.8; Br. in Opp. 9-11), the Department of Labor has not previously taken a position on the applicable standard of review in cases in which the claim for benefits was "deemed denied on review" under the prior regulations. The parties' assertions are based only on explanatory materials issued in connection with the new regulations, see Br. in Opp. 10, and on interpretive guidance on the Department's website concern ing the discrete question of when exhaustion of plan remedies is required under the new regulations, see Pet. 21 n.8.

7 For health-benefit claims, the effective date of the new regulation is no later than January 1, 2003. 29 C.F.R. 2560.503-1(o).

8 Petitioner contends (Reply Br. 3) that, even though the "deemed denied" provision has been deleted from the new regulations, "the question presented remains live" because some plans may retain the "deemed denied" language as a matter of plan design. In the absence of a "deemed denied" provision in governing regulations, however, the interpretation of language in a plan deem ing a claim to be denied if plan deadlines are not met, and the consequences for failing to meet those deadlines, may present different considerations than in a case controlled by the former regulations.

9 The increased flexibility built into the regulations may also cause courts to refine the extent to which a rule of substantial compliance designed to ac commodate situations involving "an ongoing, good faith exchange of informa tion between the administrator and the claimant," Gilbertson, 328 F.3d at 631, is necessary to ameliorate the consequences of an absolute rule of de novo review in the face of noncompliance with the regulatory deadlines.

10 No court of appeals, including the Fifth or Sixth Circuit (see pp. 11-12, supra), has yet addressed the appropriate standard of review in cases arising under the new regulations, although at least one court of appeals has speci fically reserved the question. See Finley, 379 F.3d at 1175 n.6. Because this case arises under the prior regulations, it would not be an appropriate vehicle to consider that question.

11 Petitioner errs in suggesting (Pet. 10, 23) that the Department of Labor has estimated that 14 million decisions annually are not made within the pre scribed time limits. The figure petitioner cites refers not to disability claims, but instead only to health-benefit claims, and specifically to the number of health-benefit claims whose adjudication would have had to be accelerated to comply with the time limits in the new regulations. 65 Fed. Reg. at 70,257.

Type: 
Petition Stage Amicus Brief (Invitation)
Updated October 21, 2014