Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-03886/USCOURTS-cand-5_05-cv-03886-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 28:1331 Fed. Question

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United States District Court

For the Northern District of California

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 The court adopts the parties' use of "AR [page number(s)]" to refer to Reliance's 302-page file on

Recotta, docket no. 20. 

ORDER DETERMINING THE STANDARD OF REVIEW—No. C-05-03886 RMW

JAH

United States District Court

For the Northern District of California

E-FILED on 5/26/06

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

LINDA RECOTTA,

Plaintiff,

v.

RELIANCE LIFE INSURANCE CO.;

COHERENT, INC.; MATRIX ABSENCE

MANAGEMENT, INC.; THE LONG TERM

DISABILITY PLAN OF COHERENT, INC.,

and DOES 1-10;

Defendant.

No. C-05-03886 RMW

ORDER DETERMINING THE STANDARD

OF REVIEW

[Re Docket Nos. 14, 19, 22]

Plaintiff Linda Recotta moves for an order determining that the standard of review in this

ERISA action is de novo. For the reasons set forth below, the court determines the standard of

review is for abuse of discretion.

I. BACKGROUND

Recotta previously worked in accounts payable at defendant Coherent, Inc. She has a

history of documented cardiac problems going back to at least 1998. See AR 199.1

 Complaining

of stress-induced shortness of breath, chest pain, and fatigue, she ceased work at Coherent on

Case 5:05-cv-03886-RMW Document 24 Filed 05/26/06 Page 1 of 7
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ORDER DETERMINING THE STANDARD OF REVIEW—No. C-05-03886 RMW

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January 31, 2003. AR 106. She applied for short-term disability benefits, which were granted by

defendant Matrix Absence Management, Inc. AR 102-03. Matrix, however, denied Recotta longterm disability benefits, and this decision was upheld on appeal by defendant Reliance Standard

Life Insurance Company. AR 23-26. Recotta's suit followed.

II. ANALYSIS

Reliance argues that the court must review its denial of benefits under an abuse-ofdiscretion standard; Recotta contends that de novo review is required because of a conflict of

interest. "[A] denial of benefits challenged under [29 U.S.C.] § 1132(a)(1)(B) is to be reviewed

under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary

authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire

& Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). When the plan confers discretion on the plan

administrator to determine eligibility for benefits, courts generally review the denial of benefits for

abuse of discretion. See id. A conflict of interest on the part of the plan administrator can convert

review for abuse of discretion into de novo review. Lang v. Long-Term Disability Plan of Sponsor

Applied Remote Tech., Inc., 125 F.3d 794, 797 (9th Cir. 1997). Here, plaintiff concedes that the

plan at issue gives Reliance discretion, see Mot. at 6, but argues that Reliance's decision to deny

her benefits was tainted by a substantial conflict of interest.

An apparent conflict of interest exists where a long-term disability policy is both funded

and administered by the defendant. See Bendixen v. Standard Ins. Co., 185 F.3d 939, 943 (9th Cir.

1999). Such an apparent conflict of interest "must be weighed as a factor in determining whether

there is an abuse of discretion." Tremain v. Bell Indus., Inc., 196 F.3d 970, 976 (9th Cir. 1999)

(quotation marks and brackets omitted). "[R]eview in such a circumstance, although still for

abuse of discretion, is less deferential." Id. (quotation marks omitted). 

"If, however, the program participant presents material, probative evidence, beyond the

mere fact of the 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" de novo review. Id. (citations and quotation marks omitted). "The plan then bears the

burden of rebutting the presumption by producing evidence to show that the conflict of interest did

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ORDER DETERMINING THE STANDARD OF REVIEW—No. C-05-03886 RMW

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not affect its decision to deny or terminate benefits." Id. (quotation marks omitted). "If the plan

fails to carry this burden of rebutting the presumption," the decision to deny benefits will be

reviewed de novo. Id. The Ninth Circuit has found "material, probative evidence" of a serious

conflict of interest where there were "inconsistencies in the reasons" given for a denial, Lang, 125

F.3d at 797, "procedural irregularities in the initial claims process and an unfair appeals process,"

Friedrich v. Intel Corp., 181 F.3d 1105, 1110 (9th Cir.1999), or insufficiency of the stated reasons

for denial, Tremain, 196 F.3d at 977.

When an ERISA plan is actually an insurance policy issued and administered by the

insurer, the insurer's "dual role as both the funding source and the administrator of the Plan"

creates an inherent conflict of interest. Lang, 125 F.3d at 797. The plan at issue here is a Reliance

insurance policy, and Reliance is the funding source. See AR 68. Though Matrix Absence

Management, Inc. initially determines whether a policyholder is eligible for long-term disability

benefits, Reliance is responsible for the appeal process and therefore has ultimate decision-making

authority. As such, Reliance has an apparent conflict of interest when it makes benefit eligibility

determinations, and this brings Reliance within Tremain's "less deferential" abuse-of-discretion

review. See 196 F.3d at 976. 

Since Reliance has an apparent conflict, the next question is whether plaintiff has presented

"material, probative evidence" showing that Reliance acted upon that conflict. Id. at 976. Recotta

argues that two factors indicate Reliance was operating under a conflict of interest serious enough

to warrant de novo review: (1) Reliance failed to follow its own internal policies when handling

Recotta's claim, and (2) the physician retained by Reliance to review Recotta's claim was unduly

biased in Reliance's favor. 

A. Internal policies

Recotta points out that Reliance's manual states, "After the initial claim review, a telephone

interview with the claimant should be conducted by the examiner for each claim within seven to

ten days of receiving the claim where possible and appropriate." Folan Decl., Ex. G at 5

(emphasis in original). Recotta states that she does "not recall that anyone from Reliance ever

formally interviewed" her. Recotta Decl. ¶ 10. Though Reliance's manual qualifies that phone

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ORDER DETERMINING THE STANDARD OF REVIEW—No. C-05-03886 RMW

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interviews should only be conducted where "possible and appropriate," Folan Decl., Ex. G at 5, it

appears that the expectation is that phone interviews will be conducted except in unusual

circumstances. There is no indication that it would have been impossible or inappropriate for

Reliance to interview Recotta by phone. Recotta has shown that Reliance deviated somewhat from

its written examination procedure when evaluating her claim. This alone, though, is not sufficient to

constitute a serious conflict of interest under Friedrich.

However, none of Recotta's other claims on this point are persuasive. She argues that

Reliance should have conducted further investigation of certain points and should have, for example,

conducted an independent medical evaluation of her, inquired whether the Social Security

Administration had found her permanently disabled, spoken with her treating physicians, and spoken

with her co-workers about the duties of her specific position with Coherent. While Reliance's policy

manual does state that claims examiners should "[g]ather all the facts that will help us determine if

the claimant meets the definition of disability," Folan Decl., Ex. G at 5, it also states that claimants

are "ultimately responsible for providing proof of disability on a timely basis," id. at 6. Furthermore,

the policy states that for long-term disability benefits to be paid, she must "submit[] satisfactory

proof of Total Disability to" Reliance. AR 56. If Recotta felt that Reliance needed additional

information to evaluate her claim, the burden was on her to submit such information.

B. Bias

As an initial matter, the court rejects Reliance's suggestion that the biases of the physicians it

hires are irrelevant or may not be imputed to Reliance. See Opp'n at 10-11. Physician bias could be

"material, probative evidence" of a conflict of interest; it would be illogical to disregard a proven

bias on the part of a physician reviewing records to assist in a decision whether to grant disability

benefits. The court will therefore consider Recotta's arguments on this issue.

Recotta presents an unsigned version of an opinion from Chief Judge Thomas Vanaskie as

evidence that the physician Reliance hired to review Recotta's medical records, Dr. Marvin

Goldstein, is unduly biased. See Req. Jud. Not., Ex. C. This order was originally published, Davies

v. Paul Revere Life Ins. Co., 147 F. Supp. 2d 347 (M.D. Pa. 2001), but Judge Vanaskie ordered the

opinion depublished and removed from electronic databases, Davies v. Paul Revere Life Ins. Co.,

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ORDER DETERMINING THE STANDARD OF REVIEW—No. C-05-03886 RMW

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236 F. Supp. 2d 445 (M.D. Pa. 2002). Recotta's request to take judicial notice of this opinion is

therefore denied.

Recotta's other arguments that Goldstein is biased are unpersuasive. She claims that the facts

that he "lives back East in Pennsylvania and has not treated patients for more than a decade" show

his bias. Mot. at 10; see AR 214-15. This hardly seems sufficient to make him unqualified to

review medical records, and even if it did, it would not indicate that he would necessarily have a

bias in favor of one party or the other. Other courts have referred to him as The Paul Revere Life

Insurance Company's "internal medical consultant," Mizzell v. Paul Revere Life Ins. Co., 118 F.

Supp. 2d 1016, 1018 (C.D. Cal. 2000), and "in-house medical consultant," Rosenthal v. Long-Term

Disability of Epstein, Becker & Green, P.C., 1999 WL 1567863 at *4, (C.D. Cal. 1999), but

employment by an insurance company—particularly one other than Reliance—cannot be evidence

of a serious conflict of interest without going against Tremain's command that such a situation is

only an apparent conflict of interest warranting review for abuse of discretion. See 196 F.3d at 976. 

Recotta also argues that Goldstein used only information in her file that would support a

denial of benefits and ignored other evidence that she was actually disabled, such as that her aortic

root enlarged from 3.6 centimeters to 5.0 centimeters between 2000 and 2002. Comparing

Goldstein's report to the information in her file, it does not appear that Goldstein unduly focused

only on information that would support a denial of benefits. While Goldstein's report does not

mention Recotta's aortic root enlargement, Goldstein considered a variety of diagnostic tests from

over a period of years, such as cardiac catheterizations, treadmill tests, echocardiograms, and

physical examinations. See AR 207-09. Recotta also does not explain how—particularly given

that her diagnostic test results had not markedly changed and her cardiologist stated on January

29, 2003 that "[s]he is clinically doing well" and that she may or may not be suffering from

ischemia, AR 100—a finding of aortic root enlargement compels the determination that she

qualified for long-term disability benefits under Relience's plan.

That Reliance did not conduct a phone interview of Recotta, by itself, does not constitute

"material, probative evidence" that Reliance operated under a serious conflict of interest sufficient

to review its decision to deny Recotta long-term disability benefits de novo. As a general matter,

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ORDER DETERMINING THE STANDARD OF REVIEW—No. C-05-03886 RMW

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Recotta's arguments do not indicate that the standard of review should be other than for abuse of

discretion; rather, her arguments go more to the fact that Reliance may have abused its discretion

in denying her claim. The standard of review in this action will therefore be Tremain's "less

deferential" abuse-of-discretion review.

III. ORDER

For the foregoing reasons, the court denies plaintiff's motion and determines that the policy

decision at issue will be reviewed for abuse of discretion, subject to the qualification of Tremain

mandating "less deferential" review.

DATED: 5/26/06

RONALD M. WHYTE

United States District Judge

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United States District Court

For the Northern District of California

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ORDER DETERMINING THE STANDARD OF REVIEW—No. C-05-03886 RMW

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Notice of this document has been electronically sent to:

Counsel for Plaintiffs:

Maureen A. Folan mfolan@ndkylaw.com 

Kirsten M. Fish kfish@ndkylaw.com 

Counsel for Defendants:

Colleen R. Smith csmith@hfdclaw.com 

Kevin P. McNamara kmcnamara@hfdclaw.com

Counsel are responsible for distributing copies of this document to co-counsel that have not

registered for e-filing under the court's CM/ECF program.

Dated: 5/26/06 /s/ JH

Chambers of Judge Whyte

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