Opinion
No. C-03-02466 RMW, [Re Docket No. 22, 26, 27]
January 12, 2004
Steven O. Teal, Michael Henderson, for Plaintiff
Dennis Rolstad, for Defendant
ORDER DENYING PLAINTIFF'S MOTION FOR LEAVE TO CONDUCT DISCOVERY
Plaintiff Bernita Brown's motion for leave to conduct discovery was heard on November 21, 2003. The motion is denied.
I. BACKGROUND
Plaintiff brings a claim against defendant Hartford Life and Accident Insurance Company for its termination of her long-term disability benefits from an employer-sponsored benefits plan governed by the Employee Retirement Income Security Act, 29 U.S.C. § 1132(a)(1)(B) ("ERISA"). Plaintiff was employed by Reply Corporation, which offered a benefits plan ("the Plan") to employees including long-term disability benefits. Defendant underwrote the long-term disability ("LTD") benefits portion of the Plan. Under the terms of the plan, defendant is solely responsible for both determining benefits eligibility and for paying those benefits.
In June 1994, plaintiff became disabled due to chronic pain in her right shoulder. Her claim for LTD benefits was approved, and she received payments until May 31, 2002. A periodic investigation of her claim by defendant allegedly produced videotape of plaintiff driving a manual transmission car and lifting grocery bags. Subsequently, plaintiff asserts that despite two physician reports stating that she was disabled, defendant terminated her benefits. Plaintiff filed her claim based on that termination.
The threshold issue in this litigation is what standard of review the court should apply to defendant's rejection of plaintiffs claim, de novo or abuse of discretion. The policy grants defendant discretion to interpret terms of the policy, which typically means the court applies an abuse of discretion standard. But, if an actual conflict of interest exists, the court applies a de novo standard. Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). At this stage, plaintiff seeks leave to conduct discovery in order to determine whether an actual conflict exists.
II. ANALYSIS
In determining the standard of review to apply in cases such as this, where the plan administrator or fiduciary has discretionary authority to determine eligibility, courts apply a burden shifting analysis. See Waggener v. Unum Life Ins. Co. of Am., 238 F. Supp.2d 1179, 1182 (S.D. Cal. 2002). If the plan administrator has discretion to interpret terms of the policy, as defendant does, an abuse of discretion standard is generally applied.
If, however, the program participant presents "material, probative evidence, beyond the mere fact of [an] apparent conflict, tending to show that the fiduciary's self interest caused a breach of the administrator's fiduciary obligations to the beneficiary," a rebuttable presumption arises in favor of the participant. The plan then "bears the burden of rebutting the presumption by producing evidence to show that the conflict of interest did not affect its decision to deny or terminate benefits." If the plan fails to carry this burden of rebutting the presumption, we review de novo its decision to deny benefits.Tremain v. Bell Indus. Inc., 196 F.3d 970, 976 (9th Cir. 1999) (internal citations omitted) (emphasis added).
A defendant has an apparent conflict when it both funds the plan and makes discretionary claims decisions. Id. As defendant here performs both roles, it has an apparent conflict of interest. If an apparent conflict exists, the court next determines whether plaintiff has provided evidence beyond the apparent conflict tending to show the conflict of interest caused a breach of the administrator's fiduciary duty. McDaniel v. Chevron Corp., 203 F.3d 1099, 1108 (9th Cir. 2000). Plaintiff argues it is entitled to conduct discovery to obtain just this sort of evidence.
This identical argument was raised and rejected in Newman v. Standard Ins. Co., 997 F. Supp. 1276, 1280 (C.D. Cal. 1998). The Newman court reasoned,
Although this makes a certain amount of logical sense, there are immense practical problems associated with this position. If this position were the law, then every ERISA case involving an administrator who is also the Plan funding source would involve far-reaching, open-ended, nearly limitless discovery.
* * *
Such an outcome flies in the face of the purpose of ERISA. "A primary goal of ERISA was to provide a method for workers and beneficiaries to resolve disputes over benefits inexpensively and expeditiously."Id. 1280-81 (citations omitted).
Plaintiff attempts to distinguish Newman by pointing to Tremain, 196 F.3d at 976 and Regula v. Delta Family-Care Disability Survivorship Plan, 266 F.3d 1130 (9th Cir. 2001) rev'd on other grounds, Delta Family-Care Disability Survivorship Plan v. Regula, 123 S.Ct. 2267 (2003) (in light of Black Decker Disability Plan v. Nord, 123 S.Ct. 1965 (2003)). However, those cases did not discuss whether discovery should be permitted in order to determine the standard of review. They merely allowed consideration of available extrinsic evidence along with the administrative record to ascertain whether a conflict existed. They neither overrule nor contradict Newman,
Plaintiff similarly relies on the district court opinions in Waggener, 238 F. Supp.2d at 1185-86 and Medford v. Metro., 244 F. Supp.2d 1120, 1128-29 (D. Nev. 2003). Waggener only held that extrinsic evidence along with the administrative record could be considered to ascertain whether a conflict existed in a situation where parties agreed that the de novo review standard applied. 238 F. Supp.2d at 1185-86. Waggener did not address discovery questions. Id. Medford did allow discovery but the court finds Newman's reasoning more consistent with ERISA's interest in resolving disputes inexpensively and expeditiously. Therefore, the court follows Newman as the most persuasive authority analyzing the availability of discovery. In accordance with Newman, plaintiffs motion to conduct discovery is denied.
The court notes, however, that its decision only resolves the issue of whether plaintiff is entitled to discovery based upon her current showing. The court is not resolving what standard of review is to be applied. See, e.g., Palmer v. Univ. Med. Group. 973 F. Supp. 1179, 1190-91 (D. Ore. 1997) (discovery on whether decision was tainted by conflict not allowed but review of benefits denial necessarily "a little more searching" where insurance carrier denies benefits when it is responsible for paying claims it approves).
III. ORDER
For the foregoing reasons, the court denies plaintiffs motion for leave to conduct discovery.