A commonly used defense in ERISA cases is the doctrine of exhaustion. It can result in immediate dismissal. The doctrine holds that a claimant must first exhaust the remedies available under the plan before asking a court to intervene. It is so successful that it could be called the king of ERISA defenses.

Remember the Hans Christian Andersen story about the emperor who was sold a beautiful new suit of clothes which could not be viewed by people who were stupid or incompetent? No one, including the emperor, would admit that they saw nothing. The emperor paraded through town in his new outfit. It was a young boy who pointed out that the emperor was wearing no clothes.

The doctrine of exhaustion parallels this story quite well, as noted by Judge Thapar in Wallace v. Oakwood Healthcare, Inc., No. 18-2316, at *25-26 (6th Cir. Mar. 31, 2020):

It is troubling to have no better reason for a rule of law than that the courts made it up for policy reasons. Yet that seems to be the case with ERISA's exhaustion requirement. Federal courts should reconsider when—or even whether—it's legitimate to apply this judge-made doctrine.

ERISA gives an employee a federal cause of action “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). As the text makes triply plain, this kind of claim “stands or falls by ‘the terms of the plan.'” Kennedy v. Plan Adm'r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 300 (2009). The statute is the procedural scaffolding, the plan documents the source of substantive rights.

Where does exhaustion enter this picture? The statute itself is “silent” about it. Coomer v. Bethesda Hosp., Inc., 370 F.3d 499, 504 (6th Cir. 2004).
ERISA requires plans to offer fair and reasonable internal-review procedures for claims they deny. 29 U.S.C. § 1133(2). But the statute nowhere says claimants must take advantage of those procedures as a precondition to enforcing their rights in court.

It should bother us that such a ubiquitous doctrine, one that has thwarted many an employee's efforts to enforce his benefit rights, rests on such shaky foundations. Where both the statute and the plan documents are silent about any duty to exhaust, we should think twice about whether requiring exhaustion is legitimate.

Though he didn't reference Andersen's story, Judge Thapar did unabashedly speak the truth. One of the fundamental premises of our justice system is that people be given clear notice of their rights and obligations.

A claimant should be able to know where she stands with a benefit claim, and understand what she must do to enforce her rights. Certainly, it is the courts' role to interpret that statute, but they should not add requirements which are not there. It takes an experienced ERISA attorney to challenge such matters and persuade the courts to take the steps necessary to reverse a fiction.