May was a fairly slow month in comparison to the previous five months of the year. We have highlighted one opinion from the First Circuit on the standard of review and discovery post-Glenn. We also have provided short summaries of two other cases of some interest, one dealing with how an administrator considered evidence in the record and one dealing with the recoverability of pre-judgment interest.
Last, but certainly not least, we are pleased to announce that Nicole Buntin, a member of the GWB Healthcare & Benefits Team, has been admitted and sworn in to practice in the state of North Carolina. Nicole's admission will allow us to better serve the needs of our clients with ERISA litigation in North Carolina. One of the cases we have discussed is a North Carolina case from the Western District. We will continue to include summaries of North Carolina cases of interest in future newsletters.
In Denmark v. Liberty Life Assurance Co. of Boston, --- F.3d ---, 2009 WL 1219438 (1st Cir. May 6, 2009), after finding that the evidence regarding an LTD benefit determination was "hair's-breadth close," the First Circuit remanded the benefit decision to the district court for further review under Glenn, explaining that the Court should apply the existing abuse of discretion standard of review with certain "refinements" and should obtain additional information regarding the potential effect of the insurer's structural conflict of interest on the benefit determination.
Prior to Glenn, the First Circuit consistently reviewed benefit decisions by a structurally conflicted administrator for abuse of discretion, "taking into account both the potential for conflict and the mitigating effect of market forces." The Supreme Court in Glenn, however, rejected the market forces theory, thereby precluding a reviewing court from disregarding a structural conflict without further analysis and requiring that such conflicts be given weight - "albeit not necessarily dispositive weight - in the standard-of-review equation." In addition, the Court observed, "Glenn makes explicit what was implicit in our earlier decisions: in cases in which a conflict has in fact infected a benefit-denial decision, such a circumstance may justify a conclusion that the denial itself was arbitrary and capricious."
The Court disagreed with the insured's argument that on remand, discovery should be unfettered, explaining that "full-blown discovery would reconfigure [the administrative] record and distort judicial review..." However, there may be good reason for "targeted discovery" where "a party makes a colorable claim of bias." The Court explained that such "discovery must be allowed sparingly and, if allowed at all, must be narrowly tailored so as to leave the substantive record essentially undisturbed." Interestingly, the Court suggested that in future cases, administrators may be expected "to document the procedures used to prevent or mitigate the effect of structural conflicts" within the administrative record, which would limit the need for conflict-oriented discovery to those cases where there are gaps in the record, i.e., where clarification of ambiguities is necessary or to ensure that documented procedures were followed.
* The Court's suggestion that discovery may not be necessary where plan administrators include in the administrative record claims policies and procedures intended to protect against the impact of a conflict is worthy of consideration. Of course, plaintiffs will no doubt seek discovery on whether the policies and procedures were followed, thereby defeating the purpose of including the policies and procedures in the administrative record in the first place. It will be interesting to see how courts approach this issue which will greatly influence whether plan administrators begin to include these documents in the record as a matter of course.
In Scherr v. Fleetboston Financial Corporation Group Long Term Disability Plan, 2009 WL 1324745 (9th Cir. May 4, 2009)(unpublished), the Ninth Circuit found that the claims administrator did not abuse its discretion in denying plaintiff's claim for long term disability benefits. First, it determined that the fact that the administrator arrived at a different conclusion than the SSA was not an abuse of discretion because a social security determination is not binding. Second, it determined that the administrator did not abuse its discretion because it "did not minimize the effects of [the participant's] pain or the side effects of his pain medication," rather it relied on multiple doctors' opinions that the participant's pain was not disabling. Further, the Court acknowledged that the ultimate rejection of a participant's physicians' views does not mean that the administrator ignored their opinions. Finally, the Ninth Circuit found that the district court did not err in discounting the importance of the administrator's conflict of interest because it used six truly independent doctors and a neutral review process.
Rinaldi v. CCX, Inc., 2009 WL 1338688 (W.D.N.C. May 12, 2009), involved a claim for severance benefits. The Court found that the participant was entitled to benefits and also awarded the participant pre-judgment interest. The issue reviewed was plaintiff's entitlement to and the calculation of pre-judgment interest. The Court first noted that "ERISA does not specifically provide for pre-judgment interest, and absent a statutory mandate the award of pre-judgment interest is discretionary with the trial court." But, the Court explained that "[a] district court may exercise its discretion to award pre-judgment interest in order to compensate the plaintiff 'for the loss of the use of his funds.'" It then ordered that the applicable interest rate was prescribed in 28 U.S.C. Section 1961 with respect to this particular action.