ERISA Claims Denied Review by High Court

October 2, 2001 ( - On the first day of its new session, the Supreme Court denied review of a number of employee benefit-related cases.

Among others, the high court denied review of cases involving fiduciary breach claims, ERISA preemption issues, and standard of review questions.

Serious Consideration Test

The Supreme Court declined to review the case of Pacific Bell Telephone Co. v. Wayne, a case a decision on whether the “serious consideration” test can be applied in the context of collective bargaining.

In that suit, a appeals court had found that an employer was required to disclose its proposed benefit changes, at the latest, when it offered an enhanced early retirement program during collective bargaining with its employees’ union.

Review of Breached Promises Claim

Also denied Supreme Court review was the case of McCall v. Burlington Northern/Santa Fe Co. Here the US Court of Appeals for the Fifth Circuit found that an employer did not violate ERISA when in 1995 it offered its employees a voluntary separation pay plan that was more generous than the plan it offered its employees in 1991.

A statement made in 1991 saying that additional plans offered to employees would be less generous than the 1991 plan, was deemed “truthful when made”, by the lower court.

Detrimental Reliance

In Pension Benefit Guaranty Corp. vs. Belfance, the high court also denied review of a decision that the failure of pension plan participants to allege detrimental reliance precluded the participants from claiming that their employer breached its ERISA fiduciary duties when it sent various notices to the participants, erroneously claiming that amendments to its pension plan were required by the Tax Reform Act of 1986.

Standard of Review

Supreme Court review was also denied in Cochran v. Trans-General Life Insurance Co. A court had ruled that the decision of an employee benefit plan administrator to deny benefits is reviewed under the arbitrary and capricious standard even when the administrator both administers and funds the benefits.

The ruling had found that in the absence of evidence indicating how a plan administrator’s denial of continued long-term disability benefits was influenced by an alleged conflict of interest, a federal district court was correct in concluding that denial of benefits to a plan participant was reasonable.
Heightened Review

The high court also let the ruling in Glenn v. Life Insurance Co. of North America stand. The court had been asked to decide whether a less deferential standard of review applies when an insurance company both funds and administers benefits under an ERISA plan.

The US Court of Appeals for the Eighth Circuit has found that a heightened standard of judicial review does not automatically apply when an insurance company both administers and funds an employee benefit plan. It also found that to obtain a less deferential standard of review, plan participants must show that a conflict of interest so tainted the administrator’s decision that it caused a serious breach of fiduciary duty.

The Supreme Court was also asked to decide the appropriate standard when an ERISA plan beneficiary demonstrates a conflict of interest on the part of a plan administrator.

Third-Party Administrators

Also denied was the review of American Medical Security Inc. v. Skilstaf Inc, a case questioning a   jury verdict of approximately $6.9 million, including $5 million for wantonness, in favor of a benefit plan sponsor against a third-party plan administrator.

The Supreme Court was asked to decide whether ERISA preempts state law claims brought by a self-funded employee benefit plan sponsor against a third-p