:: MetLife v. Glenn Decision Wedges Open Discovery On Use Of Outside Consultants

No one denies that speedy, simple, and inexpensive determination of actions seeking review of benefit determinations is desirable. Eliminating or sharply limiting discovery would serve that goal. But that is not the only goal.

Congress enacted ERISA to provide unsuccessful claimants with a federal forum for the fair determination of their claims. Pretrial discovery is a part of the process for which Congress opted.

Hogan-Cross v. Metro. Life Ins. Co., 2008 U.S. Dist. LEXIS 58027 (S.D.N.Y. July 31, 2008)

It was just a matter of time before we saw a case where the district court judge took a fresh view of discovery limitations in view of the Supreme Court’s decision in MetLife v. Glenn. In Hogan-Cross, Judge Kaplan rejected MetLife’s position that discovery should be limited to the “administrative” record simply because the policy language contained a discretionary clause. The opinion will likely receive ample use in ERISA discovery disputes on a wide range of issues.

[The opinion was addressed to a motion for reconsideration of a previous order adverse to MetLife on discovery and the quoted text will at points reflect this context.]

Here’s a quick overview:

#1 MetLife argued that depositions and broad discovery inquiries are not permitted “when there is no evidence in the administrative record of any actual conflict.”

To which the court replied:

MetLife’s notion that discovery is inappropriate in this case because “there is no evidence in the administrative record of any actual conflict,” a dubious proposition to begin with before Glenn, is misguided. The question here, as in all cases, is whether the discovery sought is relevant in itself or “appears reasonably calculated to lead to the discovery of admissible evidence.”

The specific requests at issue sought evidence concerning approval and termination rates for IBM long term disability claims and statistics regarding long term disability claims administered by MetLife in litigation.

Evidence of rates of claim denials and benefit terminations could be reasonably calculated to lead to the discovery of admissible evidence, the court observed, stating:

Evidence of high rates of benefit denials or terminations reasonably could lead to further inquiry as to the reasons for those actions, which might prove either benign or malignant. Accordingly, even if the Court were to grant reconsideration with respect to these requests, it would adhere to its former decision.

#2 MetLife argued that discovery requests seeking information regarding the compensation of “persons involved in evaluating, advising upon, or determining plaintiff’s eligibility for continued benefits.” was irrelevant.

To which the court replied:

The bases for and amounts of compensation paid to employees and outside consultants involved in plaintiff’s benefit termination itself could prove relevant to plaintiff’s claim. Certainly it could lead to other relevant evidence. It could matter a great deal, for example, if an outside reviewer derived all or most of his or her income from MetLife, particularly if that reviewer frequently recommended denial or termination of benefits.

This point is extremely important since outside consultants are often the source of information bearing on the reasonableness of benefit decisions. The court opined that:

Information bearing on the manner in which a conflicted plan administrator compensates outside consultants could be highly pertinent. Maintenance of compensation arrangements that create economic incentives for consultants to recommend denial or termination of benefits would have a material bearing on the likelihood that the administrator’s conflict affects its benefit determinations.

On this point alone, the case would be highly significant. When taken in context of the court’s conclusion that the Glenn decision substantially broadened the ambit of discovery in ERISA claims disputes, the decision must rank as one of the most important post-Glenn decision thus far.

Note: The district court took aim at the pre-Glenn Fourth Circuit opinion in Abromitis v. Continental Casualty Co., stating:

But Abromitis is not helpful, particularly in light of Glenn. It rested in the first instance on the Fourth Circuit’s pre-Glenn view that discovery was seldom permissible where the scope of review is the arbitrary and capricious standard. It then relied upon district court cases that concluded that where, as here, a conflict of interest is apparent on the record, discovery as to the extent of the conflict is inappropriate.

Abromitis put the cart before the horse in the district court’s view.

The ultimate question in these cases is whether the decision in question was arbitrary and capricious. In making that determination, the existence, nature, extent, and effect of any conflict of interest are relevant considerations.

And thus:

A consultant may be compensated in a manner and/or to an extent that creates a motive to recommend against the payment of benefits because such recommendations are believed to serve the interests of the plan administrator. If a decision maker knowingly were to rely on advice from such a consultant, it would be only common sense to say that the decision would command less deference than one made on the basis of unbiased advice or in ignorance of the bias.

Sea Change On Discovery Issue – The court rejected the “categorical or nearly categorical view” of Abromitis and the cases upon which it relied, i.e., that discovery is seldom if ever permissible in these cases. The categorical view “is blind to potentially important information that, at least in some cases, may be critical to the fair and informed review of benefit claims.”

Were there any doubt about this, Glenn removed it. It rejected special procedural or evidentiary rules and, in this Court’s view, thus abrogated the limitations on discovery unique to ERISA cases that were imposed or applied by such cases as Abromitis.

But see – Not all district courts will share the perspective of Judge Kaplan.  See, e.g., cases discussed in The Effect Of Conflicts Of Interest On The Scope Of Discovery (Unit 2)