McFarlane v. First UNUM Life Insurance Company
OPINION AND ORDER re: 73 MOTION for Discovery Objections to MJ Order. filed by Cherylle McFarlane. For the foregoing reasons, McFarlane's objections to Judge Parker's denial of her motions to compel discovery are overr uled. The Clerk of Court is respectfully directed to terminate the motion pending at Docket Entry 73. (Signed by Judge Ronnie Abrams on 10/12/2017) (rj)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
DATE FILED: 10/12/2017
No. 16-CV-7806 (RA)
OPINION AND ORDER
FIRST UNUM LIFE INSURANCE
RONNIE ABRAMS, United States District Judge:
Plaintiff Cherylle McFarlane brings this action against Defendant First Unum Life
Insurance Co. ("First Unum") to recover disability benefits under the Employment Retirement
Income Security Act of 1974 ("ERISA"). Before the Court are McFarlane's objections to the April
17, 2017 Order of the Hon. Katharine H. Parker, which denied two of her motions to compel
discovery. For the reasons set forth below, McFarlane's objections are overruled.
The Court assumes familiarity with the factual allegations of this case, which are recited in
its August 15, 2017 Opinion and Order. See Dkt. 84.
Mcfarlane is a former assistant nursing director at Independence Care Systems. See
Compl. Ex. 1 ("Appeal Letter") at 4 (Dkt. 1-1 ). First Unum issued a group disability policy to
Independence Care, through which Mcfarlane received disability benefits. Compl. ,-i 3; Appeal
Letter at 1. On April 28, 2014, Mcfarlane was diagnosed with fibromyalgia. See Appeal Letter
at 5. On December 15, 2014, a First Unum representative approved McFarlane's long-term
disability benefits. See id. at 8. In a letter dated January 14, 2016, however, First Unum terminated
McFarlane's long-term disability benefits, concluding that she had become able to resume the
material and substantial duties of her occupation. See id. at 9.
On October 6, 2016, Mcfarlane filed this action, asserting claims for long-term disability
benefits and for statutory penalties. See Compl. iii! 23-35. Mcfarlane alleged, inter alia, that First
Unum improperly terminated her benefits because, as both a plan administrator and payor of plan
benefits, it had a conflict of interest. See id. ii 25.
The parties proceeded to discovery. In a series of interrogatories and document requests,
Mcfarlane requested statistics regarding the liability acceptance rates for certain groups of
disability claims specialists at First Unum, including those who receive bonus awards or are
terminated. See Delott Deel. iii! 4-6, Ex. B-D (Dkt. 74). In McFarlane's view, this information is
relevant because it would allow her to conduct an empirical analysis of First Unum's alleged
conflict ofinterest. If First Unum fires specialists who approve benefits more frequently and gives
bonuses to those who more often deny benefits, McFarlane argues, it is more likely that First Unum
was operating under a conflict of interest. First Unum objected to these requests. On March 13,
2017 and March 22, 2017, Mcfarlane moved to compel First Unum to respond. See Letter from
Jeffrey Delott to Judge Parker (Mar. 13, 2017) (Dkt. 57); Letter from Jeffrey Delott to Judge Parker
(Mar. 22, 2017) (Dkt. 63 ). 1
On April 17, 2017, Judge Parker denied McFarlane's motion to compel in relevant part.
See Order (Dkt. 72). Judge Parker determined that McFarlane's requested statistics regarding
liability acceptance rates were not proportional to the needs of the case, particularly in light of the
McFarlane's March 22, 2017 letter clarified the interrogatory and document request numbers for
which she sought a response. See Letter from Jeffrey Delott to Judge Parker (Mar. 22, 2017).
fact that Mcfarlane had already been given the opportunity to conduct discovery regarding First
Unum's alleged conflict of interest. See id. at 8-9. Judge Parker noted, for example, that she had
previously permitted Mcfarlane to depose Adam Peters, the First Unum representative who was
responsible for deciding McFarlane's claim, and that she had specifically advised Mcfarlane that
she could ask Peters questions regarding First Unum's alleged conflict of interest. See id. at 3. As
a cost-efficient alternative to requesting liability acceptance rate statistics, Judge Parker suggested
that McFarlane ask Peters whether he or other First Unum employees have any financial incentives
to grant or deny claims for disability benefits. See id. In light of the discovery McFarlane had
been given an opportunity to conduct, Judge Parker concluded that McFarlane's motion was "more
akin to a second-chance fishing expedition than the 'limited discovery"' other courts had
permitted. Id. at 9.
Judge Parker also determined the liability acceptance rates Mcfarlane sought were of
limited relevance. See id. at 9-11. Relying on a number of decisions from courts in the Second
Circuit, Judge Parker explained that evidence of First Unum's overall acceptance rates, without
more, would be of "dubious relevance to the issue of whether the plaintiffs own benefits claim
was improperly denied." Id. at 9. Judge Parker was also unpersuaded by McFarlane's claim that
the statistical evidence she sought was necessary to show that First Unum has a history of rendering
biased claims determination. See id. at 10. Judge Parker found that this argument "rings hollow"
in light of the fact that McFarlane had already presented vigorous arguments regarding First
Unum's "well-recognized history of making biased claims decisions," supported by the decisions
of other courts that had specifically discussed First Unum' s "pattern of abusive tactics." Id. at 1011. Accordingly, Judge Parker denied McFarlane's motion to compel the production of statistical
data. See id. at 11.
On May 1, 2017, Mcfarlane filed objections to Judge Parker's order. See Pl.'s Mot. for
Disc. Obj. (Dkt. 73); Pl.'s Mem. in Supp. of Obj. to Apr. 17, 2017 Order ("Obj.") (Dkt. 75). On
May 5, 2017, First Unum filed a brief in opposition to McFarlane's objections. See Def.'s Mem.
in Opp'n to Pl.'s Obj. ("Def. Mem.") (Dkt. 77). On May 8, 2017, Mcfarlane filed a reply. See
Pl.'s Reply Mem. (Dkt. 78).
A district court may designate a magistrate judge to "hear and determine any pretrial matter
pending before the court," with exceptions for certain dispositive motions.
§ 636(b)(l)(A); see Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990).
"With respect to nondispositive matters, such as discovery disputes, a district judge shall 'modify
or set aside any part of the Magistrate's order that is clearly erroneous or is contrary to law.'" John
Wiley & Sons, Inc. v. Book Dog Books, LLC, No. 13-CV-816, 2015 WL 5022545, at *1 (S.D.N.Y.
Aug. 17, 2015) (alteration omitted) (quoting Fed. R. Civ. P. 72(a)). "Under this highly deferential
standard, magistrate judges are afforded broad discretion in resolving nondispositive disputes and
reversal is appropriate only if their discretion is abused." Williams v. Rosenblatt Sec., Inc., 236 F.
Supp. 3d 802, 803 (S.D.N.Y. 2017) (quoting Thai Lao Lignite (Thailand) Co., Ltd. v. Gov't ofLao
People's Democratic Republic, 924 F. Supp. 2d 508, 511 (S.D.N.Y. 2013)). "The magistrate
judge's ruling 'is contrary to law if it fails to apply or misapplies relevant statutes, case law, or
rules of procedure and is clearly erroneous if the district court is 'left with the definite and firm
conviction that a mistake has been committed."' State Farm Mut. Auto. Ins. Co. v. Fayda, No. 14CV-9792, 2016 WL 4530890, at* 1 (S.D.N.Y. Mar. 24, 2016) (alterations omitted) (quoting Thai
Lao Lignite, 924 F. Supp. 2d at 512). "The party seeking to overturn a magistrate judge's decision
thus carries a heavy burden." Id. (quoting Thai Lao Lignite, 924 F. Supp. 2d at 512).
Under Federal Rule of Civil Procedure 26(b )(1 ), "[p ]arties may obtain discovery regarding
any non-privileged matter that is relevant to any party's claim or defense and proportional to the
needs of the case." Fed. R. Civ. P. 26(b)(l). Information is "relevant" if "(a) it has any tendency
to make a fact more or less probable than it would be without the evidence; and (b) the fact is of
consequence in determining the action." Fed. R. Evid. 401. "Although not unlimited, relevance,
for purposes of discovery, is an extremely broad concept." In re Weatherford Int 'l Sec. Litig., No.
11-CV-1646 (LAK) (JCF), 2013 WL 2355451, at *3 (S.D.N.Y. May 28, 2013) (quoting Condit v.
Dunne, 225 F.R.D. 100, 105 (S.D.N.Y. 2004)). "Relevant information need not be admissible at
the trial if the discovery appears reasonably calculated to lead to the discovery of admissible
evidence." Fed. R. Civ. P. 26(b)(l). Proportionality, meanwhile, "focuses on the marginal utility
of the discovery sought." Vaigasi v. Solow Mgmt. Corp., No. 11-CV-5088 (RMB) (HBP), 2016
WL 616386, at *11 (S.D.N.Y. Feb. 16, 2016). "Proportionality and relevance are 'conjoined'
concepts; the greater the relevance of the information in issue, the less likely its discovery will be
found to be disproportionate." Id.
In ERISA cases, "district courts typically limit their review to the administrative record
before the plan at the time it denied the claim." Halo v. Yale Health Plan, Dir. of Benefits &
Records Yale Univ., 819 F.3d 42, 60 (2d Cir. 2016); see also Muller v. First Unum Life Ins. Co.,
341 F .3d 119, 125 (2d Cir. 2003) (explaining that "the presumption is that judicial review is limited
to the record in front of the claims administrator" (citation omitted)). However, on an issue such
as an alleged conflict of interest, "which is distinct from the reasonableness of the plan
administrators' decision, the district court will not be confined to the administrative record."
Zervos v. Verizon NY, Inc., 252 F.3d 163, 174 (2d Cir. 2001). Rather, the district court has
discretion to review evidence outside the administrative record upon a showing of "good cause."
See Krauss v. Oxford Health Plans, Inc., 517 F.3d 614, 631 (2d Cir. 2008). "[A]t the discovery
stage, the plaintiff need not 'make a full good cause showing, but must show a reasonable chance
that the requested discovery will satisfy the good cause requirement.'" Trussel v. Cigna Life Ins.
Co. of NY, 552 F. Supp. 2d 387, 390 (S.D.N.Y. 2008); accord Shelton v. Prudential Ins. Co. of
Am., No. 16-CV-1559 (VEC), 2016 WL 3198312, at *2 (S.D.N.Y. June 8, 2016).
Judge Parker's denial of McFarlane's motion to compel the production of statistics
regarding First Unum's liability acceptance rates was not clearly erroneous or contrary to law.
Judge Parker was within her discretion to find that the marginal relevance of this information was
"dubious." Order at 9. Of course, evidence that a claim administrator is operating under a conflict
of interest is relevant in determining whether the administrator improperly denied benefits. See
Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 112 (2008). Here, however, there is no dispute that
First Unum has a structural conflict of interest, as it was responsible for both evaluating claims
and paying for claims allowed. Nor does there appear to be any dispute that First Unum has a
history of a biased claims administration. As McFarlane documents in her complaint, the Supreme
Court, the Second Circuit, and numerous other federal courts have, in the last decade, specifically
identified First Unum as an insurer with a well-recognized history of abusive tactics, including
erroneous and arbitrary benefits denials. See Com pl. iii! 7-9 (Dkt. 1). Against this backdrop, Judge
Parker could reasonably have concluded that additional information regarding First Unum's firmwide practices, including its aggregate liability acceptance rates, would be of limited marginal
relevance to McFarlane's case.
Judge Parker was also within her discretion to question the relevance of the statistics
McFarlane sought on the grounds that they do not relate specifically to her claim. As the Second
Circuit has explained, "[n]o weight is given to a conflict in the absence of any evidence that the
conflict actually affected the administrator's decision." Durakovic v. Bldg. Serv. 32 BJ Pension
Fund, 609 F.3d 133, 140 (2d Cir. 2010); see also, e.g., Andrews v. Realogy Corp. Severance Pay
Plan for Officers, No. 13-CV-8210 (RA), 2015 WL 736117, at *7 (S.D.N.Y. Feb. 20, 2015)
(explaining that an ERISA plaintiff must "show how the inherent conflict actually affected the
Plan Administrator's decisionmaking"); Hogan-Cross v. Metro. Life Ins. Co., 568 F. Supp. 2d 410,
414 (S.D.N.Y. 2008) ("[E]vidence of high rates of denial and termination of claims, in and of
themselves, would prove little or nothing."). The statistics Mcfarlane seeks here are not tied to
her claim in particular. Rather, as aggregate statistics, they represent First Unum's resolution of
claims for claimants other than McFarlane. Thus, Judge Parker could reasonably determine that
these statistics are, in the context of this case, unlikely to show that First Unum's undisputed
conflict "actually affected" its decision. Durakovic, 609 F.3d at 140.
Judge Parker was also reasonable in determining that a deposition of the First Unum
employee who decided her claim would be a more cost-efficient method for McFarlane to obtain
the information she sought. In resolving the parties' discovery dispute, Judge Parker properly
recognized the "significant ERISA policy interests of minimizing costs of claim disputes and
ensuring prompt claims-resolution procedures." Locher v. Unum Life Ins. Co. of Am., 389 F.3d
288, 295 (2d Cir. 2004). In light of these interests, Judge Parker reasonably suggested that
Mcfarlane focus her investigation on the role that First Unum's alleged conflict of interest may
have played in the specific determination of her claim. To that end, Judge Parker concluded that
questioning the individual who actually decided her claim on the topics for which McFarlane
sought statistics-including, for example, the existence of any financial incentives for disability
claims specialists to deny or grant benefits claims-would permit McFarlane to obtain relevant
information without imposing an undue burden on First Unum. 2 Judge Parker's proposal comports
with both the proportionality principles of Rule 26(b)(l) and ERISA's goals of minimizing
expense and delays in reviewing claims determinations.
It is true, as Judge Parker recognized, that at least two courts in this district have ordered
defendants to produce statistics of claim determination rates in ERISA cases. Specifically, in both
Hogan-Cross v. Metropolitan Life Insurance Co., 568 F. Supp. 2d 410 (S.D.N.Y. 2008) and
McDonnell v. First Unum Life Insurance Co., No. 10-CV-8140 (RPP), 2011 WL 5301588, at *6
(S.D.N.Y. Nov. 3, 2011), district courts granted motions to compel claim-determination statistics,
reasoning that "[e]vidence of high rates of benefit denials or terminations reasonably could lead to
further inquiry as to the reasons for those actions, which might prove either benign or malignant."
Hogan-Cross, 568 F. Supp. 2d at 414; McDonnell, 2011 WL 5301588, at *6. Judge Parker
considered these cases, however, and determined that, under the circumstances of this case,
McFarlane's request for similar statistics was not proportional to her needs. See Order at 8. In
particular, Judge Parker reasonably distinguished both McDonnell and Hogan-Cross on the ground
that McFarlane, unlike the plaintiffs in those cases, has already had an opportunity to explore First
Unum's alleged conflict of interest yet had not adduced evidence suggesting that requests for
further information, in the form of the statistics requested, would be appropriate. The Court does
not find this conclusion clearly erroneous or contrary to law.
In sum, Mcfarlane has not provided a sufficient basis for modifying or setting aside Judge
McFarlane's argument that Peters was a mere "clerk" without any "independent judgment" in
deciding her claim is not persuasive. See Obj. at 14. During his deposition, Peters testified that he was the
"owner" of McFarlane's claim and drafted the letter terminating her benefits. See Def. Mem. Ex. 1 at
120: 10-14. The fact that a supervisor ultimately approved Peters's draft letter does not suggest that Peters
lacked sufficient knowledge to provide testimony regarding First Unum's evaluation ofMcFarlane's claim.
For the foregoing reasons, McFarlane's objections to Judge Parker's denial of her motions
to compel discovery are overruled. The Clerk of Court is respectfully directed to terminate the
motion pending at Docket Entry 73.
October 12, 2017
New York, New York
United States District Judge
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