Discovery in ERISA Cases? How Florida Federal Courts Are Changing the ERISA Landscape One Case at a Time
Review of an administrator’s benefit determination under the Employment Retirement Income Security Act (ERISA) when the arbitrary and capricious standard of review applies is ordinarily limited to the administrative record; however, a recent trend in Florida district courts is allowing limited discovery in these cases. This article sets out the standard of review in ERISA benefits determination cases and analyzes the decisions of Florida district courts that permit discovery.
Standard of Review
In reviewing an ERISA benefits determination, the 11th Circuit has established a multistep framework to guide courts in reviewing an ERISA plan administrator’s benefits decisions.1 The first five steps have remained unchanged since the court established the framework in Williams v. BellSouth Telecomms., Inc., 373 F.3d 1132, 1137-38 (11th Cir. 2004), overruled on other grounds by Doyle v. Liberty Life Assurance Co. of Boston, 542 F.3d 1352 (11th Cir. 2008).2 But the sixth step, listed below, reflects a more recent change based on the Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008), decision.3
In Blankenship v. Metropolitan Life Ins. Co., 644 F.3d 1350, 1354 (11th Cir. 2011), the11th Circuit cited to its opinion in Doyle to explain how it modified the sixth step’s “heightened” review and shifted the burden of proof regarding the influence of a conflict of interest from the administrator to the prospective beneficiary.4
For a court reviewing a plan administrator’s benefits decision, the present Williams test goes this way:
(1) Apply the de novo standard to determine whether the claim administrator’s benefits-denial decision is “wrong” (i.e., the court disagrees with the administrator’s decision); if it is not, then end the inquiry and affirm the decision.
(2) If the administrator’s decision is, in fact, “de novo wrong,” then determine whether the administrator was vested with discretion in reviewing claims; if not, end judicial inquiry and reverse the decision.
(3) If the administrator’s decision is “de novo wrong” and the administrator was vested with discretion in reviewing claims, then determine whether “reasonable” grounds supported the decision (hence, review the administrator’s decision under the more deferential arbitrary and capricious standard).
(4) If no reasonable grounds exist, then end the inquiry and reverse the administrator’s decision; if reasonable grounds do exist, then determine if the administrator operated under a conflict of interest.
(5) If there is no conflict, then end the inquiry and affirm the decision.
(6) If there is a conflict, the conflict should merely be a factor for the court to take into account when determining whether an administrator’s decision was arbitrary and capricious.5
What a Court Considers in Reviewing a Benefits Determination
A court that reviews a benefits determination under the arbitrary and capricious standard of review is limited to the information the administrator had when the administrator made its decision.
While the 11th Circuit has not definitively ruled on the scope of discovery permitted when a court reviews a benefits determination, it has affirmed a lower court’s decision to refuse to permit discovery in the ERISA context.6 In Eldridge v. Wachovia Corp. Long-Term Disability Plan, 2007 WL 117712 at *2 (11th Cir. 2007), the 11th Circuit held that discovery was unnecessary because the record was restricted to the evidence that was before the administrators.7 This is in line with a string of 11th Circuit decisions that hold, in part, that a court’s review of an administrator’s decision is limited to the records and facts before the administrator when the decision was made. In Townsend v. Delta Family-Care Disability & Survivorship Plan, 295 Fed. Appx. 971, 976 (11th Cir. 2008), the 11th Circuit turned to the question of what records the court may consider in reviewing the committee’s determination. The Townsend court determined that a district court may only consider the documents that were before the administrator, and held that the district court properly sustained the defendant’s objection to the plaintiff’s submission of documents outside the administrative record.8
Similarly, in Glazer v. Reliance Standard Life Ins. Co., 524 F.3d 1241, 1246 (11th Cir. 2008), the 11th Circuit found that the court must consider, based on the record before the administrator at the time its decision was made, whether the court would reach the same decision as the administrator. Likewise, in Richards v. Hartford Life & Accident Ins. Co., 153 Fed. Appx. 694, 697 n. 1 (11th Cir. 2005), the court held that, in ERISA cases, review is confined to the evidence that was before the administrator when the claim for benefits was denied. This has been the standard since the 11th Circuit held that “when conducting a review of an ERISA benefits denial under an arbitrary and capricious standard…the function of the court is to determine whether there was a reasonable basis for the decision, based upon the facts as known to the administrator at the time the decision was made.”9
Florida District Courts’ Expansion of Discovery
Nonetheless, despite the 11th Circuit’s rulings, a trend has developed in the federal district courts of Florida wherein the district courts are allowing discovery in ERISA cases on a limited basis. For example, the Middle District of Florida has held that discovery in an ERISA disability case is permissible on a limited basis, with focus on the claim administrator’s decisionmaking and the appropriate standard of review.10 This expanded view of discovery was elaborated upon in Cerrito v. Liberty Life Assur. Co. of Boston, 209 F.R.D. 663 (M.D. Fla. 2002), when the Middle District of Florida found that
courts have generally permitted discovery, even in instances in which an “arbitrary and capricious” standard applies, in order to assist the court in evaluating certain matters including: (1) the exact nature of the information considered by the fiduciary in making the decision; (2) whether the fiduciary was competent to evaluate the information in the administrative record; (3) how the fiduciary reached its decision; 4) whether, given the nature of the information in the record, it was incumbent upon the fiduciary to seek outside technical assistance in reaching a ‘fair and full review’ of the claim; and 5) to determine whether a conflict of interest existed.11
Defendants in ERISA cases have attempted to equate the 11th Circuit’s decree limiting the court’s review to the facts known to the administrator to be synonymous with the information contained in the administrative record.12 However, it is important to note that the district courts in Florida have not adopted this limited definition as the standard.13 As an example, the Middle District of Florida has acknowledged that, although the administrative record certainly will contain facts known to the administrator, it does not, by necessity, contain all of the facts known to the administrator.14 It has also held that “facts known to the administrator could include information not within the claims file.”15 Moreover, the Middle District has found that, “[t]o the extent those facts known are not reflected in the papers in the claims file, nothing prohibits plaintiff from conducting discovery as it pertains to those circumstances set forth in Cerrito.”16
Discovery through requests for admissions, interrogatories, and requests for production are appropriate to determine the standard of judicial review to be applied, defining the contents of the administrative file, learning what the individuals involved in the review process did, and identifying other information relevant to the claims or defenses in the case.17 In Self v. The Prudential Ins. Co. of Am., 2010 WL 996503 (N.D. Fla. 2010), the Northern District of Florida held that the fact that the trial court may only review the evidence before the administrator when it denied benefits does not necessarily preclude all discovery.18 The Self court went on to hold that “[i]t necessarily only precludes discovery on issues related to the merits of the claim for benefits.”19 The court in Self allowed the plaintiff to take depositions for the purpose of exposing the extent of any conflict of interest, establishing whether any unwritten procedures or facts were considered, determining whether a reasonable investigation was performed, and establishing whether the methodology used to review the claim was compatible with the duties of care, skill, prudence, and diligence owed in interpreting the plan.20
Limits on Discovery
Despite the recent trend by the Florida district courts in permitting discovery, such discovery is limited. Although the Florida district courts have allowed limited discovery in order to determine the appropriate standard of review in ERISA cases and in the five areas identified in Cerrito, the discovery is limited.21 In Barron v. Gen. Electric, 2006 WL 905514 at *1 (M.D. Fla. 2006), for instance, the Middle District of Florida limited the plaintiff’s proposed discovery, which included 10 depositions in five different states, holding it was too broad.22 The Barron court granted the defendant’s motion for protective order, in part, and limited the plaintiff’s discovery to a deposition of the defendant’s corporate representative regarding the five areas permitted by Cerrito.23 As the Northern District of Florida court recognized in Self, “any discovery beyond the administrative record must be narrowly tailored to address the nature, extent, and effect of a conflict of interest upon the administrator’s decision” and the areas identified in Cerrito.24
An instructive case on the discovery limits imposed by Florida district courts is Lelu v. Hartford Life & Accident Ins. Co.,626 F. Supp. 2d 1229 (M.D. Fla. 2009). In Lelu, the trial court sitting in the Middle District of Florida found that discovery was permitted in ERISA disability cases in which the arbitrary and capricious standard of review applies to evaluate the five areas identified in Cerrito.25 Even though the court acknowledged that such discovery was permissible, it nonetheless quashed the subpoena at issue in the defendant’s motion for protective order, which sought the deposition of a registered nurse employed by the employer.26 The insurer that administered the plan filed the motion to prevent the deposition of the nurse because the nurse did not provide information or participate in the insurer’s decision to deny long-term disability benefits.27 The insurer established that the nurse only participated in the short-term disability benefits decision, which was not administered by the insurer or at issue in the lawsuit.28
The court in Lelu quashed the subpoena and held that “[a] prerequisite to discovery [as contemplated in Cerrito] is a showing that there is something in the administrative record or other evidence that establishes that [the insurer] was aware of information in the possession of [the employer/plan administrator] that [the insurer] should have considered in making its decision on the claim for long-term disability benefits.”29 The Lelu court went on to note that the plaintiff did not present any citation to the administrative record or such other evidence in this regard.30
Analysis of Discovery Requests
What follows is an examination of two cases that deal with specific discovery requests and how the court analyzed the discovery to determine if it was permissible, which will assist in understanding the types of discovery allowed by Florida district courts.
•Grams v. Am. Med. Instruments Holding Long Term Disability Plan — In Grams v. Am. Med. Instruments Holding Long Term Disability Plan, 2009 WL 2926844 at *1 (M.D. Fla. 2009), the plaintiff sued the defendant, contending the defendant wrongfully denied her long-term disability benefits. The plaintiff served the defendant with a request for production and interrogatories, and the defendant responded in part and objected in part to the discovery served.31 After attempting to resolve their differences, the plaintiff filed a motion to compel discovery, which the defendant opposed.32
The court began its review by stating that the standard of review in an ERISA case will dictate what facts or evidence the plaintiff must prove in order to successfully claim an entitlement to benefits under the terms of an employee benefit plan which, in turn, will also shape the permissible scope of discovery.33 Both parties acknowledged that the arbitrary and capricious standard of review applies, and acknowledged a structural conflict of interest in this case because the same company determined eligibility for benefits and paid said benefits.34 The Grams court continued by stating that because a structural conflict of interest does, in fact, exist in this case, evidence outside the administrative record may ultimately become relevant to the judicial review of plaintiff’s ERISA claim.35 The court noted, however, that the existence of a conflict of interest does not necessarily permit the plaintiff to conduct broad discovery.36 Instead, any allowed discovery must focus on evidence that is relevant to the self-interest issues in the decision-making process and to the areas identified in Cerrito.37 The Grams court then examined the specific requests and objections to determine whether information outside the administrative record was discoverable.38
The court determined that the Grams plaintiff and defendant were in dispute regarding five categories of information, identified as 1) discovery relating to the evaluation of claims guidelines and training material; 2) discovery relating to compensation of claims evaluation personnel and their performance evaluations; 3) discovery relating to third-party compensation and prior evaluations; 4) discovery relating to plan denial rate reports; and 5) discovery relating to plan amendments.39 With respect to the plan denial reports, the defendant agreed to amend its response for this issue, therefore, the court did not address it.40
1) Discovery relating to the evaluation of claims guidelines and training material — As part of the discovery requested in Grams, the plaintiff sought documents relating to claims evaluation guidelines and training material.41 The court found that this information was directly relevant to whether proper procedures were followed in compiling the record, as well as necessary to determine the accuracy of the instant claims evaluation.42 The Grams court held that this requested information was appropriately limited in time and scope and ordered the defendant to respond to the request.43
However, with regard to the request that sought all documents, notes, lesson plans, overhead projector films, and other writings prepared and/or utilized by reviewers/consultants who participated in the plaintiff’s claim, the Grams court held that the request was overbroad and unduly burdensome.44 In sustaining the defendant’s objection, the Grams court held that the request potentially sought the production of entire libraries of information.45
2) Discovery relating to compensation of claims evaluation personnel and their performance evaluations — The Grams plaintiff also sought the production of information relating to compensation and performance evaluations of the defendant’s claims personnel.46 The court held that private information regarding personnel performance evaluations was not directly relevant to the issues brought forth in the plaintiff’s complaint, and, therefore, did not allow such discovery.47 It should be noted, however, that the Grams court allowed limited discovery into the structural conflict of interest issue and required the defendant to respond to discovery relating to compensation, bonuses, and awards.48
3) Discovery relating to third-party compensation and prior evaluations — Moreover, the Grams plaintiff sought medical evaluation service agreements between the defendant and its third-party servicers, the total amounts paid by the defendant for independent medical evaluations, and the number and outcome of prior evaluations by independent medical professionals.49 Overall, the court sustained the defendant’s objections. Fleshing out the various requests made by the plaintiff, the Grams court found that the request for all documents that evidence, reflect, record, or refer to any service agreement with third parties was unduly broad.50 Instead, the court limited the request in scope to the actual servicing agreement in effect at the time of the review of the plaintiff’s claim.51
With respect to the discovery that sought the total amounts paid by the defendant for independent medical service evaluations for the years 2002-2007, the Grams court held that the information was irrelevant to the plaintiff’s claim evaluation and any potential conflict, sustaining the defendant’s objections.52 Finally, with respect to the request that sought information regarding the total number of claims reviewed by specific individuals from 2002-2007, and how many of those claims were denied by the defendant, the court held that the discovery requested was irrelevant to the denial of the plaintiff’s claim.53 The court emphasized that “the contrast would create a meaningless result as it would not take into consideration the individualized circumstances of each case.”54
4) Discovery relating to plan amendments — The plaintiff also sought the discovery of all plan amendments to the long-term disability plan for the years 2003-2007. In sustaining the defendant’s objection, the court held that the existence of subsequent amendments to the plan were not relevant to either the plaintiff’s complaint or the defenses raised by the defendant.55
• Emery v. Am. Airlines, Inc. —Another instructive decision in which a Florida district court, the Southern District of Florida, allowed plaintiff to discover the entire claim file, including documents regarding the initial determination, as well as notes, files, logs, and diaries generated in the handling of the plaintiff’s claim, and the identity of all medical or vocational experts who rendered a report or opinion is Emery v. Am. Airlines Inc., 2010 WL 457151, at *1-2 (S.D. Fla. 2010). In Emery, the court held that 29 C.F.R. §2560.503-1(h)(2)(iii) permits such discovery because the “regulation provides [that] a claimant shall be provided…reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits.”56 The court went on to hold that whether the documents would be admissible as evidence was not at issue, and that the decision to allow discovery is distinct from the decision to allow consideration of additional evidence.57
The Emery court further held that, to the extent that facts known to the administrator were not in the claim file, discovery was permissible as to the five areas outlined in Cerrito,and to determine whether the record was complete.58 The court reasoned that, although it would only review the final determination of benefits, discovery regarding the remainder of the benefits claim process was not entirely foreclosed since it could lead to information regarding those areas.59
The court also allowed the discovery of claims manuals, procedures, guidelines, and handbooks used for assessing the claim or relating to safeguards for following plan procedures and reducing bias, stating that such documents would assist the court in determining whether proper procedures were followed with regard to compiling the record, as well as to determine the accuracy of the plaintiff’s claim evaluation.60 Discovery related to bias and conflict of interest was also allowed by the court.61 Specifically, the plaintiff requested statistical information regarding the allowance or denial of claims by the evaluators and the doctor who worked on behalf of the defendant.62 The court found that evidence of high rates of benefit denials or terminations could reasonably lead to the discovery of admissible evidence.63
Finally, with respect to the plaintiff’s request, which sought any and all information showing management checks that penalize inaccurate decisionmaking, and documents that show active steps taken to reduce potential bias and to promote accuracy, the Emery court ruled, in part, that such a request was overly burdensome.64 The court held that the defendant should not have to review every one of its files for information showing management checks or steps taken to reduce bias, finding that such a task was overly burdensome.65 The court narrowed the scope of the request and required the defendant to produce documents, if any existed, related specifically to the plaintiff’s claim.66 Finally, the court allowed the depositions of the recording secretary for the Pension Benefits Administration Committee; the doctor who made the initial decision to terminate benefits; and the individual who upheld the decision to terminate benefits on the five areas outlined in Cerrito to move forward.67
The opinions rendered by the Florida federal district courts in Grams and Emery lay out how the courts have analyzed discovery requests made by plaintiffs in ERISA cases related to alleged conflict discovery to determine if the requested discovery is appropriate.
In closing, ERISA defendants who are facing discovery requests cloaked as “conflict discovery” should argue that any discovery beyond the administrative record is not allowed pursuant to 11th Circuit precedent, which limits a court’s review of a benefits decision to only the documents that were before the administrator at the time the decision was made to approve or disprove the benefit. ERISA defendants, however, must be mindful that, until the 11th Circuit issues a definitive ruling on the scope of discovery in ERISA cases, there is a myriad of decisions rendered by Florida federal district courts that have allowed limited discovery in certain areas of inquiry, even under the arbitrary and capricious standard of review.
1 Blankenship v. Metropolitan Life Ins. Co., 644 F.3d 1350, 1354 (11th Cir. 2011); Ray v. Sun Life & Health Ins. Co., 443 Fed. Appx. 529, 532 (11th Cir. 2011).
2 Blankenship, 644 F.3d at 1354 (referring to Williams v. BellSouth Telecomms., Inc., 373 F.3d 1132, 1137-38 (11th Cir. 2004), overruled on other grounds by Doyle v. Liberty Life Assurance Co. of Boston, 542 F.3d 1352 (11th Cir. 2008)).
3 Blankenship,644 F.3d at 1354 (referring to Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008)).
4 Id. at 1355.
5 Id.; Ray, 443 Fed. Appx. at 532.
6 Eldridge v. Wachovia Corp. Long-Term Disability Plan, 2007 WL 117712 at *2 (11th Cir. 2007).
8 Townsend, 295 Fed. Appx. at 976.
9 Jett v. Blue Cross/Blue Shield of Ala.,890 F.2d 1137, 1139 (11th Cir. 1989); see also Ray,443 Fed. Appx. at 533 (“[R]eview of benefits denial is limited to consideration of the material available to the administrator at the time it made its decision.”).
10 Richard v. Intl. Bus. Machs. Corp., 2012 WL 1131996, at * 1 (M.D. Fla. 2012); Cerrito v. Liberty Life Assurance Co. of Boston, 209 F.R.D. 663, 664 (M.D. Fla. 2002).
11 Cerrito, 209 F.R.D at 664; Woodward v. Reliance Stand. Life Ins. Co., 2003 WL 1798519 at *1 (N.D. Fla. 2003) (quoting Cerrito); Rosser-Monahan v. Avon Prods. Inc., 227 F.R.D. 695, 698 (M.D. Fla. 2004) (quoting Cerrito); Crume v. Metro. Life Ins. Co., 388 F. Supp. 2d 1342, 1344-45 (M.D. Fla. 2005) (quoting Cerrito); Fish v. Unum Life Ins. Co. of Am., 229 F.R.D. 699, 701 (M.D. Fla. 2005) (quoting Cerrito); Crume v. Metro Life Ins. Co., 387 F. Supp. 2d 1212, 1213 (M.D. Fla. 2005) (quoting Cerrito); Barron v. Gen. Electric, 2006 WL 905514, at *1 (M.D. Fla. 2006) (quoting Cerrito); Self v. The Prudential Ins. Co. of Am., 2010 WL 996503, at *3 n. 2 (N.D. Fla. 2010) (quoting Cerrito); Richard, 2012 WL 1131996, at *2 (quoting Cerrito); Lake v. Hartford Life & Accident Ins. Co., 218 F.R.D. 260, 261 n. 1 (M.D. Fla. 2003) (citing to Cerrito and holding “[d]iscovery may be permitted beyond the administrative record when it is relevant to (1) examining whether an administrator fulfilled his or her fiduciary duties, (2) whether proper procedures were followed in compiling the record; (3) whether the record is complete; and (4) whether the administrator had a conflict of interest”).
12 Crume, 388 F. Supp. 2d at 1345; Fish, 229 F.R.D. at 701; see also Rosser-Monahan, 227 F.R.D. at 698.
13 Rosser-Monahan, 227 F.R.D. at 698.
14 Fish, 229 F.R.D. at 701.
15 Rosser-Monahan, 227 F.R.D. at 699.
16 Lake, 218 F.R.D. at 261.
17 Cerrito, 209 F.R.D. at 664.
18 Self, 2010 WL 996503 at *2.
19 Id. (quoting Woodward, 2003 WL 1798519 at *1).
20 Id. at *3.
21 Barron, 2006 WL 905514 at *1.
22 Id. at *2.
24 Self, 2010 WL 996503 at *3.
25 Lelu,626 F. Supp. 2d at 1231.
26 Id. 1230-31.
28 Id. at 1230.
29 Id. at 1231.
31 Grams, 2009 WL 2926844 at *1.
33 Id. at *2.
34 Id. at *2, n. 4.
37 Id. at *2, n. 5.
39 Id. at *2.
40 Id. at *4.
41 Id. at *3.
49 Id. at *4.
55 Id. at *5.
56 Emery, 2010 WL 457151 at *1.
57 Id. at *2.
61 Id. at *3.
64 Id. at *2.
67 Id. at *4.
Emilia A. Quesada is a partner at Sanchez-Medina, Gonzalez, Quesada, et al., (SMGQ Law) in Miami, where she practices in the areas of commercial litigation, banking litigation, and insurance coverage matters including life, health, disability, and ERISA disputes. She is a certified FINRA public arbitrator.
This column is submitted on behalf of the Labor and Employment Law Section, Frank E. Brown, chair, and Robert Eschenfelder, editor.