ERISA Litigation: 5 Defenses to Know and Prepare For

A ubiquitous presence in the federal courts, the Employee Retirement Income Security Act of 1974 (ERISA) regulates the administration of employee pension and welfare plans — otherwise defined as plans that provide employees with “medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability [or] death.” ERISA § 3(1). Authorizing a plan participant or beneficiary to file federal claims for the denial of benefits, breach of fiduciary duty and equitable remedies, ERISA § 502(a)(1)-(3), ERISA has spawned a body of law that is not only comprehensive, but ever evolving.  

Given the landscape, plan sponsors must actively guard against potential litigation, particularly when drafting covered plan documents. As part of that process, plan sponsors should be aware of five key defenses on which ERISA-based liability may turn: 

1. Statute of Limitations

Although ERISA contains no statute of limitations for bringing a benefits claim, courts have consistently enforced limitations periods imposed by contract, including those that begin to run before a benefits claim typically “accrues” (i.e., upon final denial of a benefits claim). See Heimeshoff v. Hartford Life & Acc. Ins. Co., 134 S. Ct. 604, 610 (2013) (finding that a contractual limitations period need only be “reasonable” to be enforceable).   

In the absence of a contractual limitations period, or if the parties have expressly agreed to incorporate a state limitation period into a regulated plan, courts will generally apply the most analogous state statute of limitations. See, e.g., Johnson v. State Mut. Life Assur. Co. of Am., 942 F.2d 1260, 1261–63 (8th Cir. 1991) (en banc) (applying Missouri’s statute of a limitations for a breach of contract action).  

Practice Tip: To protect against stale benefits claims, plan sponsors should craft reasonable plan language that clearly defines the accrual of claims. 

2. Exhaustion of Remedies

Likewise, although ERISA contains no requirement that a plaintiff exhaust administrative remedies prior to filing a civil action, courts have consistently read such a requirement into the statute. See, e.g., Edwards v. Briggs & Stratton Ret. Plan, 639 F.3d 355, 360 (7th Cir. 2011); 29 C.F.R. § 2560.503-1 (requiring that all employee benefit plans “establish and maintain reasonable procedures governing the filing of benefit claims, notification of benefit determinations, and appeal of adverse benefit determinations.”). 

As to benefit claims, a judicial consensus exists that exhaustion is required where the plan at issue mandates exhaustion — while a majority of courts are in agreement that exhaustion is required even where the plan at issue suggests that exhaustion is permissive (e.g., by informing the participant that an appeal “may” be taken to the claims administrator upon claim denial). See, e.g., Wert v. Liberty Life Ins. Co. of Boston, 447 F. 3d 1060, 1066 (8th Cir. 2006).

Practice Tip: Plan sponsors can ensure that an exhaustion requirement is readily available by including plan language that mandates a clear and unambiguous administrative remedy procedure.   

3. Improper Venue

Due in part to ERISA’s evolving legal constructs, ERISA defendants are often susceptible to so-called “forum shopping” — i.e., the filing of a lawsuit in a jurisdiction that is more likely to provide a favorable judgment to the plaintiff. However, while the statute provides — rather broadly — that suits may be filed (1) where a plan is administered; (2) where the breach took place; or (3) where a defendant resides or may be found, ERISA § 502, the vast majority of courts have found that a valid forum selection clause is nevertheless enforceable. See Feather v. SSM Health Care, 216 F. Supp. 3d 934, 940 (S.D. Ill. 2016) (collecting cases). 

Practice Tip: A plan sponsor can guard itself against forum shopping and the possibility of litigating in a disadvantageous venue by drafting a clear and unambiguous forum selection clause in the plan documents.  

4. Preemption

ERISA defendants can often rely upon the statute’s most distinctive feature: its broad preemption provision, which provides that ERISA supersedes “any and all State laws” relating to “any employee benefit plan” covered and not exempted by the statute. ERISA § 514 (defining “State law” as “all laws, decisions, rules, regulations, or other State action having the effect of law, of any State.”).  

Demonstrating the breadth of the preemption provision, courts have found that ERISA preempts not only state statutes relating to an employee health or benefit plan, but also state common law theories of recovery. Aetna Health, Inc. v. Davila, 542 U.S. 200, 216 (2004) (finding that any state law claim based on the terms of a plan is preempted). Moreover, in some limited circumstances, courts have even deemed it appropriate to develop ERISA-based federal common law. See, e.g., UIU Severance Pay Trust Fund v. Local Union No. 18–U, United Steelworkers of America, 998 F.2d 509, 512 (7th Cir. 1993) (noting that ERISA remedies may be supplemented by a federal common law remedy for restitution).

Practice Tip: While preemption is a critical ERISA-based defense, it’s important to remember that, according to many courts, ERISA preemption is not a basis for dismissal of a preempted state law claim. See, e.g., Bartholet v. Reishauer A.G., 953 F.2d 1073, 1077-78 (7th Cir. 1992). In such cases, the proper course of action is to remove the claims to federal court, but construe the state law claims as presenting ERISA claims to be resolved at the summary judgment stage.

5. Firestone Deference

Finally, a crucial defense to any benefits claim is ensuring the application of so-called “Firestone deference.” In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), the United States Supreme Court endorsed provisions within an ERISA plan that gave the plan administrator absolute discretion in interpreting and applying the plan’s terms and determining eligibility for benefits. Thus, so long as “Firestone” language appears in the plan, judicial review of a benefits denial is limited to whether the plan administrator acted “arbitrarily and capriciously” — i.e., a highly deferential standard of review intended to prevent only the most clear and egregious errors. By contrast, if Firestone language does not appear in the plan, a court may engage in the highest degree of scrutiny — de novo review — which permits review of even the smallest errors.  

Practice Tip: By including enforceable Firestone language in plan documents, a plan sponsor can ensure that a plan administrator’s benefits decision is granted appropriate judicial deference if litigation arises.

Conclusion

Frequently described by practitioners and courts as an “enormously complex” and “reticulated” statute, ERISA inherently generates numerous pitfalls for the unwary (litigants and non-litigants alike). Following some of these practice tips may assist in mitigating litigation costs and time. For those in litigation, these defenses may be the first line of argument.