Thursday, March 31, 2011

Cyr v. Reliance Standard Life Insurance Co., Ninth Circuit Case No. 07-56869 (en banc)

On March 22, 2011, an 11-judge en banc panel of the Ninth Circuit heard oral argument in this ERISA disability benefits suit in which I and Joseph Garofolo are co-counsel for the Plaintiff/Appellee, Laura Cyr. The Ninth Circuit ordered hearing en banc pursuant to our petition. The court receives between 20 and 25 petitions for hearing (as distinct from rehearing) en banc every year, but normally none are granted. In fact, this is the only ERISA appeal of which we are aware that was heard en banc in the first instance (without a 3-judge panel decision) upon the petition of a party. The United States Secretary of Labor also filed a brief an amicus (aka "friend of the court") brief in support of Mrs. Cyr, and argued at the hearing.

The amicus brief of the Secretary of Labor can be found HERE

A video of the hearing can be found HERE

An audio recording of the hearing can be found HERE

The issue that the Ninth Circuit agreed to consider en banc was whether it should affirm, reverse or modify its precedent on one narrow question: who or what is a permissible defendant to a suit for benefits under ERISA, 29 U.S.C. § 1132(a)(1)(B)? In Gelardi v. Pertec, the Ninth Circuit wrote that section (a)(1)(B) permits suits only against an employee benefit plan as an entity. 761 F.2d 1323 (9th Cir. 1985). Subsequently, the Ninth Circuit wrote that such suits may be brought against both a plan and its plan administrator (a term of art under ERISA § 3(16)), and left open the question whether or not a party functioning as a plan administrator could also be named. Everhart v. Allmerica, 275 F.3d 751 (9th Cir. 2001). In that case, Judge Reinhardt wrote an impassioned dissent arguing that any party with discretion over a claim determination should be subject to suit, and asserting that the panel should have referred the case for a hearing en banc to resolve a circuit circuit split. Subsequently, in Ford v. MCI, the Ninth Circuit, relying on Gelardi and Everhart, held that only a plan may be sued, and that, categorically, the plan’s insurer is not a proper defendant. 399 F.3d 186 (9th Cir. 2005).

In Cyr, the District Judge Dean Pregerson, in ruling in favor of Ms. Cyr on summary judgment, distinguished both Ford and Everhart on their facts, and held that Reliance was a proper defendant because it alone held ultimate authority to adjudicate benefits claims, and it alone shouldered the obligation to fund them. Cyr. V. Reliance, 525 F. Supp. 2d 1165 (C.D. Cal 2007). Reliance appealed that judgment on the basis that Ford and Everhart categorically insulate it from liability for benefits. If its interpretation of those cases were correct, it would implicate a split amongst the circuits, a split within the Ninth Circuit, and possibly contravene the Supreme Court’s decisions in Harris Trust v. Solomon Smith Barney, Inc., 530 U.S. 238 (2000), and MetLife v. Glenn, 554 U.S. 105 (2008).

If the Ninth Circuit adopts the position advocated by Mrs. Cyr and the U.S. Secretary of Labor, it will abrogate Gelardi, Ford, and Everhart, and hold that, on its face, 29 U.S.C. § 1132(a)(1)(B) admits no limit to the universe of proper defendants, and Reliance, as the party that adjudicated claims and funded the benefits, is a proper defendant to a claim for benefits under ERISA. Notably, both Judge Reinhardt and the author of the Everhart majority opinion, Judge Fisher, were on the Cyr v. Reliance en banc panel.

The pointed questions from the bench, especially from Judges Berzon and Smith, and Chief Judge Kozinski, imply that the court is inclined to adopt the Secretary's position. However, reading too much into the questions asked during an oral argument can be a risky proposition, so we'll have to wait until the court issues its opinion. A decision is expected later this year.

If you find yourself struggling with your ERISA plan's administrator or insurer over your benefits (pension, disability, health, or otherwise), let us see if we can help.

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