Opinion
No. CIV 02-193 WPJ/LFG ACE
June 11, 2002
ORDER DENYING PLAINTIFF'S REQUEST FOR LIMITED DISCOVERY ON ERISA CLAIM AND STAYING DISCOVERY ON STATE LAW CLAIMS
On May 6, 2002, the Court held an Initial Scheduling Conference, during which Plaintiff Montie Avery ("Avery") requested limited discovery on Count I (alleged denial of disability benefits under ERISA) of his Complaint for Damages. Defendants UNUM Provident Corporation and UNUM Life Insurance Company of America ("UNUM") opposed the request. The Court permitted simultaneous briefing by the parties on the scope of discovery permitted with respect to Avery's ERISA claim. After carefully considering the pertinent law and both parties' written submissions, the Court concludes for the reasons set out below that Avery's request for discovery on the ERISA claim will be denied. In addition, the Court stays discovery on Avery's state law claims, pending resolution of UNUM's motion to dismiss those claims, consistent with cost savings provisions of the Civil Justice Reform Act, 28 U.S.C. § 271, et seq.
Avery's Complaint also includes three state law claims brought under New Mexico common law, New Mexico's Unfair Insurance Practices Act and New Mexico's Unfair Practices Act. [Complaint.] UNUM has filed a motion to dismiss the state law claims, and that motion is pending before the district judge. This Court's discovery ruling is not intended to predict or supplant any decision the district judge reaches on the motion for partial dismissal. Should the state law claims survive UNUM's motion, discovery will be permitted on those claims in accordance with the Federal Rules of Civil Procedure.
Background
Avery's Complaint includes the following allegations: Avery was employed by Physicians Protective Trust Fund from August 1995 to January 1997 [doc. 1, Complaint at ¶ 6]; his employer provided disability insurance under the Physicians Protective Trust Fund [Id. at ¶ 8]; Defendants administered the plan [id. at ¶ 9]; after being diagnosed with stress induced coronary vasospasm, Avery was unable to perform his job requirements and was terminated on January 8, 1997 [id. at ¶¶ 13, 14]; on January 20, 1997, he applied for disability insurance and received it [id. at ¶¶ 15, 17, 18]; in July 1997, Avery accepted a less stressful independent contractor position as a claims adjuster but continued to receive disability benefits in accordance with the plan [id. at ¶¶ 22, 25, 27]; and, in September 2000, Avery's disability benefits were terminated [id. at ¶ 31.] Avery's ERISA claim alleges that UNUM's denial of disability benefits is a breach of contractual and fiduciary obligations to him under 29 U.S.C. § 1132(a)(1)(B). [Complaint, Count 1.]
Pertinent Legal Standard
The discovery to which a party is entitled in an ERISA action typically depends on the standard of review to be applied by the Court in reviewing the denial of benefits. In Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948 (1989), the Supreme Court addressed the appropriate standard of review regarding benefit determinations made by plan administrators under ERISA. "[A] denial of benefits challenged under 29 U.S.C. § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan," in which case the administrator's denial will be upheld unless the decision is found to be "arbitrary and capricious." Id., 489 U.S. at 115, 109 S.Ct. at 956-57. This rule derives from trust principles, which "make a deferential standard of review appropriate when a trustee exercises discretionary powers." Id. at 111, 109 S.Ct. at 954. In order to defeat the de novo presumption, the defendants bear the burden of identifying language in the plan that confers discretionary authority on the plan administrator, thereby warranting an arbitrary and capricious review. Davis v. Sandia Corporation, et al., No. CIV 98-472 JC/JHG, slip op., Doc.18, (D.N.M. Feb. 8, 1999) (citing Firestone Tire, 489 U.S. at 115); Balderrama v. Life Insurance Company of North America, No. CIV 99-1167 LCS, slip op., Doc. 25 (D.N.M. June 5, 2000) (relying on Herzberger v. Standard Ins. Co., 205 F.3d 327, 332 (7th Cir. 2000)).
If a plan supplies the administrator with the discretion to determine eligibility for benefits, the court reviews a challenge to the denial of benefits under the arbitrary and capricious standard. In applying an arbitrary and capricious standard of review, the court generally only considers the arguments and evidence before the administrator at the time the denial decision was made. Pitman v. Blue Cross and Blue Shield of Oklahoma, 217 F.3d 1291, 1295 (10th Cir. 2000); Sandoval v. Aetna Life Cas. Ins. Co., 967 F.2d 377, 380 (10th Cir. 1992); see also Chambers v. Family Health Plan Corp., 100 F.3d 818, 823-24 (10th Cir. 1996) ("Most circuits have held that in reviewing decisions of plan administrators under the arbitrary and capricious standard, the reviewing court may consider only the evidence that the administrators themselves considered.") In other words, under the arbitrary and capricious standard of review, discovery is limited to the administrative record (i.e., plan and claims file) that was before the plan administrator.
In contrast, where the plan documents do not confer discretionary authority on the administrator to make the benefit determination, a "de novo" review applies. "[D]e novo"ordinarily means that the court's review is not limited by the record, nor is any deference given the conclusion under review; rather, the court is to pursue the inquiry necessary to exercise its independent judgment" Reynolds v. UNUM Life Insurance Company of America, 1998 WL 654475 at *3, No. Civ. A. 97-D-2325 (D.Colo. June 15, 1998). However, it is unclear what the scope of review is under the "de novo" standard of review. Circuit Courts have reached differing conclusions on this issue, with some holding that a de novo standard of review does not permit the consideration of evidence not presented to the administrator, while others have held that a court conducting a de novo review must examine all facts available, not just those considered by the plan administrator at the time of the benefits denial. Some Circuit Courts require a good cause showing before allowing examination of evidence not before the administrator. Zack v. Hartford Life and Accident Insurance Co., 2002 WL 538851 at *8 (D.Kan. Mar. 20, 2002) (relying on James F. Jordan et al., Handbook on ERISA Litigation § 4.04[C], at 4-38 (2d ed. Supp. 2002)).
The Tenth Circuit has not directly defined the proper scope of de novo review in relation to an ERISA claim. In Sandoval v. Aetna Life and Casualty Inc. Co., the Circuit Court provided some guidance by discussing the goals of ERISA legislation.
A primary goal of ERISA was to provide a method for workers and beneficiaries to resolve disputes over benefits inexpensively and expeditiously. Permitting or requiring district courts to consider evidence from both parties that was not presented to the plan administrator would serious impair the achievement of the goal. If district courts heard evidence not presented to plan administrators, employees and the beneficiaries would receive less protection than Congress intended. Sandoval, 967 F.2d 377, 380 (10th Cir. 1992) (quoting Perry v. Simplicity Engineering, 900 F.2d 963, 967 (6th Cir. 1990)). The Fourth Circuit has provided similar guidance on this same question.
[W]e . . . believe that the purposes of ERISA . . . warrant significant restraints on the district court's ability to allow evidence beyond what was presented to the administrator. In our view, the most desirable approach to the proper scope of de novo review under ERISA is one which balances the multiple purposes of ERISA. Consequently, we adopt a scope of review that permits the district court in its discretion to allow evidence that was not before the plan administrator. The district court should exercise its discretion, however, only when circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision. In most cases, where additional evidence is not necessary for adequate review of the benefits decision, the district court should only look at the evidence that was before the plan administrator . . . at the time of the determination. Quesinberry v. Life Ins. Co. of North America, 987 F.2d 1017, 1025 (4th Cir. 1993) (en banc).
In Balderrama, the Honorable Leslie C. Smith concluded that the Tenth Circuit would limit the record to that which was before the plan administrator even under the broader de novo standard of review. CIV 99-1167 at *3. Judge Smith noted that the Honorable Chief Judge James A. Parker had followed this approach in LaPointe v. Continental Casualty Co., No. CIV 99-1358, slip op., Doc. 20 at *8-9 (D.N.M. Apr. 14, 2000.) In LaPointe, Judge Parker found that while the de novo standard of review was the better reasoned approach, discovery still had to be significantly limited, unless circumstances clearly established the need to gather additional evidence to conduct a just de novo review. A number of other courts have reached similar conclusions. See, e.g., Kearney v. Standard Ins. Co., 175 F.3d 1084, 1090-91 (9th Cir. 1998) (commenting that courts should not permit additional evidence merely because someone at a later time comes up with new evidence), cert. denied, 528 U.S. 964 (1999); Hammers v. Aetna Life Ins. Co., 962 F. Supp. 1402, 1406 (D.Kan. 1997) (limiting review to evidence before plan administrator); Colley v. Sandia National Laboratories, No. CIV 99-994 JP/LFG, slip op., Doc. 27 (D.N.M. Sept. 28, 2000) (discovery outside administrative record not permitted). But see Zack, 2002 WL 538851 (applying a de novo standard of review and concluding the defendant did not show good cause to grant the motion for protective order restricting discovery to the administrative record); Penyak v. UNUM Life Insurance Company of America, 1998 WL 608226 (D.Kan. Sept. 8, 1998) (where case involves interpretation of language of the plan, discovery permitted to attempt to show fiduciary applied inconsistent interpretations in determining similar claims).
Discussion
Avery first asserts that UNUM has not satisfied its burden in demonstrating that the plan documents provide the administrator with sufficient discretion to warrant an application of the arbitrary and capricious standard of review, noting that UNUM had not yet filed an Answer due to its motion to dismiss the state law claims and had not provided Avery with a copy of the actual plan as of the date of the scheduling conference. [Doc. 20, p. 3, n. 1.] Thus, Avery contends that a de novo review should be applied and that he should be permitted limited discovery on two issues:
(1) UNUM's potential conflict of interest; and
(2) the conduct of UNUM employees, etc. in terminating Avery's benefits and/or UNUM's alleged failure to gather relevant evidence in reaching the decision to deny benefits.
UNUM argues that an arbitrary and capricious standard applies because "UNUM's plan undisputedly contains the grant of discretion required by Firestone." [Doc. 19, p. 2.] Accordingly, no evidence should be considered by the Court, except the documents before the plan administrator at the time the denial decision was made. UNUM further contends that even if a de novo review applied, the scope of review would not differ. Thus, according to UNUM, even under the broader de novo standard, the only evidence to be reviewed is the administrative record before the claims decision-maker. [Doc. 19, p. 2, n. 1.]
The Court agrees with Avery that UNUM has not satisfied its burden in demonstrating that plan documents lend UNUM sufficient discretion to warrant the application of an arbitrary and capricious standard of review. UNUM cites no language from the plan itself providing the administrator with discretionary authority to determine eligibility for benefits. UNUM merely concludes that it is undisputed that UNUM has such discretionary authority. Avery, however, apparently disputes this assertion since he argues for a de novo standard of review.
Most decisions addressing which standard of review to apply in ERISA cases include a discussion of the actual plan language as to whether it confers the administrator with discretion to make the decision at issue. For example, in Zack, one of the issues before the Court was a motion for protective order limiting discovery to the administrative record. Zack, 2002 WL 538851. In deciding which standard of review to apply, the Court examined the plan language and decided that the actual terms of the plan did not vest the defendant with the relevant form of discretion to warrant an arbitrary and capricious standard of review. "[D]iscretionary authority must be specifically set forth in the plan before the more deferential arbitrary and capricious standard is invoked." Id. at *8 (internal citation omitted). The Court concluded that a de novo review applied. See also Mongeluzo v. Baxter Travenol Long Term Disability Benefit Plan, 46 F.3d 938 (9th Cir. 1995) (actual language of plan analyzed); LaPointe, CIV 99-1358 at *4 (citing to portions of the plan and commenting that "definite grants of discretion are necessary to apply an arbitrary and capricious standard of review"); Penyak, 1998 WL 608226 at *1 (court's analysis appears to indicate portions of the plan were provided in order to determine appropriate standard of review); Davis, CIV 98-0472 (court examines actual language of plan in deciding which standard of review to apply); Balderrama, CIV 99-1167 (same).
Notwithstanding the determination that UNUM failed to rebut the presumption of a de novo standard of review, the Court denies Avery's requested discovery for several reasons. First, Avery has not demonstrated circumstances that clearly establish additional evidence is necessary to conduct an adequate or just de novo review. Mongeluzo, 46 F.3d at 943-44. "In most cases, where additional evidence is not necessary for adequate review . . ., the district court should only look at the evidence that was before the plan administrator. . . ." Id. at 944 (internal citation omitted); Kearney, 175 F.3d at 1090-91 (district court should not accept additional evidence merely because someone later comes up with new evidence); Quesinberry, 987 F.2d at 1025-27 (circumstances that might allow consideration of additional evidence include claims involving complex medical questions, interpretation of terms of the plan, and/or legitimate impartiality concerns).
Here, Avery claims that he should be permitted to explore the possibility of a conflict of interest, and yet the Complaint neither alleges a conflict of interest nor that UNUM acted with impartiality. Moreover, there is no affirmative showing of a conflict. Avery also requests the opportunity to discover information about UNUM's employees and how they reached their decision.
This is similar to the plaintiff's request in LaPointe that the Court characterized as a request for permission to find new evidence, an even more questionable proposition than seeking permission to present new evidence. Avery simply has not come forward with a compelling reason to warrant departure from the general rule precluding discovery outside of the administrative record.
Policy concerns supply the second reason for the Court's denial of Avery's request.
Discovery in ERISA cases is the exception rather than the rule. It is permitted in limited circumstances. To require discovery under circumstances like these could seriously impair the achievement of ERISA's goal of providing inexpensive and expeditious resolution of disputes over employment benefits. Sandoval, 967 F.2d at 380. See also Perry v. Simplicity Engineering, 900 F.2d 963, 966 (6th Cir. 1990) (finding that if term de novo meant anything other than de novo review of administrative record, district courts would become substitute plan administrators and ERISA goal of prompt claims resolution would be undermined.)
The Court recognizes that under specific circumstances some courts permit limited discovery in relation to ERISA claims and also that the Tenth Circuit has yet to resolve this exact question. See Zack, 2002 WL 538851 at *8 (deciding it was inappropriate to restrict the scope of discovery under the de novo standard because the "possibility certainly exists" that the Tenth Circuit will conclude that all facts available must be examined); Mongeluzo, 46 F.3d at 944 (narrow definition of "mental illness" in prior decision changed legal posture of case justifying consideration of additional evidence).
This case, however, does not present the Court with sufficient reason to depart from what it perceives to be the general rule. Avery simply has not provided the Court with any compelling justification for why he is entitled to more than a full review of the administrative record with respect to his ERISA claim.
Conclusion
For the reasons stated above, Avery's request for limited discovery is DENIED. In addition, the Court stays discovery on Avery's state law claims, pending resolution of UNUM's motion for partial dismissal.
ORDER SETTING RULE 16 SETTLEMENT CONFERENCE
In an effort to facilitate a final disposition of this case, a mandatory settlement conference will be conducted in accord with provisions of the Federal Rules of Civil Procedure 16(a)(5) on Friday, August 30, 2002 beginning at 9:00 in Suite 680, 333 Lomas Blvd., N.W., Albuquerque, New Mexico. Please set aside the greater part of the day for this conference.
The parties or designated representative, other than counsel of record, with final settlement authority must be present. Similarly, counsel who will try the case must attend. Any requests to excuse a party or trial counsel from the settlement conference must be presented to the Court in writing. Prior to the conference, counsel are required to confer with one another in a good-faith effort to resolve the litigation.