Over the years we have represented numerous third party administrators (“TPAs”) in litigation matters. Because the process of administering employee benefit plans involves applying numerous technical complex laws and regulations, it is no surprise that litigation against TPAs can arise out of any number of actual or perceived errors in plan administration. One of the challenges in defending TPAs is that the claims often come down to a battle of expert witnesses. An expert witness on behalf of the plaintiff typically claims that the TPA somehow failed to properly perform the services for which it was hired, resulting in some damage to the plan or the plan sponsor, while an expert witness for the TPA argues that the TPA did everything within the standard of care, and/or that there was no damage as a result of the TPA’s conduct.

From the TPA’s standpoint, there are at least two problems associated with engaging in the “war of the experts.” The first is that litigation that turns on opinions by competing experts is not likely subject to early resolution. The second problem—which flows from the first—is that by the time the litigation advances to the stage where the experts are fully prepared to present their opinions, the cost of the litigation may approach or even exceed the amount of the plaintiff’s claimed damages.

Consequently, attorneys for TPAs need to be on the lookout for ways to resolve cases that do not depend upon waging the war of the experts. One recent case we handled provides a good example. In this case, our client purchased the assets of a third party administration firm. Well in advance of the purchase, the “seller” provided services for a client with a defined benefit pension plan. The relationship between the seller and its client broke down. Sometime later, the client sued the original TPA firm (the “seller”), several individuals who had been employed by the seller and our client, claiming that several errors had occurred in connection with the termination of the defined benefit plan, which caused the plan sponsor to have to pay significant additional amounts that it claimed could have been avoided. Our client, however, never provided any services for this client. However, the seller had gone out of business and been dissolved before the lawsuit was filed.

Before we became involved in the case, our client had been paying the costs associated not only with its own defense, but of the defense of one of the selling firm’s employees. When we took over our client’s representation from another firm, we did so only on behalf of the buyer firm and not the prior company’s employee. We reviewed the situation and determined that the claims against our client were shaky at best because they depended on notions of “successor liability.” We focused our efforts immediately on this issue. When we brought the issue to the attention of the plaintiff’s attorney, we persuaded him how difficult it would be to obtain a judgment against our client, even if our client’s predecessor might have been liable for his client’s claims. We ultimately settled the matter for a fraction of what it would have cost to litigate the case through trial—with its attendant “war of the experts.”

Successful litigation of technical employee benefit plan issues requires not only a solid grasp of how employee benefit plans work, but an equally strong understanding of how the litigation process works. Many attorneys understand litigation. In those cases where our clients also need an attorney who understands how employee benefit plans work, we are there to help.
Source: ERISA Controversy Report