ERISA Litigation Update:

ERISA Litigation Update: Proportionality in Conflict Discovery After the 2015 FRCP Amendments Paul A. Wilhelm Clark Hill PLC 500 Woodward Ave., Suite 3500 Detroit, MI 48226 (313) 309-4269 pwilhelm@clarkhill.com

Paul A. Wilhelm is a member of DRI s Life, Health and Disability/ERISA Committee as well as DRI s Employment and Labor Law Committee. He is a member with the law firm Clark Hill PLC in Detroit, where he represents employers, plan sponsors, insurers and service providers in ERISA and other benefits litigation, and represents employers in employment litigation and arbitration.

ERISA Litigation Update: Proportionality in Conflict Discovery After the 2015 FRCP Amendments Table of Contents I. Introduction...5 II. Conflict Discovery Since Glenn, Pre-2015 Amendments...5 III. The 2015 Amendments...6 IV. Lessons from Decisions Applying the 2015 Amendments Making the Most of Your Advocacy Skills...7 A. Proportionality Matters...7 B. Object, Move for Protective Order, and/or Steer the Case Another Way?...9 C. Objecting with Specificity...10 V. Conclusion...10 ERISA Litigation Update: Proportionality in Conflict Discovery After... Wilhelm 3

ERISA Litigation Update: Proportionality in Conflict Discovery After the 2015 FRCP Amendments I. Introduction When it comes to the burdens of over-litigation, ERISA benefits litigation historically has not been a culprit. Indeed, since the Supreme Court s decision in Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101 (1989), most ERISA plans contain language giving the administrator or fiduciary discretion to decide claims and/or interpret the plan. As a result, ERISA benefits litigation has, at least until more recently, involved little or no discovery outside the administrative record. The Supreme Court s decision in MetLife v. Glenn in 2008 arguably opened the doors of discovery in cases of an allegedly conflicted fiduciary (i.e., what some call a structural conflict one who would pay the claim and who makes the final administrative decision). Discovery s purpose in such a case would be to gather information on the nature and extent of the alleged conflict. In the ERISA litigation world, this new wrinkle is known as conflict discovery. Defense practitioners have been able to limit discovery since Glenn, but with mixed success. The December 2015 Amendments to the Federal Rules of Civil Procedure (the 2015 Amendments or new Rules ) have now come on the scene, emphasizing proportionality, narrowly-tailored litigation and efficiency; and the new Rules thus provide the ERISA litigator some new (or at least refreshed) tools to combat conflict discovery. II. Conflict Discovery Since Glenn, Pre-2015 Amendments The Supreme Court s Glenn decision in 2008 opened the door for ERISA practitioners to debate when and to what extent conflicts exist and matter. See Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 114 (2008). In Glenn, the Court did not discuss or even mention discovery but noted that in benefits cases an evaluator/payor conflict should be weighed as a factor in determining whether there is an abuse of discretion. Id., at 115. While examples are countless and beyond the scope of this paper, courts interpreting and applying Glenn remain inconsistent with one another and at times proceed based on assumptions while still searching for guidance. See, e.g., Myers v. Anthem Life Ins. Co., 316 F.R.D. 186, 195 (W.D. Ky. 2016) ( The Sixth Circuit has provided minimal guidance in the aftermath of Glenn; however, it is logical to assume that the Supreme Court meant for lower courts to allow some discovery beyond the administrative record when the conflict of interest is present. ). One court has observed, at least as to its own Circuit: discovery is still not permitted in the run-of-the mill case and a plaintiff still must identify a specific conflict or instance of misconduct and make a prima facie showing that there is good cause to believe that limited discovery will reveal a procedural defect. See Warner v. Unum Life Ins. Co. of Am., No. 12-C-2782, 2013 U.S. Dist. LEXIS 105067, at *7 (N.D. Ill. July 26, 2013) (long-term disability and life insurance benefits matter). Yet the court nevertheless found plaintiff had, through several assertions cited sufficient evidence of a specific conflict of interest or an instance of misconduct to warrant discovery beyond the claim file, and the court permitted discovery of compensation and bonus information and performance evaluations for certain doctors, but denying statistical, batting average information and other documents or information regarding other claims reviews, which the court found would have minimal relevance and would be an overly burdensome frolic. Id., at **8-21. Plaintiff later won on summary judgment. Warner v. Unum Life Ins. Co., No. 12-C-2782, 2014 U.S. Dist. LEXIS 178765 (N.D. Ill. Dec. 31, 2014). Other courts have seemed not to require anything more than an allegation of a structural conflict to permit discovery. Chau v. Hartford Life Ins. Co., No. 1:14-cv-8484, 2016 U.S. Dist. LEXIS 172258 (S.D.N.Y. Dec. 13, 2016) (permitting a 30(b)(6) deposition and limited discovery). ERISA Litigation Update: Proportionality in Conflict Discovery After... Wilhelm 5

And, to be sure, not all decisions taking place after the 2015 Amendments cite or rely upon them or specifically reference proportionality as such. Some appear to deal with discovery issues just as they did previously. See, e.g., Chau, supra; Johnston v. Commerce Bancshares, Inc., No. 4:15-cv-0852, 2016 U.S. Dist. LEXIS 99982, at **4-6, 8 (W.D. Mo. Aug. 1, 2016) (concluding the Eighth Circuit still has not decided whether Glenn affects discovery limitations under ERISA and noting it is still unclear when a plaintiff may conduct discovery into the extent of a plan administrator s conflict of interest. ). But in Johnston, the court permitted discovery upon showing of good cause. While not allowing depositions, the court permitted plaintiff to discover internal communications from Prudential related to the reason his particular file was brought up for review ; and Standard Operating Procedures [] used by Prudential to determine when to review and terminate benefits, including SOP outlining any criteria used for triggering a review. Id., at **1-2. See also Aitken v. Aetna Life Ins. Co., No. 16-4606, 2017 U.S. Dist. LEXIS 11012, at **7-10 (S.D. N.Y. Jan. 19, 2017) (not relying upon proportionality or the new Rules, but finding if a plan administrator is structurally conflicted and if there are sufficient allegations of procedural irregularities and a reasonable chance that the good cause standard will be satisfied, then a plaintiff may compel discovery beyond the administrative record and permitting limited discovery comprised of document requests and interrogatories relating to the nature of the decision and whether [defendant] ignored those opinions and complaints ); Myers v. Anthem Life Ins. Co., 316 F.R.D. 186 (W.D. Ky. 2016) (permitting 12 interrogatories and 10 document requests, though limited in some respect, to proceed under various theories of conflict or bias, including on compensation, structure, process and training of those involved in the case). Whether counsel made the arguments in the above cases or not, the 2015 Amendments were not reflected in the decisions; but what is clear is the new Rules are here, they matter and they can be used to one s advantage. III. The 2015 Amendments Enter the new Rules. Proportionality a term long-used but until now under-appreciated has taken center stage and is the new term of the day. See Fed. R. Civ. P. 26(b)(1) (discovery is limited to any nonprivileged matter that is relevant to any party s claim or defense and proportional to the needs of the case. ). At the time, Chief Justice Roberts commented on the new Rules: The amendments may not look like a big deal at first glance, but they are. See 2015 Year-End Report on the Federal Judiciary, at 5. Not to be forgotten, recall Rule 1 was amended such that the new Rules are to be construed, administered, and employed by the court and the parties [added language in italics] to secure the just, speedy, and inexpensive determination of every action and proceeding. See Fed. R. Civ. P. 1. The change underscores the role of the advocates to cooperate and early-on tailor requests, objections and tactics toward efficient resolution of disputes. In this vein, the Advisory Committee on the new Rules stated: Most lawyers and parties cooperate to achieve these ends. But discussions of ways to improve the administration of civil justice regularly include pleas to discourage over-use, misuse, and abuse of procedural tools that increase cost and result in delay. Effective advocacy is consistent with and indeed depends upon cooperative and proportional use of procedure. Fed. R. Civ. P. 1, Advisory Committee Notes, 2015 Amendment (emphasis added). See also Geometwatch Corp. v. Hall, No. 1:14-cv-60, 2016 U.S. Dist. LEXIS 175371, at **6-7 (D. Utah Dec. 19, 2016) (non-erisa context; citing and relying upon the Advisory Committee Notes to deny motion to compel, finding the parties had engaged in sufficient discovery proportional to the needs of the case). Proposed amendments to to limit depositions to six hours and limit interrogatories to 15 were withdrawn. Still, the above changes are significant and are intended to produce more efficient resolution of disputes very much in line with the goals of ERISA. 6 Life, Health, Disability and ERISA April 2017

Toward these ends and in lieu of new blanket limits to duration and numbers of depositions and interrogatories, the new Rules require the parties themselves (along with the court) to help act as gatekeepers. The new Rules challenge ERISA (and other) plaintiffs (a lofty goal?) on the front end of each case to tailor carefully any discovery requests to the particulars of the case. The new Rules also place upon defendants (or parties in receipt of discovery requests) the obligation to object by tailoring their objections also to the particular case, but stating the grounds and with specificity, including the reasons. See Fed. R. Civ. P. 34(b)(2)(B) ( For each item or category, the response must either state that inspection and related activities will be permitted as requested or state with specificity the grounds for objecting to the request, including the reasons. ). The new Rules importantly also require producing or objecting parties withholding documents or information subject to objections, to state whether any responsive materials are being withheld on the basis of that objection. See Fed. R. Civ. P. 34(b)(2)(C) ( An objection must state whether any responsive materials are being withheld on the basis of that objection. An objection to part of a request must specify the part and permit inspection of the rest. ). Of course, the new Rules have not brought with them an immediate reduction in litigation in general; but that s not the point of them. Indeed, since the new Rules, in 2016, civil case filings in the United States district courts increased five percent, to 291,851. See 2016 Year-End Report on the Federal Judiciary; see also 2015 Year-End Report (noting for 2015, civil filings declined six percent to 279,036. ). But of these 2016 civil filings, 6,535 were filed as ERISA cases. See Public Access to Court Electronic Records ( PACER ). This is down six percent (from 6,933 in 2015) and continues a downward trend since 2010, when 9,045 were filed as ERISA cases (then 8,424 in 2011; 7,922 in 2012; 7,289 in 2013; and 7,172 in 2014). This is all down from a peak of 11,233 in 2003. The reasons for this are not apparent, but perhaps plaintiffs counsel are becoming smarter or more selective about the cases they bring; perhaps more are resolved in the administrative process; and perhaps better and more challenging cases are being brought. Also, the DOL s new disability Final Rule published December 16, 2016 (which applies to all claims for disability benefits filed on or after January 1, 2018), which could lead to more litigation including more disputes over issues such as: the completeness and finality of the record; whether and to what extent exhaustion has occurred (and whether a procedural failing by the reviewer/defendant excuses further exhaustion); and the requirements relating to avoiding conflicts of interest has not yet taken effect. Yet as we know, ERISA litigation remains an active and complex area of practice, in which the plaintiff s bar is (in many cases) becoming ever sharper and in which courts continue to hammer out sometimes unique solutions to these disputes. Despite the slight drop in ERISA cases filed (at least for now), the need has never been greater for ERISA litigators to show up in these cases well-equipped with the latest tools to combat the more sophisticated counsel, their more sophisticated tactics and the thorny issues presented such as conflict discovery. IV. Lessons from Decisions Applying the 2015 Amendments Making the Most of Your Advocacy Skills A. Proportionality Matters Although it s still early, decisions applying the 2015 Amendments reveal proportionality and the new Rules may be beginning to mute conflict discovery, even if slightly. See, e.g., Rickaby v. Hartford Life & Accident Ins. Co., No. 15-cv-00813, 2016 U.S. Dist. LEXIS 53485 (D. Colo. Apr. 21, 2016) (long-term disability case; rejecting plaintiff s quest for batting average statistics regarding how many times medical opinions obtained through a particular chosen vendor company used for plaintiff s claim resulted in denial of long-term disabil- ERISA Litigation Update: Proportionality in Conflict Discovery After... Wilhelm 7

ity benefits for others). To be sure, quests for batting average statistics have been defeated before the 2015 Amendments. See, e.g., Warner v. Unum Life Ins. Co. of Am., No. 12 C 2782, 2013 U.S. Dist. LEXIS 105067, at **19-20 (N.D. Ill. July 26, 2013) ( Such statistical evidence ignores the potentially determinative nuances in individual cases. Just because a doctor s assessment resulted in a denial or grant of benefits in another case does not make it more likely that the denial of benefits in this case with its unique facts was infected by bias Each claim is different ); Whalen v. Std. Ins. Co., No. SACV 08-0878, 2010 U.S. Dist. LEXIS 5801, at *5 (C.D. Cal. Jan. 14, 2010) ( A simple mathematical proportion of decisions in which each doctor denies benefits is of no relevance unless it can also be shown that those denials were wrongly decided. ). But in Rickaby, the Court applied the new Rules and placed its rationale squarely within them. The Court found the determination of awarding disability benefits is necessarily fact-intensive and without discovery into underlying facts of other claims and grants or denials, a simple tally lacked probative value of any bias or lack thereof. 2016 U.S. Dist. LEXIS 53485, at **8-9. And based on information supplied by the defendant, it would have cost the defendant many thousands to compile the requested information. Id., at *10-11. Importantly, the Court further noted that even had the plaintiff amended his requests to seek information regarding the underlying facts of other claims (hence, arguably providing some relevance to the issues of the alleged conflict), it would be too burdensome under the proportionality requirement of new Rule 26. Id., at *9 & n.1 (also noting the pathway of conflict discovery in ERISA litigation is already a narrow road). The Court also underscored ERISA benefits cases are supposed to be speedy, inexpensive, and efficient. Id., at *12. Amen. The new Rules support those goals even further. ERISA litigators should be making and repeating these arguments when the opportunities call for them. Another court specifically cited the new Rules in barring discovery. In Collins v. Unum Life Ins. Co. of Am., No. 15-cv-2229, 2016 U.S. Dist. LEXIS 44238 (N.D. Ohio Mar. 31, 2016), the Court found mere allegation[s] of bias not enough to justify plaintiff s seeking discovery on the plan administrator, the claim, the claim process, appeals process, intra-company communications, how Unum handles claims in which the caused by, contributed to by, or resulting from disease of the body exclusion is utilized to deny benefits, and bonus/reward programs for Unum employees involved in Collins s claim. The court reasoned based in part based on Sixth Circuit precedent, but also reasoned: Moreover, [the new Rules did not support the request] in that the scope and volume of the discovery Plaintiff requests are not proportional to the discovery s importance to Plaintiff s claims. The requested discovery is even less important because Defendant seems to admit that it is both the administrator and payor for claims under this plan, including Plaintiff s. Plaintiff does not show how any more discovery on this issue will significantly aid Plaintiff s claim that the dual capacity impacted Unum s exercise of discretion. Id., at **5-6 (emphasis added). Both Circuit precedent and the new Rules combined to defeat the discovery requests, and this case demonstrates a successful line of reasoning using both sources of authority. Another court applied the new Rules to a more mixed result. In Curtis v. Metro. Life Ins. Co., No. 3:15- cv-2328, 2016 U.S. Dist. LEXIS 20182 (N.D. Tex. Feb. 19, 2016), another long-term disability, conflict discovery case, the Court put the brakes on some requests but allowed others. It rejected requests for performance evaluations of claim reviewers, a claims-based organizational chart, and information on the compensation of supervisors up to the head of the claims department. The Court found these items, as well as information on those not involved in the individual claims decisions, were not proportional to the needs of the case and thus not discoverable under the new Rules. Still, the Court did require defendant to describe the policy and methods used to determine compensation for the claims and appeals specialists who handled Plaintiff s claim. Id., at *15 (including calculating bonuses, pay increases or gain sharing) and permitted some other 8 Life, Health, Disability and ERISA April 2017

items. But overall, the Court used the new Rules to scale back the far-reaching conflict discovery the plaintiff sought. Other courts have followed suit, offering a mixed result while finding some arguments of proportionality persuasive. See, e.g., Owens v. Liberty Life Assur. Co., No. 3:14-cv-00507, 2016 U.S. Dist. LEXIS 145941 (W.D. Ky. Oct. 21, 2016) (finding a light threshold to conflict discovery remains based on other district court decisions, but limiting the request such that defendant was not required to submit information about reviewers who were not involved in [the] claim ); see also Scott-Warren v. Liberty Life Assur. Co., No. 3:14-cv-00738, 2016 U.S. Dist. LEXIS 136513 (W.D. Ky. Sept. 29, 2016) (similar analysis and result); Agrifolio v. Aetna Life Ins. Co., No. 16-20246, 2016 U.S. Dist. LEXIS 113097 (S.D. Fla. Aug. 24, 2016) (finding plaintiff entitled to discovery relevant to Defendant s conceded structural conflict of interest and whether the conflict effected [sic] the decision making process or resulted in procedural irregularities (including the claims manual) but ordering that in formulating his discovery requests, Plaintiff shall keep in mind the requirements [from the new Rules] that discovery be proportional to the needs of the case and that the parties work to secure the just, speedy, and inexpensive resolution of this matter. ). Arguments regarding proportionality are still unfolding in the ERISA context. Many arguments are surely yet to be tested in the courts. In the end, the advocate s best strategic use of proportionality may depend on the jurisdiction as well as the specifics of each case. As the new Rules contemplate, arguments against conflict discovery should be made after thought and inquiry tailored to the individual case. B. Object, Move for Protective Order, and/or Steer the Case Another Way? Among the many decisions that may depend upon jurisdictional considerations is whether to object to propounded discovery, and/or file a motion for a protective order and/or simply work to steer the case another direction using court-accepted scheduling parameters that may already be in place. Indeed, in some jurisdictions, courts have implemented standard ERISA scheduling orders that effectively place upon Plaintiffs the burden to cite to a procedural irregularity or issue before discovery generally is allowed, even if a structural conflict is admitted. See, e.g., Collins v. Unum Life Ins. Co. of Am., No. 15-cv-2229, 2016 U.S. Dist. LEXIS 44238 (N.D. Ohio Mar. 31, 2016) (finding plaintiff s contentions mere allegation[s] of bias [that are] not sufficient to permit discovery under Wilkins [150 F.3d 609, 616 (6th Cir. 1998)] exception to the general rule that courts are limited to reviewing the administrative record in ERISA cases and finding requests, further, were not proportional to the case). If a party simply tenders lengthy objections and responses, a court could find at least some complaints of undue burden have been waived. Derryberry v. PharMerica Corp., No. CIV-16-207, 2016 U.S. Dist. LEXIS 139773, at **10-11 (W.D. Okla. Oct. 7, 2016) ( Defendant made the unusual decision to both object to the additional discovery and supply responses to said discovery. This weighs in favor of discovery because the requested information is demonstrably not overly burdensome. Moreover, the parties have conceded that there is indeed a conflict of interest and Plaintiff s discovery requests are narrowly tailored. ). But the new Rules do require specificity for objections; and without a record of objections, the court s job may become burdensome; and in such a case, one could lose control over the direction a court s decision takes, which decision could become unwieldly. See, e.g., Myers v. Anthem Life Ins. Co., 316 F.R.D. 186, 191 (W.D. Ky. 2016) ( because Anthem has not responded to the discovery requests, the Court is left to address the Motion for Discovery without being able to address any existing, specific objections by Anthem ). In the end, these decisions are Circuit or jurisdiction-specific, but often should be decided upon by defendants early on ideally at or before the initial scheduling conference, where possible. ERISA Litigation Update: Proportionality in Conflict Discovery After... Wilhelm 9

C. Objecting with Specificity Importantly to the Court in Curtis v. Metro. Life, supra, the Court noted the defendant had not adequately briefed or supported its specific objections to many interrogatories or requests for production of documents. See, e.g., id., at **15-19 (finding many objections thus waived and overruled ). It s possible the Court would have barred more discovery requests as not proportional to the needs of the case, but we don t know because the defendant did not make the newly-required, more robust objections, with specificity, including the reasons. See Fed. R. Civ. P. 33(b)(4); 34(b)(2)(B), (C). See also Benjamin v. Oxford Health Ins., No. 3:16-cv- 408, 2017 U.S. Dist. LEXIS 27646, at *11 (D. Conn. Feb. 28, 2017) ( defendant s objections fail to comply with the rules governing discovery, particularly as revised in 2015. The Federal Rules call for the objecting party to state with specificity the grounds for objecting to the request, including the reasons. Fed. R. Civ. P. 34(b) (2)(B). The amended rule further requires that [a]n objection [] state whether any responsive materials are being withheld on the basis of that objection. An objection to part of a request must specify the part and permit inspection of the rest. Fed. R. Civ. P. 34(b)(2)(C). ). See also Shultz v. Aetna Life Ins. Co., No. 1:16-cv-94, 2016 U.S. Dist. LEXIS 156769 (M.D. Ala. Oct. 25, 2016) (striking defendants discovery objections in large part and ordering documents and ESI identifying the individuals involved, compensation, manuals and policies in effect, and communications; and a privilege log). One lesson from these cases is clear if you don t plan to object to conflict discovery with specificity, and with supporting reasons, don t bother. V. Conclusion The new Rules are not a magic wand, and do not eliminate conflict discovery. But they certainly are a powerful new weapon against it they re another arrow in the quiver of the ERISA litigation defense practitioner. The concept of conflict discovery is based on assumptions of wrongdoing or at least of clouded judgment. The more the defense practitioner can do to unmask those assumptions as inefficient, and the more one can do to the help the court understand the requests are a shot-in-the-dark approach and fail the burdenbenefit tests, the better for the defense. One can indeed use the new Rules along with other tools successfully to combat far-reaching conflict discovery requests, especially where the amount in dispute may be relatively low, and where the defense explains with thoughtful specificity the relative lack of probative value and the relatively high burden to comply. Use the tools you have, and enjoy! 10 Life, Health, Disability and ERISA April 2017