By Mark D. DeBofsky, Daley, DeBofsky & Bryant, Chicago, IL

The Supreme Court remarked in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 114 (1989), that benefit claimants should not receive less protection “than they enjoyed before ERISA was enacted.” As a result of Firestone, however, benefit claimants have been left with almost no means of challenging an unjustified benefit denial, sometimes with life and death consequences. Lawsuits over ERISA benefit claims have been transformed by the arbitrary and capricious standard of review into quasi-administrative law proceedings. Despite judicial warnings about the inaptness of such a paradigm due to the absence of procedural protections in ERISA claims, biased decisionmakers, and the lack of specialized expertise, courts nonetheless continue to declare that “ ERISA provides a limited Article III review.” Semien v. Life Insurance Co. of North America, 436 F.3d 805, 813 (7th Cir.), cert. denied 166 L.Ed.2d 251 (2006).

Many reasons exist to doubt the propriety of the current regime. In the first place, Congress authorized the right to bring a “civil action,” not a claim for administrative review. Chandler v. Roudebush, 425 U.S. 840 (1976), which involved a claim brought by a federal employee alleging discrimination in employment pursuant to § 717(c) of the Civil Rights Act, reinforces the distinction. Resolving a split in the circuits as to whether the civil action authorized by that statute was limited to a review of administrative proceedings conducted prior to suit, the Supreme Court ruled, “ where Congress intends review to be confined to the administrative record, it so indicates, either expressly or by use of a term like ‘substantial evidence,’ which has "become a term of art to describe the basis on which an administrative record is to be judged by a reviewing court." Id. at 862 n.37. Plainly, since the term “substantial evidence” cannot be found in the ERISA statute, the argument for deeming ERISA cases review proceedings is undermined.

However, even if one were to assume the appropriateness of an administrative law paradigm, the leading case on the admissibility of evidence in such proceedings raises doubts as to the validity of proceedings which allow reviewing doctors’ opinions to be accepted without question. In Richardson v. Perales, 402 U.S. 389 (1971), the Supreme Court ruled that claimants’ rights to due process are preserved only where an examining doctor’s report is presented to an unbiased tribunal and the claimant retains the right to cross-examination. ERISA claims, in contrast, are adjudicated by self-interested insurers, claims are often resolved based on reports from non-percipient witnesses, and there is no opportunity or right to cross-examination.

The absence of due process protections is a serious concern. In addition to Perales, Concrete Pipe and Products of California, Inc. v. Construction Laborers Pension Trust for Southern California, 508 U.S. 602 (1993), establishes a basis for raising a due process challenge to the manner in which ERISA claims are adjudicated. Concrete Pipe, which dealt with the assessment of pension withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980, resulted in a conclusion that any due process infirmities in the initial assessment were cured by a subsequent plenary adjudication before an arbitrator. However, the Court quoted Withrow v. Larkin, 421 U.S. 35, 58 (1975), for the proposition that if the initial factual decision “foreclosed fair and effective consideration at a subsequent adversary hearing leading to ultimate decision, a substantial due process question would be raised." The Court focused on the Due Process Clause requirement of an “impartial adjudication in the first instance;” otherwise, the court is to "conduct a de novo review of all factual and legal issues." 508 U.S. at 626, 618.

Further, although ERISA claims involve private disputes, the state action requirement for due process challenges is established by the statute itself which also creates the property right at issue. Because courts are giving deference to factual adjudications made by insurers or employers, under the principles established in Logan v. Zimmerman Brush Co., 455 U.S. 422, 430 (1982) , which ruled that under the Due Process Clause, “[a] claimant has more than an abstract desire or interest in redressing his grievance …,” a civil action lacking any meaningful tools upon which to challenge the benefit determination is Constitutionally infirm. The Supreme Court’s Firestone decision therefore cannot be read to have constitutionally granted deference to a non-Article III or even to a non-Article I decisionmaker without retaining claimants’ basic due process rights when the decisionmaker is biased, and traditional notions of a fair and impartial adjudication are absent.

Although restoration of the due process protections called for in this article may trigger fears of more costly ERISA litigation, such concerns were rejected by the Supreme Court in Firestone as a justification to impose an arbitrary and capricious standard of review as a default rule. Further, cost would present a substantial deterrent against claimants pursuing wide-ranging, expensive discovery and jury trials in when a claim has modest value, as in most cases. In addition, the Federal Rules of Civil Procedure contain a mechanism in Rule 16 that gives district judges authority to maintain tight control over pretrial proceedings to expedite litigation and discourage wasteful pretrial activities.

It is also likely that more plenary procedures would promote more settlements and less litigation if claim decisions were subjected to greater scrutiny. No one can doubt that claimants who present meritorious claims should receive compensation. However, the current system lacks incentives for claim administrators to perform thorough and objective reviews, particularly since claimants lack any means to expose faults in the claim determination. Therefore, due process must be restored to the ERISA law in order to guarantee the protections of the ERISA law promised by Congress.