District Courts Grapple With Discovery of ERISA Plan Conflicts of Interest

Although the United States Supreme Court held, in Metropolitan Life Ins. Co. v. Glenn, — U.S. —, 128 S.Ct. 2343, 2348 (2008), that a District Court must consider extrinsic evidence concerning the structural conflict itself as a factor in determining whether there has been an abuse of discretion, the Supreme Court discouraged District Courts from creating “special procedural or evidentiary rules, focused narrowly upon the evaluator/payor conflict.” Id. at 2351. Following the decision of Metropolitan LIfe Ins. Co. v. Glenn, District Courts continue to struggle to reach the right conclusion concerning the availability of discovery as to conflict of interest issues.

The Northern District of California District Court, in Conner v. Reliance Steel & Aluminum Co.’ LTD Plan, No. C 09-02487 JSW, 2009 WL 55658 (N.D. Cal. Jan. 5, 2010), recently held that, based on a structural conflict of interest concerning an ERISA plan (whereby the administrator or fiduciary making the eligibility determinations was also the funding source), the plaintiff was permitted to seek discovery as to “the scope of the conflict, as well as discovery regarding the nature, extent, and effect of the conflict on the decision making process. . . .”

The court in Conner v. Reliance, in reaching this holding, relied on Ninth Circuit precedent of Abatie v. Alta Health & LIfe Ins. Co., 458 F.3d 955, 970 (9th Cir. 2006) (holding that a District Court may “consider evidence outside the administrative record to decide the nature, extent and effect on the decision making process of any conflict of interest. . . .”), as well as Welch v. Metropolitan Life Ins. Co., 480 F.3d 942, 949-50 (9th Cir. 2007), in which the Court of Appeals held that the “district court may, in its discretion, consider evidence outside the administrative record to decide the nature, extent and effect on the decision-making process of any conflict of interest; the decision on the merits, though, must rest on the administrative record once on the conflict (if any) has been established by extrinsic evidence or otherwise.”).

The court in Conner v. Reliance Steel also relied on Gullidge v. Hartford Life & Accident Ins. Co., 501 F.Supp.2d 1280, 1283 (C.D.Cal. 2007), in which District Court, relying on Welch v. Metropolitan Life Ins. Co., also permitted discovery as to the conflict of interest. See also Kroll v. Kaiser Foundation Health Plan LTD Plan, No. C 09-01404 JSW, 2009 WL 3415678, *2 (N.D.Cal. Oct. 22, 2009) (granting plaintiff’s motion to conduct discovery as to conflict of interest, and reminding plaintiff that such discovery may not be a fishing expedition.)

Other Circuits have approached the issue differently, and perhaps with “special procedural rules”. The Seventh Circuit, prior to Metropolitan Life Ins. Co. v. Glenn, an ERISA claimant who wanted to obtain discovery as to a conflict of interest had to (1) “identify a specific conflict of interest or misconduct” and (2) “make a prima facie showing that there is good cause to believe limited discovery will reveal a procedural defect in the plan administrator’s determination.” Semien v. Life Ins. Co. of North America, 436 F.3d 805, 814 (7th Cir. 2006). Following the Metropolitan Life Ins. Co. v. Glenn decision, several District Courts within the Seventh Circuit held that Glenn superseded the standard set forth in Semien v. Life Ins. Co. of North America. See, e.g., Barker v. Life Ins. Co. of North America, — F.R.D.–, 2009 WL 5191441 (S.D.Ind. Dec. 28, 2009); Anderson v. Hartford Life and Accident Ins. Co., 2009 WL 3733343 (S.D. Ind. Mar. 19, 2009); Gessling v. Group Long Term Disability Plan, 2008 WL 5070434 (S.D.Ind. Nov. 26, 2008).