Managed Care Outlook 2023

Benefit issues - people icon

Read time: 6 minutes

The special rules and procedural requirements that have long applied to Employee Retirement Income Security Act (ERISA) benefits litigation have always had their detractors, who have argued that such requirements tend to benefit plans at the expense of plan participants. In 2022, there were some victories for those detractors, with more courts prohibiting arbitration and class action waiver clauses in ERISA plans and another circuit court permitting full discovery in certain ERISA benefits litigation. Congress also attempted to pass legislation that would have swung the pendulum even further, such that ERISA benefits litigation would proceed like any other type of litigation.

Autoren: Thomas C. Hardy

While the results of the 2022 mid-term elections have paused any action by Congress for the time being, in 2023 the courts may continue their trend of questioning (and potentially rolling back) the unusual procedures that have long characterized ERISA benefits litigation.

Circuits address arbitration and class action waiver clauses

The question of whether ERISA benefit plans may require participants to arbitrate disputes and waive their right to participate in class actions has been around for some time, and circuit courts have reached different conclusions in recent years. More circuit courts will weigh in in 2023, potentially creating a circuit split and making it more likely the U.S. Supreme Court will resolve the issue.

All courts that have addressed the issue have held that ERISA claims are generally arbitrable, but courts are split on whether a plan may require arbitration if it prevents a participant from “effectively vindicating” their statutory rights under ERISA. In 2019, the U.S. Court of Appeals for the Ninth Circuit affirmed the denial of a motion to compel arbitration in an ERISA benefits case but did not address the issue head-on. However, in 2021, the U.S. Court of Appeals for the Seventh Circuit held that an arbitration and class action waiver clause in an ERISA benefit plan was unenforceable, insofar as the clause limited the remedies available to plan participants under ERISA, and the Sixth Circuit issued a similar ruling in 2022.

As of the end of 2022, three different appeals are pending in the Second, Third, and Tenth Circuits that raise similar issues:

  • Dejesus Cedeno v. Argent Trust Co., No. 21-2891 (2nd Cir.)
  • Henry v. Wilmington Tr., N.A., No. 21-2801 (3rd Cir.)
  • Harrison v. Envision Mgmt. Holding, Inc. Bd. of Dir., No. 22-1098 (10th Cir.)

Employers and administrators of plans with arbitration and class action waiver clauses should keep an eye on these cases and other developments in this area.

Changing views on procedural requirements in ERISA benefits litigation

Procedure in ERISA benefits litigation is very different from other types of litigation. For instance, in ERISA litigation, discovery ‒ and, as a consequence, the court’s review ‒ is typically limited to the administrative record, which consists of the information before the administrator when it made its determination. ERISA claims also are generally decided by the court using an administrative review-type procedure, without a jury, and plan participants typically must exhaust all mandatory appeals required by their plan before filing suit.

Key takeaways
  • Multiple circuits are addressing arbitration and class action waiver clauses in plans.
  • Views on the scope of ERISA discovery are changing.
  • The Mental Health Matters Act further signals a potential sea-change in ERISA litigation.
Download full report
Download full report