Opinion Recap: MetLife v. Glenn
on Jun 20, 2008 at 11:43 am
Stanford Law School student Barbara Thomas provides the following recap of Thursday’s decision in No. 06-923, MetLife v. Glenn.
In an opinion that freely acknowledges its own indeterminacy, the Supreme Court ruled on June 19 that a company which both administers and funds a benefit plan operates under a conflict of interest that must be considered as a factor in a courtâ€™s review of claim denials.
The justices, while split over other questions raised by the case, agreed unanimously on the most basic issue: the Sixth Circuit was correct in holding that MetLife, as a plan administrator that both reviews claims and pays out benefits, has conflicting interests. â€œThe employerâ€™s fiduciary interest may counsel in favor of granting a borderline claim while its immediate financial interest counsels to the contrary,â€ wrote Justice Breyer.
In its decision below, the Sixth Circuit explicitly considered that conflict of interest when reviewing MetLifeâ€™s denial of benefits to respondent Glenn, a Sears employee who filed for disability benefits after a heart condition impaired her ability to work. After MetLife rejected Glennâ€™s claim, asserting that she was still physically capable of performing full-time sedentary work, Glenn brought suit against the insurance company under ERISA, which authorizes federal courts to review the decisions of benefit plan administrators. Glenn lost her case in district court but prevailed before the Sixth Circuit. In concluding that MetLife had abused its discretion in denying Glennâ€™s claim, the court of appeals relied on what it regarded as several key factors. For example, although Glenn had qualified for permanent Social Security disability benefits, MetLife ignored the findings of the Social Security Administration in deciding to deny her claim. The company also disregarded certain medical reports that supported Glennâ€™s claim, withheld some of those reports from the expert hired to review Glennâ€™s medical files, and failed to address evidence that job-related stress of any kind exacerbated Glennâ€™s illness. These factors, plus the existence of MetLifeâ€™s conflict of interest, convinced the Sixth Circuit that the claim denial was unreasonable and should be reversed.
According to the Supreme Courtâ€™s majority opinion, written by Justice Breyer and joined by Justices Alito, Ginsburg, Souter, and Stevens, the decision below was correct. The court of appeals properly â€œweighedâ€ the conflict of interest â€œas a factor determining whether there [was] an abuse of discretion.â€ This analysis included an appropriately â€œdeferential standard of reviewâ€; the presence of a conflict of interest does not, the majority emphasized, automatically authorize a court to apply heightened scrutiny to a claim denial normally analyzed only for an abuse of discretion. Instead, the conflict simply ranks as â€œbut one factor among many that a reviewing judge must take into account.â€
This â€œone factor among manyâ€ formulation does not, as the majority forthrightly admitted, constitute â€œa detailed set of instructionsâ€ to lower courts. But the opinion did give some guidance, indicating that a court reviewing the decisions of a conflicted plan administrator should engage in a two-step process. First, a court must determine the proper weight to assign to the conflict of interest. The conflict might carry little or no weight at all if, for example, the administrator has taken steps to neutralize it by â€œwalling off claims administrators from those interested in firm finances, or imposing management checks that penalize inaccurate decisionmaking irrespective of whom the inaccuracy benefits.â€ On the other hand, â€œwhere circumstances suggest a higher likelihood thatâ€ the conflict â€œaffected the benefits decision,â€ it should be weighted more heavily.
Once the court has decided the relative importance of the administratorâ€™s conflict of interest, it must examine â€œother factorsâ€ associated with the claim denialâ€”such factors as, in Glennâ€™s case, the administratorâ€™s failure to provide all medical reports to a hired expert, or its unexplained rejection of the findings of the Social Security Administration. If these â€œother factors,â€ when viewed deferentially, â€œare closely balanced,â€ leaving the court uncertain as to whether the claim denial was reasonable, then the conflict of interest may serve as a tiebreaker. Here the relative importance of the conflict of interest in the particular case becomes relevant: if the conflict seems more important, then the court may more easily determine that the â€œother factorsâ€ characterizing the claim denial point toward an abuse of discretion. If the conflict seems of little or no importance, then the courtâ€™s focus should remain mostly on the â€œother factorsâ€ involved in the adminstratorâ€™s decision. In Glennâ€™s case, for example, the Sixth Circuit gave MetLifeâ€™s conflict â€œweight to some degree,â€ but â€œwould not have found the conflict alone determinative.â€ Instead, it was largely those â€œother factorsâ€â€”MetLifeâ€™s selective emphasis on medical reports that reflected poorly on Glennâ€™s claim, its inexplicable disagreement with the Social Security Administrationâ€”that convinced the court of appeals to overrule the claim denial.
Critics of the Courtâ€™s decision will likely object that this process for weighing an administratorâ€™s conflict of interest is amorphous and unpredictable. The Court, doubtless anticipating that charge, asserted that further clarity is neither possible nor desirable: â€œThere are no talismanic words that can avoid the process of judgment. . . . [T]he want of certainty in judicial standards partly reflects the intractability of any formula to furnish definiteness of content for all the impalpable factors involved in judicial review.â€
Not all of the justices proved comfortable with this â€œwant of certaintyâ€ regarding the manner in which a conflict of interest should be factored into a courtâ€™s analysis. Chief Justice Roberts, while concurring in the bulk of the majority opinion and in the judgment, wrote separately to say that he would only give a conflict of interest such as MetLifeâ€™s weight if circumstances demonstrated that the conflict had actually influenced the claim denial in question; only then would a court be justified in â€œheightening the level of scrutinyâ€ applied. According to Roberts, the conflict of interest was irrelevant in MetLifeâ€™s case because other factors independent of that conflict demonstrated that the claim denial was unreasonable.
Justice Kennedy wrote an opinion concurring in part and dissenting in part. Unlike the Chief Justice, he did not object to either the majorityâ€™s reasoning or its framework for weighing conflicts of interest. Instead, he argued that the Court had been too hasty in voting to affirm the Sixth Circuitâ€™s ruling. The Sixth Circuit had not engaged in the process of deciding how much weight to accord MetLifeâ€™s conflict of interest. As a result, the case should have been remanded to the court of appeals for further proceedings in light of the Supreme Courtâ€™s opinion.
In dissent, Justice Scalia, joined by Justice Thomas, criticized what he called the majorityâ€™s â€œjudge-liberating totality of the circumstances test,â€ and deemed the majority opinion â€œpainfully opaque, despite its promise of elucidation.â€ He contended that an administratorâ€™s conflict of interest should not be weighed by a court unless the administrator could be shown to have acted from an improper motive. In that circumstance, a court would be free to conclude that the administrator had abused its discretion, and then to review the claim denial de novo. By that standard, the Sixth Circuit should not have considered MetLifeâ€™s conflict of interest at all, but should merely have reviewed the decision to deny benefits for reasonableness.