Smith v. Life Insurance Company of North America et al

Filing 87

MEMORANDUM OPINION AND ORDER Granting in part and Deferring in part 53 MOTION to Compel LINA to Respond to Plaintiff's Interrogatories and Requests for Production filed by Dorothy Smith, and Granting 76 MOTION for Protective Order filed by Life Insurance Company of North America.. Signed by Judge Virginia Emerson Hopkins on 7/30/14. (KWC, )

FILED
2014 Jul-30 PM 06:38
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
EASTERN DIVISION
DOROTHY SMITH,

)
)
Plaintiff,
)
)
v.
) Case No.: 1:13-CV-2047-VEH
)
LIFE INSURANCE COMPANY OF )
NORTH AMERICA, et al.,
)
)
Defendants.
)

MEMORANDUM OPINION AND ORDER
I.

Introduction
This lawsuit arises under the Employee Retirement Income Security Act of

1974 (“ERISA”). (Doc. 1 at 1). Plaintiff Dorothy Smith (“Ms. Smith”) most recently
amended her lawsuit on July 28, 2014. (Doc. 82).
Pending before the court are Ms. Smith’s Motion To Strike LINA’s Discovery
Objections and To Compel LINA To Respond to Plaintiff’s Interrogatories and
Requests for Production (Doc. 53) (the “Compel Motion”) filed on June 13, 2014, and
Defendant Life Insurance Company of North America’s (“LINA”) Motion for Entry
of Protective Order (Doc. 76) (the “Protective Motion”) filed on July 21, 2014.
The court held a hearing on July 30, 2014, to address any of the parties’ still

remaining discovery disputes. For the reasons stated in open court and herein, the
Compel Motion is GRANTED except as otherwise set out herein. Further, the
Protective Motion is GRANTED as modified by the court.
II.

Standards
A.

Discovery Orders Generally

Regarding discovery rulings:
A district court has wide discretion in discovery matters and our review
is “accordingly deferential.” Harbert Int’l, Inc. v. James, 157 F.3d 1271,
1280 (11th Cir. 1998). A court abuses its discretion if it makes a “clear
error of judgment” or applies an incorrect legal standard. Carpenter v.
Mohawk Indus., Inc., 541 F.3d 1048, 1055 (11th Cir. 2008) (per curiam).
Moreover, a district court’s denial of additional discovery must result in
substantial harm to a party’s case in order to establish an abuse of
discretion. See Leigh v. Warner Brothers, Inc., 212 F.3d 1210, 1219
(11th Cir. 2000).
Bradley v. King, 556 F.3d 1225, 1229 (11th Cir. 2009); accord Iraola & CIA, S.A. v.
Kimberly-Clark Corp., 325 F.3d 1274, 1286 (11th Cir. 2003) (“Moreover, we will not
overturn discovery rulings ‘unless it is shown that the District Court’s ruling resulted
in substantial harm to the appellant’s case.’” (quoting Carmical v. Bell Helicopter
Textron, Inc., 117 F.3d 490, 493 (11th Cir. 1997))).
B.

Rule 26 Protective Orders Specifically

Federal Rule of Civil Procedure 26(c) specifically provides that
a party may file a motion for a protective order “to protect a party or
person from annoyance, embarrassment, oppression, or undue burden or
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expense[.]” Fed. R. Civ. P. 26(c). The district court may issue a
protective order if “good cause” is shown, and such an order “is not
subjected to heightened scrutiny.” In re Alexander Grant & Co. Litig.,
820 F.2d 352, 355 (11th Cir. 1987); see also Fed. R. Civ. P. 26(c). The
burden is on the movant to show the necessity of the protective order,
and the movant must meet this burden with a “particular and specific
demonstration of fact as distinguished from stereotyped and conclusory
statements.” United States v. Garrett, 571 F.2d 1323, 1326 n.3 (5th Cir.
1978). In addition to requiring good cause, the district court must
“balance the interests of those requesting the order.” McCarthy, 876
F.2d at 91.
Ekokotu v. Federal Exp. Corp., 408 F. App’x 331, 335-36 (11th Cir. 2001) (footnote
omitted) (emphasis added).
C.

Conflict of Interest Discovery in ERISA Benefits Disputes

In Harvey v. Standard Ins. Co., 787 F. Supp. 2d 1287 (N.D. Ala. 2011), the
undersigned extensively addressed the scope of permissible conflict of interest
discovery in light of the Supreme Court’s landscape-changing ERISA benefits
decision in Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 108, 128 S. Ct. 2343,
2347-48, 171 L. Ed. 2d 299 (2008). In granting the plaintiff’s motion to compel in
Harvey, the court identified several areas of appropriate discovery post-Glenn:
In Adams v. Hartford Life and Accident Ins. Co., 589 F. Supp.2d
1366 (N.D. Ga. 2008), the court permitted discovery beyond the
administrative record to the extent that facts known to the administrator
at the time of denial were not contained in the official record, and said
that such discovery could be had as to whether (1) the administrator
fulfilled his or her fiduciary duties, (2) the proper procedures were
followed in compiling the record, (3) the record was complete, and, if a
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conflict of interest existed, discovery into “the surrounding
circumstances to determine whether such a conflict affected the benefits
decision” Id. at 1368. . . .
Without such discovery, the existence of a conflict of interest would be
analyzed in a vacuum, which would be at odds with Glenn’s holding that
“... the significance of the (conflict of interest) factor will depend upon
the circumstances of the particular case.” Glenn, supra, 554 U.S. at
108, 128 S. Ct. 2343 (emphasis supplied). It would be reasonable to
permit Harvey to attempt to ascertain the circumstances surrounding the
conflict of interest, e.g., whether the plan was or was not funded by
stop-loss insurance or another policy, it was reimbursed by the employer
for claims, whether a trust fund was established by the employer,
whether any premium rebates were given to any employer based upon
loss history, whether anyone other than the insurer played any role in
making the decision to deny benefits, what financial incentives (if any)
were awarded or available for claim denials and vice versa, what was the
extent of the reviewing doctors’ financial interest, did those doctors ever
perform similar compensated reviews for claimants, and just how
Standard handles, internally and externally, the conflict of interest and
how that process affects Standard’s financial bottom line. . . .
Harvey may have discovery in the areas delineated in Adams and in the
immediately preceding paragraph, and any other areas relating to
Standard’s conflict of interest.
Harvey, 787 F. Supp. 2d at 1291-92 (emphasis by underlining added).
III.

Analysis
A.

Compel Motion

As a result of the parties’ meet and confer efforts, the scope of the Compel
Motion has been reduced significantly. More specifically, on July 24, 2014, Ms.
Smith filed a notice with the court setting forth those areas still in dispute which are
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all limited to document production. (Doc. 80). LINA filed its response (Doc. 83)
related to these remaining contested items on July 28, 2014. On July 29, 2014, LINA
identified two additional items that remain in dispute. (Doc. 85). Ms. Smith
responded on July 30, 2014. (Doc. 86). The court heard from counsel at the hearing
on July 30, 2014. The court now addresses each contested item.
Request for Production No. 2
According to LINA’s response, the dispute over Request for Production No.
2 has now been resolved subject to the entry of a protective order. (Doc. 83 at 3 n.1).1
The court separately addresses the entry of a suitable protective order below.
Request for Production No. 3
Request No. 3 seeks the production of “actual conflict” evidence in the form
of employee performance evaluations for persons LINA has listed in its chart
responding to Interrogatory No. 3. (Doc. 54 at 32).2 LINA primarily counters that the
undersigned should be guided by another Northern District of Alabama decision
which observed that conflict discovery is unnecessary when “the court is not called
upon to weigh [the insurer]’s admitted conflict as both the funder of benefits and
adjudicator of claims; that would occur only if necessary at the sixth and final step

1

All page references to Doc. 83 correspond with the court’s CM/ECF numbering system.

2

All page references to Doc. 54 correspond with the court’s CM/ECF numbering system.
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of the Williams analysis, as understood post-Glenn.” Blair v. Metropolitan Life Ins.
Co., 955 F. Supp.2d 1229, 1254 n.16 (N.D. Ala. 2013) (citing Eldridge v. Wachovia
Corp. LTD Plan, No. 06-12193, 2007 WL 117712, *2 (11th Cir. Jan. 18, 2007)).
Having considered both sides’ positions under this court’s post-Glenn
discovery standard3 and because LINA’s performance evaluations for those
employees who were involved in administering Ms. Smith’s claim might reveal a
review-based incentive for them to deny claims,4 Ms. Smith’s Compel Motion is
GRANTED as to Request No. 3 and LINA’s objections are OVERRULED.
In particular, LINA’s resistance to Ms. Smith’s efforts to discover information
that, on its face, is relevant to the conflict of interest issue is directly at odds with the
Supreme Court’s observation in Glenn that “[b]enefits decisions arise in too many
contexts, concern too many circumstances, and can relate in too many different ways
to conflicts—which themselves vary in kind and in degree of seriousness . . . .” 554
U.S. at 116, 128 S. Ct. at 2351 (emphasis added). Because conflict of interest is
potentially a factor for this court to weigh when it evaluates the challenged benefits

3

LINA’s reference to the Blair decision is unhelpful as this court has not yet determined
what steps it will need to follow when evaluating the propriety of the contested benefits
determination made by LINA.
4

Alternatively, the import of these evaluative documents might reveal that LINA “has taken
active steps to reduce potential bias and to promote accuracy, . . . .” by not linking employee
compensation in any manner to denying claims. Glenn, 554 U.S. at 117, 128 S. Ct. at 2351.
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decision, Ms. Smith is entitled to learn from LINA the types of conflicts that exist
within its decision-making process, explore how serious those conflicts are, and
present that evidence to the court. Otherwise, “the existence of a conflict of interest
would be [inappropriately] analyzed in a vacuum . . . .” Harvey, 787 F. Supp. 2d at
1292.
Request for Production No. 6
Request No. 6 seeks to have LINA produce its “claims procedure manual in its
entirety.” (Doc. 54 at 42). LINA primarily counters that it has responded by “offering
to produce the Index of the Policies and Procedures (“P&P”) in effect when the denial
of Plaintiff’s claim was upheld on appeal.” (Doc. 83 at 10). At the hearing, counsel
for LINA candidly stated that, under the court’s order setting the hearing, LINA had
printed a copy of its claims procedure manual in its entirety (as it existed during the
relevant time period). In effect, LINA’s unduly burdensome argument had been
inadvertently made moot by the court’s order, with which LINA appropriately
complied.
Having considered both sides’ positions under this court’s post-Glenn
discovery standard5 and because the language used in LINA’s claims procedure

5

LINA’s reference to the Blair decision is unhelpful as this court has not determined what
steps it will need to follow when evaluating the propriety of the contested benefits determination
made by LINA.
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manual might reveal a favoritism toward denying claims,6 Ms. Smith’s Compel
Motion is GRANTED as to Request No. 6 and LINA’s objections are
OVERRULED.
Request for Production No. 11
As limited by Ms. Smith in her pretrial filings and as further limited by her at
the hearing, Request No. 11 now seeks only emails on the Defendant’s Outlook
system that contain Ms. Smith’s name (or derivations thereof) and/or Ms. Smith’s
claim number as search terms pertaining to the issuance of insurance coverage to
Plaintiff or the administration of any claims for Plaintiff. LINA counters that
responding to Ms. Smith’s revised request as it existed prior to the limitation added
at the hearing “would remain extremely burdensome, expensive, and would cause
significant business disruption.” (Doc. 83 at 12). Counsel for LINA asked for an
opportunity to consult with LINA regarding its position, given the further limitation
Ms. Smith agreed to at the hearing.
Accordingly, the court DEFERS RULING on this aspect of the Compel
Motion. The parties are hereby ORDERED to confer to attempt to resolve any areas
of dispute between them as to this issue and to file a joint status report, no later than

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Alternatively, the contents of the claims procedure manual might reveal that LINA “has
taken active steps to reduce potential bias and to promote accuracy, . . . .” Glenn, 554 U.S. at 117,
128 S. Ct. at 2351.
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5:00 p.m. on Monday, August 4, 2014, regarding this aspect of the Compel Motion.
IF the parties have not fully resolved this aspect of the Compel Motion, the court will
hear
further argument at 10:00 a.m. on Tuesday, August 5, 2014, in Courtroom 6A of the
Hugo Black United States Courthouse, Birmingham, Alabama.
Request for Production No. 13
Request No. 13 seeks all documents “between LINA’s subsidiaries and the
State of Alabama or its agencies and employees regarding disability income policies
the company marketed or sold in the State of Alabama in the last five (5) years. This
request includes all complaints registered with the Insurance Department of the State
of Alabama by policyholders of LINA for the same time period.” (Doc. 54 at 61). Ms.
Smith has, through the parties’ meet and confer discussions, agreed to limit this
request to the Honda Plan. Id.
LINA primarily counters that Ms. Smith has other means at her disposal to
discover this information and further that “[n]either Glenn nor Harvey support this
kind of discovery into regulatory Department of Insurance issues and correspondence
....” (Doc. 83 at 14). Having considered both sides’ positions under this court’s postGlenn discovery standard and because this court’s decision in Harvey contains an
express catchall category of any other areas relating to conflict of interest, the court
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hereby ORDERS LINA to allow Ms. Smith’s counsel, no later than Friday, August
1, 2014, to review the documents responsive to this request and to take notes
regarding the documents reviewed. Such notes may not include personal identifiers
of the complainant(s). IF Ms. Smith counsel still wishes to pursue this request after
such review, the parties shall report that fact in their joint status report due Monday,
August 4, 2014, by 5:00 p.m. and the hearing scheduled for Tuesday, August 5, 2014,
at 10:00 a.m. shall take place as scheduled.
Request for Production 14
Request No. 14 seeks reports referring to LINA’s liability acceptance rates in
Alabama for the past three years for ERISA and non-ERISA claims. LINA counters
that Ms. Smith’s theory that “LINA denies more ERISA claims than non-ERISA
claims” “is replete with specious paranoia [and] provides no legal support for
allowing this kind of overly broad request that would shed no light on the existence
of any claim specific bias.” (Doc. 83 at 15). The authorities offered by LINA in
support of its position (Doc. 83 at 15-16) are not binding on this court.
Citing to Mr. Lodi’s declaration, LINA also raises an unduly burdensome
objection. (Doc. 83 at 16). However, Mr. Lodi’s declaration does not quantify this
asserted burden in any meaningful manner (Doc. 83-1 at 4 ¶ 6) and, thus, it is entirely
ineffective at substantiating the objection.
10

At the hearing, counsel for LINA clarified that LINA does not have any such
reports and that it would have to create such a report. The court will not require LINA
to create a report.
Having considered both sides’ positions under this court’s post-Glenn
discovery standard and because LINA’s liability acceptance rates in Alabama for the
past three years for ERISA and non-ERISA claims might reflect the absence of
safeguards in place to protect against conflict,7 Ms. Smith’s Compel Motion is
GRANTED as to Request No. 14 and LINA’s objections are OVERRULED.
However, a verified response by LINA that no such reports exist will be considered
compliance.
B.

Protective Motion

The court entered a show cause order on LINA’s Protective Motion on July 24,
2014. (Doc. 79). Ms. Smith filed her show cause response on July 25, 2014. (Doc.
81). The court has reviewed the competing versions of the proposed protective order
that have been filed into the record and also discussed the proposed protective order

7

Of course, proof of these percentages presented by Ms. Smith in isolation would not be
probative of anything and simply because the court is permitting Ms. Smith to discover this
information pre-merits does not prohibit LINA from later challenging its admissibility (or the
admissibility of any other category of discovery for that matter) once the case finally reaches the
benefits review stage. Cf. Fed. R. Civ. P. 26(b)(1) (“Relevant information need not be admissible
at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible
evidence.”).
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with the parties at the hearing. The court concludes, in its discretion that, because
LINA’s version is the type of protective order that this court is accustomed to dealing
with and because Ms. Smith has not persuaded the undersigned that her format is
superior, the court will use the order proposed by LINA.
However, LINA’s version will be modified in accordance with this court’s
standard confidentiality language and will also include some of Ms. Smith’s
suggested changes. Accordingly, the Protective Motion is GRANTED as modified
by the court.
IV.

Conclusion
Accordingly, for the reasons explained above, the Compel Motion is

GRANTED in part and DEFERRED in part. Further, the Protective Motion is
GRANTED as modified by the court. The court will separately enter the protective
order.
DONE and ORDERED this 30th day of July, 2014.

VIRGINIA EMERSON HOPKINS
United States District Judge

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