Zavislak v. Google Inc. Welfare Benefit Plan

Filing 30

ORDER by Judge Nathanael M. Cousins GRANTING IN PART PLAINTIFF'S REQUEST FOR LIMITED DISCOVERY Re: Dkt. Nos. 22, 25 (nclc2, COURT STAFF) (Filed on 2/27/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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10 MARK ZAVISLAK,

Case No. 14-cv-04802 NC

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ORDER GRANTING IN PART
PLAINTIFF’S REQUEST FOR
LIMITED DISCOVERY

Plaintiff,

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v.

13 GOOGLE INC. WELFARE BENEFIT
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Re: Dkt. Nos. 22, 25

PLAN,
Defendants.

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Mark Zavislak brings this action under the Employee Retirement Income Security Act

18 of 1974 (“ERISA”), 29 U.S.C. § 1132(e)(1) to recover benefits due to him under the terms
19 of the defendant Google Inc. Welfare Benefit Plan (the “Plan”) and to clarify his right to
20 future benefits under the terms of the Plan. See generally Dkt. No. 1. The parties have
21 consented to the jurisdiction of a magistrate judge. Dkt. Nos. 8, 12. The issue before the
22 Court is whether discovery should be permitted, and if so, the appropriate scope of such
23 discovery. After considering the parties’ written submissions and the arguments of counsel
24 at the hearing, the Court GRANTS IN PART Zavislak’s request for discovery.
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I. BACKGROUND
The Plan at issue here is primarily self-funded by Google Inc. (“Google”). Dkt. Nos.

27 25; 26-1 at 3. Google is also the Plan’s administrator. Id. Anthem Blue Cross Life and
28 Health Company acts as a claims administrator and is granted discretion to administer the
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1 Plan’s claims and adjudicate any appeals from those claims. Dkt. Nos. 25; 26 ¶ 2; 26-1 at
2 3; 28 ¶ 3.
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The complaint alleges that, during the relevant time periods, Zavislak and his spouse

4 were both Google employees who were participants in the self-funded portion of the Plan.
5 Dkt. No. 1 ¶¶ 7, 9. Zavislak and his spouse each paid premiums for family medical
6 coverage. Id. ¶ 9. The Court will not summarize the details of the dispute in this case as
7 they are not relevant to the discovery issue before it. In short, the dispute concerns whether
8 a single medical expense submitted to, and counted against the deductible of, Zavislak’s
9 high deductible health plan (“HDHP”) as a primary claim may also be submitted to, and
10 counted fully against the deductible of, Zavislak’s spouse’s HDHP as a secondary claim.
11 See id. ¶¶ 11-18; Dkt. No. 25. The complaint alleges that from 2013 until early 2014,
12 Anthem allowed all such secondary claims. Dkt. No. 1 ¶ 12. Between March and May
13 2014, Anthem sometimes denied and other times allowed such claims before consistently
14 denying them. Id. ¶¶ 21-22. In September, after Zavislak appealed the denial of his
15 claims, Anthem retroactively denied claims it had earlier allowed. Id. ¶ 25.
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The complaint further alleges that Anthem’s stated reason for denying the claims

17 changed several times. Anthem initially denied the claims “due to coordination of
18 benefits.” Id. ¶ 19. After Zavislak filed his appeal, Athem issued a final determination
19 denying the appeal due to an unspecified “IRS regulation on Health Savings Accounts.”
20 Id. ¶ 26. When Zavislak asked for a copy of that regulation, Anthem was unable to locate
21 it and instead pointed him to irrelevant documents. Id. ¶ 27-29. When Zavislak insisted
22 that he was entitled to the actual documents Anthem relied upon, Anthem amended its final
23 appeal determination to cite to a number of IRS documents that, according to the
24 complaint, either support Zavislak’s position or are irrelevant. Id. ¶¶ 30-32.
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Zavislak seeks an order allowing him to conduct limited discovery “aimed at

26 uncovering the impact of an apparent conflict of interest on the part of the Google Inc.
27 Welfare Benefit Plan administrator.” Dkt. No. 22. The Plan opposes the request. Dkt. No.
28 25. Both parties submitted briefs supported by declarations. Dkt. Nos. 22, 25. The briefs
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1 assume for the purposes of the issue presented that the abuse of discretion standard applies.
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II. LEGAL STANDARD

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When a plan confers discretion on the administrator to determine eligibility for

4 benefits or to construe the terms of the plan, the Court applies abuse of discretion review.
5 Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 963 (9th Cir. 2006). However, “if a
6 benefit plan gives discretion to an administrator or fiduciary who is operating under a
7 conflict of interest, that conflict must be weighed as a ‘facto[r] in determining whether
8 there is an abuse of discretion.’” Id. at 965 (quoting Firestone Tire & Rubber Co. v. Bruch,
9 489 U.S. 101, 115 (1989)).
The Ninth Circuit has held that an insurer that acts as both the plan administrator and

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11 the funding source for benefits operates under a “structural conflict of interest.” Id. at 965.
12 This is so because, on the one hand, “such an administrator is responsible for administering
13 the plan so that those who deserve benefits receive them,” while on the other, the
14 administrator “has an incentive to pay as little in benefits as possible to plan participants
15 because the less money the insurer pays out, the more money it retains in its own coffers.”
16 Id. at 965-66.
The abuse of discretion review is “informed by the nature, extent, and effect on the

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18 decision-making process of any conflict of interest that may appear in the record.” Id. at
19 967. “This standard applies to the kind of inherent conflict that exists when a plan
20 administrator both administers the plan and funds it, as well as to other forms of conflict.”
21 Id. “The court may consider evidence beyond that contained in the administrative record
22 that was before the plan administrator, to determine whether a conflict of interest exists that
23 would affect the appropriate level of judicial scrutiny.” Id. at 970. While the district court
24 may, in its discretion, consider extrinsic evidence “to decide the nature, extent, and effect
25 on the decision-making process of any conflict of interest,” the decision on the merits
26 “must rest on the administrative record once the conflict (if any) has been established, by
27 extrinsic evidence or otherwise.” Id.
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III. DISCUSSION

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Whether Discovery Should Be Allowed

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Zavislak argues that discovery should be permitted because the inconsistencies with

4 the way his claims were handled indicate a conflict. Dkt. No. 22. However, a showing of
5 inconsistencies or mistakes in the claims administration does not by itself demonstrate
6 conflict. See Conkright v. Frommert, 559 U.S. 506, 509 (2010) (holding that honest
7 mistake in ERISA plan interpretation does not justify stripping the plan administrator of
8 deference for subsequent related interpretations of the plan).
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Zavislak further contends that, because Google acts as both the Plan administrator

10 and the funding source for benefits, there is a structural conflict of interest under Abatie.
11 Dkt. No. 22. The Ninth Circuit in Abatie, 458 F.3d 955 did not address the specific
12 situation such as the one presented here, where the plan administrator is the funding source
13 but has delegated the claims administration function to a separate entity. Under the
14 reasoning articulated in Abatie, however, the fact that a separate entity acted as a claims
15 administrator does not necessarily mean the absence of conflict if the plan administrator
16 and funding source influenced the rule that resulted in denial of benefits.
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The case of Brown v. United Healthcare Insurance Co , No. 14-cv-0661 (S.D. Cal.

18 Sep. 12, 2014), Dkt. No. 15, cited by Zavislak is closer to the facts of the present case. The
19 court in Brown found that the plaintiff had “proffered potential inconsistencies with the
20 way the claim was handled that compel the Court to exercise its discretion to allow limited
21 discovery to permit a full examination of the impact the undisputed structural conflict of
22 interest had on Defendants’ claim handling decisions.” Id. at 6. In Brown, Qualcomm was
23 both the plan administrator and funding source of the plan at issue, while UnitedHealthcare
24 acted as a third-party administrator of the plan and denied the plaintiff’s claims. Id. at 1-2;
25 see also id., Dkt. No. 13 at 2. As the plan administrator, Qualcomm had the discretionary
26 authority to interpret the plan, while the claims administrator, UnitedHealthcare was
27 responsible for the day-to-day administration of the plan’s coverage as directed by the plan
28 administrator. Id., Dkt. No. 13 at 23. The court noted that the presence of a structural
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1 conflict of interest was “undisputed,” as the record established that Qualcomm was both a
2 funding source and administrator of the plan. Id., Dkt. No. 15 at 5. In so concluding, the
3 court did not address the role of UnitedHealthcare as the claims administrator.
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The present case is similar to Brown in that the plan administrator is also the funding

5 source while a separate entity handles the claims administration. In addition, here Zavislak
6 proffers three facts as evidence that the plan administrator, Google, may have influenced
7 the denial of the claims at issue. First, Zavislak’s declaration submitted in support of his
8 discovery request states that he had a telephone conversation with Anthem’s Account
9 Executive for Google who revealed that the change in Zavislak’s claims processing
10 between 2013 and 2014 was due to a claims audit. Dkt. No. 22-1 ¶ 3.
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Second, Zavislak’s declaration summarizes a discussion with Google’s U.S. Health

12 Plan Program Manager who stated that Google does randomly audit certain claims. Dkt.
13 No. 22-1 ¶ 2. According to Zavislak, the Google employee further stated that he planned
14 to seek reimbursement from Anthem for amounts that he believed were incorrectly paid on
15 Zavislak’s claims in 2013. Id.; Dkt. No. 22.
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Third, Zavislak relies on a document produced in discovery as part of Anthem’s

17 claim file. Dkt. No. 22-2. The document consists of internal email exchanges at Anthem
18 discussing Zavislak’s appeal of the denial of his claims. Id. As part of this exchange,
19 Anthem’s Managing Associate General Counsel noted that a decision favorable to Zavislak
20 was an “option [that] increases the likelihood that Google will have to pay claims under the
21 member’s coverage under the wife’s plan” and asked Anthem’s Senior Associate General
22 Counsel if she thinks that “because of that we’d need Google’s consent before offering up
23 that second option.” Id. at 3. The document produced does not contain a response to that
24 question. It is possible that such a response or further discussion on the subject might not
25 have been memorialized in writing. While the Plan attempts to minimize the significance
26 of this document, the fact is that an Anthem attorney considered it at least possible that
27 Google’s consent was required to apply a rule that would result in payment of claims. The
28 Plan could have, but did not, submit a declaration explaining whether the attorney’s inquiry
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1 triggered any response or further discussion on the subject.
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In opposition to the request for discovery, the Plan argues that no structural conflict

3 exists because the claims administrator, Anthem, determined on its own that Zavislak’s
4 claims “failed to comply with the terms of the Plan and the [Internal Revenue] Code” and
5 so denied them without any interference from Google. Dkt. No. 25. In support for this
6 assertion, the Plan offers a declaration by Google’s Health Care Delivery Manager stating
7 that the decision to “review and/or deny Plaintiff’s claims during and after March 2014”
8 was entirely Anthem’s and that Google was not “involved in Anthem’s substantive
9 decision with respect to any claim or appeal of the Plaintiff’s.” Dkt. No. 26 ¶¶ 4-5. In
10 addition, a declaration by Anthem’s Regional Vice President, National Account
11 Management vaguely states that “[a]t some point in 2014, it came to Anthem’s attention
12 that plaintiff Mark Zavislak was not submitting claims in accordance with the applicable
13 law and Plan requirements.” Dkt. No. 28 ¶ 4. The declaration further states that Anthem
14 acted pursuant to its discretion and did not take any direction from anyone else. Id. ¶ 5.
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The Court finds that the declarations submitted by the Plan are conclusory and

16 conspicuously fail to address the role that Google plays as the Plan administrator, whether
17 Google or Anthem has the responsibility for construing the terms of the plan and for
18 determining how the Plan should be administered to ensure compliance with the Internal
19 Revenue Code, and whether Google had any communications with Anthem about the rule
20 that was applied to deny Zavislak’s claims. If the entity that funds the plan, Google,
21 directed or influenced a rule that resulted in decreased payments by Google, that could
22 demonstrate a conflict despite the fact that another entity administered Zavislak’s claims
23 and appeals.
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The Plan does not cite to a controlling authority on point in support for its position.

25 The Plan relies on Patrick v. Hewlett-Packard Co., No. 06-cv-1506 (S.D. Cal. Dec. 1,
26 2008), Dkt. No. 76, where the court overruled the plaintiff’s objections to a magistrate
27 judge’s order that denied discovery, finding no structural conflict of interest. The court
28 held that, because defendant HP funded the plan, while the plan granted VPA discretionary
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1 authority to determine the extent and amount of benefits, no structural or inherent conflict
2 of interest existed. Id. at 9. Unlike this case, in Patrick, VPA not only was authorized to
3 process claims, determine eligibility for and the amount of any benefits, and render
4 decisions on appeals of denied claims, but also was “unambiguously granted the discretion
5 to construe Plan language and make decisions on review on behalf of HP.” Id., Dkt. No.
6 66 at 15. Also unlike this case, the plaintiff in Patrick had not identified anything in the
7 record that gave HP the right to make or influence claims decisions. Id., Dkt. No. 76 at 5.
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Similarly inapposite is Riffey v. Hewlett-Packard Co. Disability Plan, No. 05-cv-

9 1331, 2007 WL 946200 (E.D. Cal. Mar. 27, 2007) which is cited by the Plan. Riffey also
10 involved a self-funded plan by HP with VPA as the plan’s claims administrator. Id. at *1.
11 The claims administrator again had the discretionary power to construe the language of the
12 plan. Id. at *10. The court in Riffey rejected the argument that a structural conflict of
13 interest is transferred from the funding source of a plan to the claims administrator, where
14 the administrator is not paid on the basis of claims denied. Id. at *11. By contrast in this
15 case the Plan administrator is the funding source of the Plan, no evidence has been
16 presented that the claims administrator had the discretion to construe the terms of the Plan,
17 and there is some evidence that the Plan administrator may have influenced the rule applied
18 by the claims administrator to deny Zavislak’s claims.
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For the same reason, the Plan’s citation to McClintic v. Zions Bancorporation, No.

20 12-cv-128, 2013 WL 4950865 (D. Ariz. Sept. 13, 2013) is also not helpful. While the
21 court there found no structural conflict of interest because the claims administrator of the
22 plan was not the funding source for the plan benefits, there is no indication that the plan
23 administrator was the funding source or that the plan administrator influenced the denial of
24 benefits. Id. at *2. The court in McClintic also found no connection between the discovery
25 requested by the plaintiff and the alleged conflict of interest.
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In conclusion, the Court finds that Zavislak has made a sufficient showing of a

27 possible conflict to justify discovery limited to whether and to what extent the Plan
28 administrator, Google, participated in or influenced the formulation, adoption, or revision,
Case No. 14-cv-00584 NC
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ule
ulted in the denial of Zavislak’s cl
laims.
1 of the ru that resu

2 B.

Th Approp
he
priate Scope of Discov
very

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ed
Th Court ha reviewed the discove requeste by Zavis which consists of four
he
as
d
ery
slak

nt
i
ries. Dkt. N 22 at 7- The Cou is mindf
No.
-9.
urt
ful
4 documen requests and seven interrogator
ngress sought “to creat a system that is [not] so comple that adm
te
]
ex
ministrative c
costs,
5 that Con
tion
ses,
s
ring
A]
6 or litigat expens unduly discourage employers from offer [ERISA plans in the
ce.” Conkr
right, 559 U.S. at 517 (Varity Corp v. Howe, 516 U.S. 4 497 (1996)).
U
(
rp.
489,
7 first plac
urt
at
very
oad. See e.g id. at 7 (R
g.,
RFP
8 The Cou finds tha the requested discov here is unduly bro
eeking “Any and all ag
y
greements or understan
ndings betw
ween the pla administr
an
rator
9 No. 1 se
ministrator re
elating to th managem and/or administra
he
ment
r
ation of the health
10 and the claims adm
0
ce
ssue
”).
urt
at
wing
y
11 insuranc plan at is herein” The Cou finds tha the follow limited discovery is
1
iate
o
ent
12 appropri based on the curre record:
2

13
3

Document Re
equests:

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4

1.

The ag
greement be
etween Goo and An
ogle
nthem refer
renced in Dkt. No. 28 ¶ 10

em
ursuant to a written agr
reement wi Google”
ith
”).
15 (stating that “Anthe acted pu
5

16
6

2.

All do
ocuments th relate to the rule(s) that was us by Anth to deny
hat
sed
hem
y

k’s
17 Zavislak claims.
7

18
8

In
nterrogatorie
es:

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9

1.

Descri in detail all commu
ibe
unications b
between Go
oogle and A
Anthem rela
ating to

(s)
s
nthem to de Zavisla claims, including b not limi to
eny
ak’s
but
ited
20 the rule( that was used by An
0
mmunication on the su
ns
ubject raised by Anthem Manag
d
m’s
ging Associa General
ate
l
21 any com
1
l
ail
m’s
General Co
ounsel at Dk No. 22-2 at 3.
kt.
2
22 Counsel in his ema to Anthem Senior Associate G
2

23
3

2.

Descri in detail all commu
ibe
unications b
between Go
oogle and A
Anthem rela
ating to

k’s
a
24 Zavislak claims and/or appeals.
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IT IS SO OR
T
RDERED.

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Date: Februa 27, 2015
ary
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____
__________
__________
____
Nath
hanael M. C
Cousins
Unit States M
ted
Magistrate J
Judge

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SCOVERY

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