In Ariana M. v. Humana Health Plan of Tex., 2018 U.S. App. LEXIS 5227, *5, 2018 WL 1096980 (March 1, 2018) (“Ariana M. II”), a majority of judges of the U.S. Court of Appeals for the Fifth Circuit, in an en banc decision, recently overturned its quarter century old holding in Pierre v. Connecticut General Life Insurance Company, 932 F.2d 1552 (5th Cir. 1991), which held that the factual determinations of ERISA benefit plan claim administrators are entitled to deference, regardless of whether the plan includes a grant of discretionary authority. Under Pierre, the Fifth Circuit has long held that such factual determinations can only be overturned if they are found to be arbitrary and capricious. In overturning its holding in Pierre, the Fifth Circuit joined nine sister circuits in ruling that all aspects of ERISA benefit denials will be reviewed de novo unless the governing plan delegates discretionary authority to the claim administrator.

In Pierre, the Fifth Circuit held that Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) – which held that the default standard of review was de novo – governed only issues of plan interpretation. Under Pierre, factual determinations were to be afforded deference and thus, reviewed under the arbitrary and capricious standard regardless of whether the plan included a delegation of discretion. This interpretation of Firestone conflicts with every other Circuit Court that has considered this issue.

In Ariana M. v. Humana Health Plan of Tex., Inc., 854 F.3d 753 (5th Cir. 2017)(“Ariana M. I”), the Fifth Circuit initially upheld the continued vitality of Pierre deference. The plaintiff argued that a Texas statute prohibiting the use of discretionary clauses in insurance policies precluded the district court from conducting a deferential review of the claim administrator’s factual determinations and instead required those determination to be reviewed de novo. The Fifth Circuit rejected the plaintiff’s argument, unanimously holding that “Texas’s anti-discretionary clause law does not change [the Fifth Circuit’s] normal Pierre deference.” Nevertheless, the original Fifth Circuit panel that heard this case acknowledged the conflict with its sister circuits and one of the judges noted in a concurring opinion that this conflict required resolution. See post by Greg Bennici regarding Fifth Circuit’s Decision in Ariana M. I dated May 2, 2017

The Fifth Circuit decided to consider the Ariana M. I decision en banc to address this conflict and in Ariana M. II, overruled Pierre to hold that Firestone’s default de novo standard applies to both factual determinations and plan interpretations by ERISA claim administrators. The Fifth Circuit provided several grounds for its decision to overrule Pierre, including the fact that no other circuit agreed with its interpretation of Firestone. It also rejected as misplaced Pierre’s reliance on trust law and its analogies to the deference afforded to agency decisions and the factual findings of district courts to support its interpretation of Firestone. The Fifth Circuit also rejected as unsupported the prediction in Pierre that a default de novo standard would result in a vast increase in ERISA trials that would burden the courts and reduce funds available to pay legitimate claims. Lastly, the Fifth Circuit held that its decision to overrule Pierre and join its sister circuits was influenced by ERISA’s strong interest of uniformity.

Six of the fourteen Fifth Circuit Judges joined in two dissenting opinions concerning the appropriate standard of review. Circuit Judge E. Grady Jolly authored one dissent joined by the five other dissenting judges and stated that the “misguided majority” opinion “ignores the practicality of administrative and trust law, misreads Firestone and is swept up by outdated cases of other circuits.” Circuit Judge Pricilla Owen authored a separate dissent in which she stated that because trust law, which requires a trustee’s factual determination to be given deference, governs the appropriate standard of review, benefits denials of ERISA claim administrators should be given deference.

Lastly, although the Fifth Circuit changed the applicable test to determine the appropriate standard of judicial review for ERISA benefit denials, it declined to overrule its decision in Vega v. Nat’l Life Ins. Servs., 188 F.3d 287, 290 (5th Cir. 1999), which held that a court’s review of an ERISA plan claim administrator’s benefit determination, even under the de novo standard, is limited to the documents in the administrative record (with few exceptions). In fact, the Fifth Circuit stated that limiting discovery and the scope of the courts review in this manner mitigates concerns about the time and expense of litigation under a de novo standard.