Opinion Recap: MetLife v. Glenn

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 court’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. “The employer’s fiduciary interest may counsel in favor of granting a borderline claim while its immediate financial interest counsels to the contrary,” wrote Justice Breyer.

In its decision below, the Sixth Circuit explicitly considered that conflict of interest when reviewing MetLife’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 Glenn’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 Glenn’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 Glenn’s claim, withheld some of those reports from the expert hired to review Glenn’s medical files, and failed to address evidence that job-related stress of any kind exacerbated Glenn’s illness. These factors, plus the existence of MetLife’s conflict of interest, convinced the Sixth Circuit that the claim denial was unreasonable and should be reversed.

According to the Supreme Court’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 “weighed” the conflict of interest “as a factor determining whether there [was] an abuse of discretion.” This analysis included an appropriately “deferential standard of review”; 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 “but one factor among many that a reviewing judge must take into account.”

This “one factor among many” formulation does not, as the majority forthrightly admitted, constitute “a detailed set of instructions” 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 “walling off claims administrators from those interested in firm finances, or imposing management checks that penalize inaccurate decisionmaking irrespective of whom the inaccuracy benefits.” On the other hand, “where circumstances suggest a higher likelihood that” the conflict “affected the benefits decision,” it should be weighted more heavily.

Once the court has decided the relative importance of the administrator’s conflict of interest, it must examine “other factors” associated with the claim denial—such factors as, in Glenn’s case, the administrator’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 “other factors,” when viewed deferentially, “are closely balanced,” 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 “other factors” characterizing the claim denial point toward an abuse of discretion. If the conflict seems of little or no importance, then the court’s focus should remain mostly on the “other factors” involved in the adminstrator’s decision. In Glenn’s case, for example, the Sixth Circuit gave MetLife’s conflict “weight to some degree,” but “would not have found the conflict alone determinative.” Instead, it was largely those “other factors”—MetLife’s selective emphasis on medical reports that reflected poorly on Glenn’s claim, its inexplicable disagreement with the Social Security Administration—that convinced the court of appeals to overrule the claim denial.

Critics of the Court’s decision will likely object that this process for weighing an administrator’s conflict of interest is amorphous and unpredictable. The Court, doubtless anticipating that charge, asserted that further clarity is neither possible nor desirable: “There 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.”

Not all of the justices proved comfortable with this “want of certainty” regarding the manner in which a conflict of interest should be factored into a court’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 MetLife’s weight if circumstances demonstrated that the conflict had actually influenced the claim denial in question; only then would a court be justified in “heightening the level of scrutiny” applied. According to Roberts, the conflict of interest was irrelevant in MetLife’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 majority’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 Circuit’s ruling. The Sixth Circuit had not engaged in the process of deciding how much weight to accord MetLife’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 Court’s opinion.

In dissent, Justice Scalia, joined by Justice Thomas, criticized what he called the majority’s “judge-liberating totality of the circumstances test,” and deemed the majority opinion “painfully opaque, despite its promise of elucidation.” He contended that an administrator’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 MetLife’s conflict of interest at all, but should merely have reviewed the decision to deny benefits for reasonableness.