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Argument recap: MetLife v. Glenn

The justices spent almost the whole of oral argument attempting to understand the practical differences between the (supposedly) varying standards of review proposed by MetLife, Glenn, and the United States. At the start of argument by petitioner’s counsel Amy Posner, the justices clarified terminology, making no secret of the fact that they considered MetLife to be operating under a conflict of interest. (Justice Scalia: “So let’s call that [an insurer with conflicting interests in serving beneficiaries and boosting profits] a conflicted fiduciary, somebody who has two loyalties, whether or not he allows the one loyalty to distort his judgment.”). But determining how an insurer’s conflicted status should factor into a court’s review of claim denials proved far more difficult, and the justices returned to the question again and again.

Posner argued that a structural conflict of interest should not be weighed by a court unless there is some indication that a “slip occur[red],” and the conflict actually affected the claims administration process. But the justices were dissatisfied with her formulation. Chief Justice Roberts asked how exactly the judicial review should work—how does a court consider the conflict of interest as a factor but no more? Given the same set of facts, when an insurer has denied a claim, would the presence or absence of a conflict of interest make the denial reasonable in the first instance but unreasonable in the second? Posner suggested that the plan administrator had discretion to make the decision in either instance. But what does that mean? Justice Scalia pressed. Does the conflict of interest make no difference then? Yes, it does make a difference, Posner conceded, but the conflict “must be a factor that’s weighed with the other factors.”

Justice Ginsburg attempted to clarify the applicable standard by looking at the facts of Glenn’s case as an example. She suggested that MetLife’s denial of benefits to Glenn, coming after its insistence that Glenn seek disability benefits from the Social Security Administration, seemed suspicious. But while she and Posner argued back and forth over whether MetLife’s actions were in fact suspicious, the standard for which Posner was advocating remained vague. Justice Souter waded into the fray with a hypothetical. If a judge is reviewing a denial of benefits and is “on the fence” with regard to whether the denial was reasonable, can the existence of a structural conflict of interest in effect push him off the fence by convincing him to rule against the insurer? Is the conflict a sort of tiebreaker?

Barely giving Posner time to reply with an equivocal answer, Justice Alito jumped in with an alternative standard. He understood MetLife’s argument to be that the conflict should not be weighed at all by the judge absent evidence that the conflict actually affected the decision on the claim. Wasn’t that right? Yes, said Posner. But she then agreed with Souter that the conflict-as-tiebreaker standard he had proposed “could” also be consistent with the Court’s precedent.

Well, who was right? demanded the Chief Justice. Souter or Alito? Which standard? Justice Stevens noted that if Justice Alito were correct, Posner would then face a problem of proof, because it’s not clear how a plaintiff could prove that a conflict of interest had actually affected a benefit denial. Posner acknowledged that “[t]hat is a problem” but proposed no solution.

Counsel for the respondent, E. Joshua Rosenkranz, received many of the same questions as Posner. Rosenkranz characterized the standard advocated by Glenn as “especially careful scrutiny” but ran into the same problems that Posner had when he tried to define it. Chief Justice Roberts tried to pin him down: “[W]hich position do you adopt? . . . [T]he Justice Souter hypothetical or the Justice Alito hypothetical?” Both, said Rosenkranz. His version of “especially careful scrutiny” entails two components: first, searching review of the actions of a structurally conflicted fiduciary, and second, a greater likelihood that a decision at the “outer limits of the zone of reasonableness” will be overruled if made by a conflicted insurer.

His answer did not satisfy the justices. Justice Souter set out three hypotheticals. In each the fiduciary in question was posited to have a structural conflict of interest. In the first case, the fiduciary denies a claim for what are clearly profit-related motives. In the second, the fiduciary’s decision is “within the zone of reasonableness,” but “close to the edge.” In the third, the judge reviewing the fiduciary’s decision is entirely torn as to whether the decision was reasonable; the evidence on each side of the issue is perfectly balanced. How would the standard of review advocated by Glenn factor into each scenario? Rosencranz offered several answers, none of which clearly answered the question, and none of which seemed to resolve the questions in the justices’ minds. And so, when Nicole Saharsky of the Solicitor General’s Office took her turn at the podium to argue in support of Glenn, the justices returned to the same issue.

The Chief Justice began questioning Saharsky almost immediately, expressing concern that the standard of review she was suggesting—reasonableness review “where the conflict of interest is considered as a factor”—did not seem distinct from regular abuse-of-discretion review. Breyer, Scalia, and Ginsburg pressed Sarharsky on the practical applications of the standard she had articulated, but, while making general references to trust law as a guide, she was unable to offer a more precise formulation. Finally Justice Kennedy turned the Court’s attention to the specifics of the case at hand: “Can you tell me what the Sixth Circuit did wrong here?” It used the wrong standard of review, Sarharsky replied, using the terms “arbitrary and capricious” rather than “reasonable,” but the United States otherwise supports the decision of the Sixth Circuit. The appellate court properly applied “greater scrutiny to . . . the claims determination in this case” because of MetLife’s conflict of interest.

Justice Scalia broke in to comment that “greater scrutiny” did not sound like reasonableness review with the conflict of interest added in as an extra factor to consider; it sounded like a stricter standard of review. Justice Souter attempted to clarify the situation by proposing two different models of judicial weighing that would incorporate the conflict of interest as a factor. One would take the conflict into account at the same time that all other evidence about the claims determination was reviewed. The second would require the judge first to evaluate all other evidence, and then to consider the conflict of interest only if the initial evaluation of evidence “results[ed]in something close to equipoise”—again, the conflict-of-interest as tiebreaker. The first scenario is correct, said Saharsky; the conflict should be considered during the initial analysis. With little time remaining in her argument, she added that the problem with the justices’ questions was that the conflict-of-interest factor has no precise mathematical weight; it is just “something that the Court has to take into account.”

In a brief rebuttal, Posner argued that MetLife’s conflict of interest “should have no effect” on the “zone of reasonableness,” thus concluding an argument in which no advocate seemed to satisfy a majority of the Justices with his or her proposed answer to the second Question Presented.