Jones et al v. Allen, et al
Filing
106
ORDER. The motion to compel discovery and supplement the record (doc. 82 ) is granted in part and denied in part. The motion to hold in abeyance any ruling on the motion to compel is denied (doc. 72 ). Signed by Magistrate Judge Terence P Kemp on 3/21/2013. (pes1)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Craig S. Jones, et al.,
Plaintiffs,
v.
Case No. 2:11-cv-380
Kerry A. Allen, Plan
Administrator, et al.,
JUDGE MICHAEL H. WATSON
Magistrate Judge Kemp
Defendants.
OPINION AND ORDER
Plaintiffs brought this ERISA action against former
employers, certain other entities, and one individual connected
with the severance plans at issue in this case.
In conjunction
with their briefs opposing Defendants’ motion for entry of
judgment on the administrative record, Plaintiffs have moved to
compel discovery and supplement the record (Docket #72).
Because
resolution of this motion could impact the standard of review to
be applied to the motion for judgment on the administrative
record, it must be resolved first.
Defendants have also filed a
motion to hold in abeyance any ruling on the motion to compel
pending the Court’s determination of the objections to the report
and recommendation (Docket #88).
For the reasons that follow, the motion to compel discovery
and supplement the record is granted in part and denied in part
as discussed below.
The motion to hold in abeyance any ruling on
the motion to compel is denied.
I.
Motion to Hold in Abeyance
Defendants have moved to hold in abeyance any ruling on the
motion to compel.
Defendants argue that the resolution of their
objection to the report and recommendation regarding the motion
for partial summary judgment “could well affect the Court’s
analysis of whether Plaintiffs are entitled to discovery,” (doc.
#88, Mem. at 2), explaining that the Court could reject the
Magistrate Judge’s recommendation as to the standard of review.
However, they fail to explain how such a ruling would affect the
motion to compel.
Indeed, in claims for denial of ERISA benefits
district courts are typically limited to the existing
administrative record whether the standard of review is abuse of
discretion or de novo.
Wilkins v. Baptist Healthcare Sys., Inc.,
150 F.3d 609, 615 (6th Cir. 1998).
And the circumstances that
permit district courts to admit evidence beyond the
administrative record do not depend on whether the standard of
review is abuse of discretion or de novo.
Because resolution of
Defendants’ objections to the report and recommendation would not
affect the Court’s ruling on the motion to compel, the motion to
hold in abeyance is denied.
II.
Motion to Compel Discovery
While district courts are typically limited to the existing
administrative record for claims for denial of ERISA benefits,
there are circumstances where the district court may admit
evidence not presented to the plan administrator:
The district court may consider evidence outside of the
administrative record only if that evidence is offered
in support of 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. This also means that any prehearing
discovery at the district court level should be limited
to such procedural challenges.
Moore v. Lafayette Life Ins. Co., 458 F.3d 416, 430 (6th Cir.
2006) (quoting Wilkins v. Baptist Healthcare System, Inc., 150
F.3d 609, 619 (6th Cir. 1998)).
“[U]ntil a due process violation
is at least colorably established, additional discovery beyond
the administrative record into a plaintiff's denial of benefits
claim is impermissible.”
Moore, 458 F.3d at 431.
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Plaintiffs
discuss several potential avenues for fitting within this
exception, which are set forth below.
A.
Conflict of Interest
Bias is one of the permissible justifications for discovery
listed in Moore.
Plaintiffs have alleged that “because
Defendants both fund the benefits and determine claims under the
Plans, they suffer an inherent (and actual) conflict of interest
that must be factored into the Court’s analysis . . . .”
(Doc.
#72 at 51.)
The Supreme Court has noted the potential impact of this
type of a conflict of interest:
Often the entity that administers the plan, such as an
employer or an insurance company, both determines
whether an employee is eligible for benefits and pays
benefits out of its own pocket. We here decide that
this dual role creates a conflict of interest; that a
reviewing court should consider that conflict as a
factor in determining whether the plan administrator
has abused its discretion in denying benefits; and that
the significance of the factor will depend upon the
circumstances of the particular case.
Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 108 (2008) (citation
omitted).
In discussing the significance of the conflict of
interest, the Supreme Court noted that it should be a more
important factor “where circumstances suggest a higher likelihood
that it affected the benefits decision, including, but not
limited to, cases where an insurance company administrator has a
history of biased claims administration,” and “should prove less
important (perhaps to the vanishing point) where the
administrator has taken active steps to reduce potential bias and
to promote accuracy, for example, by walling off claims
administrators from those interested in firm finances, or by
imposing management checks that penalize inaccurate
decisionmaking irrespective of whom the inaccuracy benefits.”
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Id. at 117 (citations omitted).
The Court of Appeals has read the Supreme Court decision in
Glenn to counsel against imposing a threshold evidentiary showing
of bias as a prerequisite to discovery where there is an
administrator/payor conflict; but “[t]hat does not mean, however,
that discovery will automatically be available any time the
defendant is both the administrator and the payor under an ERISA
plan.”
Johnson v. Connecticut Gen. Life Ins. Co., 324 F. App'x
459, 466-67 (6th Cir. 2009).
“District courts are well-equipped
to evaluate and determine whether and to what extent limited
discovery is appropriate in furtherance of a colorable procedural
challenge under Wilkins.”
Id.
Here, the three committee members were Kerry Allen, Brian
Ferguson, and James Popp.
(Doc. #51, Exh. 1.)
According to Mr.
Ferguson’s declaration, all three were PNC employees at the time
of the committee deliberations and decisions at issue.
(Id.)
Mr. Ferguson was employed by PNC as Vice President, Human
Resources, Ms. Allen was PNC’s Vice President, Corporate Benefits
Manager, and Mr. Popp was PNC’s Director, Employee Relations.
(Id.)
In light of this clear conflict of interest, Glenn, 554
U.S. at 108, and in light of the facts in the administrative
record regarding the basis for the committee’s decision, the
Court has discretion to look beyond the administrative record to
consider Plaintiffs’ allegations of bias.
Johnson, 324 F. App'x
at 466-67.
Plaintiffs have pointed to Mr. Ferguson’s deposition
testimony from a separate lawsuit in which he testified that he
reviewed the National City Plan prior to PNC’s purchase of
National City “to enable [PNC’s] M&A group to calculate the cost
of what a transaction with National City may be.”
(Doc. #79,
Exh. R-4 at 22-23.) In describing his review, he testified that
he “appl[ied] the number of people that were likely to be
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displaced that fell in [certain salary grades], I just applied
what the plan said they would get.
analysis.
So it was just a cost
There wasn’t an analysis of – within any great detail
about who would be eligible and how that happened.”
Id. at 24.
He received no separate compensation for being part of the
committee – he was paid the same amount by PNC whether or not he
was on the committee.
Id. at 42.
He testified that being part
of the committee was one of his job responsibilities.
Id. at 45.
He also testified that he could probably have resigned from the
committee without jeopardizing his continued employment.
Id. at
46-47.
While the above facts do not appear to be contested, there
are disputes as to other circumstances that could affect the
degree of potential bias.
Defendants state that Mr. Ferguson was
testifying about the 2008 version of the National City Plan and
that “there is no evidence to suggest Mr. Ferguson conducted any
prior analysis of the 2005 Plan’s termination.”
14.)
(Doc. #79 at
However, the parties have presented no evidence
demonstrating that he did not analyze the 2005 Plan’s
termination, and Plaintiffs allege that he should have done so as
a part of his review.
There also could be additional relevant
evidence of the types the Supreme Court discussed in Glenn.
Accordingly, the Court finds that just cause exists to allow
appropriate discovery limited to discovering evidence of bias and
conflict of interest and any resulting denial of due process.
B.
Denial of Due Process
It appears that Plaintiffs are arguing a due process
violation based on Defendants’ failure to provide a reasoned
denial within the time set forth in the Plans.
However, there is
no dispute of fact as to the timing of the denials.
Discovery
into timeliness or untimeliness of the claim denials is not
warranted.
Further, the timeliness of the claim denials is
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governed by the Plans, including the consequences for failing to
meet the deadline for issuing a claim denial.
Accordingly, to
the extent that the deadline was missed, the Plans provide for
automatic approval of the claims and so there would be no
violation of due process.
Plaintiffs also argue that the committee failed to
investigate and collect pertinent evidence.
This argument is
discussed in the next section, which addresses the alleged
inadequacy of the administrative record.
C.
Inadequacy of Administrative Record
When a plan administrator has acted arbitrarily and
capriciously in deciding what information he or she would
consider in deciding a claim, the Court of Appeals has held that
such a case must be remanded to allow the administrator “to
conduct a review in the first instance, considering the relevant
material it originally excluded.”
See, e.g., Killian v.
Healthsource Provident Administrators, Inc., 152 F.3d 514, 522
(6th Cir. 1998).
It is not always clear what records a plan
administrator has considered.
In such cases, courts sometimes
allow discovery into “whether a complete administrative record
has been assembled, whether any relevant material was not
submitted to the Plan Administrator, and what was considered by
the Plan Administrator.”
See, e.g., Pediatric Special Care, Inc.
v. United Medical Resources, No. 10-13313, 2011 WL 133038, *2
(E.D. Mich. Jan. 14, 2011); see also Crosby v. Louisiana Health
Service & Indem. Co., 647 F.3d 258, 263 (5th Cir 2011).
However, in at least one instance, the Court of Appeals denied
discovery as to the completeness of the administrative record
because the defendant’s counsel “submitted that [the defendant]
has produced an exact copy of the Administrative Record as it was
maintained in the ordinary course of [the defendant’s] business,”
and Plaintiff presented no evidence to support his contention
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that the defendant produced an incomplete copy of the
administrative record.
Likas v. Life Ins. Co. of N. Am., 222 F.
App'x 481, 485 (6th Cir. 2007).
Here, Defendants have filed what they have represented to be
the complete administrative record, and they have specifically
described the documents as including “the materials submitted by
Plaintiffs in connection with their claims for benefits, nonprivileged materials created or considered by the committees in
the course of making their benefits determination and the
governing plan documents.”
(Docket #59 at 2.)
Plaintiffs point
out that Defendants filed a version of the Administrative Record
that they represented as complete and then subsequently added
documents to the Administrative Record, and Plaintiffs argue that
this should raise suspicion that the current version of the
Administrative Record is incomplete.
However, it is very common
in the process of discovery that a party will provide documents
in response to a document request and later realize that
documents were omitted or that one interpretation of the document
request would include additional documents, and so the producing
party supplements its previous production.
While there are
certainly times when multiple versions of the administrative
record would raise suspicions, the Court does not find sufficient
cause here to permit discovery into the completeness of the
administrative record.
Plaintiffs’ primary argument as to the administrative
record, however, appears to be a slightly different one.
In
their motion to compel, Plaintiffs summarize the occasions on
which they requested documents from Defendants but were denied
those documents.
(Docket #72 at 11.)
Plaintiffs noted that the
Plan Administrator and Committee asserted that the requested
documents were not relevant because they had not been presented
to nor relied upon by the committee.
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Id.
Plaintiffs wrote
“[b]ut of course, the reason Plaintiffs requested the information
was so that they could present it to the Committee.”
Id.
Further, in their reply, Plaintiffs assert that they have
“demonstrated that Defendants have omitted evidence from the
Administrative Record that absolutely should have been collected
and considered by the Committee with regard to Plaintiffs’ claims
for severance.”
(Docket #82 at 19.)
Plaintiffs argue that
Defendants denied them due process by “deliberately avoid[ing]
gathering the information the Committee was obligated to include
in the administrative record.”
(Docket #72 at 44.)
Plaintiffs
cite to Warshaw v. Continental Cas. Co., 972 F. Supp. 428, 430
(E.D. Mich. 1997), in which the court interpreted Perry v.
Simplicity Engineering, 900 F.2d 963 (6th Cir. 1990), to permit
the admission of evidence that was reasonably available to the
plan administrator but that the plan administrator chose not to
seek.
However, if the committee acted arbitrarily and
capriciously in deciding what information it would consider in
deciding a claim, the case can be remanded to the committee with
instructions to consider information that it improperly chose not
to consider.
See, e.g., Killian, 152 F.3d at 522.
Further, if a
failure to investigate pertinent evidence arose from a conflict
of interest, the discovery regarding the conflict of interest may
demonstrate a clear due process violation, which may result in
substantive discovery being ordered as discussed below.
D.
Substantive Discovery
“If discovery into alleged procedural defects supports a
plaintiff’s allegations of due process denial, then a district
court is obligated to permit discovery into more substantive
areas of a plaintiff’s claim.”
Moore v. Lafayette Life Ins. Co.,
458 F.3d 416, 430-31 (6th Cir. 2006). “If a court finds that due
process was not denied, however, then it is appropriate for the
district court to deny further discovery into substantive areas,
8
or else a plaintiff could circumvent the directive of Wilkins
merely by pleading a due process problem.”
Id. at 431.
At this
point, the Court finds that it is premature to permit substantive
discovery.
E.
Defenses to Motion to Compel
Defendants argue that Plaintiffs are not entitled to
discovery because the allegations in the Complaint are
insufficient to permit the discovery sought.
Although not
addressing whether allegations of bias need be pled in the
complaint, the Court of Appeals has stated generally that
district courts have discretion to determine if an allegation of
bias is sufficient to permit discovery.
Johnson v. Connecticut
Gen. Life Ins. Co., 324 F. App'x 459, 466-67 (6th Cir. 2009).
Defendants cite Rule 26(b) and cases from the Eastern District of
Tennessee case to stand for the proposition that Plaintiffs must
have pled a conflict of interest in order to be permitted
conflict of interest discovery.
(Docket #79 at 37.)
However,
Rule 26(b) does not require Plaintiffs to plead conflict of
interest in their complaint in order for the discovery to be
relevant.
Rather, Rule 26(b) provides that the scope of
discovery is “any nonprivileged matter that is relevant to any
party’s claim or defense,” and conflict of interest is certainly
relevant to the claims at issue in this case because it affects
the Court’s application of the standard of review.
Further, even
if Defendants are correct that conflict of interest must be pled
in the complaint, Plaintiffs’ complaint includes allegations
sufficient to make conflict of interest discovery relevant.
(See, e.g., Docket #2 at ¶208 (“The Plan Administrator is once
again trying to avoid the express terms of an employee benefit
plan for its benefit and at the significant cost and expense of
Plaintiffs and other similarly situated Red Plan participants”).)
Therefore, this defense does not preclude conflict of interest
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discovery here.
Defendants also make arguments regarding which issues were
presented to the committee.
Plaintiffs state, “Defendants assert
that Plaintiffs’ arguments in support of conflict discovery fail
because Plaintiffs did not make them to the Plan
Administrator/Committees first.”
(Docket #82 at 6.)
If
Defendants are making that assertion, that assertion would fail,
because the rationale for allowing discovery outside of the
administrative record is to look into whether there was a denial
of due process.
See, e.g., Moore v. Lafayette Life Ins. Co., 458
F.3d 416, 430-31 (6th Cir. 2006).
However, it appears that
Defendants were actually arguing that substantive discovery
requested by Plaintiffs should be denied because, among other
reasons, the substantive issues were not raised during the
administrative process.
(Docket #79 at 42.)
To the extent
Defendants are arguing about substantive discovery, such
arguments are premature at this point.
Defendants also argue that Plaintiffs cannot prevail on
their claim relating to inadequacy of the administrative record
because they cannot point to documents that were missing.
Because the Court is not ordering discovery related to any
inadequacy of the administrative record at this time, the Court
need not address that defense.
III.
Conclusion
For all the foregoing reasons, the Court denies Defendants’
motion to hold in abeyance any ruling on the motion to compel
(Docket #88) and grants in part and denies in part Plaintiffs’
motion to compel discovery and supplement the record (Docket
#72).
Plaintiffs are authorized to seek discovery limited to the
subject matter authorized by this Order within fourteen days
after this Order is filed.
Any party may, within fourteen days after this Order is
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filed, file and serve on the opposing party a motion for
reconsideration by a District Judge.
28 U.S.C. §636(b)(1)(A),
Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 91-3,pt.
I., F., 5.
The motion must specifically designate the order or
part in question and the basis for any objection. Responses to
objections are due fourteen days after objections are filed and
replies by the objecting party are due seven days thereafter.
The District Judge, upon consideration of the motion, shall set
aside any part of this Order found to be clearly erroneous or
contrary to law.
This order is in full force and effect, notwithstanding the
filing of any objections, unless stayed by the Magistrate Judge
or District Judge. S.D. Ohio L.R. 72.3.
/s/ Terence P. Kemp
United States Magistrate Judge
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