Executive Summary: The Fourth Circuit expands the scope of admissible evidence in an ERISA employee benefits case.

The very first principle applied in a lawsuit for benefits from an ERISA-governed employee benefit plan is as follows: When the plan bestows the administrator with discretionary authority to determine whether the claimant is entitled to benefits under the plan, the Court reviews the administrator’s decision for abuse of discretion. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). From there, the second main principle follows: When the Court reviews the administrator’s decision for abuse of discretion, the scope of admissible evidence is limited to the Administrative Record, i.e., all the documents and information “known to the administrator at that time of its decision.” Sheppard & Enoch Pratt Hosp. v. Travelers Ins. Co., 32 F. 3d 120, 125 (4th Cir. 1994).

In the Fourth Circuit’s brand new decision, Helton v. AT& T, Inc. Pension Benefit Plan, 2013 U.S. App. LEXIS 4575 (4th Cir. March 6, 2012), the Court examined under the microscope what an administrator may have “known at the time,” and interpreted that phrase to include anything that the administrator would have, could have, or should have known when it reviewed the claimant’s benefit claim. Otherwise, the plan administrator “could simply omit any evidence from the administrative record that would suggest their decisions were unreasonable.”

This particular comment by the Court was not earth-shattering; of course, an administrator has a duty to review what is before it. However, the Court went further. Relying upon Booth v. Wal-Mart Stores Inc. Assoc. Health and Welfare Plan, 201 F. 3d 335 (4th Circ. 2000) and its long-standing factor test for evaluating whether an administrator abused its discretion, the Court held that “a district court may consider evidence outside of the administrative record … when such evidence is necessary to adequately assess the Booth factors and the evidence was known to the plan administrator when it rendered its benefits determination.”

The Helton Court went on to interpret what is “known” when the administrator is a corporation (the most common situation): Basically, any records the corporation has are imputed upon the corporation’s knowledge. Thus, the Helton Court explained, the Court should be able to review the plan administrator’s prior coverage determinations to assess whether its decision in the subject case was consistent with earlier interpretations of the plan (the fourth Booth factor). While this appears facially logical, the Helton Court suggested a dramatically increased discovery burden, requiring the administrator to make exhaustive searches into past decisions – something for which the administrator would not necessarily have had any reason to search in reviewing the claimant’s benefit claim, as every claimant’s case is based upon its own unique facts. The Court also discussed the eighth factor, conflict of interest, which was recently addressed by the Supreme Court in MetLife v. Glenn, 554 U.S. 105 (2008), and declared: “One can envision many circumstances in which a Court would need to look to extrinsic evidence to evaluate … the impact of a plan fiduciary’s conflict of interest.”

Arguably, the Helton Court’s application of its holding to the fourth and eighth Booth factors was dicta, as it was not necessary for reaching its decision, which involved the fiduciary’s alleged failure to examine its own records to determine whether it gave proper notice of a plan change to the Plaintiff. Nevertheless, Plaintiffs’ counsel in the Fourth Circuit now have increased leverage in arguing for expanded discovery and the admissibility of extrinsic evidence in ERISA benefit cases.

Contact Information

If you have any questions please contact Katherine Lange, the principal drafter of this client alert, Debbie Harden, John Despriet or you may contact the Womble Carlyle attorney with whom you usually work.