Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_01-cv-00175/USCOURTS-azd-4_01-cv-00175-0/pdf.json

Parties Involved:
Terri Gatti
Plaintiff
Reliance Standard Life Insurance Company
Defendant

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Terri Gatti,

Plaintiff, 

v.

Reliance Standard Life Insurance

Company,

Defendant.

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 No. CV-01-175-TUC-FRZ

 ORDER

Background

In this case, which arises under the Employee Retirement Income Security Act

(ERISA), Plaintiff Terri Gatti seeks reinstatement of long-term disability benefits that

Defendant Reliance Standard Life Insurance Company (Reliance) discontinued in April

2000. 

On February 24, 2003, the Court issued an Order resolving the parties’ then-pending

motions for summary judgment. The Court reviewed de novo Reliance’s decision to

terminate Gatti’s benefits, concluding that such a review was appropriate because either: (1)

in light of Jebian v. Hewlett-Packard Company, 310 F.3d 1173 (9th Cir. 2002), Reliance’s

benefits decision was made outside the boundaries of conferred discretion; or (2) in light of

Regula v. Delta Family-Care Disability Survivorship Plan, 266 F.3d 1130 (9th Cir. 2001),

there was a serious conflict of interest because Reliance violated the treating physician rule.

In reviewing Reliance’s decision de novo, the Court determined that Gatti had established

entitlement to benefits under the general disability provisions of the ERISA plan because she

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was disabled from hepatitis B and that Reliance had failed to establish that the payment of

benefits was precluded by the mental or nervous disorder limitation in the ERISA plan. 

The Court ordered Reliance to reinstate Gatti’s long-term disability benefits and pay

back payments. In a subsequent Order, the Court awarded Gatti attorney’s fees and costs

based on the parties’ stipulation.

In Gatti v. Reliance Standard Life Insurance Company, 415 F.3d 978 (9th Cir. 2005),

the Ninth Circuit Court of Appeals concluded that the Court had erred in applying a de novo

standard of review because Jebian did not control and Regula was no longer good law. The

Ninth Circuit remanded the case to the Court for “reconsideration under the appropriate

standard of review.” Gatti, 415 F.3d at 985. The Ninth Circuit instructed the Court to

review Reliance’s decision for an abuse of discretion, unless the Court, based on other

evidence of substantive harm, concluded that a de novo review was still justified. Id. at 986.

The Ninth Circuit also instructed the Court to “reconsider its award of fees and costs

depending on the results of the merits determination.” Id.

Before the Court could comply with the Ninth Circuit’s opinion – indeed, before the

Ninth Circuit’s mandate had issued – Gatti filed a motion for summary judgment. Reliance

filed a cross-motion for summary judgment. Both parties filed all possible responses and

replies. Also pending before the Court are Gatti’s unopposed motion to strike portions of

Reliance’s reply and Gatti’s unopposed request for hearing.

This Order complies with the Ninth Circuit’s mandate and resolves the motion and

cross-motion for summary judgment, the motion to strike, and the request for hearing.

Motion to Strike

In her Motion to Strike, Gatti seeks to strike references in Reliance’s Reply

Memorandum to a study allegedly published by the National Institute of Health. Gatti notes

that this study is not included in the Administrative Record and, therefore, runs afoul of the

Ninth Circuit’s directive that the Court “may properly consider anything that was part of the

administrative record before February 6, 2001.” Id. at 986. Reliance did not file a response

to the motion to strike. 

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Reliance also could have abused its discretion by “(1) render[ing] a decision without

explanation, [or] (2) constru[ing] provisions of the plan in a way that conflicts with the plain

language of the plan.” Boyd, 410 F.3d at 1178. The parties have not argued on remand that

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The Court deems Reliance’s failure to respond to the motion to strike to be a consent

to the Court granting the motion. See Rules of Practice of the United States District Court

for the District of Arizona LRCiv 7.2(i). Moreover, striking the references is appropriate

because the study is not part of the administrative record. Finally, Reliance has provided

nothing to demonstrate that the study even exists – it has not provided the name of the study,

the date on which it was published, a citation for the study, or a copy of the study. Thus, the

Court will strike, and will not consider, Reliance’s references to, and discussion of, the

alleged National Institute of Health study, which are located on page 2, lines 15-19, and page

4, lines 16-17, of Reliance’s Reply Memorandum in Support of its Motion for Summary

Judgment.

Motion and Cross-Motion for Summary Judgment

A. Standard of Review

The Ninth Circuit instructed the Court to review Reliance’s decision for an abuse of

discretion, unless the Court “concludes that de novo review is nonetheless justified based on

other evidence of substantive harm.” Gatti, 415 F.3d at 986. Gatti has not argued in this

remand that de novo review is justified based on other evidence of substantive harm. Thus,

the Court will review Reliance’s decision for an abuse of discretion.

“Deferential review, of course, does not mean no review.” Jordan v. Northrop

Grumman Corp. Welfare Benefit Plan, 370 F.3d 869, 879 (9th Cir. 2004). The Court cannot

uphold Reliance’s decision if Reliance relied on clearly erroneous findings of fact, failed to

base its decision on substantial evidence, or failed to ground the decision on a reasonable

basis. See Boyd v. Bert Bell/Pete Rozelle NFL Players Ret. Plan, 410 F.3d 1173, 1178 (9th

Cir. 2005); Jordan, 370 F.3d at 879; Snow v. Standard Ins. Co., 87 F.3d 327, 331-32 (9th Cir.

1996), overruled on other grounds in Kearney v. Standard Ins. Co., 175 F.3d 1084 (9th Cir.

1999).1

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either of these grounds is applicable.

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B. Facts

In reviewing Reliance’s decision, the Court will “consider anything that was part of

the administrative record before February 6, 2001, the date that Reliance made its final

decision.” Gatti, 415 F.3d at 986. In the Court’s February 24, 2003 Order, the Court set

forth an eleven-page, detailed recitation of the facts contained in the administrative record.

Rather than repeat those facts in their entirety, the Court incorporates them as part of this

Order. However, the Court will provide an abbreviated discussion of the facts central to the

dispute.

Gatti, while employed as an account executive at PaineWebber Group, was covered

under a group long-term disability policy governed by ERISA and issued by Reliance. Gatti

was diagnosed with Hepatitis B in 1992 and stopped working due to complications from the

disease, including fatigue. [Gatti Record 517] Reliance accepted her claim for long-term

disability benefits, effective May 1993. [Gatti Record 519-20]

In April 2000, Reliance terminated Gatti’s benefits. [Gatti Record 32-35] Reliance

notified Gatti that, based on its review of her medical records, it had determined that she had

not been disabled due to a physical disability since November 1997, when her “liver enzymes

. . . returned to a normal range” and her “Hepatitis B [became] inactive.” [Gatti Record

33-34] Reliance determined that Gatti was entitled to additional benefits under the mental

or nervous disorder limitation of her policy because she had been diagnosed with Bipolar

Disorder in November 1997. [Gatti Record 34] But Reliance terminated this benefit because

it had paid under the mental/nervous disorder limitation for more than the maximum twentyfour months. [Gatti Record 34]

Gatti appealed the termination of her benefits, claiming she was “disabled from

something physical.” [Gatti Record 23] In July 2000, Reliance had Dr. Steven J. Feagin, an

independent medical specialist, review Gatti’s claim file through May 18, 2000. [Gatti

Record 71] After reviewing the file, Dr. Feagin stated:

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While no one argues with the diagnosis of Hepatitis B, it is quite clear

that the claimant has not been as physically impaired as she has

claimed. The gastroenterologists, Drs. Sampliner and Rice, are

certainly correct in their statements that fatigue does not always

correlate well with the level of liver enzymes. In this case though, one

has now seen more than 2 1⁄2 years of normal enzymes with reversion

of the Hepatitis Be Ag from positive to negative. The claimant has at

times been described as “doing relatively well” with her hepatitis being

said to be “in remission”. In addition, the claimant has had a quite

active social life if one judges from the recurrent problems with her

boyfriends prompting exacerbations of her anxiety and depression.

. . . .

Chronic Hepatitis B Infection – There has been no evidence of ongoing

disease activity and there is nothing objective to confirm this as the

source of the claimant’s fatigue complaints in recent years. The

attending physicians have simply taken the claimant’s self-reported

fatigue complaints and have attributed them to the hepatitis. There has

been no confirmation of the validity of the fatigue complaints and there

has been no evidence of ongoing disease activity.

. . . . 

Multiple Psychiatric Issues – As noted above, the claimant has had

multiple diagnoses for many years. The diagnosis of bipolar disease

has come into question recently but it is unclear if this issue is

legitimately raised or simply brought into question in an attempt to

distance this from the fatigue complaints. The claimant has clearly had

ongoing chronic psychiatric issues with episodic deteriorations in status

related to her recurring failures in relationships. It is actually unclear

whether she has had continuous psychiatric restrictions and limitations

prohibiting her occupation, but it is quite clear that her psychiatric

status has been her primary limiting impairment on an episodic basis.

[Gatti Record 72-73]

In October 2000, Reliance affirmed its decision to terminate Gatti’s benefits. [Gatti

Record 1, 6] Reliance stated that it had looked to other factors (beyond the hepatitis B) to

explain Gatti’s fatigue because her liver functions had normalized and her Hepatitis Be Ag

findings had been negative for more than two years. [Gatti Record 3] In affirming its

decision to terminate benefits, Reliance relied on Dr. Feagin’s report, concluding that Gatti

had not been continuously physically disabled since 1997, and that “[a]ssuming arguendo”

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that Gatti was disabled since November 1997, her disability was due to her psychiatric

illness, not her Hepatitis B. [Gatti Record 4-5]

Because Reliance had not provided certain documents to Gatti, Reliance gave Gatti

an opportunity to present Reliance with “any additional medical evidence which she believes

might allow [Reliance] to reinstate her benefits.” [Gatti Record 6] Among other things, Gatti

submitted a December 7, 2000 letter from her treating physician, Dr. Nicholas H. Rice. [Gatti

Record 571] Dr. Rice indicated that “[s]ome new objective information” had become

available. [Gatti Record 571] Dr. Rice stated that he believed that Gatti:

has a physical ailment, namely viral hepatitis, which has caused a

chronic disease state. Her ongoing symptoms include fatigue and

weakness since November of 1992. Although her liver enzymes have

normalized recently, the symptoms persist. This is not unusual in cases

of viral hepatitis as I indicated in my earlier correspondence.

The new information is the result of a HBV DNA test, a recently

introduced procedure. The attached result indicates that [Gatti] has

active viral replication and therefore an ongoing disease process. This

is objective information to support the symptoms [Gatti] has described.

[Gatti Record 571]

In February 2001, Reliance again declined to reinstate Gatti’s benefits. [Gatti Record

562] Reliance rejected the additional information Dr. Rice provided, claiming that the HBV

DNA test suggested only that Gatti had active hepatitis B on the date of the exam (September

28, 2000), but did not establish that Gatti had active hepatitis B prior to the exam or that the

hepatitis B precluded Gatti from working on September 28, 2000, or prior to the exam. [Gatti

Record 563]

C. Discussion

Reliance “does not dispute the premise that active Hepatitis B is accompanied by

chronic fatigue.” [U.S.D.C. document #54 at 9] Indeed, Reliance found Gatti disabled and

consistently paid benefits from 1992 through November 1997 based on the symptoms from

active hepatitis B. And, even if Gatti’s bipolar disorder caused or contributed to her fatigue,

Reliance has conceded that benefits are still payable beyond the mental/nervous disorder

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limitation “[i]f the individual remains totally disabled due to the physical condition.”

[U.S.D.C. document #55 at 3; U.S.D.C. document #52 at 14] Thus, even if Gatti had a

disabling bipolar disorder, she would still be entitled to benefits, under Reliance’s

interpretation of its policy, if she remained totally disabled due to hepatitis B symptoms. 

Before his December 7, 2000 letter, Dr. Rice had consistently stated that Gatti had

chronic hepatitis B with continuing fatigue symptoms and that Gatti’s continuing fatigue

symptoms were not unusual for chronic hepatitis B patients, notwithstanding normalized

liver enzyme levels. [Gatti Record 101-02, 118, 135] Although Dr. Feagin accepted this

position, he rejected a finding of disability based on chronic hepatitis B because “[t]here has

been no evidence of ongoing disease activity and there is nothing objective to confirm this

as the source of [Gatti]’s fatigue complaints in recent years.” [Gatti Record 72-73]

In his December 7, 2000 letter, Dr. Rice stated that, although Gatti’s liver enzymes

had normalized, the recently introduced HBV DNA test indicated that Gatti had “active viral

replication and therefore an ongoing disease process,” which would constitute “objective

information to support the symptoms she has described.” [Gatti Record 571] Reliance

rejected Dr. Rice’s conclusion, claiming that the HBV DNA test only suggested that Gatti

had active hepatitis B on the date of the exam (September 28, 2000), but did “not prove that

her [hepatitis B] was active in the months/years leading up to September 28, 2000” or that

Gatti’s hepatitis B “rendered her unable to work in [the] months/years prior to the date of

testing.” [Gatti Record 563]

Although Reliance was not required to accord special weight to Dr. Rice’s opinion,

Reliance could not arbitrarily refuse to credit Gatti’s reliable evidence, “including the

opinions of a treating physician.” See Black & Decker Disability Plan v. Nord, 538 U.S. 822,

834, 123 S. Ct. 1965, 1972, 155 L. Ed. 2d 1034 (2003); Jordan, 370 F.3d at 879. Dr. Rice’s

December 7, 2000 conclusion responds directly to Dr. Feagin’s prior conclusion rejecting a

finding of disability based on chronic hepatitis B. But, rather than present the HBV DNA

test result information to Dr. Feagin or any other medical professional for review, Reliance’s

non-medical personnel made ipse dixit conclusions about the DNA evidence that were

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unsupported by the record or by any medical evidence. See Schikore v. BankAmerica

Supplemental Ret. Plan, 269 F.3d 956, 960 (9th Cir. 2001) (“[A]n abuse of discretion occurs

when a plan administrator fails to develop facts necessary to make its determination.”); see

also Booton v. Lockheed Med. Benefit Plan, 110 F.3d 1461, 1464 (9th Cir. 1997) (“[T]o deny

the claim without explanation and without obtaining relevant information is an abuse of

discretion.”). Cf. Moon v. Unum Provident Corp., 405 F.3d 373, 375-78 (6th Cir. 2005)

(noting that Dr. Feagin reviewed applicant’s initial claim, applicant’s appeal submissions,

and applicant’s new medical evidence ); Davis v. Unum Life Ins. Co. of America, 2005 WL

743082, **5-6 (N.D. Ill. 2005) (Dr. Feagin reviewed applicant’s medical records, and

reviewed medical records again after applicant submitted additional medical records);

Orndorf v. Paul Revere Life Ins. Co., 2004 WL 3413979, **9-10 (D. Mass. 2004) (Dr.

Feagin reviewed applicant’s medical history, and, when plan administrator was presented

with additional medical records, Dr. Feagin reviewed these additional records). There is no

evidence in the record challenging the validity of the HBV DNA test or suggesting that it was

available prior to the date of the exam. Nor is there any evidence in the record suggesting

that, had HBV DNA tests been available in November 1997 through April 2000, they would

have yielded results different from the September 28, 2000 test.

 Reliance abused its discretion when it arbitrarily rejected Dr. Rice’s December 2000

conclusion regarding Gatti and denied her benefits. Reliance’s February 2001 findings were

not based on evidence, substantial or otherwise. They were simply based on Reliance’s nonmedical personnel’s supposition. That is arbitrary and insufficient. Thus, Reliance is not

entitled to summary judgment.

However, Gatti has the burden of establishing her entitlement to benefits under the

general provisions of the ERISA plan. See Horton v. Reliance Standard Life Ins. Co., 141

F.3d 1038, 1040 (11th Cir. 1998). The Court, based on the record before it, cannot conclude

that a “reasonable fiduciary would necessarily have to grant the claim or that a remand to

[Reliance] would be a useless formality.” Miller v. United Welfare Fund, 72 F.3d 1066,

1073 (2nd Cir. 1995). See Mizzell v. Paul Revere Life Ins. Co., 118 F. Supp. 2d 1016, 1023

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(C.D. Cal. 2000) (citing Miller and remanding because “[t]he record before the Court is

inadequate to conclude that there is no possible evidence that could support a denial of

benefits”); cf. Dionida v. Reliance Standard Life Ins. Co., 50 F. Supp. 2d 934, 942 (N.D. Cal.

1999) (declining to remand, but citing Miller and stating that “[a] court that finds a plan

administrator has abused its discretion may determine a claimant’s eligibility for benefits if

it finds that remand would be ‘useless formality’ because the plan administrator ‘would

necessarily have to grant the claim’”). Thus, the Court will not grant summary judgment to

Gatti and will not award benefits directly. Instead, the Court will remand this matter to

Reliance for reconsideration. 

Attorney’s Fees

The Ninth Circuit Court of Appeals instructed the Court to “reconsider its award of

fees and costs depending on the results of the merits determination.” Gatti, 415 F.3d at 986.

The Court’s award of fees and costs was based on the parties’ stipulation. [U.S.D.C.

document 83 at 2] The parties stipulated to an award of attorney’s fees and costs, but

qualified that agreement with a specific stipulation that, “in the event Defendant’s appeal is

successful and the decision of the District Court is reversed, or if the Appellate Court vacates

the award of fees, Plaintiff will not be entitled to the stipulated amount of fees and costs.”

[U.S.D.C. document #78] Because the Ninth Circuit reversed this Court’s original decision,

the Court, in accordance with the parties’ stipulation, will vacate the award of fees and costs.

The parties have not addressed the standard for whether the Court should exercise its

discretion and award attorney’s fees and costs to either party. See 29 U.S.C. § 1132(g)(1).

The Court will provide the parties with an opportunity to do so. 

Request for Hearing/Request for Oral Argument

It is unclear whether Gatti’s Request for Hearing is a request for oral argument on the

motions for summary judgment, an issue that was also raised in Gatti’s motion for summary

judgment and response to Reliance’s cross-motion for summary judgment, or a request that

the Court make a “timely determination of this matter.” To the extent it is a request for oral

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argument, the Court, in its discretion, will deny the request; the Court has determined that

the issues have been fully and adequately briefed and that oral argument would not aid the

Court in its understanding of the issues. To the extent it is a request for a determination of

this matter, the Court will deny the request as moot; this Order constitutes a determination

of the matter.

Conclusion

In light of the foregoing,

IT IS ORDERED that:

1. Plaintiff’s Motion for Summary Judgment (U.S.D.C. document #100) is

DENIED.

2. Defendant’s Cross-Motion for Summary Judgment (U.S.D.C. document #105)

is DENIED.

3. Plaintiff’s Motion to Strike (U.S.D.C. document # 113) is GRANTED. 

4. Plaintiff’s Request for Hearing (U.S.D.C. document #118) is DENIED AS

MOOT.

5. Plaintiff’s requests for oral argument (contained in U.S.D.C. documents #100

and #107) is DENIED.

IT IS FURTHER ORDERED that this matter is REMANDED to Defendant for

reconsideration of Plaintiff’s claim in a manner consistent with this decision.

IT IS FURTHER ORDERED that the parties are granted leave to file motions and

memoranda on the issue of whether the Court should exercise its discretion and award

attorney’s fees and costs to either party. Any motions and supporting memoranda shall

fully comply with the Local Rules governing costs and fees. 

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IT IS FURTHER ORDERED that the Clerk of the Court is DIRECTED TO:

1. STRIKE Defendant’s references and discussion of the alleged National

Institute of Health study, which are located on page 2, lines 15-19, and page

4, lines 16-17, of Defendant’s Reply Memorandum in Support of its Motion

for Summary Judgment (U.S.D.C. document #116).

2. ENTER judgment accordingly.

DATED this 13th day of March, 2006.

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