Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_03-cv-04926/USCOURTS-cand-5_03-cv-04926-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.: Employee Benefits

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ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR FURTHER DISCOVERY– 03-04926

RMW

MAG

E-FILED on 7/8/05

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

ELIZABETH WILKERSON,

Plaintiff,

v.

RIFFAGE.COM DISABILITY INCOME

PROTECTION PROGRAM; SUN LIFE

ASSURANCE COMPANY OF CANADA,

Defendants.

No. C-03-04926 RMW

ORDER GRANTING IN PART AND

DENYING IN PART PLAINTIFF'S MOTION

FOR FURTHER DISCOVERY

[Re Docket No. 59]

On October 18, 2004, the court granted plaintiff limited discovery into an alleged conflict of interest

involving defendant Sun Life's Assurance Company of Canada ("Sun Life"). Plaintiff now seeks additional

discovery regarding said conflict of interest. Sun Life opposes the request. The motion was heard on June

17, 2005. For the following reasons, the court grants in part and denies in part plaintiff's request for

additional discovery.

I. BACKGROUND

Plaintiff claims that she was improperly denied benefits under a disability plan governed by ERISA

provisions. She originally submitted her claim on February 16, 2001, was denied benefits on June 1, 2001,

and, after multiple appeals, received a final decision denying benefits on November 27, 2002. She

subsequently filed the action currently before this court and, on May 24, 2004, moved the court to determine

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ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR FURTHER DISCOVERY– 03-04926

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the standard of review for her disability claim and permit her to conduct discovery into the extent Sun Life's

review ofthe administrative record. After reviewing the moving papers and conducting a hearing on the matter,

the court tentatively determined that the abuse of discretion standard of review was appropriate because (1)

the disabilityplanconferred discretiononSunLife to determine eligibilityfor benefits and (2) plaintiff had failed

"to present material, probative evidence, beyond the mere fact of [an] apparent conflict ofinterest"asrequired

under the burden-shifting analysis in Tremain v. Bell Indus. Inc., 196 F.3d 970, 976 (9th Cir. 1999). 

While the matter was under submission, plaintifffiled a supplemental declaration arguing that an email

discovered after the hearing raised an issue with regard to whether Sun Life had an actual conflict of interest.

The email, sent by the director of the long term disability ("LTD") claims department, Steve Bailey, uses the

phrase "Kick It Up a Notch" to introduce a lottery program in which an LTD claims department employee's

chances of winning a lottery prize increases for each qualifying closure or termination. 

After considering SunLife'ssupplementalresponse, the courtfound thatthis emailraisedconcernabout

the possibility of Sun Life's conflict of interest for the following reasons: 

(1) the e-mail was written and the lottery proposed by the then Director of

Sun Life's Group Disability Claim Department; (2) plaintiff's claimwas still in

the appeal process; (3) the express purpose of the lottery was to encourage

closures and terminations of claims (which does not occur if the claim is

approved)so as to "have an impact on the bottomline results ofthe business"

(id.); (4) in June 2002 Sun Life was approximately $1,000,000 behind its

original projection for the month and significantly behind on

terminations/denials; and (5) the claims group apparently recognized and had

talked for months about a need to create an environment fostering closures.

("Overthe past months, we have beentalking quite a bit about "Kicking it Up

a Notch", creating an environment for individuals to excel on professional

performance and contribute to positive results within our division . . . (and)

have an impact on the bottomline results of the business." (Id.).

 

October 18 Order at 8. Accordingly, the court granted the plaintiff sixty days to perform limited "discovery

onthe effect ofthe program" and ordered the partiesto submitsupplementalbriefing onthe standard ofreview.

The court specified discovery could include: "(1) a 30(b)(6) deposition of the person most knowledgeable

about the "Kick It Up a Notch" program, its development, application, implementation, and cancellation; (2)

any written records of the development, application, implementation, and cancellation of the "Kick It Up a

Notch" program; (3) any written records of any awards or incentives given for terminations/closures of LTD

claims between January 1, 2000 and December 31, 2003; (4) the deposition of Steve Bailey and one

representative claims person subject to Bailey's supervision; and (5) summary records showing total number

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ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR FURTHER DISCOVERY– 03-04926

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of LTD claims made, closed, or terminated for each month starting December 1999 and ending December

2003." October 18 Order at 9.

Plaintiff has completed the discovery permitted under the court's October 18 Order and nowrequests

that the court authorize additional discovery into Sun Life's alleged conflict of interest. 

II. DISCUSSION

A. Limited Discovery in ERISA Cases

Two primary goals of ERISA are to increase the likelihood beneficiaries will receive full benefits, and

to maintain premium costs at a reasonable level. See Kearney v. Standard Ins. Co., 175 F.3d 1084, 1094

(9th Cir. 1999) (quoting 29 U.S.C. § 1001b(c)(3), (5)). The Supreme Court has emphasized "the need for

prompt and fair claimssettlement procedures" inERISAgoverned plans. Pilot Life Ins. Co. v. Dedeaux, 481

U.S. 41, 54 (1987). "In the context of discovery, the court should therefore balance the goal of maintaining

lowpremiumcosts which may be effected bylimitingthe scope ofdiscovery, and thusthe expense oflitigation,

with the demands of reaching an informed and independent review of the benefits decision." Medford v.

Metro. Life Ins. Co., 244 F. Supp. 2d 1120, 1128-29 (D. Nev. 2003). Thus, discovery is limited in ERISA

cases. Waggener v. UNUM Life Ins. Co. of America, 238 F. Supp. 2d 1179, 1185 (S.D. Cal. 2002)

("Because of the interest in both maintaining premium costs at a reasonable level and allowing for the prompt

and fair resolution of claims, discovery simply cannot be as broad and overreaching [in ERISA cases] as in

other types of cases.").

Where the planbeneficiaryplaintiff provides "material, probative evidence of a conflict,"suchevidence

maycreate a rebuttable presumptionthat the administrator's decisiondenying benefits "wasinfact a dereliction

ofitsfiduciaryresponsibilities." Regula v. Delta Family-Care Disability Survivorship Plan, 266 F.3d 1130,

1145 (9th Cir. 2001), vacated on other grounds by 539 U.S. 901, 156 L. Ed. 2d 109, 123 S. Ct. 2267

(2003) (citing Lang v. Long-Term Disability Plan, 125 F.3d 794, 798 (9thCir.1997)). In such a case, the

court will conduct a de novo review of the administrative record, where it might ordinarily conduct a review

under the abuse of discretion standard. Pursuant to the Ninth Circuit's burden shifting analysis

If . . . the program participant presents material, probative evidence, beyond

the mere fact of[an] apparent conflict, tending to show that the fiduciary's self

interest caused a breach of the administrator's fiduciary obligations to the

beneficiary, a rebuttable presumption arises in favor of the participant. The

planthenbearsthe burdenofrebutting the presumptionbyproducing evidence

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1 Bailey reported directly to Shunney, who was, in 2002, the Vice President of the Group

Insurance division.

2 DeCoff is no longer a Sun Life employee.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR FURTHER DISCOVERY– 03-04926

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to show that the conflict of interest did not affect its decision to deny or

terminate benefits. If the plan fails to carry this burden of rebutting the

presumption, we review de novo its decision to deny benefits.

Tremain, 196 F.3d at 976. As of its October 18 Order, this court was not yet satisfied that plaintiff had

presented sufficient evidence to showthat any SunLife self-interest caused a breach ofitsfiduciaryobligations

to plaintiff. But it expressed concernthat SunLife had closure and termination goals that tended to show selfinterest affected claims decisions. Accordingly, it granted limited discovery into the existence of an actual

conflict of interest.

B. Discovery to Date

At the completion of that limited discovery, plaintiff has discovered that Steve Bailey, the manager of

the LTDclaims department at the time the June 2002 lotteryemailwassent, did not become the direct manager

until January 2002. Before that, Kenneth Arruda directly managed that department. Through depositions of

Bailey and Michael Shunney,1 Sun Life's designated 30(b)(6) witness, that "Kick It Up a Notch" was not a

program. Instead, it was a slogan designed to motivate Sun Life employees. Plaintiff argues that, rather than

motivating Sun Life claims personnel to work harder, as claimed by Bailey, the originator of the "Kick It Up

a Notch" slogan, the focus was ongetting claims personnel to terminate or close more claimsinorder to ensure

Sun Life's profitability. Although discovery to date has produced two emails expressing termination/closure

goals in addition to the June 2002 lotteryemailthat originally caused the court concern, plaintiff contends that

it is unlikely that all of the directives from Sun Life management to claims personnelwere made inconjunction

with the "Kick It Up a Notch" slogan. Further discovery is required, she contends, to adequately determine

the extent of the alleged conflict.

Plaintiff also deposed Sandy DeCoff, as the claims examiner subject to Bailey's supervision. DeCoff

was the examiner that reviewed plaintiff's claim and who ultimately wrote the finaldenialletter.2 Plaintiff does

not appear to base her request for additional discovery DeCoff's deposition.

C. Additional Discovery

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3 The court previously ordered, and Sun Life has produced, monthly statistical data from

December 1999 through December 2003 regarding new claims, terminations, and closures. 

4 Although plaintiff first submitted her claim in December 2000 and received a second denial

of that claim in November 2002, the court permitted discovery regarding awards and incentives for

terminations/closures from January 2000 through December 2003.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR FURTHER DISCOVERY– 03-04926

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Plaintiff seeks to discover other evidence regarding the extent to which Sun Life communicated its

financial goals to its claims personnel. To that end, plaintiff seeks (1) to depose Kenneth Arruda; (2) all

communications from Bailey to Arruda sent between February 16, 2001 and November 27, 2002 that refer

to terminations, closures, or financial performance of the group disability department; (3) all communications

(apparently without limitation) from Bailey or Arruda to employees of the group disability department during

that same period; (4) additional statistical data regarding Sun Life's claims. In addition to the statistical data

previously ordered produced, plaintiff seeks monthly data on (a) pending cases, (b) backlog cases (if kept);

(c) approved cases; (d) reserves; (e) profits for the month; (f) denied cases; and (g) reopens.3

Muchofthe additionaldiscoveryplaintiffrequestsrelatesto Sun Life'sfinancialinterest and the impact

ofthatfinancialinterest onthe claims process. "Though the claimant obviously has a financial interest in getting

the money, while the plan has a financial interest in keeping it, that alone cannot establish conflict of interest in

the administrator, because it would leave no cases in the class receiving deferential review under Firestone."

Jordan v. Northrop Grumman Corp. Welfare Benefit Plan, 370 F.3d 869, 876 (9th Cir. 2004). Here,

however, plaintiff contends that Sun Life emphasized its financial performance and rewarded its claims

personnel only whentheyresolved claimsina mannerthat benefitted Sun Life's financial performance: namely,

closures or terminations of claims. To determine whether this was so, the court authorized discovery into

awards or incentives givenforterminations/closures, including the "Kick It Up a Notch" program for the entire

period relevant to plaintiff's claiminitsOctober 18 Order.4 Plaintiff contends that additional discovery into Sun

Life's financialdata is necessaryinorder to determine whether those goals were communicated to claims staff

and impacted the claims determination process. The court disagrees. Whatever Sun Life's financial interest,

the crucial inquiry is whether that interest translated into goals communicated to the claims personnelina way

that resulted in a claim resolution in plaintiff's case that favored Sun Life's interest over the beneficiary's. 

However, because the previous discoverywaslimited to incentive and awards programs and plaintiff's

discovery to date demonstrates that "Kick It Up a Notch" was not a program but a slogan, the court will

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ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR FURTHER DISCOVERY– 03-04926

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authorize further limited discovery into whether goals regarding terminations and closures were actually

communicated to relevant long-term disability claims personnel irrespective of whether those goals were part

of an official incentive program. Specifically, Sun Life is ordered to produce email announcements or other

written communications sent to Sandra DeCoff between January 1, 2002 and November 27, 2002 from the

director of that group (Bailey or Arruda, depending who was director ofthe group at the time) communicating

terminationand closure goals. January 1, 2002 precedes the introduction of the "Kick it Up a Notch" slogan,

the first evidence plaintiff presents that termination and closure goals were communicated to LTD personnel,

by a month and a half; November 27, 2002 is the date of the final denial of plaintiff's claim. 

To be clear, this additionaldiscoveryonly applies to emails and other writtencommunications fromthe

director of the LTD group on which DeCoff is designated a named recipient. This additional discovery, in

conjunctionwiththe previously-ordered discovery regarding actual award or incentives given forterminations

and closures, will assist the court in determiningwhether SunLife articulated closure and terminationgoals that

may have resulted in an actual conflict of interest with respect to plaintiff's claim. 

The court issatisfied that the statisticaldata provided to date demonstratesthe levelofterminations and

closures during the relevant timeframe. It finds that the additional statistical data plaintiff seeks regarding

pending cases, backlog cases, approved cases, reserves, profits for the month, denied cases, and reopens is

confidential information and concludes that requiring defendants to produce it at this stage of the litigation is

unnecessary and would be unduly burdensome. With the limited exception of the number of claims approved

inFebruary2002 and how many of those approvals came afterthe February26, 2002 Baileyemail, AR590-

91, plaintiff's request for additional statistical data is denied.

III. ORDER

For the foregoing reasons, the court grants in part and denies in part plaintiff's request for additional

discovery. Plaintiff is permitted 60 days to conduct discovery into the written communications of which DeCoff

was a recipient regarding terminationor closure goals asset forthabove. Sun Life shall also provide to plaintiff

the totalnumber of claims approved in February 2002 and how many of those approvals were made afterthe

February 26, 2002 Bailey email. Sun Life shall produce items responsive to this order within 30 days of the

date of the order. The case management conference presently scheduled for July 29, 2005 shall be

rescheduled for October 14, 2005 at 10:30 a.m. Plaintiff shall file a supplemental brief on the standard of

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ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR FURTHER DISCOVERY– 03-04926

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review by September 9, 2005. Sun Life shall file its response by September 23, 2005. Plaintiff's response,

if any, shall be filed by September 30, 2005.

DATED: 7/8/05 /s/ Ronald M. Whyte

RONALD M. WHYTE

United States District Judge

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ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR FURTHER DISCOVERY– 03-04926

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Notice of this document has been electronically sent to:

Counsel for Plaintiff(s):

Ronald Glenn Dean rdean@74erisa.com

Counsel for Defendant(s):

Maria A. Tahmouresie mtahmouresie@barwol.com

Counsel are responsible for distributing copies of this document to co-counsel that have not registered for efiling under the court's CM/ECF program.

Dated: 7/8/05 /s/ MAG

Chambers of Judge Whyte

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