“Unimportant” Case Yet Another Way SCOTUS Taking Away Your Rights
By Matt Wessler, Staff Attorney
Yesterday, the U.S. Supreme Court decided Heimeshoff v. Hartford Life Insurance Co., a case that has generated less attention than almost any other this term. That’s probably because the case combined two of the least exciting areas of the law—statutes of limitations and ERISA—all packaged in a suit involving the denial of a woman’s claim for disability benefits (the law surrounding insurance benefits doesn’t really sweeten the pot). So it might surprise you to know that, despite its completely-under-the-radar status, the case will likely have far-reaching implications—both doctrinal and practical—for employees (and their families) who are forced to sign non-negotiable contracts, either as a condition of employment or as part of their benefits package. In addition, the case adds another robust data point to the emerging (and not so surprising) legacy of the Roberts Court as perhaps the most pro-contract court in the history of modern American jurisprudence. (Full disclosure: I argued Heimeshoff, so I’m not at all an unbiased observer).
In a unanimous decision—written by Justice Thomas—the Court in Heimeshoff held that, under ERISA, benefit plans can start the clock running on an employee’s benefits lawsuit before that lawsuit could ever be filed in court. In the Court’s view, because ERISA doesn’t explicitly say anywhere that a plan may not do this, it follows that a plan may do it. Here is how the Court framed its rule:
Absent a controlling statute to the contrary, a participant and a plan may agree by contract to a particular limitations period, even one that starts to run before the cause of action accrues, as long as the period is reasonable.
A number of commentators have seen this case as not particularly important because the stakes seemed so low—not many people will run up against the statute of limitations in their ERISA claims. So the Court’s ruling here—that parties can contractually alter the time when a limitations clock starts running—won’t have much impact outside of a few employees who might lose some amount of time to file their claim.
But here’s why I think that’s wrong: The Court’s decision yesterday triggered a seismic shift in the blackletter law governing statutes of limitations. Until yesterday, it had been the settled rule—since the 1830s—that, for limitations purposes, a federal statutory cause of action does not accrue until the plaintiff can actually file her claim in court. Yesterday, however, the Court changed this rule and held that, now, a contract can alter when the limitations clock starts running.
Why is this important? Well, because a lot of statutes look like ERISA, including many employment discrimination statutes.
So now, for any statute (like ERISA) where Congress has not explicitly said that the limitations clock may not start running before a plaintiff can file her claim in court, a contract can start the clock running earlier, and potentially eliminate (or dramatically curtail) a plaintiff’s right to file a statutorily-guaranteed civil action. Before yesterday, no court had ever allowed an employer to do something like this; now, I think it’s absolutely on the table. It wouldn’t surprise me at all to see employers begin changing their contracts to start the clock running on various potential types of claims before plaintiffs can ever file them in court. And I would expect to see this decision being used across the board to justify these efforts to limit an employee’s ability to hold the company accountable for violating the law.
First, a brief primer on ERISA: ERISA is a statue that governs employment-based health, welfare, and pension benefits. It was passed in the 1970s after a series of high profile employers frittered away their employees’ retirement funds, and the statute is designed to protect and safeguard the benefits that employees and their families have been promised. About half the country—maybe 190 million Americans—receives some set of benefits from an ERISA plan. Many health insurance plans that are offered to employees by their employer are regulated by ERISA; the same is true of most disability insurance or pension plans offered by an employer. When these benefits are governed by ERISA, they must comply with certain conditions and obligations imposed by the statute, and it means that any employee or qualifying participant (like a family member) who receives benefits through one of these plans has certain rights that are guaranteed by the statute.
The Heimeshoff case involves one of ERISA’s core rights—the ability to file a federal lawsuit challenging a denial of benefits. Under ERISA, if an employee believes she is entitled to benefits but her employer (usually through what’s called a “plan administrator”) disagrees, she is allowed to ask a judge (by filing a lawsuit) to resolve the disagreement. But, because the claim can only be filed if her employer first denies her benefits claim, she must first present her request for benefits to her employer’s plan and “exhaust” whatever internal procedures her plan has established. In many cases, this internal exhaustion process can take years, and an employee may not file a lawsuit in court until it is complete.
And that’s the rub.
What happened in this case is that Julie Heimeshoff’s ERISA Plan inserted a provision into its plan documents that started the limitations clock running on her federal right to file a lawsuit at the very beginning of the internal claims process, years before she ever had the right to go to court. She challenged that provision, arguing that, under ERISA, an employer couldn’t change when the clock started to run on a federal claim, because doing so would override 200 years of case law on how statutes of limitations work (they don’t start running until the claim is ripe) and because it would undermine the structure of ERISA itself—which intentionally couples a mandatory internal claims process with a later right to challenge the outcome of that internal process in federal court.
Had the Court agreed, this case would have indeed have been unimportant, because it would have simply followed the long line of cases holding that a statute of limitations cannot commence to run before a plaintiff can file her claim in court. But the Court refused to apply that rule, and in so doing, departed from centuries of precedent.
A contract is what changed. None of the statute of limitations authority authority had ever involved an effort by one party to change the running of the limitations clock via contract. And that was the only opening the Court needed. Here is how Justice Thomas explained it:
None of those decisions, however, addresses the critical aspect of this case: the parties have agreed by contract to commence the limitations period at a particular time. For that reason, we find more appropriate guidance in precedent confronting whether to enforce the terms of a contractual limitations provision.
And, not surprisingly, cases addressing the enforceability of a contractual limitations period—which is what Justice Thomas means when he says “precedent confronting whether to enforce the terms of a contractual limitations provision—have said that the limitations period can be set by contract in the absence of any specific length specified in the statute.
This is that seismic shift in doctrine: Until now, no court had ever taken the rules governing the length of a limitations period and applied them to the question of accrual, i.e., when the clock starts running. Certainly federal law has never treated the two the same—until now. Indeed, the Supreme Court has repeatedly explained that, where Congress has not specified a limitations period for a federal cause of action, the length of that period can be stipulated to by the parties. But when that period starts to run—the “accrual date”—is determined by reference to the statute itself.
Before the Court’s decision in Heimeshoff, the rule that parties could contractually alter the length of a limitations period but not when it began to run made sense. It is fine for parties to contractually change a limitations period (where the statute itself does not specify a period) because the length of a limitations period is necessarily arbitrary and reflects a value judgment concerning the point at which the interests in favor of protecting valid claims are outweighed by the interests in prohibiting the prosecution of stale ones. In the absence of Congress’s value judgment, parties remain free to make this choice themselves. But what is not “arbitrary,” and therefore not open to alteration, is the point at which the limitations period commences. For federal statutes, Congress controls this feature of law, either by incorporating the standard rule that a limitations period commences when a claim is ripe for judicial review or by departing from it with specific language.
I will be writing more about this in the coming months, but ultimately this case is another in the (increasingly) long line of cases where the Roberts Court has allowed a contract to trump other sources of law – statutes, common law, equity, even rules of procedure – all premised on the false assumption that contracts between companies and individuals are anything other than one-sided, non-negotiable documents that are imposed on employees on a take-it-or-leave-it basis. And, in this case, I think that decision will have a significant and negative impact on the laws that Congress has already passed and on the rights of employees and their families.