Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_12-cv-01337/USCOURTS-azd-2_12-cv-01337-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Tracy Shoup, 

Plaintiff, 

vs.

Metropolitan Life Insurance Company et

al.,

Defendants. 

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No. CV 12-01337-PHX-FJM

ORDER

The court has before it plaintiff's motion to compel discovery (doc. 19), defendants'

response (doc. 20), and plaintiff's reply (doc. 21). 

Defendant Cognizant Technology Solutions ("Cognizant") sponsors an ERISAgoverned employee welfare benefit plan (the "Plan") which provides short-term and longterm disability ("STD" and "LTD") benefits to Plan participants. Cognizant self-funds STD

benefits under the Plan, whereas Metropolitan Life Insurance Company ("MetLife") funds

LTD benefits. Cognizant has delegated claims administration for both STD and LTD

benefits to MetLife. 

Plaintiff seeks discovery regarding MetLife's potential conflict of interest. Defendants

argue that our review is limited to the administrative record and that the requested discovery

should be denied because MetLife adjudicates STD benefits claims free of any structural

Case 2:12-cv-01337-FJM Document 25 Filed 01/18/13 Page 1 of 3
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conflict of interest, and because MetLife has not adjudicated plaintiff's LTD benefits claim.

The parties agree that the relevant standard of review is abuse of discretion. Courts

are generally limited to the administrative record when reviewing a case on its merits for

abuse of discretion, Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 970 (9th Cir. 2006).

However, if the administrator is operating under a conflict of interest, “that conflict must be

weighed as a factor in determining whether there is an abuse of discretion.” Firestone Tire

& Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S. Ct. 948, 957 (1989) (quotation omitted).

Therefore, we have discretion to consider extrinsic evidence when a conflict of interest exists

in the claims decision-making process. A structural conflict of interest exists where an entity

both administers and funds a benefits plan. Metropolitan Life Ins. Co. v. Glenn, 554 U.S.

105, 112, 128 S. Ct. 2343, 2348 (2008); Abatie, 458 F.3 at 965. Limited discovery is

permitted to determine “the nature, extent, and effect on the decision-making process of any

conflict of interest.” Abatie, 458 F.3d at 970. In weighing a conflict of interest, courts will

consider factors such as “evidence of malice, of self-dealing, or of a parsimonious claimsgranting history.” Id. at 968. 

Here, Cognizant self-funds STD benefits under the plan, and delegates claim

administration to MetLife. Plaintiff argues that a structural conflict of interest is not

necessarily negated by delegating authority to a third-party administrator. We agree. See

Rude v. Intel Corp. Long Term Disability Plan, 2012 WL 4120490 at *1 (D. Ariz. 2012).

Plaintiff contends that MetLife's STD claims personnel have an incentive to deny STD claims

so that a claimant will not be eligible for LTD benefits. It is conceivable that the LTD

benefits Plan could influence MetLife's STD claim management practices. Discovery is

appropriate to flesh out the claim.

A structural conflict of interest exists in connection with the LTD benefits decisionmaking process because MetLife both administers and funds LTD benefits under the Plan.

Defendants claim the LTD benefits are not at issue in this action. Defendants argue that

plaintiff's request for MetLife to evaluate her LTD claim was insufficient because she never

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submitted an LTD claim form or proof of loss, and therefore she failed to exhaust the

administrative remedies with respect to the LTD claim. See Defendant's Response at n. 1.

Generally, "an ERISA plaintiff claiming a denial of benefits 'must avail himself or herself

of a plan's own internal review procedures before bringing suit in federal court.'" Vaught v.

Scottsdale Healthcare Corp. Health Plan, 546 F.3d 620, 626 (9th Cir. 2008). However,

administrative exhaustion is not required where "the administrative route is futile or the

remedy inadequate." Amato v. Bernard, 618 F.2d 559, 568 (9th Cir. 1980). Plaintiff argues

that it would be futile for her to exhaust her LTD administrative remedies because the STD

and LTD definitions of disability are essentially the same, and the plans are fully integrated.

The assertion of the claim to LTD benefits is sufficient to warrant discovery on it. The issue

of exhaustion can be decided on summary judgment.

IT IS ORDERED GRANTING plaintiff’s motion to compel (doc. 19). Defendants

must respond to plaintiff's eight interrogatories and four requests for production. Plaintiffs

may depose Dr. McPhee and two claim analysts. The Rule 16 Scheduling Order will not be

amended as a result of this order.

DATED this 17th day of January, 2013.

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