Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00634/USCOURTS-caed-2_05-cv-00634-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 28:1132 E.R.I.S.A.

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1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

PATRICIA McCURDY,

Plaintiff, CIV S-05-0634 WBS EFB

vs.

METROPOLITAN LIFE 

INSURANCE COMPANY, et al., ORDER

Defendants.

__________________________________/

This case was before the undersigned on February 28, 2007, for hearing on plaintiff’s

motion for leave to conduct discovery outside the administrative record. Plaintiff brings this

action pursuant to the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§

1001 et seq. and, ordinarily, such claims are resolved on review of an administrative record. 

Jesse S. Kaplan appeared as plaintiff’s counsel, and William Lee appeared as defense counsel. 

Following the hearing and pursuant to the court’s order, the parties submitted additional briefing

on the issue of proposed discovery concerning the “reserve” amounts set by defendants with

respect to plaintiff’s claim for disability benefits. Having reviewed all submitted materials, the

court issues the following order. 

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I. BACKGROUND

Plaintiff’s ERISA claim is brought under 29 U.S.C. §§ 1132(e)(1) and (f), and seeks to

recover benefits under a long term disability insurance policy (the “Plan”) insured by

Metropolitan Life Insurance Company (“MetLife”) and provided by plaintiff’s former employer,

Bank of America (collectively, “defendants”). Plaintiff was a full-time employee of Bank of 

America until October 16, 2002, when she ceased working due to alleged impairments, including

insulin-dependent diabetes with lower extremity edema, hypertension, right shoulder tendinitis,

and panic attacks. Subsequent to ceasing employment, plaintiff made a claim for benefits under

the Plan, which contained a discretionary clause giving the plan administrator (MetLife)

discretion to determine eligibility for benefits. MetLife both administers the Plan and funds it. 

Plaintiff’s claim for benefits was denied at all levels of the administrative process. Accordingly,

she filed the present action seeking review of the administrator’s denial of benefits. Presently

before the court is plaintiff’s motion for leave to conduct discovery outside the administrative

record. 

II. ANALYSIS

A. Standard of Review in ERISA Cases and Scope of Discovery

In ERISA cases, when a plan administrator’s decision is reviewed by the district court,

the default standard of review is de novo. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955,

963 (9th Cir. 2006). However, if the Plan confers discretionary authority on the plan

administrator (as it does in the this case), then the standard of review is abuse of discretion. Id.

(citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)). The Ninth Circuit has

held that where an insurer acts as both the plan administrator and the funding source for benefits

(as it does in this case), it operates under what may be termed a structural conflict of interest. 

Abatie, 458 F.3d at 965 (citing Tremain v. Bell Indus., Inc., 196 F.3d 970, 976 (9th Cir. 1999)). 

In light of such a conflict, the Ninth Circuit – prior to Abatie – would engage in a burden-shifting

analysis to determine the appropriate standard of review. See Atwood v. Newmont Gold Co., 45

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F.3d 1317 (9th Cir. 1995). Under the rubric set forth in Atwood, if the plaintiff could come

forward with “material probative evidence” showing the administrator’s self-interest affected its

denial of benefits, then the administrator would have to come forward with evidence to the

contrary. If it could not, then the court would review the denial of benefits de novo, rather than

for abuse of discretion. The Ninth Circuit overturned Atwood’s burden-shifting paradigm in

Abatie, and held that abuse of discretion is the appropriate standard of review where a plan

contains a discretionary clause. When the standard of review is abuse of discretion, the district

court must base its ultimate decision on the merits only on the administrative record, and not on

extrinsic evidence. Abatie, 458 F.3d at 970. However, the Court in Abatie affirmed that district

courts still have discretion to consider evidence beyond what is contained in the administrative

record, even where the standard is abuse of discretion:

A subtler question arises when a court must decide how much weight to

give a conflict of interest under the abuse of discretion standard. In

making that determination, the court may consider evidence outside the

record. . . . Although a district court may review only the administrative

record when considering whether the plan administrator abused its

discretion. . . . it may, in its discretion, consider evidence outside the

administrative record to decide the nature, extent, and effect on the

decision-making process of any conflict of interest. . . .

Abatie, 458 F.3d at 970 (emphasis added) (citations omitted). Thus, while a district court’s

decision may not rest on evidence extrinsic, it may nonetheless consider such evidence to

“decide the nature, extent, and effect on the decision-making process of any conflict of interest.” 

Id.

Given the appropriateness of considering such extrinsic evidence on the conflict

questions, it logically follows that a party should is entitled to conduct discovery beyond the

scope of the administrative record – even if only for the limited purpose set forth in Abatie.

B. Plaintiff’s Discovery Requests

Plaintiff has submitted six separate discovery requests. The court addresses each request

below.

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1. Plaintiff’s First Request

Plaintiff requests “any and all policies, riders, amendments, and other indicia of

insurance reflecting or constituting the plan coverage involved herein.” At the February 28,

2007, hearing, defendant MetLife represented that it had produced all such information to

plaintiff as part of the administrative record. Because the requested documents constitute part of

the administrative record, which the district court must consider when reviewing the

administrator’s denial of benefits, they are, under Abatie, appropriate discovery requests if, in

fact, they were not included in the record previously produced by the defendant. As noted, the

defendant has represented that the documents were included in the record it produced. 

Accordingly, MetLife shall provide plaintiff with a verified, written response confirming that all

the items requested above have been provided to plaintiff as part of the administrative record. 

2. Plaintiff’s Second Request

Plaintiff further requests “all documents in the possession, custody, or control of

defendants referring, reflecting, relating, or pertaining to plaintiff and plaintiff’s claim that

defendants contend are not part of the administrative record of plaintiff’s claim proceeding.”

Again, at the hearing, defendant MetLife represented that it has produced everything related to

plaintiff’s claim. Accordingly, in order to obviate any future dispute on this issue, MetLife shall

provide plaintiff with a verified, written response to that effect.

3. Plaintiff’s Third Request(s)

Plaintiff’s third request is multi-tiered, and by plaintiff’s own characterization thereof,

relates to issues concerning California’s policy with respect to discretionary clauses in plans

such as the one in this case. In particular, plaintiff requests: 

“All documents constituting or containing any discretionary clause, or

other language or basis, defendants contend affects the standard of review

to be applied by the court in this action; all documents constituting,

containing, referring to, or reflecting any agreement between the two

defendants, or the defendants and any entity relating to Bank of America,

that any such discretionary clause(s), or language or basis, would be part

of the documents responsive to (3), including any consideration given for

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 On February 26, 2004, in a letter opinion to a plaintiff in an action before the United

States District Court for the Northern District of California, the Chief Counsel for the California

Insurance Commissioner explained that it was the opinion of the Department of Insurance that

“all such discretionary clauses in disability insurance contracts violate California law and

deprive insureds of protections to which they are entitled.” February 26, 2004 Letter Opinion per

Cal. Ins. Code § 12921.9: Discretionary Clauses (“Letter Opinion”), at 1. Specifically, the Letter

Opinion concluded that discretionary clauses render the contract “unintelligible, uncertain,

ambiguous, abstruse and likely to mislead” in violation of Cal. Ins. Code § 10291.5(b)(1)

because the clauses negate operative terms of the contract and may cause insureds to believe a

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inclusion of such discretionary clause(s), or language or basis, and any

negotiations regarding them; all documents constituting, containing,

referring, or reflecting the authorization for any such discretionary

clause(s), or language or basis, including by the California Insurance

Commissioner, by the Plan, and by any person or entity relating to Bank

of America; and, the names, addresses, and telephone numbers of each

individual likely to have discoverable information regarding [these]

subjects. . . .”

Plaintiff’s Amended Notice of Motion for Leave to Conduct Discovery, at 1-2. These requests

are denied, except to the extent that defendants shall provide plaintiff with written, verified

responses on the issue of whether or not the discretionary clause contained in the Plan was

approved by the California Department of Insurance. Defendants shall also provide any relevant

documentation showing either the approval or non-approval of the clause. 

The balance of plaintiff’s “third request” is denied. It is undisputed that the Plan contains

a discretionary clause, and that under Abatie, the appropriate standard of review is abuse of

discretion. Plaintiff’s argument that the standard of review should change because the Plan’s

discretionary clause may be void as against public policy pursuant to California law is ill-taken. 

Regardless of any underlying state policy disfavoring discretionary clauses, the United States

Supreme Court has approved of such clauses and held that administrator’s decisions made

pursuant to such clauses should be reviewed for abuse of discretion. See Firestone Tire &

Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); see also Hansen v. Unum Life Ins. Co., 2004

U.S. Dist. LEXIS 22995, at *30 (E.D. Cal. Oct. 21, 2004) (holding that Cal. Ins. Code § 10291.5

falls within ERISA’s preemptive scope as it clearly relates to an employee benefit plan).1

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denial of benefits is unreviewable. Letter Opinion at 1. This court agrees with the holding in

Hansen that these state law provisions are not controlling given ERISA’s preemptive effect on

employee benefit plans. 

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4. Plaintiff’s Fourth Request

Plaintiff additionally requests “all documents constituting, reflecting, or pertaining to the

reserve set, or mandated for, this claim.” 

As requested by the court, the parties have submitted additional briefing on whether or

not plaintiff should be allowed to conduct discovery concerning the reserve amount set for

plaintiff’s claim. Defendant MetLife asserts that such information is irrelevant for two reasons. 

First, MetLife asserts that “state law mandates that reserves are set for each claim, and therefore,

reserves do not indicate any intent or subjectivity on the insurer’s part.” MetLife argues that it

has found no authority that discovery of reserve information is allowed outside the context of 

“bad faith” insurance actions. Indeed, in the context of such “bad faith” actions, courts have

found that reserve information is relevant, for example, with regard to an insurer’s intent in

deciding not to defend or settle a claim. See, e.g., American Protection Ins. Co. v. Helm

Concentrates, Inc., 140 F.R.D. 448, 449-50 (E.D. Cal. 1991). Second, MetLife argues that the

two claims representatives who reviewed and made determinations regarding plaintiff’s claim

and appeal were unaware of the reserve amounts set for plaintiff’s claim, and were therefore not

influenced by it. MetLife supports these assertions with sworn declarations by those claims

representatives. Plaintiff attacks those declarations, arguing that they fail to aver that the two

declarants were the actual decisionmakers who denied plaintiff’s claim. The court agrees that

based on the information provided by MetLife, it is not entirely clear whether there were other

representatives involved with the decision to deny plaintiff’s claims. 

Further, MetLife cites no authority for the proposition that discovery concerning the

reserve amount set for plaintiff’s claim is precluded. Even though the amount of a reserve is, at

least in part, determined by state law, American Protection, 140 F.R.D. at 449, defendant has not

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shown that the reserve is irrelevant with respect to the administrator’s decision to deny benefits

when, as here, the administrator also funds the Plan. Under Abatie, such evidence may shed

light on the admitted “structural conflict of interest” present in this case. Abatie, 458 F.3d at

965. The district court may consider such evidence in determining what weight to give to that

conflict. Id. at 970. Accordingly, plaintiff’s fourth request is granted, and MetLife shall produce

“all documents constituting, reflecting, or pertaining to the reserve set, or mandated for, this

claim.” 

5. Plaintiff’s Fifth Request

Plaintiff also requests “all in-house, Metropolitan Life Insurance Company, documents,

including claim and procedural manuals, guidelines, bulletins, and memoranda, describing or

pertaining to the handling of disability claims in general, and disability claims involving

diabetes, peripheral edema, and anxiety claims in particular.” 

The court finds that such information is discoverable in light of Abatie, which

specifically noted the relevance of whether or not an administrator has complied with the

procedural requirements dictated by the Plan. Abatie, 458 F.3d at 971 (noting that although an

administrator’s failure to comply with procedural requirements ordinarily does not alter the

standard of review, there are “some situations in which procedural irregularities are so

substantial as to alter the standard of review.”). “When an administrator engages in wholesale

and flagrant violations of the procedural requirements of ERISA, and thus acts in utter disregard

of the underlying purpose of the plan as well, we review de novo the administrator’s decision to

deny benefits. We do so because, under Firestone, a plan administrator’s decision is entitled to

deference only when the administrator exercises discretion that the plan grants as a matter of

contract.” Id. (citing Firestone, 489 U.S. at 111). Given the relevance of an administrator’s

adherence to procedural requirements, plaintiff is entitled to conduct discovery thereon. 

Accordingly, plaintiff’s “fifth” request is granted with some modifications, as discussed

at the February 28, 2007, hearing. MetLife shall produce to plaintiff “all in-house, Metropolitan

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Life Insurance Company, documents, including claim and procedural manuals, guidelines,

bulletins, and memoranda, describing or pertaining to the handling of disability claims, disability

claims involving diabetes, peripheral edema, and anxiety claims in particular.” Such production

shall be limited to the time period during which plaintiff’s claim was being processed, and shall

be produced, where applicable, in accordance with the terms of the stipulated protective order

separately entered in this action. 

6. Plaintiff’s Sixth Request

Finally, plaintiff requests “the names, addresses, and telephone numbers of all individuals

who provided medical or vocational information referring, relating, or pertaining to the

administrative determination of plaintiff’s claim, and of all individuals who authored, advised,

supervised, or contributed to the writing of, the administrative denials of that claim.” 

Again, at the hearing, MetLife represented that it had already produced all such

information as part of the administrative record. Accordingly, in order to eliminate any future

dispute on this issue, MetLife shall provide plaintiff with a verified, written response to that

effect. 

III. CONCLUSION

In accordance with the foregoing, plaintiff’s request to conduct discovery outside the

administrative record is granted in part and denied in part:

1. MetLife shall provide plaintiff with verified, written responses to plaintiff’s first,

second, and sixth discovery requests, as set forth above; 

2. Defendants shall provide plaintiff with written, verified responses on the issue of

whether or not the discretionary clause contained in the plan was approved by the California

Department of Insurance. Defendants shall also provide any relevant documentation showing

either the approval or non-approval of the clause; 

3. MetLife shall produce all documents constituting, reflecting, or pertaining to the

reserve set, or mandated for, plaintiff’s claim; 

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4. MetLife shall produce to plaintiff all in-house, Metropolitan Life Insurance Company,

documents, including claim and procedural manuals, guidelines, bulletins, and memoranda,

describing or pertaining to the handling of disability claims, disability claims involving diabetes,

peripheral edema, and anxiety claims in particular. Such production shall be limited to the time

period during which plaintiff’s claim was being processed, and shall be produced, where

applicable, in accordance with the terms of the stipulated protective order separately entered in

this action. 

IT IS SO ORDERED. 

DATED: March 23, 2007.

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