Due to the quasi-administrative law paradigm the courts apply in Employee Retirement Income Security Act (ERISA) cases, no issue has confounded the courts more than the scope of permitted discovery.

In Wise v. Life Ins.Co. of North America, 2012 U.S.Dist.LEXIS 50231 (C.D.Ill. April 10, 2012), the plaintiff, Linda Wise, sought accidental death benefits under an ERISA plan sponsored by her late husband’s employer, Honeywell International Inc. The plan was underwritten and insured by the Life Insurance Company of North America (LINA), a CIGNA company. After filing suit, Wise sought to take the type of discovery normally sought in an accidental death benefit dispute such as the cause and circumstances of the decedent’s death and the process and procedure involved in adjudicating the claim. However, LINA sought to bar all discovery, asserting the claim should be decided solely on the so-called “administrative” record. The court disagreed and ruled that discovery was appropriate regardless of the standard of review, which was undecided at the time of the issuance of this ruling because LINA asserted it was still in the process of compiling materials that could be construed as the governing plan documents.

Citing Krolnik v. Prudential Ins. Co. of America, 570 F.3d 841, 843 (7th Cir. 2009), the court determined that if the case is adjudicated under the default de novo standard, it should be treated in the same manner as any other breach of contract action. Thus, the court ruled that Wise was entitled to obtain in discovery all relevant plan documents in order to determine the meaning of the plan and whether ambiguities exist. While the defendant argued that additional discovery is necessary only for the court to make “an informed and independent decision,” the court pointed out that LINA was blurring the distinction between the scope of discovery and the scope of admissibility of evidence and further explained:

“An ERISA action for benefits under de novo review should have the same scope of discovery as any other contract case.” See Krolnik, 570 F.3d at 843. The scope of discovery is broad. A party may obtain discovery regarding any matter, not privileged, which is relevant to the claim or defense of any party. Relevant information need not be admissible at trial if the discovery appears to be reasonably calculated to lead to the discovery of admissible evidence. Fed. R. Civ. P. 26(b)(1).

If, however, the arbitrary and capricious standard applied, while acknowledging that the court’s review is primarily confined to the claim record, the court further determined: “Discovery may be allowed regarding the plan administrator’s possible conflict of interest and whether that conflict may have affected the decision.” (citing Baxter v. Sun Life Assur. Co. of Canada, 713 F.Supp.2d 766, 771-72 (N.D. Ill. 2010)). On the other hand, the court also found that evidence regarding conflicts would be irrelevant under the de novo standard “because the court reviews the matter without regard to the administrator’s decision. Krolnik , 570 F.3d at 843.”

This common-sense ruling will no doubt be instructive in future cases, but the key case involving discovery in ERISA actions remains Nagele v. Electronic Data Sys. Corp., 193 F.R.D. 94, 107 (W.D.N.Y. 2000), which condemned restrictions on discovery in ERISA cases for the following reason:

Given the potential for a growing caseload of claims seeking review of ERISA-covered benefit denials, there may be an understandable motivation to restrict discovery as a means of accelerating disposition of these cases. But judicial review without a complete and accurate record is in no one’s interest and making mistakes quickly does not comport with the meaningful judicial review Congress undoubtedly had in mind.

Indeed, Nagele presaged Metro.Life Ins.Co. v. Glenn, 554 U.S. 105 (2008), and its emphasis on the need to assure that plan administrators are rendering accurate claim decisions free from financial bias and procedural unreasonableness. Nagele went on to point out that discovery is permitted in trust actions, the underlying basis for ERISA law, regardless of whether the trustee is granted discretionary authority. And the court furnished multiple examples of ERISA cases where discovery proved useful in uncovering defects in plan interpretation and in the administration of claims, thus leading the court to conclude: “The risk of additional burden to plan administrators must be balanced against the right of aggrieved participants to obtain, as contemplated by Congress, meaningful judicial review.” Id.

Again, the same message was conveyed inGlenn by the Supreme Court’s citation of Universal Camera Corp. v. NLRB, 340 U.S. 474, 490 (1951), which mandated that “courts must now assume more responsibility for the reasonableness and fairness” of administrative decisions and that deferential review should not permit courts to “be influenced by a feeling that they are not to abdicate the conventional judicial function.”

Thus, while courts retain broad powers to control abusive discovery, the proven value and necessity of discovery should be the ordinary course and not the exception.

Note: I represented the plaintiff in the Baxter v. Sun Life case cited above.

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