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).
The First Circuit, following Metropolitan Life Ins. Co. v. Glenn, continues to prohibit claimant from obtaining discovery concerning conflict of interest, unless the claimant can make a threshold showing of bias beyond a structural conflict of interest. See Sansby v. Prudential Ins. Co. of Am., 2009 WL 799468, *2 (D.Mass. Mar. 25, 2009); McGahey v. Harvard Univ. Flexible Benefits Plan, 2009 WL 799464, *2-3 (D.Mass. 2009).
District Courts within the Second Circuit require that the claimant seeking discovery concerning the conflict of interest show “a reasonable chance that the requested discovery will satisfy the good cause requirement.” See Mergel v. Prudential Life Ins. Co. of America, No. 09 CV 00030 (HB), 2009 WL 2849084 (S.D.N.Y. Sep. 1, 2009) (holding that plaintiff made necessary showing that the requested discovery concerning the conflict of interest has a reasonable chance to meet the good cause requirement that would allow the court to admit evidence outside the administrative record); Kagan v. Unum Provident, No. 03 CV 8130 (KMK)(GAY), 2009 WL 3486938 (S.D.N.Y. Oct. 29, 2009) (“[T]here is no carte blanche to discovery evidence outside the record. Rather, the party seeking to discovery such evidence must show ‘a reasonably chance that the requested discovery will satisfy the good cause requirement.’). See also Kruk v. Metropolitan Life Ins. Co., No. 07 CV 1533 (CSH), 2009 WL 141543, *2 (D.Conn. May 26, 2009) (discovery as to the conflict of interest was not inconsistent with deferential standard of review).
In Mergel v. Prudential, Prudential resisted discovery, based on its contention that District Court’s review was limited to the administrative record under a deferential standard of review. Id. at * 1. The District Court rejected Prudential’s position, and stated that Prudential’s argument “conflates the standard of review with the standard for discovery.” Id. The District Court agreed that even if Prudential were found to be operating under a conflict of interest, that would “not affect the deferential standard of review”. The District Court, however, concluded that “the role that the conflict may have played in the outcome can only be assessed after discovery has been allowed and complied with.”