Card v. Principal Life Insurance Company
Filing
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MEMORANDUM OPINION & ORDER: 1. Defendant's Motion 20 for Leave to File a Reply is GRANTED. 2. Plaintiff's Motion 17 for Discovery is GRANTED IN PART and DENIED IN PART. 3. This matter is scheduled for a TELEPHONE CONFERENCE on 5/4/2016 at 02:30 PM. (see Order for Instructions). Signed by Judge Karen K. Caldwell on 3/31/2016.(CBD)cc: COR, D
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
AT LEXINGTON
SUSAN CARD, aka Karen Card,
CIVIL ACTION NO. 5:15-139-KKC
Plaintiff,
V.
MEMORANDUM OPINION AND
ORDER
PRINCIPAL LIFE INSURANCE
COMPANY,
Defendant.
*** *** ***
This matter is before the Court on Plaintiff Susan Card’s Motion for Discovery (DE
17) and Defendant Principal Life Insurance Company’s Motion to Strike Plaintiff’s
Response or, in the alternative, for Leave to File a Reply. (DE 20). For the reasons set forth
below the Court will grant in part and deny in part Plaintiff’s motion for discovery and
grant Defendant’s motion for leave to file a reply.
I. BACKGROUND
This dispute arises over disability insurance policies held by Plaintiff Susan Card
that were underwritten and administrated by Defendant Principal Life Insurance
Company. (DE 1 at 2.) On May 17, 2015, Plaintiff filed a complaint with this Court alleging
that Defendant breached its disability insurance contracts with Plaintiff by wrongfully
denying her claim both when it was filed in December of 2013 and on appeal.1 (DE 1.) The
Complaint further alleges that Plaintiff was denied a full and fair review due, in part, to
Defendant’s operating under an inherent conflict of interest as both the evaluator and
Plaintiff’s Amended Complaint (DE 3) makes no substantive changes and only resolves a clerical
error.
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payor of claims under Plaintiff’s policy. This Court has jurisdiction over these claims
pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §
1132, which provides a mechanism for enforcing insurance policies like Plaintiff’s.
This Court entered a scheduling order on June 29, 2015, setting a briefing schedule
in the event that the parties could not agree on the applicable standard of review. (DE 9.)
Defendant filed its brief on August 13, but Plaintiff’s brief was not submitted until
September 1, 2015, (DE 19) Defendant now asks that this filing be stricken. (DE 20.) In the
interim between the standard of review filings, Plaintiff also moved for discovery related to
Defendant’s alleged conflict of interest. (DE 17.) The following analysis will address (1) the
parties’ filing disputes, (2) the applicable standard of review, and (3) Plaintiff’s entitlement
to discovery.
II. ANALYSIS
A. DEFENDANT’S MOTION
Before turning to the discovery and standard of review questions this Court must
first dispense with the parties ongoing feud over several collateral matters including: the
timeliness of Plaintiff’s brief regarding the standard of review (DE 26 at 4), the timeliness
of Defendant’s filing of the administrative record (DE 24 at 2), and the propriety of allowing
Plaintiff to file a reply brief to correct a deficiency alleged by Defendant’s responsive brief
on the standard of review. (DE 24 at 2.) These contentions led directly to Defendant’s
Motion now before this Court. (DE 20.) This Court is not persuaded by either party’s efforts
to play “gotcha.”
Plaintiff previously requested an extension to file her brief on the standard of
review. (DE 10.) However, Plaintiff’s subsequent brief did not rely on the material she
claimed was needed before she could file that brief, namely the administrative record. (DE
19.) Instead, Plaintiff alleged deficiencies in Defendant’s brief. (DE 19.) This type of attack
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would not have been possible without the requested extension, which allowed Plaintiff to
file a responsive brief, rather than arguing an independent basis for her proposed standard
of review. (DE 9.) Having styled her brief as a response, Plaintiff opened the door for
Defendant’s reply under this District’s Joint Local Rules of Civil Practice. See LR 7.1(c) (“A
party may file a reply memorandum within fourteen (14) days of service of the response.”).
Consistent with the permissive amendment and supplementation standards of the Federal
Rules of Civil Procedure, and in order to properly evaluate the applicable standard of
review this Court will consider all of Plaintiff and Defendant’s filings. Cf. Fed. R. Civ. P. 15
(“[o]n motion and reasonable notice, the court may, on just terms, permit a party to serve a
supplemental pleading”). Defendant’s alternative motion to file a reply brief will be granted.
(DE 20.)
B. DE NOVO OR DEFERENTIAL REVIEW
Plaintiff alleges that discovery is necessary to determine if, and to what extent, an
alleged conflict of interest biased the Defendant’s analysis of her claims. (DE 17 at 3).
However, Defendant claims that Plaintiff’s motion for discovery would be moot if she
succeeds on her argument for a de novo standard of review. (DE 22 at 2.) Supreme Court
and Sixth Circuit precedent accord with this view. See Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101, 115 (1989) (“if a benefit plan gives discretion to an administrator or
fiduciary who is operating under a conflict of interest, that conflict must be weighed as a
factor in determining whether there is an abuse of discretion”) (internal citations omitted);
Pearce v. Chrysler Grp., L.L.C. Pension Plan, 615 F. App'x 342, 350 (6th Cir. 2015) (“the
district court's review is limited to the administrative record absent evidence to support ‘a
procedural challenge to the administrator's decision, such as an alleged lack of due process
afforded by the administrator or alleged bias on its part.’“) (emphasis in original) (citing
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Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609 (6th Cir. 1998)). Thus, this Court will
address Plaintiff’s entitlement to de novo review before turning to her discovery request.
Plaintiff argues for a de novo review of Principal’s decision. (DE 19.) Defendant
argues for the more deferential arbitrary and capricious standard due to the Plan’s
delegation of discretionary authority. (DE 10.) As noted above, Defendant’s chide Plaintiff
for requesting discovery “only relevant in matters subject to an arbitrary and capricious
standard of review,” while arguing for a de novo review. (DE 22 at 2.) Though this Court is
not convinced that Plaintiff has “implicitly conceded” her standard of review argument by
requesting discovery (DE 20 at 3), Defendant has provided sufficient evidence to justify a
more deferential review than de novo. Cf. Fed. R. Civ. P. 8(d)(3) (“A party may state as
many separate claims or defenses as it has, regardless of consistency.”)
Courts reviewing benefit determinations under ERISA apply a de novo standard
unless the plan provides “the administrator or fiduciary discretionary authority to
determine eligibility for benefits,” in which case a “deferential standard of review [is]
appropriate.” Firestone, 489 U.S. at 111, 115. Plaintiff claims that de novo review should
apply, not because the plan does not satisfy the test above, but because Defendant’s
standard of review brief did not specifically state what individual vested with discretion
exercised that authority in reviewing Plaintiff’s claims. This argument is unpersuasive for
two independently sufficient reasons.
First, the case law cited by Plaintiff in support of her claim that Defendant has the
burden of proving both that the plan vested discretion, and that that discretion was
actually exercised by the designee, does not establish such a requirement. (DE 24 at 2.)
Both the Northern District of Ohio’s unreported holding, and the Sixth Circuit decision
cited therein, establish that deference is appropriate only if both those circumstances
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exist—neither Court addresses burdens of proof. Christoff v. Ohio N. Univ. Employee Ben.
Plan, No. 3:09-CV-540, 2010 WL 2246336, at *2 (N.D. Ohio June 4, 2010) (citing Shelby
County Health Care Corp. v. Majestic Star Casino, LLC Group Health Benefit Plan, 581
F.3d 355, 365 (6th Cir. 2009)). As Defendant points out, this issue usually only arises when
a plan administrator vested with authority purports to have delegated that authority to a
third party—generally a subsidiary corporation. See Frazier v. Life Ins. Co. of North
America, 725 F.3d 560 (6th Cir. 2013). Absent an allegation that Defendant delegated, or
did not actually exercise, the discretionary authority granted by the Plan documents, an
Administrator Defendant establishes an entitlement to deferential review by showing “that
the benefit plan gives the administrator or fiduciary discretionary authority to determine
eligibility for benefits or to construe the terms of the plan.” Firestone, 489 U.S. at 115.
Defendant’s brief and attached exhibits established as much and thus, Principal has
established an entitlement to deferential review.
Second, even if Defendant was saddled with the burden Plaintiff seeks, its initial
brief arguably made the requisite showing, and if not, its reply certainly establishes that
Defendant indeed exercised its delegated authority. Defendant’s brief states that the plan
documents “validly conferred discretionary authority to Principal Life to make the benefit
determinations at issue.” (DE 12 at 6.) The referenced determinations “at issue” are clearly
stated in Plaintiff’s complaint: “Ms. Card submitted her claim for disability benefits, but
Principal denied her claim. [ ] Ms. Card subsequently appealed the claim denial, but
Principal denied her appeal.” (DE 1 at 2 (emphasis added).) Defendant’s initial brief alleges
that it was given discretion to make the contested decisions, which were undisputedly made
by Defendant. Plaintiff’s claim that Defendant did not allege a valid exercise of discretion
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is, thus, undercut by Plaintiff’s own allegation that Defendant exercised that discretion, as
incorporated by reference.
Moreover, to the extent Plaintiff’s challenge relies on the original brief’s failure to
argue that Defendant’s individual employees were vested with discretion, the position is
untenable. It is well settled that ““[a]rtificial entities such as corporations may act only
through their agents[.]” Braswell v. United States, 487 U.S. 99, 110 (1988). Thus, it was
unnecessary for Defendant to further clarify that its employees actually made the
“determinations at issue.” (DE 12 at 6.) The determinations could have been made no other
way. Because Plaintiff presents no other support for applying a de novo review, this Court
will review Defendant’s determination under the “highly deferential arbitrary-andcapricious standard of review.” Canada v. Am. Airlines, Inc. Pilot Ret. Ben. Program, 572 F.
App'x 309, 312 (6th Cir. 2014) (“although American both funds the Plan and determines
Plan eligibility, the district court properly factored the airline's dual role and inherent
conflict of interest into its application of the arbitrary-and-capricious standard rather than
imposing a heightened standard of review altogether”).
C. DEGREE OF DEFERENCE AND DISCOVERY
Normally, when examining the merits of an ERISA benefit denial a “district court's
review is limited to the administrative record.” Pearce v. Chrysler Grp., L.L.C. Pension
Plan, 615 F. App'x 342, 350 (6th Cir. 2015) However, this Circuit recognizes an exception
for evidence “offered in support of a procedural challenge to the administrator’s decision.”
Johnson v. Connecticut Gen. Life Ins. Co., 324 F. App'x 459, 466 (6th Cir. 2009) (quoting
Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609 (6th Cir. 1998)). Here, Plaintiff
represents that Defendant has a “conflict of interest as the party paying benefits and
administering the claim.” (DE 17 at 4.) Though Defendant states that other courts in this
District have required a threshold showing beyond a mere allegation of a conflict, the Sixth
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Circuit has declined to adopt such a requirement. Johnson, 324 F. App'x at 466 (“Although
[Defendant] argues [for] a threshold evidentiary showing of bias as a prerequisite to
discovery . . . , the Supreme Court's admonition . . . discouraging the creation of special
procedural or evidentiary rules for evaluating administrator/payor conflicts of interest
counsels against it.”).
Defendant does not dispute that it was both the evaluator and the payor for
Plaintiff’s claims—this situation creates an inherent conflict of interest. (DE 25 at 6.) Thus,
this Court will exercise its discretion to permit narrow discovery into Defendant’s procedure
to determine how it should impact this Court’s review. See Johnson, 324 F. App'x at 467
(“[d]istrict courts are well-equipped to evaluate and determine whether and to what extent
limited discovery is appropriate in furtherance of a colorable procedural challenge”);
Brainard v. Liberty Life Assura. Co. of Boston, 2014 WL 7405798, at *2 (E.D. Ky. Dec. 30,
2014) (“discovery must be strictly confined to the procedural challenge”). This District has
previously stated the rationale for allowing such discovery:
Because the defendant's conflict of interest is a factor that the
Court must consider when deciding whether the defendant
abused its discretion in denying the plaintiff's claim and
because the significance of that factor depends on the
particular circumstances in the case, limited discovery
regarding the conflict of interest is appropriate. Without such
discovery, plaintiffs would be severely hindered in their ability
to obtain evidence to show the significance of the conflict of
interest.
Brainard, 2014 WL at *4.
In short, an inherent conflict gives this Court reason to be skeptical of a plan
administrator’s determination. The degree of skepticism that conflict should engender must
be based on the extent of the conflict, which must be determined before this Court can
proceed to review the denial of Plaintiff’s benefits. Having held that Plaintiff is entitled to
some discovery, this Court must now determine the permissible scope of that discovery.
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D. SCOPE OF DISCOVERY
Plaintiff first contends that discovery should be liberally permitted because she also
brings a claim under 29 U.S.C. § 1132(a)(3), which is not controlled by the ERISA discovery
limitations. Though the validity of this claim as an independent source of relief is not now
questioned before this Court, Plaintiff should note that courts reviewing claims under §
1132(a)(3) that are also adequately remedied by § 1132(a)(1)(B) have dismissed the §
1132(a)(3) cause of action as duplicative. See Wilkins v. Baptist Healthcare Sys., Inc., 150
F.3d 609, 615 (6th Cir. 1998) (“Because § 1132(a)(1)(B) provides a remedy for Wilkins's
alleged injury that allows him to bring a lawsuit to challenge the Plan Administrator's
denial of benefits to which he believes he is entitled, he does not have a right to a cause of
action for breach of fiduciary duty pursuant to § 1132(a)(3).”); Kmatz v. Metro. Life Ins. Co.,
458 F. Supp. 2d 553, 557 (S.D. Ohio 2005) (“it is not the label that the plaintiff puts on the
claim which controls . . . [i]t is whether the complaint seeks recovery of plan benefits that
controls.”); cf. Varity Corp. v. Howe, 516 U.S. 489, 512 (1996) (“’catchall’ provisions act as a
safety net, offering appropriate equitable relief for injuries caused by violations that §
[1132] does not elsewhere adequately remedy”).
Regardless of their validity, the claims also have the same factual basis. (DE 1.) In such
circumstances courts in this District have not differentiated between various ERISA causes
of action in limiting discovery. Kmatz, 458 F. Supp. at 557, 561 (plaintiff bringing “breach of
contract claims arising out of a failure to provide benefits” adjudicated as § 1132(a)(1)(B)
claims “entitled to limited discovery”). The single Magistrate Judge’s recommendation cited
by Plaintiff does not support a contrary result. Jones v. Allen, No. 2:11-CV-380, 2014 WL
1155347, at *8 (S.D. Ohio Mar. 21, 2014). The Jones Court merely stated that “the parties
have not cited, and the Court is unaware of, any authority limiting discovery in ERISA
breach of fiduciary duty claims.” Id. This dictum, from a court without controlling
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authority, does not address breach of contract claims, or even attempt to state a rule.
Moreover, this Court has uncovered persuasive authority limiting the scope of discovery for
ERISA claims styled as breach of contract claims. Kmatz, 458 F. Supp. at 557, 561. Plaintiff
has provided no persuasive justification for ignoring such a limitation under an ERISA
scheme that seeks to provide “an inexpensive and expeditious method of resolving benefits
disputes.” Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 618 (6th Cir. 1998).
Consequently, this Court will review Plaintiff’s requests for consistency with the limited
discovery available for procedural challenges under ERISA.
Defendant challenges many of Plaintiff’s requests and interrogatories as (1) lacking
relevance to the bias at issue here (DE 22 at 5–7), (2) being overly broad (DE 22 at 7), (3)
needing clarification to resolve ambiguity, (4) addressing Defendant’s determinations not
before this Court (DE 22 at 7–8), and as (5) requesting documents outside its possession,
custody, and control (DE 22 at 8). The Supreme Court opened the door for some discovery in
ERISA cases when the decision maker operated under an inherent conflict of interest. See
Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 116 (2008). However, Glenn gave discretion to
the district courts to determine the appropriate scope of that discovery. Id. at 119 (“our
elucidation of Firestone's standard does not consist of a detailed set of instructions”).
Consistent with the recently amended Federal Rules of Civil Procedure, the Court
believes a pretrial conference would provide the best forum for “expediting disposition of
[this] action.” Fed. R. Civ. P. 16(a). The conference will address the permissible scope of
discovery; however, the parties should be cognizant of their duty under the amended rules
to “secure the just, speedy, and inexpensive determination of every action.” Fed. R. Civ. P.
1.
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Accordingly, IT IS ORDERED as follows:
1. Defendant’s Motion for Leave to File a Reply (DE 20) is GRANTED.
2. Plaintiff’s Motion for Discovery (DE 17) is GRANTED IN PART and DENIED
IN PART.
3. This matter is scheduled for a telephonic conference on May 4, 2016 at 2:30
p.m. The parties are to call 888-684-8852, using access code 6823688. Please dial
in a few minutes before the conference is scheduled to begin.
Dated March 31, 2016.
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