Estate of Barton v. ADT Security Services Pension Plan: “Off the Rails” - Plan Administrator’s Burden
When an ERISA plan provides the plan administrator with discretion to interpret the terms of the plan, the administrator’s claims and appeals decisions are generally reviewed by courts under a lenient standard of review such as “abuse of discretion.” In such cases, courts generally will not upset the plan administrator’s decision absent a clear error.
Recently, the United States Court of Appeals for the Ninth Circuit decided the case of Estate of Barton v. ADT Security Services Pension Plan, No. 13-56379 (April 21, 2016), that threatens to throw a wrench in the standard of review analysis. Barton presented what appears to be a factually difficult situation. The plaintiff had not worked for the company in decades. The plan administrator had no record of the plaintiff being entitled to pension benefits, but the plaintiff presented records that showed prior employment with company-related entities. According to the plan administrator, however, the plaintiff’s records failed to establish that those entities participated in the pension plan, or that he had earned enough years of continuous service to be entitled to a benefit. Consequently, the plan administrator denied his claim. The district court applied an abuse of discretion standard and found in favor of the plan.
The 9th Circuit reversed and remanded. The majority opinion held that “where a claimant has made a prima facie case that he is entitled to a pension benefit but lacks access to the key information about corporate structure or hours worked needed to substantiate his claim and the defendant controls such information, the burden shifts to the defendant to produce this information.” The majority noted that its decision would “not require defendants to produce records listing entities not covered by their pension plan,” but rather only information about which companies did participate. The majority expressed its concern that holding otherwise would create a “Kafkaesque regime where corporate restructuring can license a plan administrator to throw up his hands and say ‘not my problem.’”
The dissent, however, argued that the majority’s decision went “off the rails” and created a “one-off burden-shifting rule” that contravened existing Supreme Court precedent holding that courts should not make “ad-hoc exceptions” to the abuse of discretion standard. According to the dissent, the administrative record showed that the plan administrator’s decision was not clearly erroneous.
It is unclear at this point how Barton will affect other cases in the 9th Circuit. It is possible that courts will read the majority’s holding narrowly, and only apply the new burden-shifting rule in circumstances very similar to the facts in Barton. It is also possible, however, that Barton may be used as a tool to get around the abuse of discretion standard in many cases where there is a lack of clear historical information and the facts appear unfair to the plaintiff. Plan administrators in the 9th Circuit should keep a close eye on how this progresses.