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Supreme court to hear several business cases

Disputes affecting risk, benefit managers slated for rulings


WASHINGTON—At first glance, the docket facing the Supreme Court when it begins its new term Oct. 5 might appear more noteworthy for what it doesn't address than for what it does.

As Robin Conrad, executive vp of the National Chamber Litigation Center Inc. in Washington, noted during a court preview last week, business cases make up slightly more than half of the high court's docket of cases it will hear this term. Unlike recent years, the list contains no cases involving federal pre-emption of state laws or environmental issues. In fact, it contains only one case involving the Employee Retirement Income Security Act.

But that case—Sally L. Conkright et al. vs. Paul J. Frommert et al.—is one of a handful of cases of interest to risk managers and benefit managers. And the term could become even more interesting if the high court decides to review a San Francisco law relating to employer health care spending.

The issue in Conkright vs. Frommert involves how much deference a court must give to an ERISA plan administrator's interpretation of the terms of the plan. A group of Xerox Corp. retirees who left and then returned before retiring brought the suit. At issue is the method of accounting for lump sum distributions received by the employees when they first left the company when determining the benefits to which they were entitled at retirement.

In a review of the case, a three-judge panel of the 2nd U.S. Circuit Court of Appeals ruled last year that a district court has no obligation to defer to a plan administrator's reasonable interpretation of the plan's terms if the administrator arrived at the conclusion outside the context of an administrative claim for benefits. It also held that a district court has “allowable discretion” to adopt any “reasonable” interpretation of the retirement plan terms under certain circumstances. The high court has not set a date for oral arguments.

A case involving class actions is slated for oral argument on Nov. 2. The suit—Shady Grove Orthopedic Associates P.A. vs. Allstate Insurance Co.—presents the justices with the question of whether state legislatures can dictate procedure in federal courts.

New York state law bars lawsuits seeking a statutory penalty from being brought as class actions. In the underlying case, the orthopedic group alleged that Allstate failed to pay statutory interest penalties on overdue payments of insurance benefits owed under no-fault automobile insurance policies. Rather than seeking the payments—which Allstate did pay Shady Grove—sought the interest penalties in a federal suit, citing diversity of the parties involved: Allstate is an Illinois corporation, Shady Grove is a Maryland corporation, and the insurance policy is governed by New York law. A district court judge and three-judge panel of the 2nd U.S. Circuit Court of Appeals held that New York law prevailed.

In an amicus brief filed with the Supreme Court, a group of insurance and business organizations argues that the state law should prevail. “Nothing in the federal Class Action Fairness Act supports petitioner's assertion that it is entitled to bring a class action claim to recover New York statutory penalties. Indeed, the legislative history of CAFA makes clear that its primary purpose was to address the problem of the overreadiness of some state courts to certify multistate and national class actions.”

Last week, the justices agreed to review an employment discrimination case brought by a group of black firefighters against the city of Chicago. The plaintiffs in Arthur L. Lewis Jr. et al vs. Chicago claim that the city's use of an employment test had an unlawful racial impact. The question before the court is whether a plaintiff can bring an action under Title VII of the Civil Rights Act of 1964 is how long the plaintiffs have to bring suit—whether they must do so within a specified period after the test was taken or whether they can wait until the test has been used to hire new employees.

The justices still are mulling whether to review Golden Gate Restaurant Assn. vs. City and County of San Francisco. The case involves a San Francisco law that requires some employers to make health care expenditures.

Opponents of the mandate that took effect in 2008 argue that it violates ERISA, but a three-judge panel of the 9th U.S. Circuit Court of Appeals last year upheld the ordinance. Earlier this year, the full appeals court refused to rehear the case, which the association appealed to the Supreme Court.