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Laura Villanueva v. Life Insurance Company of North America

January 31, 2013

LAURA VILLANUEVA,
PLAINTIFF,
v.
LIFE INSURANCE COMPANY OF NORTH AMERICA,
DEFENDANT.



The opinion of the court was delivered by: Barbara A. McAuliffe United States Magistrate Judge

ORDER GRANTING PLAINTIFF'S REQUEST FOR LEAVE TO CONDUCT ) DISCOVERY

Plaintiff Laura Villanueva ("Plaintiff ") brings this action against Defendant Life Insurance Company of America ("LINA" or "Defendant") seeking damages based on the denial of her long-term disability insurance benefits she claims are due her under an ERISA-governed benefits plan. During the initial scheduling conference, Plaintiff argued that the Court should grant leave to conduct discovery. Before ruling on the matter, the Court instructed the parties to prepare supplemental letter briefing to discuss whether Plaintiff is entitled to discovery against the Plan administrator. On December 7, 2012, Defendant filed its letter briefing. (Doc. 19). Plaintiff filed her supplemental briefing on December 19, 2012. (Doc. 20). The Court deemed the matter suitable for decision without oral argument pursuant to Local Rule 230(g), and vacated the hearing scheduled for January 11, 2013. (Doc. 14). Having considered the moving, and opposition papers, as well as the Court's file, Plaintiff's request for leave for limited discovery is GRANTED.

BACKGROUND

Plaintiff began working for Jo-Ann Stores in 2001 and continued her employment until 2008. Due to a combination of severe migraines, depression disorder, back pain and other conditions, Villanueva's last day of work was October 30, 2008. During her employment, she was insured under an ERISA disability insurance plan through her employer, which was administered by LINA. In its role as plan administrator, LINA was responsible for both claims determination and payment on claims. After reviewing her medical records, LINA approved her claim for short-term disability ("STD") benefits. After her STD benefits were exhausted in April 2009, Villanueva applied for LTD benefits. LINA initially denied Plaintiff's claim for LTD benefits on May 26, 2009. Plaintiff appealed LINA's decision and by letter dated December 20, 2009, LINA informed Plaintiff that it was reversing its earlier claim decision and approving her claim for LTD benefits.

During her LTD benefits period, LINA obtained information reflecting that Plaintiff could work in a sedentary capacity. LINA also conducted surveillance activities on two separate occasions. On October 6, 2011, LINA informed Plaintiff that it was denying her claim for LTD benefits as of that same date.

Plaintiff brings suit under ERISA seeking past due benefits, attorneys fees and costs. (Pl's. Compl. at 18, Doc. 1). In the instant motion, Plaintiff moves for leave to conduct written discovery and depositions of the physicians that LINA hired to evaluate her claim, the IME organizations that referred physicians to LINA, and the surveillance company all in an effort to inquire into the scope and extent of LINA's alleged conflict of interest. (Doc. 20 at 4).*fn1 LINA resists Plaintiff's effort to obtain discovery. (Doc. 19).

DISCUSSION

A. Whether Plaintiff is Entitled to Discovery

Generally, litigants in a civil action may obtain discovery regarding "any non-privileged matter that is relevant to any party's claim or defense...." FED. R. CIV. P. 26(b)(1). In an ERISA case such as this one, however, discovery plays a far more limited role because the primary purpose of ERISA is "to provide a method for workers and beneficiaries to resolve disputes over benefits inexpensively and expeditiously." Boyd v. Bert Bell/Pete Rozelle NFL Players Retirement Plan, 410 F.3d 1173, 1178 (9th Cir. 2005).

Whether discovery is appropriate in an ERISA case "is directly related to the standard of review employed by the Court." Santos v. Quebecor World Long Term Disability Plan, 254 F.R.D. 643, 647 (E.D. Cal. 2009). When an ERISA plan grants discretion to the plan administrator, the court reviews the benefits decision for an abuse of discretion. Abatie v. Alta Health & Life Insurance Co., 458 F.3d 955, 967 (9th Cir. 2006).*fn2 While abuse of discretion review is typically confined to the administrative record, the "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." Abatie, 458 F.3d at 970. A structural conflict of interest exists where the insurer acts as both the plan administrator and the funding source for benefits. Id. at 965. It is well-established that it is within the Court's discretion to permit discovery regarding a structural conflict of interest of an ERISA plan administrator and its affect, if any, on its decision in the case. See Burke v. Pitney Bowes Inc. Long-Term Disability Plan, 544 F.3d 1016, 1028 n.15 (9th Cir. 2008) ("Whether to permit discovery into the nature, extent, and effect of the Plan's structural conflict of interest is also a matter within the district court's discretion.").

Both parties concede that, as seen here, when a structural conflict of interest is present, discovery is permitted.*fn3 Defendant resists discovery, however, arguing that Plaintiff must show that a structural conflict of interest influenced its decision before the Court should allow limited discovery. Gough v. Pacific Telesis Group Comprehensive Disability Benefits Plan, 2007 WL 4531695, *1 (E.D. Cal. 2007) (denying plaintiff's request for conflict discovery because there is no evidence that any exercise of discretion in the decision-making process below was tainted by a conflict of interest, finding Plaintiff's arguments purely speculative and denying additional discovery into potential conflict of interest); Bartholomew v. UNUM Life Insurance Co., 579 F. Supp. 2d 1339, 1342 (W.D. Wash. 2008) (refusing to allow discovery because discovery request was little more than a fishing expedition. There are no allegations of actual conflicts or irregularities in her proceedings).

Plaintiff responds that the cases cited by LINA are against the weight of authority and that she is not required to make a threshold showing that LINA's decision was influenced by a conflict of interest before she can engage in discovery. Plaintiff cites Klein v. Northwestern Mutual, 806 F.Supp.2d 1120, 1125 (S.D. Cal. 2011), where the District Court specifically explained that "[t]he Bartholomew court's limitation of the plaintiff to evidence already in his or her possession is contrary to the vast weight of authority since Abatie as well as specific guidance from the Ninth Circuit. Klein, 806 F.Supp. at 1127.

The Court must weigh all of the facts and circumstances to credit the plan administrator's reason for denying coverage. Abatie, 458 F.3dat 968. Under Abatie, the Court has discretion to allow limited discovery, not just into the presence of a conflict of interest, but into the nature, extent, and effect of such a conflict. Since Abatie, courts in the Ninth Circuit "have, by and large, allowed limited and narrowly tailored discovery into both demonstrating and probing conflicts of interests." Stephan v. Thomas Weisel Partners, LLC, 2009 U.S. Dist. LEXIS 75585, 2009 WL 2511973 * 9 (N.D. Cal. 2009).

Further, the Court is not persuaded by Defendant's contention that, in order to obtain the requested discovery, Plaintiff must make a preliminary showing of a conflict of interest beyond the structural conflict of interest which the parties agree exists in this case. A number of courts in this circuit have authorized discovery in ERISA cases without requiring any such preliminary showing. See, e.g., Klein, 806 F. Supp. 2d at 1120; Harper v. UNUM Life Ins. Co., 2007 U.S. Dist. LEXIS 47533 (E.D. Cal. June 19, 2007) (Plaintiff entitled to discovery exploring structural conflict of interest, but not discovery related to whether the Plan's decision was correct); Frost v. Metropolitan Life Ins. Co., 414 F. Supp. 2d 961 (C.D. Cal. 2006) (discovery permitted but requested scope went beyond alleged conflict); Klund v. High ...


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