Ryan v. Cargill, Incorporated

Filing 14

ORDER by Magistrate Judge Jonathan E. Hawley granting in part and denying in part 9 Motion for Discovery Authorization. Ryan shall submit appropriate interrogatories to Cargill limited to the question as allowed in this Order in subsection III.C, infra, within 14 days of entry of this Order. Cargill shall respond or object within the time period set forth in Federal Rule of Civil Procedure 15(b)(2). A Telephone Status Conference is set for 2/10/2015 at 1:30 PM (court will place call) before Magistrate Judge Jonathan E. Hawley to set additional deadlines in this matter and consider any requests by Ryan for additional conflict discovery if he believes that Cargills responses to his interrogatories warrant the same under the law as set forth herein. See written order. Entered on 11/12/14. (WG, ilcd)

E-FILED

Wednesday, 12 November, 2014 11:07:43 AM
Clerk, U.S. District Court, ILCD

IN THE
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
PEORIA DIVISION
THOMAS M. RYAN,
Plaintiff,
v.

Case No. 1:14CV01183

CARGILL, INCORPORATED,
Defendant.
Order
Before the Court is the Plaintiff, Thomas Ryan’s, Motion for Discovery
Authorization (D. 9; D. 10) and the Defendant, Cargill, Incorporated’s (Cargill),
response thereto (D.11). The Court heard oral argument on the motion on
November 10, 2014. For the reasons stated, infra, Ryan’s motion is GRANTED in
part and DENIED in part.
I
Ryan alleges that Cargill denied him a “Disability Retirement Benefit” and
therefore “benefits due to him under the terms of his plan,” giving him a cause of
action under the Employee Retirement Income Security Act (ERISA). 29 USC §
502(a).
As alleged in the Complaint (D. 1), Ryan had nineteen years of
“Continuous Service” with Cargill when, at age thirty-nine, he suffered a severe
spinal injury at the Cargill soybean facility in Bloomington, Illinois. Mr. Ryan
thereafter applied for a “Disability Retirement Benefit” under the 2002 “Pension
Plan” (Plan), to which he was a Participant as defined by that Plan. Cargill,
acting as the Plan Sponsor and Administrator, denied the application.

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In doing so, Cargill noted that “Section 1.16 of the Plan provides that a
Participant is not eligible for Retirement under the Plan unless the Participant
has a ‘termination of employment for reason other than death after a Participant
has fulfilled all the requirements for a . . . Disability Retirement.’” (emphasis in
original) (D. 1-2 at ECF p. 2). Section 11.1 provides:
A Participant shall be eligible to receive a Disability Retirement
Benefit on or after having attained age forty-five (45) and having
completed (15) or more years’ Continuous Service and having the
Company determine upon application by such Participant that he is
totally and permanently disabled, as hereinafter defined.
(D. 1-1 at ECF p. 34). The dispute in this case involves the age requirement.
Cargill interpreted these provisions as requiring a Participant to have
reached the age of forty-five at the time of “termination” before being eligible for
a Disability Retirement Benefit. Because Ryan was not age forty-five at that time,
Cargill concluded that the Plan forever precluded Ryan from receiving the
Disability Retirement Benefit; he was ineligible because he did not meet the age
requirement. (D. 1-2 at ECF p. 2). Cargill also stated that “the Plan has been
consistently administered to require termination after attainment of both the age
and service requirements listed for a Disability Retirement Benefit.” Id. Ryan,
however, alleges that so long as a Participant meets the disability and
Continuous Service requirements, then he is entitled to the Disability Retirement
Benefit at age forty-five, regardless of how old the Participant was at the time of
“termination.” In other words, Ryan was eligible for the benefit at the time of
“termination” at age thirty-nine, but he could not receive the benefit until he
reached age forty-five.
In the parties’ Proposed Discovery Plan Pursuant to Rule 26(f) (D.), they
disputed the discovery allowable in this case. Cargill posited that no discovery
should be allowed, the case being limited to the administrative record, whereas
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Ryan argued that he was entitled to some limited discovery. The Court directed
the parties to brief the issue, and the issue is now before the Court.
In Ryan’s Memorandum, quoting from the Discovery Plan, he notes that
he seeks discovery in three areas. The first area involves exploring the structural
conflict of interest inherent in the situation where the plan administrator both
evaluates claims for benefits and pays benefits claims, present here because
Cargill performs both roles. See Metropolitan Life Ins Co v Glenn, 554 US 105, 114
(2008). He would like to explore the nature and extent of this conflict with the
following:
No. 1. Plaintiff [Ryan] also intends limited interrogatories
concerning Cargill’s compensation policies for the staff that decide
and review benefits claims, any management checks for inaccurate
decision-making and management steps to wall off benefit claims
from company finances.
(D. 10 at ECF pp. 4-5).
The second area involves Cargill’s statement to Ryan that “the Plan has
been consistently administered to require termination after attainment of both
the age and service requirements listed for a Disability Retirement Benefit.” (D.
1-2). Ryan would like limited interrogatories to determine the truth of this
statement, he claiming that Cargill “opened the door” to this discovery by
making this statement.
Finally, he seeks a calculation from Cargill of the monthly Disability
Retirement Benefit he would have received had Cargill approved the benefit for
him when he attained age forty-five in 2012, along with a specific itemized
explanation of that calculation, with citation to Plan provisions for support. (D.
10 at ECF pp. 4-5). He argues he is entitled to discovery in this area because it “is
simple common sense” to require the Plan fiduciary to verify the amount at
stake. (D. 10 at ECF p. 5).
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Cargill, however, argues that Ryan is entitled to no discovery at all.
Specifically, Cargill posits that because this case involves a deferential standard
of review, this case must be decided on the record submitted to the administrator
alone. Perlman v. Swiss Bank Corp Comprehensive Disability Protection Plan, 195 F3d
975, 981 (7th Cir 1999).

Second, although there is a limited exception for

discovery even in cases with deferential review where a structural conflict of
interest is present, Ryan has failed to meet the threshold showing necessary to
allow discovery into this question.
II
“Deferential review of an administrative decision means review on the
administrative record.” Perlman, 195 F3d at 981-82. The general rule, with one
notable exception discussed, infra, is that discovery is allowable only where
review is de novo. Id at 982. Although decisions of ERISA plan administrators
presumptively receive de novo review, if the plan establishes discretionary
authority then review is deferential. Id at 980. Here, the Plan gives the
administrator such discretion and, ordinarily, the deferential standard would
therefore apply. (D. 1-1 at ECF p. 79).
Although the parties dispute what the appropriate standard of review is in
this case, the Court first finds that, under either standard of review, Ryan is not
entitled to discovery which is unrelated to the conflict question. Here, the only
question in the case revolves around the proper interpretation of the relevant
Plan language. Under a de novo standard of review, the only information
necessary to resolve the question is the language of the Plan itself. Thus, the
discovery sought in item “No. 3” relating to what Ryan’s potential benefits
would be should he prevail is irrelevant to the question at hand. What Ryan’s
benefits would be makes it no more or less likely that one interpretation of the
Plan is better than another. Likewise, regarding item “No. 2,” whether the Plan
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did or did not consistently interpret the Plan in the way it did in this case, again,
does not make it more or less likely that one interpretation of the Plan is better
than another. If the Court were to conduct a de novo review in this case, it would
look at the language of the Plan, interpret it, and decide what the proper reading
of the Plan is. None of the discovery Ryan seeks would be relevant to that
determination.
On the other hand, under a deferential standard of review where the Court
would decide whether the decision of Cargill was “arbitrary and capricious,”
Perlman, 195 F3d at 982, items 2 and 3 might be relevant. If Cargill interpreted the
Plan the way Ryan does in every case but his, then it may very well have acted in
an “arbitrary and capricious” manner here. Therefore, Cargill’s practices in the
past in similar situations would be relevant to this question. However, under the
deferential standard of review, although the information Ryan seeks is relevant,
such discovery is ordinarily precluded. Perlman, 195 F3d at 981-82 (“Deferential
review of an administrative decision means review on the administrative
record.”). Ryan has not cited, nor has the Court found, cases which allow
discovery in this circumstance on any question, no matter how relevant, with the
exception of discovery exploring a conflict of interest.
The Court is mindful of the Catch-22 nature of this finding; if review is de
novo, the discovery sought is irrelevant, but if review is deferential, the discovery
sought may be relevant but is ordinarily precluded by the caselaw. Nevertheless,
the Court is bound to follow those precedents and, accordingly, under either
standard of review, discovery unrelated to a conflict of interest is not
permissible. The Court therefore denies Ryan’s request for discovery to the
extent that he seeks discovery unrelated to the conflict of interest question.

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III
A
As mentioned, supra, one issue on which courts have allowed discovery is
where the plan administrator both evaluates claims for benefits and pays benefits
claims, present here because Cargill performs both roles. Specifically,
notwithstanding Perlman’s limitation on discovery, the Seventh Circuit in Semien
v Life Ins Co of North America, 426 F3d 805 (7th Cir 2006), carved out an exception
where this type of conflict is present. Where this type of structural conflict is
present, the court held that discovery in a case challenging the benefits
determination of plan administrators is permissible only in “exceptional”
circumstances—circumstances in which the claimant can “identify a specific
conflict of interest or instance of misconduct” and “make a prima facie showing
that there is good cause to believe limited discovery will reveal a procedural
defect.” Dennison v Mony Life Retirement Income Security Plan for Employees, 710
F3d 741 (7th Cir 2013), quoting Semien, 436 F3d at 815.
Subsequent to Semien, however, the United States Supreme Court decided
Metropolitan Life Ins Co v Glenn, 128 US 2243 (2008). In Glenn, the Court held that
the dual role presented in this case creates a conflict of interest, structural in
nature, and present in every such case. Glenn, 128 US at 2346. When determining
how a court should take this conflict into account, the Court held that the conflict
should “be weighed as a ‘factor’ in determining whether there is an abuse of
discretion.” Id at 2350, quoting Firestone Tire & Rubber Co v Brunch, 489 US 101,
115 (1989). The Court also noted some facts which inform the conflict question,
such as the likelihood that the conflict affected the benefits decision, a history of
biased claims administration, steps by the administrators to reduce potential bias

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and to promote accuracy, and management checks that penalize inaccurate
decisionmaking irrespective of whom the inaccuracy benefits. Id at 2351.
This language in Glenn caused some courts to question the continued
validity of the burden erected by the holding in Semien before “conflict
discovery” is permissible, see for example Gessling v. Group Long Term Disability
Plan for Employees of Spring/United Mgmt Co, 2008 WL 5070434 (SD Ind 2008). In
Dennison, the Seventh Circuit directly addressed the impact of Glenn on the
holding of Semien and its effect on conflict discovery.
The court in Dennison reiterated its opinion that benefits review officers
should not “be subjected to extensive discovery on a thinly based suspicion that
their decision was tainted by a conflict of interest.” 710 F3d at 746, citing Marrs v
Motorola, Inc,

577 F3d 783, 787 (7th Cir 2009). Although “[t]here is a latent

conflict of interest any time someone is asking for money from a company,” that
conflict can be “muted to an extent if the party is an employee or former
employee, since good relations with employees are a corporate asset.” Id. Noting
that Glenn “is not about discovery,” the court reaffirmed that even where a
structural conflict of interest exists, the correct standard of review remains after
Glenn the arbitrary and capricious standard—“one of the facts that must be taken
into account in applying that standard is any conflict of interest.” Dennison, 710
F3d at 747, quoting Fischer v Liberty Life Assurance Co, 576 F3d 369, 375 (7th Cir
2009). To determine the likelihood and gravity of the conflict “might require
discovery to ‘identify a specific conflict of interest or instance of misconduct,’ a
task of identification that in Semien [the court] said was a prerequisite to
discovery, not a goal of discovery.” Id.
The court in Dennison ultimately concluded that “[t]hese cases suggest a
softening, but not a rejection, of the standard announced in Semien; and there can
be no doubt that even when some discovery is necessary in a particular case to
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explore a conflict of interest, trial courts retain broad discretion to limit and
manage discovery under Rule 26 of the civil rules.” 710 F3d at 747. Beyond this
articulation, the court declined to further “trace out the contours of permissible
discovery under ERISA,” given that the “case law [is] in flux.” Id.
The district courts in this circuit since Dennison have settled on a functional
test for when to allow discovery when a structural conflict is present. For
example, in Warner v Unum Life Ins Co of America, 2013 WL 3874060, *3 (ND IL),
the court stated that “in light of Semien, as ‘softened’ by Dennison, discovery is
still not permitted in the run-of-the mill case in the Seventh Circuit, and the twopart test established in Semien remains instructive.” Although not an “onerous”
burden, “a plantiff still must identify a specific conflict or instance of misconduct
and make a prima facie showing that there is good cause to believe that limited
discovery will reveal a procedural defect” before being able to obtain discovery
in a case governed by the arbitrary and capricious standard. Id. Applying this
standard, the court in Warner noted that the plaintiff cited to several facts which
allowed it to meet its burden, including the administrator’s alleged hostility to
the type of disability claim she made and a history of biased claims
administration that sparked an investigation of its claims practices by the United
States Department of Labor and dozens of state regulatory authorities, which
culminated in the administrator paying a multi-million dollar fine and hundreds
of millions of dollars to past claimants. Id. These alleged facts met the “softened”
Dennison standard and, therefore, the court allowed limited discovery into the
conflict question.
On the other hand, using the same “run-of-the-mill” standard articulated
in Warner, the court in Boxell v Plan for Group Ins of Verizon Communications, Inc,
2013 WL 5230240, *5 (ND Ind), declined to allow conflict discovery. The court
noted that the plaintiff “has not identified a specific conflict or instance of
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misconduct or made a prima facie showing that there is good cause to believe
that limited discovery will reveal a procedural defect.” Although the plaintiff
might have disagreed with the plan administrator’s conclusion, “that does not
equate to even a preliminary showing of misconduct, bias, or conflict of interest
that might warrant discovery beyond the record on which the administrator
relied,” the court concluded. Id.
The court in Gerbert v Thrivent Financial for Lutherans Group Disability
Income Ins Plan, 2013 WL 6858531 (ED Wis), applying the “run-of-the-mill” test,
also declined to allow conflict discovery. Distinguishing the facts in the case from
those in Warner, the court noted that in Warner the requisite showing was made
due to the documented history of bias on the part of the plan administrator. The
plaintiff in Gerbert, however, like the plaintiff in Boxell, had no such similar facts
to direct the court, and therefore lacked the “key to open the door to additional
discovery that is not permitted in the typical case.” Id at *2.
B
Applying the correct standard in this case as outlined in Dennison and its
progeny, it inevitably follows that Ryan fails to make the threshold showing
necessary to allow conflict discovery, with one very limited exception, discussed
in subsection “III.C”, infra. In “No. 1,” Ryan seeks discovery directly related to a
conflict of interest. This case is the quintessential “run-of-the-mill” case.
Although the structural conflict as defined in Glenn is present here, there are
virtually no other facts which would allow conflict discovery. Neither the
Complaint nor Ryan’s Motion cite a specific conflict or instance of misconduct.
No history of bias or prior specific findings of conflict by other courts is noted by
Ryan. One cannot meet the “softened” Semien standard with virtually no facts, or
even allegations, related to a conflict. Indeed, to allow conflict discovery in this
case would turn the Seimien/Dennison standard on its head. As the court in
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Dennison stated, identifying a “specific conflict of interest or instance of
misconduct . . . was a prerequisite to discovery, not a goal of discovery;” Ryan
seeks to do just the opposite. 710 F3d at 747. Moreover, if conflict discovery were
allowed in this case, where the only fact alleged is the structural conflict
identified in Glenn, then conflict discovery would be allowable in virtually every
such case. Without question, the courts have rejected such a rule, instead
adopting the “softened” Semien standard.
The Court is sympathetic to Ryan’s assertion that “[i]n order for the Court
to weigh a potential conflict or bias, it first has to be subject to discovery; if no
discovery, there’s nothing to weigh.” (D. 10 at ECF p. 6). Common sense might
make one wonder how one can even meet the “softened” Semien standard
without being allowed some discovery to at least meet that burden. However, the
precedents are clear and, as Warner illustrates, it is possible to meet ones burden
without discovery; the facts and specific instances of bias presented in Warner
were all presented to the court prior to and in support of allowing discovery. Thus,
although somewhat counter-intuitive, one can—and indeed must—have specific
facts of bias or misconduct before being allowed to conduct discovery into a
structural conflict. Ryan having none, conflict discovery is precluded, with one
exception.
C
As the court in Dennison noted, trial courts retain broad discretion to limit
and manage discovery under Rule 26 of the civil rules.” 710 F3d at 747. The court
in Dennison further declined to outline the contours of the “softened” Semien
standard, leaving it to the lower courts to do so, as the courts in Warner, Boxell,
and Gerbert did under the particular circumstances of those cases. Id. Lower
courts must balance the interest in not subjecting benefits review officers “to
extensive discovery on a thinly based suspicion that their decision was tainted by
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a conflict of interest,” 710 F3d at 746, citing Marrs v Motorola, Inc, 577 F3d 783,
787 (7th Cir 2009), against the need for information for courts to “weigh”
regarding the impact of a structural conflict of interest. Glenn, 128 US at 2350. In
the present case, there is one area where the weighing of these factors falls on the
side of allowing some limited discovery.
As Ryan notes, when denying him benefits, Cargill asserted that “the Plan
has been consistently administered to require termination after attainment of
both the age and service requirements listed for a Disability Retirement Benefit.”
(D. 1-2 at ECF p. 2). Ryan argues that this statement “opened the door” to some
discovery on this question, and the Court agrees. This statement, as part of the
administrative record, stands as the only evidence on this question in the record.
It is an assertion made by Cargill without any evidence in the record to support it
and, without discovery, Ryan has no means of testing the veracity of this
statement. This statement brings the case out of the “run-of-the-mill” case on the
issue to which it is directed. It is fundamentally unfair to allow Cargill to inject
this question into the administrative record, while being shielded from providing
any evidence to support the claim.
Likewise, discovery on this question is directly related to the structural
conflict of interest for which courts have allowed discovery in exceptional cases.
If Cargill’s assertion is unsupported by facts, then the false assertion would itself
be evidence of “a specific conflict of interest or instance of misconduct” which
would allow Ryan to “make a prima facie showing that there is good cause to
believe [further] limited discovery will reveal a procedural defect.” Dennison, 710
F3d at 741, quoting Semien, 436 F3d at 815. In other words, if Cargill in fact did
not always interpret the Plan in the manner it asserts, then further discovery
might be warranted to explore how, if at all, the structural conflict present in this
case impacted that difference in interpretation. On the other hand, if the facts
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establish the truth of its assertion, then, in light of the analysis in the Order, there
would be no “good cause” to allow further exploration into the conflict question.
Moreover, allowing discovery on this limited question does little violence
to the policy against subjecting benefit review officers to “extensive” discovery.
The question here is a simple one which can be addressed by a few
interrogatories asking: 1) has Cargill ever interpreted the relevant Plan
provisions differently than it did in the present case and, if so, 2) what were the
circumstances of those instances. 1 The data on this question should be easily and
readily available to Cargill and, assuming the truth of its assertion, may involve a
simple answer of “no.” In light of the circumstances of this case, the weighing of
the relative interests in favor and against “conflict” discovery, and the precedents
on the question, the Court finds this limited discovery is warranted and within
its “broad discretion to limit and manage discovery under Rule 26 of the civil
rules.” Dennison, 710 F3d at 747.
IV
For the reasons stated, supra, Ryan’s Motion for Discovery Authorization
(D. 9) is GRANTED in part and DENIED in part.
Ryan shall submit appropriate interrogatories to Cargill limited to the
question as allowed in this Order in subsection III.C, infra, within 14 days of
entry of this Order. Cargill shall respond or object within the time period set
forth in Federal Rule of Civil Procedure 15(b)(2).
A telephonic status conference is set on February 10, 2015, at 1:30 pm to set
additional deadlines in this matter and consider any requests by Ryan for

The Court does not presume to provide Ryan with the exact wording of any interrogatories it may
submit to Cargill, but rather simply notes here the general areas to which any such interrogatory is
limited.

1

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additional conflict discovery if he believes that Cargill’s responses to his
interrogatories warrant the same under the law as set forth herein.
So Ordered.
Entered on November 12, 2014
s/Jonathan E. Hawley
U.S. MAGISTRATE JUDGE

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