Deldebbio v. Walgreens Company et al

Filing 43

ORDER RE: DISCOVERY DISPUTE (Illston, Susan) (Filed on 3/5/2012)

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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 DAVID DELDEBBIO, 5 No. C 11-01866 SI Plaintiff, ORDER RE: DISCOVERY DISPUTE v. 6 WALGREENS CO., et al., 7 Defendants. 8 9 United States District Court For the Northern District of California 10 11 / On February 1, 2012, plaintiff submitted a letter brief to the Court regarding a dispute over his request to depose nine persons in connection with this case. On February 7, 2012, defendant objected to all nine depositions. 12 BACKGROUND 13 Plaintiff David DelDebbio was employed with defendant Walgreens Co. for over thirty years. 14 He was a participant in and a beneficiary of the Walgreens Income Protection Plan (“Plan”). Defendant 15 Sedgwick Claims Management Services (“Sedgwick”) and Walgreens were the administrators of that 16 plan. In 2009, plaintiff became unable to work due to severe mental disabilities. 17 Plaintiff applied for long term disability (“LTD”) benefits under the Plan. He was denied by 18 Sedgwick. He resubmitted his claim to another department at Sedgwick and was denied. He then 19 appealed this decision within Sedgewick and was denied again. At no time did any person from 20 Sedgwick examine plaintiff regarding his disability. 21 Plaintiff alleges seven causes of action: (1) denial of ERISA benefits, (2) breach of fiduciary 22 duty, (3) equitable relief under ERISA, (4) breach of contract, (5) bad faith, (6) injunctive relief, and 23 (7) declaratory relief. 24 Plaintiff is seeking to depose nine people in connection with his denial of benefits: (1) Angela 25 Cannon, the employee of Sedgwick who made the initial decision to deny the claim; (2) Sedgwick’s 26 long term disability specialist, who made the decision to deny the claim after review; (3) Sedgwick’s 27 appeal specialist, who made the decision to deny the claim after appeal to Sedgwick; (4) Lawrence J. 28 1 Albers, M.D., a doctor on whose opinion Sedgwick based its denial of the claim; (5) Reginald Givens, 2 M.D., same; (6) Marcus Goldman, M.D., same; (7) Sedgwick’s Person Most Knowledgeable (“PMK”) 3 regarding plaintiff and his claim; (8) the Plan’s PMK regarding plaintiff and his claim; and (9) 4 Walgreen’s PMK regarding plaintiff and his claim. 5 6 DISCUSSION Defendants object to these depositions primarily on the grounds that evidence in ERISA 8 litigation is limited to the administrative record.1 In an ERISA benefits case, evidence outside the 9 administrative record can only be considered under limited circumstances. Opeta, 484 F.3d at 1217 10 United States District Court For the Northern District of California 7 (citing Mongeluzo v. Baxter Travenol Long Term Disability Benefit Plan, 46 F.3d 938, 943–44 (9th 11 Cir.1995)). In the Ninth Circuit, additional evidence has been admitted when there is a conflict of 12 interest between the plan’s administrator and source of funding, or where the standard of review is 13 unclear. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 970-71 (9th Cir. 2006); Klund v. High 14 Tech. Solutions, Inc., 417 F. Supp. 2d 1155, 1159-60 (S.D. Cal. 2005). 15 16 1. Conflict of interest 17 Where a conflict of interest exists between the administrator of an ERISA plan and the source 18 of that plan’s funds, discovery is allowed outside the administrative record. See Frost, 414 F. Supp. 2d 19 at 963; Lang v. Long-Term Disability Plan, 125 F.3d 794, 797 (9th Cir. 1997). To show a conflict of 20 interest, the plaintiff must provide “material, probative evidence, beyond the mere fact of the apparent 21 conflict, tending to show that the fiduciary's self interest caused a breach of the administrator's fiduciary 22 obligations to the beneficiary.” Frost v. Metropolitan Life Ins. Co., 414 F. Supp. 2d 961, 963 (C.D. Cal. 23 2006) (citing Atwood v. Newmont Gold Co., Inc., 45 F.3d 1317, 1322 (9th Cir.1995)). In both Frost and 24 Lang, the administration and funding for the plans in question came from the same source. Frost, 414 25 F. Supp. 2d at 963-64; Lang, 125 F.3d at 797. Here, Sedgwick administers the plan, but Walgreens 26 27 28 1 This order allows discovery regarding plaintiff’s ERISA claims. It does not address the common law causes of action in the complaint. Counsel are urged to examine the viability of the common law causes of action in light of plaintiffs’ ERISA claims. 2 1 funds it. Therefore, no apparent conflict of interest exists. Nevertheless, defendant has agreed to make 2 the person most knowledgeable regarding any conflict of interest at Sedgwick available to be deposed. 3 Defendant’s Letter at 5. The Court GRANTS plaintiff’s request to depose the PMK at Sedgewick 4 regarding any conflict of interest between the administrator and the fund. 5 6 2. Unclear standard of review In an ERISA benefits case, the administrative record is reviewed de novo unless the plan itself 8 grants discretion to its administrators. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). 9 Even where the plan administrator has discretion, review is de novo if the administrators committed 10 United States District Court For the Northern District of California 7 flagrant procedural violations. Gatti v. Reliance Standard Life Ins. Co., 415 F.3d 978, 985 (9th Cir. 11 2005). Where the nature of the procedural violations is unclear, discovery is allowed to determine the 12 correct standard of review. Klund, 417 F.Supp.2d at 1159-60. 13 Plaintiff has alleged procedural violations of ERISA. “[P]rocedural violations of ERISA do not 14 alter the standard of review unless those violations are so flagrant as to alter the substantive relationship 15 between the employer and employee, thereby causing the beneficiary substantive harm.” Gatti, 415 16 F.3d at 985; see also Jebian v. Hewlett-Packard Co. Employee Benefits Org. Income Prot. Plan, 349 17 F.3d 1098 (9th Cir.2003) (administrator’s failure to adhere to its own procedures requires de novo 18 review). “When an administrator can show that it has engaged in an ongoing, good faith exchange of 19 information between the administrator and the claimant, the court should give the administrator's 20 decision broad deference notwithstanding a minor irregularity.” Abatie, 458 F.3d at 972 (internal 21 quotations omitted). “Even when procedural irregularities are smaller, though, and abuse of discretion 22 review applies, the court may take additional evidence when the irregularities have prevented full 23 development of the administrative record. In that way the court may, in essence, recreate what the 24 administrative record would have been had the procedure been correct.” Id. at 973. 25 In other words, in the context of ERISA procedural violations, discovery outside the 26 administrative record is proper where there have been flagrant violations of ERISA procedure 27 constituting substantive harm to the beneficiary, or where procedural violations have prevented the full 28 development of the administrative record. See id. at 974 (administrator who adds a new reason for 3 1 denial on appeal insulates that rationale from review, thus violating the procedure and purpose of 2 ERISA). ERISA requires plans to “provide adequate notice in writing to any participant or beneficiary 4 whose claim for benefits under the plan has been denied, setting forth the specific reasons for such 5 denial . . . .” 29 U.S.C. § 1133. Plaintiff alleges that defendants failed to “provide a detailed 6 explanation as to why they rejected the specific evidence” in plaintiff’s file, that they “failed to provide 7 a description of any material or information necessary” for plaintiff to perfect his claim, and failed to 8 provide plaintiff’s attorney “with enough time to review the administrative records prior to the deadline” 9 for plaintiff’s appeal. Compl. ¶¶ 35, 51-53, 59-61. Plaintiff has not alleged that any of these actions 10 United States District Court For the Northern District of California 3 flagrantly violate ERISA procedure. None of these allegations appears to have prevented the full 11 development of the administrative record. Plaintiff is not entitled to discovery regarding the standard 12 of review due to alleged procedural violations of ERISA at this time. 13 In their letter defendants discuss their willingness to allow written depositions of the physicians 14 for the limited purpose of establishing the relationship of the doctors to the administrators, the financial 15 compensation realized by the doctors, and the extent to which the doctors perform services for the 16 administrator versus other companies. Defendants’ Letter at 5-6. The Court ORDERS written 17 depositions pursuant to the above specifications. 18 19 CONCLUSION 20 For the reasons stated above, the Court GRANTS plaintiff’s request to depose the person most 21 knowledgeable regarding potential conflicts of issue between Sedgwick and the Plan. Plaintiff may also 22 seek written depositions from the doctors who examined the record for the limited purposes stated 23 above. The Court DENIES plaintiff permission to seek the remaining depositions. Plaintiff must serve 24 the appropriate requests and notices by March 12, 2012. [docs. 37 and 38]. The Court extends non- 25 expert discovery deadline until March 30, 2012. 26 27 IT IS SO ORDERED. Dated: March 5, 2012 SUSAN ILLSTON United States District Judge 28 4

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