Two years ago, the U.S. Supreme Court let Wal-Mart block its female workers’ sex discrimination claims in Wal-Mart v. Dukes by changing the rules governing class actions. Next Tuesday, Wal-Mart will ask the Court to block its workers’ long-term disability claims in Heimeshoff v. Hartford Life & Accident Insurance Co. and Wal-Mart Stores, Inc., by changing the rules governing statutes of limitations, too. The company is arguing, believe it or not, that the statute of limitations to sue it for wrongfully denying long-term disability benefits starts running shortly after the claims for benefits are submitted, long before it rules on them (much less denies them), and long before the injured workers could ever file a case in court.
As Public Justice’s Matt Wessler will tell the Court and our briefs explain in detail, we think Wal-Mart is wrong. So does the U.S. Government, which has filed an amicus brief agreeing with us --and disagreeing with Wal-Mart -- on every issue in the case.
Every first-year law student learns that statutes of limitations, which set a time limit on how long a person has to sue, don’t start running -- can’t start running, as a matter of common sense -- until a person suffers a wrong and could actually file a case in court. If someone tries to sue before that, his or her case will be thrown out. As the Supreme Court has long said, “All statutes of limitation begin to run when the right of action is complete...” Clark v. Iowa City, 20 Wall. 583, 589 (1875). Indeed, the Court has “repeatedly recogn
ized that Congress legislates against the standard rule that the limitations period commences when the plaintiff has a complete and present cause of action.” Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545 U.S. 409, 418 (2005).
Under the Employee Retirement Income Security Act, or ERISA, the federal law that governs Wal-Mart’s long-term group disability insurance plan (administered by Hartford), injured workers seeking benefits have to file a claim for them, submit “proof of loss” (evidence they are entitled to the benefits that is supposed to be filed within 60 days
of the claim), and go through an internal claims resolution process, including an internal appeal. Until they do that and lose the appeal, their claim is not officially denied -- and they cannot file a suit in court. That makes sense because the lawsuit ERISA authorizes is for wrongful denial of benefits.
Julie Heimeshoff worked for Wal-Mart for almost 20 years, rising to the position of Senior Public Relations manager. When Ms. Heimeshoff began suffering from significant pain and fatigue, she had trouble working. She was later diagnosed with fibromyalgia, irritable bowel syndrome, lupus, and several other chronic pain sources. In June 2005, her pain became so severe that she had to stop working altogether. She sought benefits and, after a long internal process, her claim was denied. The statute of limitations was three years and, less than three years later, she filed suit.
But Wal-Mart insists -- and the U.S. Court of Appeals for the Second Circuit held -- that her lawsuit is barred by the statute of limitations. Why? Because Wal-Mart's ERISA plan says the statute of limitations is three years long and starts to run when injured workers’ “proof of loss” is due. That is crazy. Injured workers cannot sue then. They have not been denied benefits yet. The internal claims process could easily take more than three years -- and enforcing Wal-Mart’s provision would give it an incentive to make the process as long as possible. If the statute of limitations starts running when the workers’ “proof of loss” is due, then workers whose internal claims process lasted more than three years would never have a time they could sue. Neither would workers whose claims were originally granted, so they had no basis to sue in the first place, but whose benefits were denied three years later. (Remember, these are long-term disability benefits paid out over time. People get better and worse. If Wal-Mart simply granted workers benefits originally, waited until three years after their “proof of loss” was originally due and filed, and then denied them any benefits from that point on, the statute of limitations would have run before the denial ever took place. Kafka would be proud.) The statute of limitations could be used to block disabled workers from ever seeking justice in court.
Wal-Mart says that isn’t happening in this case, so its ERISA plan should be enforced as written. Moreover, Wal-Mart says, if it did happen, courts would not (and should not) allow that result, because courts should not enforce ERISA statutes of limitations provisions they find “unreasonable” as applied to the facts of a specific case. But the whole idea of starting statutes of limitations running before a person can sue is “unreasonable” in every case -- as well as nonsensical and contrary to long-standing, basic principles of law.
Wal-Mart’s “reasonableness’ exception, moreover, makes one thing clear: Wal-Mart is not trying to enforce the statute of limitations provision in its ERISA plan as written. It wants workers and their lawyers to read the provision as written (the statute starts running when “proof of loss” is due) and accept it—and courts to do the same. But, to justify it, Wal-Mart is willing to concede it contains an unwritten (extra double secret) exception: if workers and their lawyers ignore what it says and sue anyway, and federal courts find it unreasonable under the facts of the case, then it will not be enforced. This for a statute, ERISA, that is supposed to provide clarity and predictability to all involved.
We say that Wal-Mart’s “start the clock running before the race can be run” provision violates ERISA and that the statute of limitations to sue for a wrongful denial of benefits cannot start running until the benefits are denied and the worker can actually file a case in court. Wal-Mart says the statute of limitations starts running shortly after the claim is submitted and long before the worker could ever file a case in court, even if that means the worker could never file a case in court, unless (to fit into Wal-Mart's exception) the worker sues anyway and a federal court later finds the application of Wal-Mart’s statute of limitations provision “unreasonable” under the circumstances of that specific case.
Which approach makes more sense? Which provides clearer guidance to companies, workers, insurers, and judges? Which could Congress have possibly intended when it enacted ERISA, which requires workers to complete an internal claims process, bars them from suing unless and until their claim is wrongfully denied, and explicitly guarantees them “ready access to the federal courts.”
We think the answer is obvious. We will get a better idea what the Supreme Court thinks next Tuesday.
* This piece is cross-posted on the Public Justice blog.