Opinion ID: 3011361
Heading Depth: 2
Heading Rank: 2

Heading: What Constitutes A Conflict?

Text: Employers typically structure the relationship of ERISA plan administration, interpretation, and funding in one of three ways. First, the employer may fund a plan and pay an independent third party to interpret the plan and make plan benefits determinations. Second, the employer may _________________________________________________________________ 2. In an article entitled The Supreme Court Flunks Trusts, 1990 S. Ct. Rev. 207, Professor John H. Langbein argues that the Supreme Court's correlation of arbitrary and capricious review with discretionary decisions and de novo review with nondiscretionary decisions has no foundation in the common law of trusts. See id. at 219. He submits that in our opinion in Bruch we were following trust-law tradition in scrutinizing fiduciary conduct more closely when conflict of interest is suspected. Id. at 217. Langbein correctly predicted that companies would quickly redraft their plans to confer unambiguous grants of discretion so as to garner deferential review, see id. at 221, and also predicted that the problems of how courts should deal with conflicted fiduciaries would resurface, see id. at 222. 11 establish a plan, ensure its liquidity, and create an internal benefits committee vested with the discretion to interpret the plan's terms and administer benefits. Third, the employer may pay an independent insurance company to fund, interpret, and administer a plan. While we have previously held that the first two arrangements do not, in themselves, typically constitute the kind of conflict of interest mentioned in Firestone, see infra Section E, today we address the third arrangement for the first time, concluding that it generally presents a conflict and thus invites a heightened standard of review.3 Our sister circuits that have examined this issue have fallen into two basic camps. Most hold that the nature of the relationship between the funds, the decision, and the beneficiary invites self-dealing and therefore requires closer scrutiny, but others allow heightened review only if there is independent evidence that the conflict infected a particular benefits denial.