The Supreme Court Flunks Trusts, Supreme Court Review 207 (1991)
When the administrator of a pension or employee benefit plan denies a participant's claim for a benefit under the plan, and the dissatisfied participant sues to recover the benefit, what standard of review should the court apply in evaluating the reasonableness of the administrator's decision? Should the court adopt a deferential standard of review, presuming the correctness of the administrator's decision and requiring the participant to bear the burden of showing that the decision was unreasonable? Or should the court apply a de novo standard of review, considering the merits of the benefit denial without any presumption in favor of the plan's internal decisionmaking?
Because ERISA, the 1974 regulatory scheme, federalizes the field of pension and employee benefitplans, the question of the appropriate standard of review of benefit denials is one of federal law. Because, however, the statutory text fails to speak to the standard of review, the federal courts have had to deal with the question as a matter of decisional law. By the late 1980s, deferential review under the so-called arbitrary-and-capricious standard was the norm among the courts of appeal, although some significant exceptions were being carved from that standard, especially in the Third Circuit. In Firestone Tire & Rubber Co. v. Bruch, the Supreme Court astonished the ERI SA bar by overturning the arbitrary-and-capricious standard and instituting de novo review.
Date of Authorship for this Version
Langbein, John H., "The Supreme Court Flunks Trusts" (1991). Faculty Scholarship Series. Paper 489.