HOCHEISER v. LIBERTY MUTUAL INSURANCE COMPANY et al
Filing
45
MEMORANDUM OPINION AND ORDER denying 35 Motion to Compel Discovery from Defendants. Signed by Magistrate Judge Douglas E. Arpert on 11/13/2018. (mmh)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
____________________________________
DAVID HOCHEISER,
:
:
:
Plaintiff,
:
:
v.
:
:
LIBERTY MUTUAL INSURANCE
:
COMPANY et al.,
:
:
Defendants.
:
:
Civil Action No. 3:17-cv-6096
FLW-DEA
MEMORANDUM OPINION
AND ORDER
ARPERT, United States Magistrate Judge
This matter comes before the Court on Plaintiff’s Motion to Compel Defendants to
Answer Plaintiff’s Discovery Demands. ECF No. 35. Defendants oppose the Motion. ECF No.
36. The Court has fully reviewed the submissions of the parties and considers same without oral
argument pursuant to Fed. R. Civ. P. 78. For the reasons set forth below, Plaintiff’s Motion
is DENIED.
I.
BACKGROUND 1
The facts of this case are well known to the Parties and were set down at length in the
Opinion of U.S. District Judge Frieda L. Wolfson dismissing the original Complaint. ECF No.
25. Briefly, Plaintiff was a mortgage broker for Wells Fargo. ECF No. 27 at ¶2. After being
diagnosed with several medical impairments, Plaintiff filed a claim for long-term disability
benefits under an employee-benefits plan established by Wells Fargo (“the Plan”). Id. at ¶¶
2,12,16. The Plan was funded and administered by Liberty Mutual Insurance Co. and Liberty
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The following facts are taken from Mr. Hocheiser’s Amended Complaint, ECF No. 27, and are assumed true for
purposes of this Memorandum and Order.
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Mutual Insurance Co. of Boston (collectively “Liberty”) and governed by the Employee
Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1132. Id. at ¶¶ 3,12,14. Liberty
initially denied Plaintiff’s claim, and Plaintiff appealed. Id. at ¶¶ 26-27. By letter dated
December 9, 2014, Liberty notified Plaintiff it was reversing that denial, based on Liberty’s
determination that Plaintiff was eligible for long-term disability benefits. Id. at ¶ 29 and Exhibit
4. As a result, Plaintiff began receiving disability benefits under the Plan. Id. at ¶ 30 and Ex. 4).
That said, the letter also stated that Liberty would continue to evaluate Plaintiff’s claim and
would require periodic updates from Plaintiff’s medical providers. Id. Thereafter, Liberty sought
and received several batches of medical records and authorizations updating Plaintiff’s condition.
Id. at 53-89. By letter dated May 23, 2016, Liberty terminated Plaintiff’s long-term disability
benefits under the Plan. Id. at ¶ 89. Liberty said the denial was based in part on a change in the
Plan’s definition of disability after two years of benefits payments, as well as its continuing
review of Plaintiff’s file. ECF No. 27-7 at pgs. 22-36. According to the Plan, during the first 24
months of payments, disability means, “the Covered Person, as a result of Injury or Sickness, is
unable to perform the Material and Substantial duties of his Own Occupation.” ECF No. 1-1 at p.
45. (emphasis added) After 24 months, disability is defined as the inability “to perform the
Material and Substantial duties of Any Occupation.” Id. (emphasis added) Plaintiff
administratively appealed the termination of benefits, a decision that was upheld on February 18,
2017. Id. at ¶¶ 88,93. On June 16, 2017, Plaintiff filed an action in Superior Court of New Jersey,
Law Division, Monmouth County. Id. at ¶ 1. On August 14, 2017, Defendants removed the
action to this District on the basis of federal question jurisdiction, pursuant to 28 U.S.C. §§ 1331
and 1441. Id. Thereafter, Defendants moved to dismiss Plaintiff’s Complaint. Id.; see also ECF
No. 7. Judge Wolfson dismissed without prejudice Plaintiff’s claims against the five individual
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defendants, Plaintiff’s common law claims asserted in Counts One, Two, Three, and Five, as
well as the claims under §§ 502(a)(2) and 502(a)(3) of ERISA asserted in Count Four. ECF No.
25. Plaintiff was given leave to amend the Complaint within 30 days. ECF No. 25,26. Plaintiff
filed an Amended Complaint on April 18, 2018. ECF No. 27. On June 15, 2018, Defendants filed
a Motion to Dismiss the Amended Complaint, ECF No. 34, while Plaintiff filed the instant
motion. ECF No. 35.
II.
LEGAL STANDARD
Under 29 U.S.C. § 1132(a)(1)(B), or ERISA, a participant in an employee-benefit plan is
empowered to bring suit to recover benefits due him. The United States Supreme Court has held
that a Court’s evaluation of an ERISA claim requires a de novo standard of review “unless the
benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility
for benefits or to construe the terms of the plan,” in which case the arbitrary-and-capricious
standard of review applies. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 112-15 (1989).
Whether the de novo or arbitrary-and-capricious standard applies affects the judicial inquiry into
both any dispositive motion, see Hatchigian v. Nat’l Elec. Contractors Ass’n, 589 F. App’x 606,
608 (3d Cir. 2014) (“where an ERISA plan’s terms provide the plan administrator with
discretionary authority to interpret the plan and determine benefits eligibility, the administrator’s
decision will be upheld unless it is arbitrary and capricious.”)) and, more important to the instant
Motion, the discovery parameters.
When evaluating ERISA claims under the arbitrary-and-capricious standard, a court is
limited to “that evidence that was before the administrator when he made the decision being
reviewed.” Mitchell v. Eastman Kodak Co., 113 F.3d 433, 440 (3d Cir. 1997), abrogated on
other grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008). That said, the Third Circuit
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also has found “that when a reviewing court is deciding whether to employ the arbitrary and
capricious standard or a more heightened standard of review, it may consider evidence of
potential biases and conflicts of interest that are not found in the administrator’s record.”
Johnson v. UMWA Health & Ret. Funds, 125 F. App’x 400, 405- 06 (3d Cir. 2005). The
existence of a conflict of interest (e.g., when the entity responsible for determining benefits
eligibility also pays the benefits) or evidence of potential biases or procedural abnormalities are
factors to be considered, among others, in determining the appropriate standard of review. Glenn,
554 U.S. at 117.
III.
DISCUSSION
In this case, Plaintiff seeks, via interrogatories and requests for production, details about
all facts, personnel and documents Liberty relied on in reaching the decision to terminate
disability benefits. ECF No. 35-2 at pgs. 84-99. Defendants objected to most of the interrogatory
questions and requests for documents. Id at pgs. 163-181. The most-often stated objection was
that such information was “beyond that permitted in ERISA cases.” Id. Otherwise, Defendants
stated, as in the response to Interrogatory No. 1, that Plaintiff had received the complete
administrative claims file from Liberty on October 16, 2017. Id. at pg. 177.
Defendants contend the objections are grounded in Third Circuit jurisprudence declaring
that where an ERISA-governed plan grants the plan administrator “clear and unequivocal
discretion to administer terms of the plan,” discovery is limited to the administrative record on
which the termination decision was based. Def. Br. in Opp. to Mot. to Compel at 1. Defendants
say language in the Plan, both explicit (“Interpretation of the Policy[:] Liberty shall possess the
authority to construe the terms of this policy and to determine benefit eligibility hereunder.” ECF
No. 1-1 at p. 75) and suggestive (“In determining whether the Covered Person is disabled,
Liberty will not consider…” Id at pg. 59), gives Defendants discretionary authority over the
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Plan’s administration. Defendants point to Viera v. Life Ins. Co. of North America for the
proposition that “[t]here are no ‘magic words’” connoting discretionary power, and that
“discretionary powers may be granted expressly or implicitly.” Def. Br. at 8-9 (quoting Viera,
642 F.3d 407, 413 (3d Cir. 2001). Defendants contend the Plan’s explicit and suggestive
phrasing referred to above “is functionally equivalent to Viera’s suggested language and
unequivocally grants Liberty discretion to interpret the plan.” Def. Br. at 9. As a result,
Defendants say, the arbitrary-and-capricious standard applies, and thus discovery is limited to the
administrative record.
Defendants further contend that even if the broader, de novo standard of review were to
apply, Plaintiff still would not be entitled to additional discovery because the administrative
record is sufficiently “robust and includes the universe of documents this Court would need to
make an independent benefit determination,” including “3,912 pages [] and …the full panoply of
Plaintiff’s medical records, Liberty’s peer reviews, claims notes, and correspondence between
the parties.” Def. Br. at 14.
Plaintiff contends the above jurisprudence is “not applicable to the discovery at issue in
this matter” because Defendants “ignore the distinction between the two policies at issue in the
case at bar.” Pl. Br. in Support of Mot. to Compel at 15. (emphasis added) Specifically, Plaintiff
contends there is an ERISA-governed disability plan provided by his Well Fargo employer AND
an “additional …self-purchased policy by the plaintiff and thus [] not subject to the ERISA
limitations.” Id. As to this second policy, Plaintiff quotes Rush Prudential HMO, Inc. v. Moran,
536 U.S. 355, 376 (2002) overruled in part on other grounds by Kentucky Ass’n of Health Plans,
Inc. v. Miller, 538 U.S. 329 (2003), for the proposition that “ERISA’s civil enforcement
provisions ‘authoriz[e] civil actions for six specific types of relief.’” Id. Plaintiff contends the
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non-ERISA claims are based “upon the bad faith and capricious actions undertaken by the
defendants and their exercise of discretionary authority.” Id. at 16. Thus, Plaintiff contends, “the
objections espoused by defendants cannot be applicable and defendants must be compelled to
provide the discovery requested.” Id.
The Court’s inquiry begins by noting that this is not the first time Plaintiff has referred to
the existence of a second disability policy held by Plaintiff. Judge Wolfson remarked in her
Opinion granting the Motion to Dismiss the original Complaint, “[i]n his Opposition brief,
Plaintiff also argues, for the first time, that, in addition to having long-term disability benefits
under the Plan, Plaintiff also paid for additional long-term disability benefits that ‘should not be
considered governed by ERISA as it is not part of...the [Plan].’” ECF No. 25, n6. But, Judge
Wolfson stated, the original Complaint was devoid of references to a second, self-purchased
disability policy and “because it is ‘axiomatic that the complaint may not be amended by the
briefs in opposition to a motion to dismiss,’ Com. of Pa. ex rel. Zimmerman v. PepsiCo, Inc.,
836 F.2d 173, 181 (3d Cir. 1988) (citation omitted), it follows that the Court will not consider
Plaintiff’s argument that he is eligible for disability benefits outside of the Plan on this Motion.
See Bell v. City of Philadelphia, 275 F. App’x 157, 160 (3d Cir. 2008) (observing that “a
plaintiff ‘may not amend his complaint through arguments in his brief in opposition....’”).” Id.
Like the original Complaint, the Amended Complaint also is “devoid of references to a
second, self-purchased disability policy,” though Plaintiff does employ the construction “Liberty
disability policy(ies)” four times. ECF No. 27 at ¶¶ 40,42,44,46. In all other references, Plaintiff
appears to refer to the policy and/or claim in the singular. See, e.g., Id. at ¶ 79. (“This complaint
was about the way in which the individual defendants handled Plaintiff’s claim….”). Indeed,
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Plaintiff demands in each Count that Plaintiff be declared “disabled within the meaning of the
policy.” Id. at pgs. 18-20.
The above notwithstanding, the first explicit reference to a second, self-purchased policy
for the purposes of the instant motion comes in Plaintiff’s Brief in Support of the Motion to
Compel. ECF No. 35. 2 Plaintiff states that the “issue of two separate policies, one ERISA and
one non-ERISA, has been present in this case from the outset.” Id. at 2. Plaintiff evidences this
point by citing not to the Amended Complaint nor to the original Complaint, but to the same
brief in opposition to the Motion to Dismiss discussed in Judge Wolfson’s footnote mentioned
above. Id. Like Judge Wolfson, this Court can not consider Plaintiff’s argument based on a
second policy that is mentioned for the first time in his brief in support of the instant motion. See
Bell, 275 F. App’x at 160 (observing that “a plaintiff ‘may not amend his complaint through
arguments in his brief ....”). This Court also can not entertain Plaintiff’s suggestion made in the
Reply Brief that Plaintiff be given leave to file what would be a second amended complaint to
separately plead counts for any non-ERISA claims based on the purported second disability
policy, as there is no formal motion before this Court seeking such relief. Thus, the only policy at
issue before this Court is the one expressly referred to in the Amended Complaint, the Wells
Fargo ERISA long-term disability plan.
As to this Plan, the Court begins by noting that per Viera, “[t]he plan administrator bears
the burden of proving that the arbitrary and capricious standard of review applies.” Viera, 642
F.3d at 413 (citing Kinstler v. First Reliance Std. Life Ins. Co., 181 F.3d 243, 249 (2d Cir.1999).
The Court finds Defendants have met this burden. The “Interpretation of the Policy” provision of
the policy explicitly states: “Liberty shall possess the authority to construe the terms of this
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Plaintiff’s letter brief reply to Defendants’ opposition also references the second policy. ECF No. 38.
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policy and to determine benefit eligibility hereunder.” ECF No. 1-1 at pg. 75. Because Liberty
possesses such discretionary authority, the arbitrary-and-capricious standard of review applies to
this matter. Firestone, 489 U.S. at 112-15. Where the arbitrary-and-capricious standard applies, a
court is limited to reviewing the record that was before the Plan administrator at the time the
denial of benefits occurred. Mitchell, 113 F.3d at 440. As a result, discovery is limited to the
administrative record upon which Defendants based the termination-of-benefits decision.
That said, discovery beyond the administrative record is permissible in some instances
where there is a structural conflict of interest or procedural irregularities. See Johnson, 125 F.
App’x at 405-06. “‘The structural inquiry focuses on the financial incentives created by the way
the plan is organized,’ i.e., whether there is a conflict of interest, and ‘the procedural inquiry
focuses on how the administrator treated the particular claimant.’” Irgon v. Lincoln Nat. Life Ins.
Co., No. CIV.A. 13-4731 FLW, 2013 WL 6054809, at *5 (D.N.J. Nov. 15, 2013) (quoting Post
v. Hartford Ins. Co., 501 F.3d 154, 162 (3d Cir.2007) overruled on other grounds by Estate of
Schwing v. Lilly Health Plan, 562 F.3d 522 (3d Cir. 2009)).
A conflict of interest can be created if an employer pays an independent insurance
company both to evaluate claims and to pay plan benefits. Irgon, 2013 WL 6054809, at *5
(citing Glenn, 554 U.S. at 114. Plaintiff alleges that from the beginning Liberty “did everything
to deny the plaintiff his benefits.” Pl. Reply Br. at p.4. As such, Plaintiff does not explicitly
allege that a conflict of interest exists, only that Liberty’s “interest” in denying benefits
“conflicts” with Plaintiff’s contention that benefits should not have been denied. Nevertheless,
Defendants concede a conflict of interest exists because “claims under the [disability] plan are
both administered and paid by Liberty.” Def. Br. at pg. 16 (citing Glenn, 554 U.S. at 114).
However, Defendants also correctly point out that, under Glenn, “such a conflict is but one
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factor among many for the Court to consider in determining whether Liberty abused its
discretion in denying benefits.” Id. (citing Glenn, 554 U.S. at 108). Absent more, the singular
fact that Liberty administers and pays claims is not by itself enough to open the door to
discovery of extra-record materials.
In a procedural analysis, “courts consider procedural irregularities to determine ‘whether,
in this claimant’s case, the administrator has given the court reason to doubt its fiduciary
neutrality.’” Irgon, 2013 WL 6054809, at *6 (quoting Post v. Hartford Ins., 501 F.3d at 165
(internal citations omitted). “These procedural irregularities may include, inter alia: (1) a
reversal of a benefits determination without additional evidence, (2) a disregard of opinions
previously relied upon, (3) a self-serving selectivity in the use of evidence or reliance on selfserving paper reviews of medical files, (4) a reliance on the opinions of non-treating physicians
over treating physicians without explanation, (5) a reliance on inadequate information or
incomplete investigation, (6) failure to comply with the notice requirements of Section 504 of
ERISA, (7) failure to analyze all relevant diagnoses, and (8) failure to consider plaintiff’s ability
to perform actual job requirements.” Id.; See also Miller v. Am. Airlines, Inc., 632 F.3d 837,
848-55; Lamanna v. Special Agents Mut. Benefits Ass’n, 546 F.Supp.2d 261, 287
(W.D.Pa.2008).
Here again, Plaintiff does not explicitly allege in the Amended Complaint any of Irgon’s
list of procedural irregularities. Plaintiff does, however, allege facts that could be construed as
procedural irregularities, mainly that Liberty either ignored or failed to give proper weight to the
opinions of Plaintiff’s medical providers. See e.g., ECF No. 27 at ¶85. Plaintiff also alleges a
Liberty administrator was biased against Plaintiff’s claim, as evidenced by the administrator
describing Plaintiff’s claimed disability as a “fairytale” in a denial letter. Id. at ¶ 61(g). No
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further details about this allegation are provided. Defendants state that the correspondence
referred by Plaintiff was a letter dated May 7, 2014 and avers that the word “fairytale” appears
nowhere either in that letter or in the administrative record. ECF No. 36 at 17; see also July 2,
2018 Cert. of Shaina E. Hicks at ECF No. 36-1. Even if Plaintiff did explicitly allege procedural
abnormalities, “the existence of procedural abnormalities is not an automatic trigger permitting
discovery beyond the administrative record.” Stevens v. Santander Holdings USA, Inc. SelfInsured Short Term Disability Plan, No. CIV.A. 11-7473 PGS, 2013 WL 322628, at *9 (D.N.J.
Jan. 28, 2013). Indeed, “[a] plaintiff must establish a reasonable suspicion of misconduct before
the court permits discovery” beyond the administrative record. Irgon, 2013 WL 6054809, at *5
(citing Delso v. Trustees of Ret. Plan for Hourly Employees of Merck & Co., No. CIV. 04-3009
(AET), 2006 WL 3000199, at *3 (D.N.J. Oct. 20, 2006) (“If a plaintiff establishes a reasonable
suspicion of misconduct, then courts should allow discovery requests reasonably likely to either
confirm or disconfirm the presence of bias. See Fed.R.Civ.P. 26(b)(1)).
In this case, Plaintiff’s allegations that a court could construe as claims of procedural
irregularities do not rise to the level that warrant discovery beyond the administrative record. In
the end, Plaintiff’s main contention is that Liberty either ignored or failed to give proper weight
to the opinions of Plaintiff’s medical providers. Plaintiff’s allegations, without more, do not raise
a reasonable suspicion of misconduct by Defendants. Thus, the Court will not permit discovery
of documents beyond the administrative record.
As to Plaintiff’s interrogatories, Plaintiff has not demonstrated with any specificity that
the questions posed by those interrogatories are not already answered in the Administrative
Record. Consider Interrogatory No. 3, which asks Defendants to “[p]lease set forth each fact
YOU relied upon in determining to withhold payment of the claim tendered by David
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Hocheiser.” ECF No. 35-2 at 162. Interrogatory No. 5 asks Defendants, “[p]lease state the date
that YOU determined that the claim for benefits tendered by David Hocheiser was not covered
under the terms of the SUBJECT POLICY.” Id. at p. 163. Finally, Interrogatory No. 7 asks
Defendants, “[p]lease set forth each fact YOU relied upon in determining to withhold payment of
the claim tendered by plaintiff.” Id. at p. 164. Defendants have stated that the administrative
record provided to Plaintiff is 3,200 pages and includes “the full panoply of Plaintiff’s medical
records, Liberty’s peer reviews, claims notes, and correspondence between the parties.” Def. Br.
at 14. Plaintiff has not made any showing that answers to such interrogatories would fill any gaps
in such a voluminous record. Without such specificity, the Court is not persuaded that Plaintiff
requires this Court’s assistance to compel answers to gain information it may already have.
IV.
CONCLUSION AND ORDER
Having considered the papers submitted pursuant to Federal Rule of Civil Procedure 78
and for the reasons set forth above;
IT IS on this of 13th day of November 2018,
ORDERED that Plaintiff's Motion to Compel Discovery from Defendants [ECF No. 35]
is DENIED.
s/ Douglas E. Arpert
DOUGLAS E. ARPERT
UNITED STATES MAGISTRATE JUDGE
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