United States District Court, D. Arizona
ORDER
Dominic W. Lanza, United States District Judge.
Pending
before the Court is Plaintiff Nathan Culver's
(“Culver”) motion to conduct discovery (Doc. 40),
which Defendants oppose (Doc. 48). As explained below, the
motion will be denied.
BACKGROUND
Culver
is a former employee of Defendant NXP USA, Inc.
(“NXP”) who, after becoming disabled in October
2014, sought benefits under NXP's Long Term Disability
Insurance Plan. (Doc. 40 at 1-3.) NXP self-funded this plan
and hired a pair of third-party companies-first Aetna and
then Prudential-to serve as plan administrators. (Doc. 40 at
1-3; Doc. 48 at 2-3.) Both companies were hired pursuant to a
“flat fee” contract that called for them to
receive a set fee from NXP for each claim they administered.
(Doc. 48 at 2-3.) Aetna approved Culver's initial claim
for long-term disability benefits, which covered the period
from May 2015 through October 2016, but then terminated his
benefits after determining he was able to return to work.
(Doc. 40 at 3.) In May 2018, Prudential- which, by that time,
had replaced Aetna as NXP's plan administrator-denied
Culver's appeal of the termination decision.
(Id.) Culver contends that NXP saved over $160, 000
due to the wrongful denial of his disability claim.
(Id.)
ANALYSIS
The
parties' dispute concerns whether Culver should be
allowed to propound discovery aimed at determining whether
Aetna and Prudential were afflicted by a conflict of interest
when they denied his claims.
In his
brief, Culver argues he's entitled to conduct such
discovery, even though NXP self-funded its insurance plan and
delegated authority to Aetna and Prudential to make claims
decisions, because (1) under Wallace v. Intel Corp.,
2006 WL 2709839 (D. Ariz. 2006), the delegation of
claim-administration responsibility to a third party
doesn't eliminate the existence of a conflict of interest
(Doc. 40 at 3-4), (2) the “dirty, and far too often
unknown secret in the disability insurance industry” is
that companies like Prudential hire “conflicted and
biased” doctors to deny meritorious claims
(id. at 4-5), (3) the Ninth Circuit has repeatedly
“allowed conflict discovery into an administrator's
relationship with its third-party vendor(s), and also to the
third-party vendor's reviewing medical professionals,
” as well as “into whether the Plan has a history
of parsimonious claims handling” (id. at 5),
and (4) the only way to obtain evidence of such practices is
to propound discovery, because “conflict evidence never
resides in a claim file” and “a court cannot
perform an adequate Abatie credibility determination
without discovery” (id. at 5-6).
In
their brief, Defendants argue that (1) conflict-of-interest
discovery is only appropriate in “dual role”
ERISA cases, unlike this case, where the entity that funds
the plan also resolves claims for benefits (Doc. 48 at 3-4),
(2) the one case that seems to authorize conflict discovery
outside the dual-role context, Wallace, is no longer
good law in light of subsequent Ninth Circuit and Supreme
Court decisions (id. at 4-5), and (3) to the extent
Culver may be entitled to any conflict-of-interest discovery,
he already has the relevant documents (NXP's contracts
with Aetna and Prudential), [1] so his additional demands are
irrelevant and disproportionate to the needs of the case
(id. at 5-7).
The
Court agrees with Defendants. Although the Ninth Circuit has
recognized that a plaintiff in an ERISA case may be entitled
to seek and introduce conflict-of-interest evidence-because
the presence of a conflict of interest triggers a
less-deferential standard of review-its decisions applying
this principle have involved “dual role”
relationships where the same entity was responsible for
funding the plan and making claims decisions (and, thus, had
a financial incentive to deny as many claims as possible).
See, e.g., Demer v. IBM Corp. LTD Plan, 835 F.3d
893, 900 (9th Cir. 2016) (“MetLife has a structural
conflict of interest because MetLife both evaluates claims
made against the Plan and funds claims.”); Montour
v. Hartford Life & Accident Ins. Co., 588 F.3d 623,
629-30 (9th Cir. 2009) (holding that the standard of review
in ERISA cases becomes “more complex” when
“the same entity that funds an ERISA benefits plan also
evaluates claims, as is the case here”); Nolan v.
Heald College, 551 F.3d 1148, 1153 (9th Cir. 2009)
(“[T]he parties agree that MetLife operates under a
structural conflict of interest as an entity that both
determines eligibility for benefits and pays benefits
awards.”); Burke v. Pitney Bowes Inc. Long-Term
Disability Plan, 544 F.3d 1016, 1027 (9th Cir. 2008)
(“[A] structural conflict of interest does exist . . .
. Because the district court did not consider the Plan's
structural conflict of interest as a factor in making its
decision, we vacate the district court's ruling and
remand for further proceedings consistent with this
opinion.”); Abatie v. Alta Health & Life Ins.
Co., 458 F.3d 955, 965-66 (9th Cir. 2006) (en banc)
(recognizing that “an insurer that acts as both the
plan administrator and the funding source for benefits
operates under what may be termed a structural conflict of
interest” and that “such an inherent conflict of
interest . . . ought to have some effect on judicial
review”).
This
doesn't seem to be a coincidence. In Nolan, the
court explained that the relevance of the type of evidence
now sought by Culver[2] flowed from the fact that it “bore
on MetLife's structural conflict of interest.” 551
F.3d at 1150. Here, however, there is no structural conflict
of interest-NXP has no role in administering claims and its
third-party administrators, Aetna and Prudential, aren't
financially responsible for paying successful claims. Day
v. AT&T Disability Income Plan, 698 F.3d 1091, 1096
(9th Cir. 2012) (“The district court did not err in
finding no inherent or structural conflict of interest. The
Plan is funded by AT & T and not Sedgwick, and
administered by Sedgwick and not AT &
T.”).[3] It follows that Culver isn't entitled
to the categories of evidence he wishes to obtain through his
proposed discovery requests-although those materials may be
helpful in establishing the severity of a structural
conflict of interest, see Nolan, 551 F.3d at 1150,
there is no Ninth Circuit case establishing they are subject
to discovery in the absence of a structural
conflict. Burke, 544 F.3d at 1028 n.15
(“Whether to permit discovery into the nature, extent,
and effect of [a] Plan's structural conflict of
interest is . . . a matter within the district court's
discretion.”) (emphasis added). See also Murphy v.
Deloitte & Touche Grp. Ins. Plan, 619 F.3d 1151,
1162 (10th Cir. 2010) (concluding that although discovery is
generally disfavored in ERISA cases, “discovery related
to the scope and impact of a dual role conflict of
interest may, at times, be appropriate”) (emphasis
added).
Finally,
even if the materials sought by Culver might be discoverable
despite the absence of a dual-role relationship, as some
district courts have concluded, [4] the Court
Selkirk/McKenna.” (Doc. 40 at 6.) would exercise its
discretion to deny his discovery request under Rule 26(b)(1)
due to a lack of proportionality. Culver already has copies
of NXP's contracts with Aetna and Prudential, and
authorizing the type of wide-ranging discovery being sought
here in every ERISA case, even those without a structural
conflict of interest, would undermine “a primary goal
of ERISA, which endeavors ‘to provide a method for
workers and beneficiaries to resolve disputes over benefits
inexpensively and expeditiously.'” Boyd v. Bert
Bell/Pete Rozelle NFL Players Retirement Plan, 410 F.3d
1173, 1178 (9th Cir. 2005) (citation omitted). See also
Jones v. PepsiCo, Inc., 185 F.Supp.3d 437, 444 (S.D.N.Y.
2016) (“[Jones] argues that Sedgwick has a conflict of
interest because it has a financial incentive to keep PepsiCo
happy-and its contracts intact-by denying claims. But that
logic would apply to any third-party administrator and make
it virtually impossible to administer an ERISA plan without a
conflict of interest.”).
Accordingly,
IT IS ORDERED that:
(1) Culver's motion for discovery (Doc. 40) is ...