Argument analysis: Nobody seems worried about ERISA limitations periods
on Oct 17, 2013 at 10:42 am
In Tuesday’s argument in Heimeshoff v. Hartford Life & Accident Insurance Co., the Justices seemed convinced that no matter how they decide this case, it probably won’t be a big deal. As noted in our preview, there is a dearth of data explaining how often the statute of limitations actually prevents the beneficiary of an ERISA-regulated plan from filing suit. Sometimes, such information gaps invite speculation, wild theories, and entertaining hypotheticals. On Tuesday, however, the Justices responded by wondering out loud whether the issues in the case even matter. From the Justices’ questions, it’s not at all clear who will win, but the case is unlikely to break along stereotypical liberal-conservative lines.
Matthew Wessler, appearing for petitioner Julie Heimeshoff, went first. After some back and forth with the Justices about why his client had taken so long to file her claim, the conversation naturally turned to why it was important to have certainty about the start date for the statute of limitations. Justice Kennedy asked whether there was any evidence in other circuits which apply Hartford’s rule that it “has caused difficulties and disruption and unfairness.” Justice Scalia said that any ancillary legal questions – such as whether a statute of limitations should be tolled – would inevitably be resolved by lower courts addressing them on a case-by-case basis. Justice Breyer queried whether the problem could be solved by simply filing suit before the statute of limitations ran and then asking the court to stay the lawsuit pending the outcome of administrative proceedings. Justice Sotomayor wondered whether the Department of Labor couldn’t just solve the problem by enacting a regulation establishing a statute of limitations. And then Justice Kagan asked whether Heimeshoff had “identified any cases in which this [accrual date] serves to prevent somebody from bringing a suit”; when Wessler did not, she commented that his proposed rule “seems just a little bit like a solution in search of a problem.”
These questions shared a common theme: the Justices wanted to know if an uncertain start date for a statute of limitations is a real problem, and they wanted to know whether it was a problem that they – as opposed to the lower courts or the Department of Labor – had to address.
Wessler responded that “the core problem here isn’t so much one of unfairness as it is certainty and predictability of what employees’ and plans’ rights are under an ERISA plan.” To start the statute of limitations running early would invite collateral litigation and inject uncertainty into the process. “But,” Wessler argued, “that gets lawyers and courts involved in a process that should be private. ERISA’s internal benefits process, it processes millions of claims a year.” A rule that permits the statute of limitations to run during the administrative process would turn “what should be a non-adversarial, private process into one that is adversarial.” The respondent’s rule would provide an incentive for “more lawyers [to] get involved, because if you are uncertain about how much time you’ll have you will be in a position where you want advice. This provision breeds confusion, and when we are confused we look for help, and the help that is going to come into this process are lawyers.” “That in and of itself drastically undermines the point of this internal benefit administration and just amplifies and magnifies the litigation costs associated with it.”
Assistant to the Solicitor General Ginger Anders, representing the United States and supporting Heimeshoff, stood up next. The government’s position is functionally identical to Heimeshoff’s, and so it is not surprising that she received essentially similar questions. Justice Scalia asked why courts exercising equitable discretion couldn’t resolve any unfairness; Justices Kagan and Ginsburg asked for evidence that beneficiaries cannot file their claims within three years of proof of loss; and Justice Ginsburg asked why it wouldn’t make sense for a beneficiary to file a protective lawsuit prior to exhaustion.
Anders’s responses were similar to Wessler’s. She explained that in the government’s view, “the problem with [Hartford’s] framework is that it actually sets the required exhaustion procedure . . . and the required judicial review . . . against each other, because a plaintiff who is going through exhaustion is not going to know while she’s going through the exhaustion process how much time she’s going to have remaining.” She also stressed that there are some cases in which “it has taken over two and a half years for exhaustion to occur,” leaving the beneficiary with relatively little time to decide whether to sue, retain a lawyer, and file the complaint. Suing early and asking the court to stay the case pending exhaustion does not solve the problem, Anders argued, because that “would turn the exhaustion process and the point of exhaustion on its head, and that essentially would require a rush to court by claimants who don’t know yet whether the exhaustion process will be resolved in their favor. And the point of exhaustion is . . . to avoid unnecessary suits like that.”
Catherine Carroll then rose to argue on behalf of Hartford. Justice Breyer noted that his law clerks had engaged in some “computer-assisted research” and had located five cases in which the statute of limitations expired before exhaustion, and four other cases in which exhaustion occurred very shortly before the statute of limitations had run. He asked what Hartford thought should happen to those people. Carroll replied that courts can apply equitable doctrines such as estoppel and tolling to preserve the plaintiffs’ claims in those cases. At that point, Chief Justice Roberts spoke for the first time. He expressed skepticism about the equitable solution, calling it “very difficult to apply.”
Justice Kagan then asked whether it would be permissible for an ERISA plan to utilize a statute that ran for eighteen months from proof of loss. Carroll responded that it would be a “harder case” because the period might be found unreasonably short. But, she argued, courts are equipped to make that determination on a case-by-case basis. Justice Breyer wanted to know why it wouldn’t be much simpler to always run the statute of limitations from the date of exhaustion, when the claim accrues.
At that point, Carroll pivoted to play offense, arguing that “the question before the Court is not what would be the best idea or the best, most simple model if we were writing on a blank slate. The question is, is this term in an ERISA plan, in a suit from which the Petitioner’s rights flow from that plan and her cause of action seeks to enforce the terms of that plan – may that provision be excised from every plan in which it appears in all cases on a categorical basis, because we can imagine the possibility of five or nine cases in which its operation had to be addressed through the application of traditional equitable doctrines?” Over the next few minutes, Carroll would reliably return to this theme, contending that a legal rule which permits courts to excise a term of an ERISA plan in a lawsuit to enforce the plan would constitute “a tectonic shift in the law of ERISA,” perhaps opening the floodgates to ignore other plan terms.
After that, a strange thing happened: several Justices asked questions that appeared to be genuine questions, as opposed to arguments masquerading as questions. But then Chief Justice Roberts got the argument back on track, not even bothering to ask questions, but instead simply stating that, although “the last thing you want in this process is to get lawyers involved at the claim procedure,” Hartford’s rule would encourage exactly that by subjecting beneficiaries who are unfamiliar with the legal system to seek legal advice before the administrative process was complete. The Chief commented that “[i]t just seems to me that the problem of a statute of limitations that runs before the claim even accrues requires people to worry about their legal rights in a way that – the simple rule about when your benefits are denied, that’s when the period starts running.”
The duration of Carroll’s argument was uneventful. Justice Breyer attempted to determine whether an ERISA plan term that frustrated the exhaustion requirement could be excised, and Justice Kagan appeared sympathetic to that idea. Carroll ultimately stated that it could. She also argued that Heimeshoff “bears a burden to say there is some anchor in the statute or some basis in evidence or experience to say, not simply to speculate, that there is a potential clash with the remedial scheme, but that there is one.”
Up for rebuttal, Wessler caught a question from Justice Alito: whether courts would have to decide how long was a reasonable amount of time to have to sue, and – if so – whether that would result in a lot of collateral litigation. Wessler responded that one year from the date a claim accrues is universally regarded as reasonable, and while there might be some litigation about a period shorter than that, one year was a safe bet and a common plan term. Wessler also pointed out that the type of reasonableness inquiry in that situation would not be a case-specific factual determination about whether a particular plaintiff had a reasonable amount of time, but instead an objective inquiry into whether a certain amount of time from accrual was sufficient, and therefore an easier inquiry with less uncertainty.
It’s not easy to count to five in this case. The only Justice who clearly tipped his hand was Chief Justice Roberts, in support of Heimeshoff. But whether he will be able to rally a majority to that cause is far from clear. Justice Breyer will likely be an easy sell, but Justices Ginsburg, Alito, Sotomayor, and Kagan did not seem particularly enthusiastic about either side’s position – in large part because they don’t seem sympathetic to this particular beneficiary, who took a very long time to file a rather simple claim. Justice Scalia’s comments indicate that he supports Hartford’s view, and Justice Kennedy’s questions indicated leanings in that direction as well. Justice Thomas, as is his practice, did not ask any questions. It will be interesting to see whether this is a case in which one Justice with a strong view can build a majority, and also whether anybody cares enough to actually write a dissent or concurrence.
A final note: One question, first raised by Justice Sotomayor and put to every advocate, was whether the Department of Labor had the authority to enact a regulation prescribing a statute of limitations – including an accrual date. Wessler stated that he wasn’t sure, but he wasn’t aware of anything that would stop the government from regulating. Carroll likewise stated that she wasn’t sure, but she had doubts about whether the Department could compile a factual record that would provide a non-arbitrary basis for taking that action. Anders stated that she believed the Department of Labor could regulate because the statute of limitations is so intertwined with the effectiveness of the claims procedure, but she ran into resistance from Justice Scalia, who thought it would be highly unusual for an administrative agency to set a statute of limitations. Ultimately, nobody gave a sufficiently clear answer to give the Justices comfort that the Department of Labor will simply resolve this issue.