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Aluisi v. Elliott Manufacturing Co.

April 15, 2009

TERRY ALUISI, PLAINTIFF,
v.
ELLIOTT MANUFACTURING CO., INC. ET AL., DEFENDANTS.



The opinion of the court was delivered by: Anthony W. Ishii Chief United States District Judge

ORDER DENYING PLAINTIFF'S REQUEST THAT THE COURT CONSIDER TESTIMONY OUTSIDE THE RECORD PLAN, (Document #111)

BACKGROUND

In this action Plaintiff requests that the court review Defendant's denial of long term disability benefits pursuant to ERISA. The second amended complaint alleges that Unum Life Insurance Company of America ("Unum"), on behalf of Defendant Elliott Manufacturing Co., Inc. as the ERISA Plan and the ERISA Plan Administrator ("Elliott"), improperly denied Plaintiff's long term disability benefits under ERISA.

On March 5, 2009, the court issued its ruling concerning Plaintiff's request that the court consider evidence outside the record. The court ruled as follows:

The court finds that if Unum's investigation was so minimal that it never followed up with questions to Plaintiff's treating physicians, Plaintiff's evidence of what his treating physicians would have told Unum if properly asked may be relevant to show a conflict of interest. The court may admit extrinsic evidence "when the irregularities have prevented full development of the administrative record. In that way the court may, in essence, recreate what the administrative record would have been had the procedure been correct." . . . .

Based on this authority, the court finds that the proposed testimony of Plaintiff's treating physicians is admissible if the administrative record was not fully developed. Plaintiff must first show from the administrative record that there was no "meaningful dialogue" with Plaintiff and/or Unum did not seek further information from Plaintiff's treating physicians and relied only on their brief and vague records. Evidence outside the record may only be considered to show an abuse of discretion, and it is not admissible to show whether Defendant properly denied the benefits. Thus, Plaintiff may not provide evidence from his treating physicians unless Plaintiff provides an offer of proof from the administrative record showing how the record was not fully developed.

On March 13, 2009, Plaintiff filed a brief on Unum's improper investigation. On March 30, 2009, Defendant filed a response to Plaintiff's brief alleging an improper investigation. The court heard oral arguments on April 6, 2009, at 1:30 p.m.

LEGAL STANDARD

The general rule is that "when applying an abuse of discretion standard to an ERISA plan, the district court's review is limited to the administrative record." Burke v. Pitney Bowes Inc. Long-Term Disability Plan, 544 F.3d 1016, 1027-28 (9th Cir. 2008); Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 970 (9th Cir. 2006). However, the 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 " Nolan v. Heald College, 551 F.3d 1148, 1153 (9th Cir. 2009); Burke, 544 F.3d 1028; Abatie, 458 F.3d at 970. "Similarly, the district court may consider evidence outside the administrative record if it determines that procedural irregularities prevented the full development of the administrative record." Burke, 544 F.3d at 1028; Abatie, 458 F.3d at 970. The court may recreate what the administrative record would have been had the procedure been correct. Abatie, 458 F.3d at 972-73.

The Abatie court found as follows:

When a plan administrator has failed to follow a procedural requirement of ERISA, the court may have to consider evidence outside the administrative record. For example, if the administrator did not provide a full and fair hearing, as required by ERISA, 29 U.S.C. § 1133(2), the court must be in a position to assess the effect of that failure and, before it can do so, must permit the participant to present additional evidence. We follow the Sixth Circuit in holding that, when an administrator has engaged in a procedural irregularity that has affected the administrative review, the district court should "reconsider [the denial of benefits] after [the plan participant] has been given the opportunity to submit additional evidence."

As we noted earlier, if the plan administrator's procedural defalcations are flagrant, de novo review applies. And as we also noted, when de novo review applies, the court is not limited to the administrative record and may take additional evidence.

Even when procedural irregularities are smaller, though, and abuse of discretion review applies, the court may take additional evidence when the irregularities have prevented full development of the administrative record. In that way the court may, in essence, recreate what the administrative record would have been had the procedure been correct.

Abatie, 458 F.3d at 973-73 (internal cites omitted).

The Ninth Circuit has implied that the failure to conduct a thorough investigation can be a procedural irregularity. See Jebian v. Hewlett-Packard Co. Employee Benefits Organization Income ...


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