What Does de novo Review Mean Under ERISA? An en banc Fifth Circuit will answer that question for the 30+ million people laboring under its unique interpretation.

In Ariana M. v. Humana Health Plan of Texas, Inc., a three-judge panel of the Fifth Circuit recognized that questions concerning the standard of review for ERISA cases are “not headline-grabbing.”ⁱ However, after the three-judge panel unanimously upheld Defendant Humana’s denial of residential treatment for an eating disorder under Plaintiff Ariana M.’s health insurance plan, all three members of the panel joined in a concurrence. The topic: the “striking” fact that the Fifth Circuit stood alone in deferring to an ERISA administrator’s factual determinations when the plan does not contain a valid grant of discretionary authority.ⁱⁱ In other words, when the de novo standard of review applied.

Since the U.S. Supreme Court decided Firestone Tire & Rubber Co. v. Bruch, most of the law regarding the meaning and application of the standard of review for ERISA cases focused on the historically more common standard – abuse of discretion.ⁱⁱⁱ This is likely because every circuit, other than the Fifth Circuit, interpreted de novo review in the same way: de novo review means giving no deference to the underlying decision – factual, legal, or otherwise.^iv

However, in Pierre v. Conn. Gen. Life Ins. Co. of N. Am., decided shortly after Firestone, the Fifth Circuit held the de novo standard applied only to issues of plan interpretation.^v Importantly, the Fifth Circuit gave deference to factual determinations regarding benefit eligibility. This created a circuit split which only grew more one-sided as time went on.^vi

As the concurrence in Ariana M. explained, “[a]s any sports fan dismayed that instant replay did not overturn a blown call learns, it is difficult to overcome a deferential standard of review.”^vii Clearly, the benefits protected by ERISA are far more important than a sporting event, making it troubling that the outcome of a de novo case in the Fifth Circuit might be determined by its unique standard of review, rather than the accuracy of the factual determination. Historically, most ERISA cases involved plans with discretionary clauses, rendering this concern about non-uniformity of less import. Texas, however, recently enacted an anti-discretion statute, effectively implementing a de novo review over cases that in other states might be subject to abuse of discretion review. Thus, going forward, the Pierre decision effects more people.

Further, the concurrence noted the reasoning supporting Pierre had eroded. A subsequent Supreme Court case, Metro. Life Ins. Co. v. Glenn, treated de novo review as the general standard without limiting it to denials based on plan term interpretations.^vii Further, one of the primary points made by Pierre was that trust law draws a distinction between judicial review of a trustee’s legal and factual decisions – a contention that has not withstood scrutiny.^ix Finally, Pierre had voiced public policy concerns about the courts’ ability to conduct de novo review of factual determinations based on a cold record. The concurrence observed that the other circuits experienced no administrative difficulties. The concurrence even noted that, should a case present complicated medical evidence, the courts can appoint independent experts to assist in the evaluation.^x

Based on these concerns, and that the Pierre decision continues to undermine the uniform treatment of ERISA plans that the statute seeks to achieve, the concurrence declared, “[t]he lopsided split that now exists cries out for resolution.”^xi

Plaintiff petitioned for en banc rehearing. She was joined by a number of amicus curiae. The AARP filed an amicus brief arguing, “[t]he importance of the proper standard of review for ERISA benefit denials cannot be overstated, inasmuch as this standard is often outcome determinative. Plan administrators are able to insulate their decisions to deny benefits from exacting judicial scrutiny by the use of discretionary clauses. Discretionary clauses require claimants not only to prove that the insurer was wrong, but also that the decision was beyond reason.”^xii

The Texas Department of Insurance filed an amicus brief, stating, “Texas has expressly enacted regulatory and statutory measures regulating insurance to protect consumers and ensure that they receive de novo review, by a neutral adjudicator, of all aspects of an ERISA benefit claim denial.”^xiii

The Alliance for Eating Disorders Awareness’ amicus brief argued: “The Alliance has a substantial interest in the standard of review for benefit denials because it directly affects eating disorder patients’ access to necessary and often life-saving treatment. A denial of health insurance coverage for eating disorder treatment could literally mean the difference between the life and death of severely mentally ill patients. Insulating an insurance company’s factual determinations regarding health benefit claims from true judicial scrutiny undermines the goal of ERISA to protect participants’ and beneficiaries’ employee benefit coverage. It insulates insurance companies from accountability for their benefit determinations and thus, places the health and treatment of beneficiaries at risk.”^xiv

The Office of Public Insurance Counsel, an agency of the State of Texas, also submitted an amicus brief in support of Plaintiff, arguing “Pierre’s continued application runs counter to the intent of ERISA and the State of Texas to establish uniform treatment for consumers and it negatively affects Texas’s statutory and regulatory efforts to protect all Texas consumers’ rights to a full de novo review by a neutral and independent adjudicator. This case should be used as an opportunity for en banc review to overturn Pierre.”^xv

Defendant Humana opposed the en banc petition. However, a majority of the members of the Fifth Circuit heard the cries of the concurrence and the petitioners and agreed to rehear the case en banc.

Issues presented to the Court en banc

In granting the petition for rehearing en banc, the Fifth Circuit did not provide guidance regarding what issue(s) it wished to reconsider. It granted Plaintiff and Defendant one brief each, with Plaintiff filing her brief prior to Defendant. The Department of Labor, which regulates and enforces ERISA, was subsequently allowed to file an amicus brief.

However, Rule 35 of the Federal Rules of Appellate Procedure states that an en banc hearing is not favored and ordinarily will not be ordered unless it involves a question of exceptional importance. I n 1998, when this language was added to the Rule, the Committee Notes stated that “a strong candidate for a rehearing en banc is one in which the circuit persists in a conflict created by a pre-existing decision of the same circuit and no other circuits have joined on that side of the conflict.”^xvi

Plaintiff used her brief to present two issues to the Court:

The Department of Labor filed the next brief, offering a single question: whether the Court should overturn Pierre and hold that factual findings made by a plan administrator that has not been granted discretion in deciding benefit claims should be reviewed de novo.

Defendant Humana shared in the notion that the continued validity of Pierre was at issue, but it also added a second issue, “[r]egardless of the applicable standard of review, did the services at issue fail to meet ‘medical necessity’ under Appellant’s health plan?” Essentially, Defendant asked the en banc Fifth Circuit to rule on the merits of the underlying claim.

Issues that dominated the en banc oral argument provide a hint at the possible outcome.

In a bit of a curiosity, it was not until Plaintiff’s time was running out that the Fifth Circuit asked whether Pierre should be affirmed or overturned. All the prior questions had assumed Plaintiff would win on getting Pierre overturned and focused on what happens then. Similarly, the Fifth Circuit did not ask the Department of Labor why it believed Pierre was incorrectly decided or ask Defendant why it believed Pierre was correct and all the other circuits were wrong. At least five hypothetical questions were posed to Defendant that assumed the Pierre deference given to factual findings was no longer the standard.

At least three questions focused on whether empirical research, data, or studies had been conducted to show the impact the Fifth Circuit’s de novo procedure had on case outcomes and costs versus the other districts’ procedures. No party had this information, which seemed to puzzle the Court. This line of questioning supported other questioning that implied the sky was not falling and justice was being done under the current system – countering the anecdotes and blustering offered by Plaintiff and the amicus.

The Court devoted much of its questioning to the nuts and bolts of evidentiary issues the district court might face if Pierre was overturned – both for the case at hand and for cases generally. Some vocal members of the Court seemed adamant that admitting evidence outside of the claim file (aka administrative record) was counter to ERISA and case law. Perhaps in response to these questions, another judge inquired whether the statute itself addressed what evidence can be considered (it does not).

Perhaps the issue that garnered the most attention, and certainly the most surprising topic given this was an en banc hearing, was whether Plaintiff prevailed under a de novo standard under the facts of this case. Even under a full de novo standard, many judges’ questions indicated a willingness to consider issues of fact – making the en banc Court the finder of fact and rendering a remand to the district court unnecessary. While this seems unlikely given the role of en banc review, the amount of time spent on the issue presents it as a possibility here.

Conclusion
Two of the three judges who joined in the Pierre decision continue to sit on the Fifth Circuit. One can presume they will vote to uphold that decision. The three judges who joined in the Ariana M. concurrence, which laid out the problems with Pierre, will presumably vote to overturn the decision en banc. We shall see what the remaining 12 judges will do. Based on the questioning, it appears likely that Pierre will fall, the Fifth Circuit will provide guidance to the district courts about admitting evidence outside the claim file, and remand the matter back to the district court to apply the new de novo review process.

ⁱAriana M. v. Humana Health Plan of Texas, Inc., 854 F.3d 753, 765 (5th Cir. 2017).
ⁱⁱId. at 763.
ⁱⁱⁱFirestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989) (if plan documents do not grant discretion to the administrator, the de novo standard applies; if plan documents do grant discretion, the abuse of discretion standard applies).
^ivKinstler v. First Reliance Standard Life Ins. Co., 181 F.3d 243, 250–51 (2d Cir. 1999); Luby v. Teamsters Health, Welfare & Pension Trust Funds, 944 F.2d 1176, 1183–84 (3d Cir. 1991); Reinking v. Phila. Am. Life Ins. Co., 910 F.2d 1210, 1213–14 (4th Cir. 1990) (overruled on other grounds by Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1030 (4th Cir. 1993)); Rowan
^vUnum Life Ins. Co. of Am., 119 F.3d 433, 435–36 (6th Cir. 1997); Ramsey v. Hercules, Inc., 77 F.3d 199, 203–05 (7th Cir. 1996); Walker v. Am. Home Shield Long Term Disability Plan, 180 F.3d 1065, 1070 (9th Cir. 1999); Shaw v. Conn. Gen. Life Ins. Co., 353 F.3d 1276, 1285 (11th Cir. 2003) (all applying de novo review when the plan does not grant discretion).
^v Pierre v. Conn. Gen. Life Ins. Co. of N. Am., 932 F.2d 1552, 1662 (5th Cir. 1991).
^vi At the time the Fifth Circuit decided Pierre, only the Fourth Circuit had addressed this issue, determining de novo review applied to factual determinations. See Reinking, 910 F.2d at 1213-14.
^viiAriana M., 854 F.3d at 762.
^viiiMetro. Life Ins. Co. v. Glenn, 554 U.S. 105, 110-111 (2008).
^ixRamsey, 77 F.3d at 203.
^xThe concurrence sited generally to Walker v. Am. Home Shield Long Term Disability Plan, 180 F.3d 1065, 1070-71 (9th Cir. 1999) for this proposition.
^xiAriana M., 854 F.3d at 765.
^xiiAriana M., Case No. 16-20174, Document No. 00513981743 (filed May 5, 2017).
^xiiiId. at Document No. 00513988050 (filed May 10, 2017).
^xivId. at Document No. 00513991885 (filed May 12, 2017).
^xvId. at Document No. 00514005693 (filed May 24, 2017).
^xviF.R.A.P. Rule 35, Committee Notes on Rules – 1998 Amendment.