Jun 23, 2017

Murphy v. Deloitte & Touche Group Ins. Plan


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9/11/2010
Brian S. King
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Earlier this week the U.S. Court of Appeals for the Tenth Circuit issued an important decision regarding an issue that Circuit and District courts across the country have struggled with since the Supreme Court's MetLife v. Glenn decision a couple of years ago.  The case is Murphy v. Deloitte & Touche Group Ins. Plan, 2010 U.S. App. LEXIS 18752 (10th Cir. 2010).  I've placed Murphy in the website library.  The bedeviling question concerns the degree to which claimants in ERISA benefit recovery cases are entitled to conduct discovery in litigation relating to issues of conflict of interest.  

MetLife v. Glenn, 554 U.S. 105 (2008), provided guidance on how courts should adjust the abuse of discretion standard of review for ERISA benefit denial cases where the same entity charged with ERISA's fiduciary duty responsibilities is also paying benefits out of its own assets.  The Court suggested that discovery may be appropriate to allow the claimant an opportunity to gather information that sheds light on the nature and extent of the conflict.  In turn, this information would be presented to the court so that a judge could take into account the nature and extent of the conflict in calibrating how much deference would be owed to the decision-maker.  If the conflicted decision-maker was scrupulous in meeting ERISA's fiduciary and claims processing requirements, significant deference would be provided by the district court.  If the decision-maker pursued its own financial interests at the expense of the claimant or cut corners in following ERISA's claims procedure requirements, less deference would be shown.  

The Supreme Court didn't come right out and say that discovery was allowed in these cases.  But it intimated that discovery may be necessary to allow the parties and the court to carry out the conflict calibration process.  Since Glenn, insurers and ERISA plan administrators have argued vociferously that when dealing with an abuse of discretion standard of review, no discovery should be allowed.  Doing so allows the claimant to impermissibly supplement the pre-litigation appeal record.  On the other hand, claimants have argued that to give the Court's language in Glenn any meaning, claimants have to be given a chance to uncover facts showing how significant any conflict is and how seriously it has tainted the insurer's or plan administrator's perspective on a claim.  

Courts across the country have split on the issue.  Some simply do not allow any discovery.  But, although I haven't conducted a comprehensive survey, my sense is most courts have allowed limited discovery so long as it is directed to conflict of interest and is not used to supplement the merits of the claim.

Murphy, is the first Circuit decision to tackle the issue head on. The Tenth Circuit threads the needle between the two positions. The case holds that discovery is allowed relating to conflict of interest in particular circumstances. Federal Rule of Civil Procedure 26(b) governs discovery on this question as it does with any other discovery matter in federal civil litigation.  It may be apparent to a court on the face of an administrative record that conflict of interest discovery is not necessary or may be so costly or burdensome as to be unjustified. Other times, the scope and extent of the conflict of interest will not be apparent from the face of the pre-litigation appeal record and targeted discovery will be necessary.  As with all other discovery disputes, the trial judge has broad discretion to resolve any arguments between the parties.    



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