10th Circuit sticks to 'review proceeding'
Chicago Daily Law Bulletin
January 28, 2008
by MARK D. DEBOFSKY
After a district court awarded benefits to the plaintiff, the insurer successfully appealed to the 10th U.S. Circuit Court of Appeals, which issued a ruling narrowly constraining the scope of consideration of ERISA claims under the de novo standard of adjudication. Jewell v. Life Ins.Co. of North America, 2007 U.S.App.LEXIS 27832 (Nov. 30, 2007).
The plaintiff, a director of national sales for Sprint Telecommunications, became disabled a year after being hired due to severe headaches, dizziness, panic attacks and depression. His claim was initially approved; shortly thereafter, though, the insurer advised Lynn Jewell that his benefits were going to be limited to only two years of payments due to classification of the basis of his disability as a mental impairment. Jewell contested that determination, claiming that all of his symptoms were due to a stroke, and that he had been previously misdiagnosed. The insurer, Life Insurance Company of North America, nonetheless upheld its decision and Jewell filed suit in state court alleging breach of contract. The claim was removed to federal court based on ERISA preemption, and the insurer sought a judgment on the administrative record. After granting the plaintiff's motion to supplement the record with expert opinions, the district court ruled in Jewell's favor. LINA appealed.
At the outset of its opinion, in a footnote, the court criticized the procedural mechanism under which the case was decided, noting:
''The Federal Rules of Civil Procedure contemplate no such mechanism as 'judgment on the administrative record.' Cf. R. Ct. Fed. Cl. 52.1(b). Parties should avoid the practice of requesting it, and courts should avoid purporting to grant it. Doing so often creates unnecessary work for an appellate court in deciding whether to construe such a motion ex post as one for a bench trial 'on the papers,' e.g., Hall v. UNUM Life Ins. Co of Am., 300 F.3d 1197, 1200 (10th Cir. 2002), or as one for summary judgment, e.g., Gannon v. Aetna Life Ins. Co., F. Supp. 2d , No. 05 Civ. 2160, 2007 WL 2844869, at *6 (S.D.N.Y Sept. 28, 2007). See Muller v. First Unum Life Ins. Co., 341 F.3d 119, 124 (2d Cir. 2003).''
Turning to the merits, the court examined the district court's admission of evidence outside the claim record. Since the case was decided under the de novo standard, the court of appeals reexamined its ruling in Hall v. UNUM Life Insurance Co. of America, 300 F.3d 1197 (10th Cir. 2002), which found that even under the de novo standard, ''the best way'' for a district court ''to implement ERISA's purposes in this context is ordinarily to restrict de novo review to the administrative record'' compiled during the claim administration process, instead of taking new evidence, hearing witnesses, and the like. Id. at 1202. Hall nonetheless ruled that in ''unusual'' cases, supplementing the record may be appropriate.
Nonetheless, the 10th Circuit stated that it was ''again emphasiz[ing] that ERISA policy strongly disfavors expanding the record beyond that which was available to the plan administrator. Supplemental evidence should not be used to take a second bite at the apple, but only when necessary to enable the court to understand and evaluate the decision under review.''
In order to meet the ''significant burden'' of introducing extra-record evidence, the court ruled the following standards have to be met: ''(1) the evidence must be 'necessary to the district court's de novo review'; (2) the party offering the extra-record evidence must 'demonstrate that it could not have been submitted to the plan administrator at the time the challenged decision was made'; (3) the evidence must not be '[c]umulative or repetitive'; nor (4) may it be 'evidence that ''is simply better evidence than the claimant mustered for the claim review.'' ' Hall, 300 F.3d at 1203 [citation omitted]. Even then, 'district courts are not required to admit additional evidence when these circumstances exist because a court 'may well conclude that the case can be properly resolved on the administrative record without the need to put the parties to additional delay and expense.' ''
Citing the seminal ruling on this issue, Quesinberry v. Life Ins. Co. of N. Am. , 987 F.2d 1017 (4th Cir. 1993), the court cataloged circumstances in which additional evidence will be considered: ''claims that require consideration of complex medical questions or issues regarding the credibility of medical experts; the availability of very limited administrative review procedures with little or no evidentiary record; the necessity of evidence regarding interpretation of the terms of the plan rather than specific historical facts; instances where the payor and the administrator are the same entity and the court is concerned about impartiality; claims which would have been insurance contract claims prior to ERISA; and circumstances in which there is additional evidence that the claimant could not have presented in the administrative process.''
Applying these principles, the court of appeals found the district court erred in admitting supplemental reports prepared by the treating doctors. Although the district court held the letters could assist the court in its review, there was no explanation as to why the information could not have been submitted sooner. Thus, the court ruled, ''Without more than its meager finding that the letters might perhaps be useful, the district court should not have admitted them.'' The court did rule, though, that ''necessity'' is not to be construed too strictly as to be ''absolutely indispensable.'' However, the court added that necessity should not be too lax, either, and should not mean either ''convenient'' or ''useful.''
Examining the letters themselves, the court found they stated diagnostic conclusions without articulating a sufficient rationale as to why the initial diagnoses were incorrect. Although the plaintiff further argued that the letters were presented as a means of rebutting the insurer's claim that the treating doctors' findings lacked credibility, the court disagreed, explaining:
''Second, Mr. Jewell argues that, by disbelieving what he claims was his doctors' diagnosis of an organic disorder, LINA put the doctors' credibility at issue. The question of the credibility of an expert - as opposed to the question of the reliability of the expert's conclusions - concerns whether the expert is believable. See, e.g., Washington v. Schriver , 255 F.3d 45, 52 (2d Cir. 2001). Credibility embraces such matters as professional qualifications, mental capacity, bias and interest, and bad moral character. So, for instance, the size of an expert's fee or the fact that he only testifies for plaintiffs in civil cases may be relevant to his credibility. See Edward J. Imwinkelried, The Silence Speaks Volumes, 1998 U. Ill. L. Rev. 1013, 1034-35. Whether, as is important here, these doctors were correct, or whether their conclusions were based on sufficient evidence and sound medical science, bears on their credibility in no genuine sense.''
The court also faulted the plaintiff for not offering an explanation as to why the evidence could not have been offered during the claim process. Nor did the plaintiff make a showing that the evidence was admissible because it had been submitted earlier and that it was the insurer's fault it was not included in the record. In addition, the court deemed much of the evidence cumulative of evidence that had already been presented; and found it would be improper to allow admission of ''simply better evidence'' of the same kind that was already in the record.
The 10th Circuit contrasted the circumstances in Hall where evidence of two surgeries performed subsequent to the claim appeal obviously could not have been submitted earlier, and the evidence was probative of the severity of the pain about which the plaintiff complained since she would likely not have undergone surgery if her pain was not severe and legitimate. The court found Jewell's evidence not at all comparable; and his self-serving declaration was similarly deemed improperly admitted for the same reasons. Finally, because the district court had placed great weight on the improperly admitted evidence, the court found the admission of the reports could not be viewed as harmless error. Accordingly, the court remanded the matter to the district court for de novo review based solely on the claim record.
Although there is a strong suggestion in the opinion that the court simply disbelieved the contents of the letters authored by the treating doctors as post hoc litigation-driven rationales, the fundamental underpinning of this ruling may be questioned and the implications of the decision raise concerns. The ruling creates a dangerous possibility of conflation of the scope of discovery with the scope of admissibility of evidence in ERISA cases. While the court was critical of the evidence offered by the plaintiff, it could have pointed out, in the same manner as the 6th Circuit in Calvert v. Firstar Finance Inc., 409 F.3d 286 (6th Cir. 2005), that discovery could have helped illuminate the credibility and reliability of all of the medical opinions offered. The Supreme Court made it clear in Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003), that benefit claims determinations need to be based on reliable evidence. Credibility and reliability cannot be assessed without discovery, though. It would be very disappointing if this ruling were cited as a basis for barring discovery as to credibility and reliability - both as to the claimant's physicians as well as the insurer's medical directors and consultants. The lessons learned from such discovery were apparent in Bedrick v. Travelers Insurance Co., 93 F.3d 149 (4th Cir. 1996), where the medical insurer's consultants' findings were shown to be both biased and unreliable when the doctors were subjected to cross-examination. Also see, Nagele v. Electronic Data Sys. Corp., 193 F.R.D. 94, 104 (W.D.N.Y. 2000) (highlighting the value of discovery in illuminating the accuracy of a claim determination).
Of greatest significance, though, was that the 10th Circuit adhered to an administrative law paradigm in its consideration of this case despite the footnote presented at the outset of the opinion critical of the utilization of an administrative procedure to resolve this case. Moreover, the scope of review in Jewell places it in direct conflict with Diaz v. Prudential Ins.Co. of America, 499 F.3d 640 (7th Cir. 2007). The Jewell ruling presumes that even under the de novo standard, the court is conducting a review proceeding. However, Diaz reached the opposite conclusion, holding:
''The district court's task in engaging in de novo consideration of the decision of the plan administrator is not the same as its job in reviewing administrative determinations on the basis of the record the agency compiled under the substantial evidence rule, as it might do in a Social Security benefits case. See Ramsey v. Hercules Inc., 77 F.3d 199, 205 (7th Cir. 1996). Some of the confusion in this area may be attributable to the common phrase ''de novo review'' used in connection with ERISA cases. In fact, in these cases the district courts are not reviewing anything; they are making an independent decision about the employee's entitlement to benefits. In the administrative arena, the court normally will be required to defer to the agency's findings of fact; when de novo consideration is appropriate in an ERISA case, in contrast, the court can and must come to an independent decision on both the legal and factual issues that form the basis of the claim. What happened before the Plan administrator or ERISA fiduciary is irrelevant. See Patton v. MFS/Sun Life Financial Distributors Inc., 480 F.3d 478, 485-86 (7th Cir. 2007). That means that the question before the district court was not whether Prudential gave Diaz a full and fair hearing or undertook a selective review of the evidence; rather, it was the ultimate question whether Diaz was entitled to the benefits he sought under the plan. See Wilczynski v. Kemper Nat. Ins. Companies, 178 F.3d 933, 934-35 (7th Cir. 1999).
Indeed, approaching ERISA cases as ''review proceedings'' appears aberrant under the guidelines set out by the Supreme Court in Chandler v. Roudebush, 425 U.S. 840 (1976). There, the court analyzed how to determine whether a ''civil action'' authorized by Congress is to be heard as a de novo proceeding or as a reviewing proceeding, akin to administrative review. The court found:
''In most instances, of course, where Congress intends review to be confined to the administrative record, it so indicates, either expressly or by use of a term like 'substantial evidence,' which has 'become a term of art to describe the basis on which an administrative record is to be judged by a reviewing court.' Ibid. E. g., 5 U.S.C. § 706 (scope-of-review provision of Administrative Procedure Act); 12 U.S.C. § 1848 (scope-of-review provision applicable to certain orders of the Board of Governors of the Federal Reserve System); 15 U.S.C. § 21 (c) (scope-of-review provision applicable to certain orders of the Interstate Commerce Commission, the Federal Communications Commission, the Civil Aeronautics Board, the Federal Reserve Board, and the Federal Trade Commission); 21 U.S.C. § 371 (f)(3) (scope-of-review provision applicable to certain orders of the Secretary of Health, Education, and Welfare).''
Applying this analysis to ERISA, where neither the statute itself nor the legislative history suggests a review proceeding, the paradigm applied by the 10th Circuit is both in conflict with the most recent 7th Circuit ruling and appears contrary to law.
I was counsel for plaintiff in the Diaz ruling cited in this article.