In abuse of discretion cases, evidence outside the administrative record is completely inadmissible. Newman v. Standard Insurance Company, 997 F.Supp. 1276, 1280 (C.D. Cal. 1998). "Permitting a district court to examine evidence outside the administrative record would open the door to the anomalous conclusion that a plan administrator abused its discretion by failing to consider evidence not before it."
If the plan does not meet its burden, courts review the decision to deny benefits de novo.Friedrich, 181 F.3d at 1109 (citing Atwood, 45 F.3d at 1323); see also Newman v. Standard Ins. Co., 997 F. Supp. 1276, 1279 (C.D.Cal. 1998). "Only if the administrator does meet its burden is it entitled to the deferential abuse of discretion standard of review."
In such cases, courts have not granted discovery. See e.g. Shemano-Krupp v. Mut. of Omaha Ins. Co., 2006 U.S. Dist. LEXIS 84352, *29-31 (N.D. Cal. Nov. 20, 2006) (denying discovery where there was no evidence of a conflict of interest beyond the "apparent conflict which exists when the insurer both funds and administers the plan"); Baldoni v. Unumprovident, Ill. Tool Works, Inc., 2007 U.S. Dist. LEXIS 14127, *15 (D. Or. Feb. 26, 2007) (denying discovery when an insurer both administers and funds the plan unless the plaintiff makes "a threshold showing"); Newman v. Standard Ins. Co., 997 F. Supp. 1276, 1280-81 (C.D. Cal. 1998) (denying discovery when an insurer both administers and funds the plan because of "immense practical problems associated with this position," including expensive litigation which "flies in the face of the purpose of ERISA"). B. Applicable Standard of Review — Abuse of Discretion
The court recognizes that some courts have refused to grant any discovery requests in ERISA actions. In Newman v. Standard Insurance Co., 997 F.Supp. 1276 (C.D.Cal. 1998), the Central District of California held that there is no entitlement to discovery on the plan's possible conflict of interest because such discovery might be so extensive that it would undermine one of the primary goals of ERISA — to resolve disputeS over benefits inexpensively and expeditiously. Id. at 1280-81.
Indeed, as Plaintiff argues, the consequence of interpreting Tremain to endow a beneficiary with the ability to present evidence of conflict of interest, without allowing that beneficiary to conduct discovery on those issues would amount to granting the beneficiary a right without an effective remedy. Defendants correctly cite Newman v. Standard Insurance Co., 997 F.Supp. 1276, 1280-81 (C.D.Cal. 1998) in support of their position with regard to discovery. Id. (holding that there is no entitlement to discovery on the apparent conflict between an insurance company's role as administrator and funding source of a benefits plan because such discovery might be so extensive that it would undermine one of the primary goals of ERISA — to resolve disputes over benefits inexpensively and expeditiously). Nevertheless, the only effective way for an ERISA plaintiff to enforce the right to present evidence of conflict of interest is to preserve his or her ability to discover such evidence.
To allow discovery in every ERISA case involving an administrator who is also the funding source "would involve far-reaching, open-ended, nearly limitless discovery." Newman v. Standard Ins. Co.. 997 F. Supp. 1276,1280 (C.D. Cal. 1998). The tremendous expenses thereby incurred would frustrate the prompt and affordable resolution of benefit claims. Plaintiff cites several Ninth Circuit cases for the proposition that the court is not limited to the administrative record when determining whether an actual conflict of interest has tainted the benefit decision.
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,
If such a conflict of interest appears to be present, the court still reviews the decision for abuse of discretion — assuming the Plan contains the requisite language conferring discretion upon the plan administrator — but the court's review is a little more searching (depending upon the severity of the conflict) and the court is not as quick to defer to the administrator's discretion.Id; see also Spangler v. Unum Life Ins. Co., 38 F. Supp.2d 952, 955-56 (N.D. Okla. 1999) (denying discovery on conflict of interest relevant to what standard of review applies); Newman v. Standard Ins. Co., 997 F. Supp. 1276, 1280-81 (C.D. Cal. 1998) (same). The approach of the court in Palmer may make sense where the district court is reviewing the record for abuse of discretion, where evidence outside the record simply may not be considered.
Several district courts have examined this same question and have declined to allow discovery (when applying an arbitrary and capricious standard of review). In Newman v. Standard Ins. Co., 997 F. Supp. 1276, 1280 (C.D.Cal. 1998), the trial court recognized that the plaintiff did not seek discovery on the merits of the claim, but wanted discovery as to the issue of whether the conflict tainted the administrators decision. The plaintiff, in Newman, argued that the only way to obtain material, probative evidence beyond the mere fact of the apparent conflict was through discovery.
While generalizations are impossible (and dangerous), it can be said that the courts have searched for a close connection between the information sought and the issues presented. E.g.,Buchanan v. Reliance Standard Life Ins. Co., 5 F.Supp.2d 1172 (D.Kan.1998)(discovery limited to narrow question of the manner in which insurance company made the decision); Newman v. Standard Ins. Co., 997 F.Supp. 1276 (C.D.Cal.1998)(disallowing discovery as to possible conflict of interest); Palmer v. University Medical Group, 973 F.Supp. 1179 (D.Or.1997)(same). The scope of discovery in ERISA cases permitted is simply not the same as the discovery permitted by Fed.R.Civ.P. 26(c).