Civil litigators ask: Did the Supreme Court flunk constitutional law?

The winner or loser of litigation under the Employee Retirement Income Security Act (ERISA) is frequently determined by whether the judge must give “deference” to the employer’s insurance company when it decides an employee’s claim under a retirement plan.  An example from one of my cases is helpful.

Ruling for the employee, but only after first finding that deferential review of a disability benefit claim denial was not required, I was able to get to the merits. The facts were astonishing: “Frankly, it is hard to know where to begin. How [the insurance company] could conclude that a heart attack and stroke victim in his early fifties could work full-time even at seated work, when he was literally half blind, had serious vascular problems, and suffered severe pain that deprived him of normal sleep, is beyond me.”

And that brings me to the title of this post. The title comes from a fascinating and provocative new piece about ERISA litigation written by Jonathan M. Feigenbaum and Scott M. Riemer. See Did the Supreme Court Flunk Constitutional Law When It Permitted Discretionary Review of Insured ERISA Benefits Cases.

The authors set the stage this way:

In the 1983 comedy Trading Places the amoral Duke
brothers conduct an experiment in social Darwinism
debating whether genetics or nurturing is the source of
success. They make a wager, and then put their theories
to the test. They manipulate the life of Louis Winthorp
III (Dan Akroyd), a successful commodities trader,
by “trading places” with Billy Ray Valentine (Eddie
Murphy), a street con artist.

We’ll bet the same amount wagered by the Duke
brothers with our readers – identify any litigation in
the federal courts between private litigants, other than
discussed in this paper, where the Article III Judge must
defer to the decision of the defendant without conducting
a full trial on the merits. We bet you can’t.

The authors then explain in detail why they believe that judicial deference accorded the decisions of insurance companies under ERISA, as interpreted by the Supreme Court, is both unconstitutional and unjustified. If you handle civil litigation in the federal courts, chances are you will have an ERISA case. If so, this article is a “must read.”

RGK

10 responses

  1. I practice in this area. The US Supreme Court did fail at Constitutional Law when it elevated contract to the same level as the law governing contracts. Imagine tying a courts hands just because a unilaterally formed unconscionable contract is written to completely disenfranchise our jurisprudence. That is the same as transforming Plan Sponsors and Insurers into legislators and courts (actually elevating them above both. Ridiculous.

    When the illogic applied in the pre-emption cases is examined we see that it is not ERISA that pre-empts laws, it is the profit-motivated whim of the Plan Sponsors and Claims administrators that has replaced the law. This is embarrassing. Who ever thought the law would be so degraded as to allow legal protection to be afforded to oppression and unconscionability. (e.g., Walmart v. Shank; what you thought was insurance was really just a loan).

    When the Supreme Court decreed that state substantive law was pre-empted, they needed to tell us what law would govern. They said if state law doesn’t apply then the “Federal Common Law” will apply. The problem was ever since Erie v Tompkins, every first year law student knows there is no such thing as Federal Common Law since the US Courts have always applied the law of the relevant state. When the court realized that, they then instructed the District Court Judges to “fashion” a body of Federal Common Law. Translation: Go invent some FCL to fill the void created by our distortion of Federal Pre-emption (as if Congress really “intended” any of this or had ever even thought about anything past ” Duh! We don’t want punitive damages draining the plans”).

    The real harm that has happened is that the Supreme Court, in abandoning the rule of law under the rationalization that this is “the intent of Congress” has elevated a well-lobbied big insurance legislation to a place even the Congress that enacted it never dreamed it would go. Politics influenced by money elevated above the law by the institution that is charged with preventing that from happening. If this can happen once, it will happen again and again and again.

  2. If this can happen once, it will happen again and again and again.

    Seems to me it already has happened, lots of times. See, for instance, the progression from Berman through Midkiff to Kelo and that evolution’s impact on property rights–and so on contracts involving property–for just one example.

    I was going to snark about what Henry Waxman and Alberto Gonzales said about the law and the Supreme Court, but I won’t.

    Eric Hines

  3. RIch, the ERISA thing has always struck me as weird, but my experience in ERISA is so ancient that I am reluctant to comment on it. But one of the weirdest things to me has always been Chevron deference to administrative interpretations of law. I get the idea that the agency is closer to to the facts (like a trial court) so its factual determinations can only be set aside if they lack “substantial evidence.” But why is the interpretation of the law by a bureaucrat entitled to weight but that of a lower court federal judge is not? The rationale has always been that these things are so grimly technical that really the bureaucrats are in a better position to understand it. Really? The issue in Chevron involved whether the EPA’s so-called “bubble” regulation (which treated each plant as a single “fixed source” was right, or whether each smokestack was a “fixed source.” OK, that’s debatable, but it’s not really that “hard” of an issue. I think this sort of deference has promoted laziness on behalf of federal courts (and it must be said their clerks). Gee, this is a hard case. The government wins. See Chevron. Best, Pat.

  4. This is an aspect of the judiciary I’ve never understood. The Federal judiciary is a coequal–and coeval–branch of the Federal government, neither subordinate nor superior to the legislative or the executive branches. This leveling of the government hierarchy is by design, following in the experience, as it does, the colonial times example of the English judicial system being at once subordinate to and a part of the English executive–the monarchy–and on the other hand subordinate to the Parliament under the Parliamentary Supremacy theory, so that judicial review wasn’t even allowed. This was further colored by the Founders’ proximate experience with the subordination of colonial judges both to the (monarch-named) colonial governors and that far distant Parliament–and to the Privy Council.

    In particular, judicial review was something the colonials had been kicking around for decades before they wrote and ratified our Constitution; Marshall was just following history when he acted in Marbury. Plus, Judicial review by itself requires equality of the Article III branch with those of Articles I and II.

    So: why are Federal judges, with one potential exception, showing any deference to anything other than what the Constitution says, then what the law says, and then what their superior Appellate court says, much less what that bureaucrat says?

    The one exception follows the pseudo-logic of bureaucrats knowing better than judges: a slight deference to the Congress. But not because Congress knows better, rather because those folks are closer to the people whose law it is: they were elected by those people and are fired or rehired (in theory) at regular intervals, while judges are lifetime employees of the people and are chosen and confirmed or rejected only convolutedly by distant representatives of the people.

    Finally, and a not very distant aside from my point: bureaucrats know better? Too often (most of the time?) bureaucrats don’t even understand their own regulations. What’s come out of Obamacare and Dodd-Frank–without considering the merits/demerits of those two laws–are examples, along with the EPA: regulations don’t take three years to write, with many of the required regulations not yet written. Single regulations don’t take 200 pages to explain; they might need five sentences. And consider the IRS: if those folks were acting honestly (and given what’s been in the press, I can’t say, were I on a jury assessing guilt/innocence based on the published claims, they were not), the regulations under which they were acting were not…clear.

    Eric Hines

  5. Pingback: PS on the ERISA post « Hercules and the umpire.

  6. IT has been my experience, particularly recently, that the Supreme Court simply does not give a rat’s ass whether precedent is honored or mangled, nor does it care about what the actual intent behind or purpose of legislation was. It (or at least, 4 to 5 of them) cares primarily about being “pro-business,” yet does not have the honesty to come right out and say it. While I find this disgusting, at the least, my state’s (WI) highest court has at least been honest enough to make clear in oral arguments that 3-4 of its 7 members care only and first about whether this decision will limit or expand liability for business interests. That too is disgusting, but they do have the courtesy (or at least the guilelessness) to be open about it.

  7. Jeremiah,

    In fairness to the Supreme Court, the idea of “precedent” is far less compelling as a theoretical matter in the Supreme Court as contrasted with the inferior federal courts. This is because the precedent setting body–the Supreme Court–is always obligated to reconsider its precedents when there is a good reason to do so. And, as some Justices have said, the Constitution properly trumps precedent in the Supreme Court because the Supreme Court determines what the Constitution means, the Constitution has more authority than precedent, and the Supreme Court is the only body that can finally make or set aside precedent for the whole nation.

    For a discussion of precedent and a comparison of vertical vs. horizontal precedent, see my essay on the subject in the context of partial-birth abortion. It is here.

    All the best.

    RGK

  8. Pingback: Here’s an idea that only our lawmakers could come up with: LET’S TAKE MORE MONEY!!!! | tomorrowsfuturetodaydotorg

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