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Fernandes v. Fort Dearborn Life Insurance Co.

April 13, 2010


The opinion of the court was delivered by: Gregory G. Hollows United States Magistrate Judge


Introduction and Summary

ERISA cases, whose benefits standard grants discretion to the plan administrator in claims decisions, were initially intended as a record review district court adjudication process. However, the years of ERISA adjudication have complicated that process. The undersigned finds for this ERISA discovery motion filed in 2010 that although discovery is not altogether prohibited, something more than the inherent potential conflict of "adjudicator as payor" must be present before discovery is permitted in ERISA actions seeking review of determinations in non-governmental program disability plans. If discovery is permitted, that discovery is at least initially limited to directly ascertaining the nature and extent of the conflict -- period.

The complaint in this action posits facts which cross the "something more" threshold. Discovery will be permitted as set forth below.


Taking the facts of the complaint as true, plaintiff worked for Greater New Bedford Community Health Center ("Greater New Bedford") when she became disabled. She was awarded short term and later, long term disability benefits provided by her employer. Fort Dearborn Life Insurance Co. is currently the plan administrator for Greater New Bedford, but apparently a predecessor insurance company (Highmark Life Insurance) made the initial decisions in plaintiff's case. Fort Dearborn later bought some of Highmark's business (including plaintiff's Greater New Bedford Plan) in 2006. Plaintiff's benefits were briefly terminated approximately from September 2005-February 2006, but then reinstated. Fort Dearborn finally terminated plaintiff's benefits by way of a March 8, 2007 letter.

Plaintiff has been found eligible for Social Security Disability benefits, and apparently still receives them. Fort Dearborn offset those SSA payments due plaintiff under the Greater New Bedford Plan, i.e., subtracted the SSA benefits from any monies otherwise owing under the Plan.

It is undisputed that Fort Dearborn is the Plan administrator (approve, deny and terminate benefits) and payor of the benefits on behalf of the Greater New Bedford Plan.


Since the standard of review by which the merits of this disability termination case will be judged drives the discovery determination, a word about the correct standard of review for deciding this case is in order.

A "discretionary" ERISA plan whose benefits entitlement is determined by an administrator, who or which, is also responsible for making payments if claims are positively adjudicated, is a plan whose administrator has a conflict of interest. Metropolitan Life Ins. Co. v. Glen, __U.S.__, 128 S.Ct. 2343, 2348 (2008). This conflict does not require de novo review of the decision which is claimed to be affected by the conflict, but the conflict is a factor to be determined on judicial review under an abuse of discretion standard of review. Id. at 2350. The importance of the conflict factor depends on the individual circumstances of the case. Id. at 2351. For example, if a conflicted administrator has a history of biased decisions, the factor of conflict of the case under review will become much more important when scrutinizing the merits of a claims decision. If, on the other hand, the administrator has taken concrete steps to minimize any effect of bias, the factor of conflict is at the "vanishing" point. Id. The Ninth Circuit's case of Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 968-969 (9th Cir. 2006) (en banc), precisely anticipated the discussion of Metropolitan. See Montour v. Hartford Ins. Co., 588 F.3d 623, 630-31 (9th Cir. 2009).

Thus, evidence outside the record may at times be considered, and hence, discovered. However, the parties' positions on how much discovery is permitted prove both too much and too little. Plaintiff would ignore the context in which ERISA decisions are made, abuse of discretion, preferably on a review of the record only, and impose general Fed. R. Civ. P. 26 discovery standards, i.e., general discovery on the barest of factual allegations/conclusions in a complaint. ERISA benefits were not intended by Congress to be adjudicated in a lengthy, expensive court proceeding. Chadwick v. Met. Life Ins. Co.. 498 F. Supp. 2d 1309, 1318 (E.D. Cal. 2007) citing Taft v. Equitable Life Assurance Co., 9 F.3d 1469, 1472 (9th Cir. 1994). The benefits were supposed to be determined within a quick and efficient process, and plaintiff's "everything is fair game in discovery" runs counter to Congress' goal. On the other hand, Fort Dearborn's quintessentially Catch 22 position -- no discovery is possible until the trial judge makes a determination of the precise standard of review, which by then the time for discovery will have expired, understates the need for the trial judge to have the correct circumstances with which an accurate standard of review may be determined. It also conflicts with Ninth Circuit precedent which presumes that ERISA actions may have some discovery. Welch v. Met. Life Ins. Co., 480 F.3d 942, 949-950 (9th Cir. 2007).

The correct balance to be drawn is that set forth in Baldoni v. Unumprovident, Illinois Tool Works, Inc., 2007 WL 649295 (D. Or. 2007) (cited with approval in Chadwick, supra.):

This district has balanced these opposing considerations-the plaintiff's need and the underlying purpose of ERISA-by requiring plaintiffs to make a threshold ...

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