Proposed Legislation Could Postpone Discovery in ERISA Litigation

A proposed bill, H.R. 6084, the “ERISA Litigation Reform Act,” is largely aimed at raising pleading standards in suits alleging prohibited transactions under ERISA Section 406.

But one portion of the bill could have significant impacts on ERISA litigation even outside the realm of prohibited transactions. The proposed legislation would impose a stay on discovery once a defendant files a motion to dismiss under Rule 12 in any action against a plan or its fiduciaries under Section 502. The stay would be automatic unless the court finds that particularized discovery is necessary to preserve evidence or prevent undue prejudice. The bill would also impose document preservation obligations during the pendency of the stay.

This new legislation, which was introduced by U.S. Rep. Randy Fine (R-Fla.), would have meaningful impacts on the practicalities and logistics of litigation, as ERISA defendants are often required to engage in costly discovery while motions to dismiss are pending, even where they are confident in their likelihood of having claims dismissed under Rule 12.

Though the proposed bill was discussed at length during a hearing held by the Subcommittee on Health, Employment, Labor, and Pensions last month, its future is uncertain as it remains in committee after the hearing.

Should you have any questions regarding discovery obligations or anticipated or ongoing ERISA actions, Phelps’ health care attorneys can answer questions and help you navigate the uncertainties of litigation.

Please contact Errol King, Brittany Holt Alexander or any member of Phelps’ health care team if you have questions or need advice and guidance.