1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 EASTERN DISTRICT OF CALIFORNIA 11 12 RUBY CHACKO, No. 2:19-cv-01837-JAM-DB 13 Plaintiff, 14 v. ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S 15 AT&T UMBRELLA BENEFIT PLAN REQUEST FOR RECONSIDERATION NO. 3, 16 Defendant. 17 18 Before this Court is Plaintiff’s request for 19 reconsideration, (“Mot.”) ECF No. 32, of the Magistrate Judge’s 20 ruling granting in part and denying in part Plaintiff’s motion to 21 compel, March 16, 2020 Order (“Order”), ECF No. 29. Plaintiff 22 requests that the Court overrule the Magistrate Judge’s findings 23 and grant the motion to compel as it pertains to conflict-of- 24 interest discovery. Mot. at 9. For the reasons stated below 25 this Court GRANTS in part and DENIES in part Plaintiff’s request 26 for reconsideration. 27 /// 28 /// 1 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND 2 Plaintiff Ruby Chacko (“Plaintiff”) was a participant in 3 Defendant AT&T Umbrella Benefit Plan No. 3 (“Defendant” or “the 4 Plan”). Mot. at 2. The Plan is an employee-benefit plan that 5 provides long-term disability (“LTD”) benefits. Id. It is 6 governed by the Employee Retirement Income Security ACT of 1974 7 (“ERISA”). Id. 8 Plaintiff filed this suit against Defendant, seeking to 9 reinstate her LTD benefits. Compl. ECF No. 1. At issue is a 10 discovery dispute between the Plan and Plaintiff. Mot. at 2. 11 Plaintiff filed a Motion to Compel, seeking discovery responses 12 from Defendant regarding the Administrative Record and the Plan’s 13 alleged conflict of interest. Mot. to Compel, ECF 24. Defendant 14 opposed all discovery in the case. Response to Req. for 15 Reconsideration (“Response”), ECF No. 33, at 2. Specifically, 16 Plaintiff moved to compel: (1) the completeness of the 17 Administrative Record; (2) conflict-of-interest discovery 18 concerning the relationship between the Plan and its third-party 19 administrator, Sedgwick; and (3) conflict of interest discovery 20 concerning a vendor and physician retained by Segdwick to 21 evaluate Plaintiff’s claim. Mot. at 2. 22 The Magistrate Judge held a telephonic hearing on 23 Plaintiff’s motion to compel on March 13, 2020. Transcript of 24 Proceedings, ECF No. 31. At the hearing, the Magistrate Judge 25 granted the motion to compel as it pertained to the 26 Administrative Record but took the two issues on conflict-of- 27 interest discovery under submission. Id. Three days later, the 28 Magistrate Judge issued an order denying Plaintiff’s motion as to 1 the conflict-of-interest discovery. Order at 4. 2 3 II. OPINION 4 A. Legal Standard 5 A magistrate’s ruling on non-dispositive matters, including 6 motions to compel, must not be disturbed unless “clearly 7 erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(A); Fed. 8 R. Civ. P. 72(a); E.D. Local Rule 303(f). The “clearly 9 erroneous” standard applies to “factual determinations and 10 discretionary decisions.” Nevis v. Rideout Memorial Hospital, 11 No. 2:17-cv-02295, 2019 WL 6310155 at *1 (E.D. Cal. Nov. 25, 12 2019). A finding is only clearly erroneous, when the district 13 court is “left with a ‘definite and firm conviction that a 14 mistake has been committed.’” Cohen v. U.S. Dist. Court. For N. 15 Dist. Of California, 568 F.3d 703, 708 (9th Cir. 2009)(citations 16 omitted). In contrast, the “contrary to law standard,” allows 17 the independent review “of purely legal determinations by the 18 magistrate judge.” Enns Pontiac, Buick, & GMC Truck v. Flores, 19 N0. 1:07-cv-01043-LJO-BAM, 2012 WL 639541 at *4 (E.D. Cal. Feb. 20 27, 2012). A magistrate judge’s decision is “contrary to law,” 21 if it “contradict[s] or ignore[s] applicable precepts of law, as 22 found in the Constitution, statutes or case precedent.” Id. 23 B. Analysis 24 1. Structural Conflict of Interest 25 Plaintiff seeks reconsideration of the Magistrate Judge’s 26 denial of conflict of interest discovery concerning the 27 relationship between the Plan and its third-party administrator. 28 Mot. at 3. 1 In denying discovery on this issue, the Magistrate Judge 2 found there is no structural conflict of interest, where as 3 here, the benefit “Plan’s administrator [has] delegated the duty 4 to decide claims to unconflicted third parties . . . .” Id. 5 (quoting Scoles v. Intel Corporation Long Term Disability 6 Benefit Plan, 657 Fed. Appx. 667, 668 (9th Cir. 2016)). More 7 importantly, the Magistrate Judge found the Ninth Circuit had 8 already determined there was no structural conflict of interest 9 present “in the very plan at issue here.” Id. (citing Day v. 10 At&T Disability Income Plan, 698 F.3d 1091, 1096 (9th Cir. 11 2012)). This Court has reviewed the Magistrate Judge’s findings 12 and finds them to be correct. Plaintiff’s arguments for 13 reconsideration are not persuasive. 14 Upon review of this issue, the Court does not find the 15 Magistrate Judge’s ruling denying Plaintiff’s motion to compel as 16 to the structural conflict-of-interest discovery to be clearly 17 erroneous or contrary to law. Plaintiff’s request for 18 reconsideration on this issue is DENIED. 19 2. Retained Expert’s Conflict of Interest 20 Plaintiff also seeks reconsideration of the Magistrate 21 Judge’s ruling denying discovery on financial conflict-of- 22 interest concerning the independent physician consultants. Mot. 23 at 5. Plaintiff argues this ruling is contrary to law, as it 24 “applies too narrow of a reading of the Ninth Circuit’s decision 25 in Demer v. IBM Corporation LTD Plan, 835 F.3d 893 (9th Cir. 26 2016).” Id. This Court agrees. 27 In Demer, the plaintiff similarly challenged the denial of 28 his disability benefits, and argued the Plan had two conflicts 1 of interests that warranted the court’s standard of review to be 2 “tempered by skepticism.” 835 F.3d at 899-900. First, MetLife 3 was both the claim administrator for the Plan and its insurer. 4 Id. at 900. Second, Plaintiff alleged there was a financial 5 conflict of interest surrounding physicians MetLife hired to 6 review the medical record. Id. 7 The Ninth Circuit addressed these two issues separately. 8 First, it noted the district court found MetLife had a 9 structural conflict of interest because it both evaluated the 10 claims and funded the claims. Id. Yet the district court did 11 not temper its standard of review with skepticism, because 12 MetLife “had taken affirmative steps to reduce potential bias 13 and promote accurate claim determinations.” Id. Although 14 Plaintiff challenged the district court’s reasoning, the Ninth 15 Circuit neglected to resolve this first issue. Instead, it 16 found that even if the district court’s ruling was correct, 17 “some skepticism [was] warranted here because of the financial 18 conflict” surrounding the Independent Physician 19 Consultants(“IPCs”). Id. at 901. 20 In addressing the second question, the Ninth Circuit 21 clarified that a financial conflict of interest “is distinct 22 from the purported structural conflict of interest.” Id. In 23 other words, even if MetLife lacked any structural conflict of 24 interest, that did “not preclude MetLife from having a conflict 25 of interest based on an IPC’s financial interest.” Id. The 26 court held that Plaintiff’s evidence that the IPC’s earned a 27 substantial amount of money from MetLife each year and had also 28 performed a substantial number of reviews for MetLife, “raise[d] 1 a fair inference that there is a financial conflict.” Id. at 2 902. It therefore found this evidence should be considered in 3 reviewing MetLife’s decision for an abuse of discretion.
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1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 EASTERN DISTRICT OF CALIFORNIA 11 12 RUBY CHACKO, No. 2:19-cv-01837-JAM-DB 13 Plaintiff, 14 v. ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S 15 AT&T UMBRELLA BENEFIT PLAN REQUEST FOR RECONSIDERATION NO. 3, 16 Defendant. 17 18 Before this Court is Plaintiff’s request for 19 reconsideration, (“Mot.”) ECF No. 32, of the Magistrate Judge’s 20 ruling granting in part and denying in part Plaintiff’s motion to 21 compel, March 16, 2020 Order (“Order”), ECF No. 29. Plaintiff 22 requests that the Court overrule the Magistrate Judge’s findings 23 and grant the motion to compel as it pertains to conflict-of- 24 interest discovery. Mot. at 9. For the reasons stated below 25 this Court GRANTS in part and DENIES in part Plaintiff’s request 26 for reconsideration. 27 /// 28 /// 1 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND 2 Plaintiff Ruby Chacko (“Plaintiff”) was a participant in 3 Defendant AT&T Umbrella Benefit Plan No. 3 (“Defendant” or “the 4 Plan”). Mot. at 2. The Plan is an employee-benefit plan that 5 provides long-term disability (“LTD”) benefits. Id. It is 6 governed by the Employee Retirement Income Security ACT of 1974 7 (“ERISA”). Id. 8 Plaintiff filed this suit against Defendant, seeking to 9 reinstate her LTD benefits. Compl. ECF No. 1. At issue is a 10 discovery dispute between the Plan and Plaintiff. Mot. at 2. 11 Plaintiff filed a Motion to Compel, seeking discovery responses 12 from Defendant regarding the Administrative Record and the Plan’s 13 alleged conflict of interest. Mot. to Compel, ECF 24. Defendant 14 opposed all discovery in the case. Response to Req. for 15 Reconsideration (“Response”), ECF No. 33, at 2. Specifically, 16 Plaintiff moved to compel: (1) the completeness of the 17 Administrative Record; (2) conflict-of-interest discovery 18 concerning the relationship between the Plan and its third-party 19 administrator, Sedgwick; and (3) conflict of interest discovery 20 concerning a vendor and physician retained by Segdwick to 21 evaluate Plaintiff’s claim. Mot. at 2. 22 The Magistrate Judge held a telephonic hearing on 23 Plaintiff’s motion to compel on March 13, 2020. Transcript of 24 Proceedings, ECF No. 31. At the hearing, the Magistrate Judge 25 granted the motion to compel as it pertained to the 26 Administrative Record but took the two issues on conflict-of- 27 interest discovery under submission. Id. Three days later, the 28 Magistrate Judge issued an order denying Plaintiff’s motion as to 1 the conflict-of-interest discovery. Order at 4. 2 3 II. OPINION 4 A. Legal Standard 5 A magistrate’s ruling on non-dispositive matters, including 6 motions to compel, must not be disturbed unless “clearly 7 erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(A); Fed. 8 R. Civ. P. 72(a); E.D. Local Rule 303(f). The “clearly 9 erroneous” standard applies to “factual determinations and 10 discretionary decisions.” Nevis v. Rideout Memorial Hospital, 11 No. 2:17-cv-02295, 2019 WL 6310155 at *1 (E.D. Cal. Nov. 25, 12 2019). A finding is only clearly erroneous, when the district 13 court is “left with a ‘definite and firm conviction that a 14 mistake has been committed.’” Cohen v. U.S. Dist. Court. For N. 15 Dist. Of California, 568 F.3d 703, 708 (9th Cir. 2009)(citations 16 omitted). In contrast, the “contrary to law standard,” allows 17 the independent review “of purely legal determinations by the 18 magistrate judge.” Enns Pontiac, Buick, & GMC Truck v. Flores, 19 N0. 1:07-cv-01043-LJO-BAM, 2012 WL 639541 at *4 (E.D. Cal. Feb. 20 27, 2012). A magistrate judge’s decision is “contrary to law,” 21 if it “contradict[s] or ignore[s] applicable precepts of law, as 22 found in the Constitution, statutes or case precedent.” Id. 23 B. Analysis 24 1. Structural Conflict of Interest 25 Plaintiff seeks reconsideration of the Magistrate Judge’s 26 denial of conflict of interest discovery concerning the 27 relationship between the Plan and its third-party administrator. 28 Mot. at 3. 1 In denying discovery on this issue, the Magistrate Judge 2 found there is no structural conflict of interest, where as 3 here, the benefit “Plan’s administrator [has] delegated the duty 4 to decide claims to unconflicted third parties . . . .” Id. 5 (quoting Scoles v. Intel Corporation Long Term Disability 6 Benefit Plan, 657 Fed. Appx. 667, 668 (9th Cir. 2016)). More 7 importantly, the Magistrate Judge found the Ninth Circuit had 8 already determined there was no structural conflict of interest 9 present “in the very plan at issue here.” Id. (citing Day v. 10 At&T Disability Income Plan, 698 F.3d 1091, 1096 (9th Cir. 11 2012)). This Court has reviewed the Magistrate Judge’s findings 12 and finds them to be correct. Plaintiff’s arguments for 13 reconsideration are not persuasive. 14 Upon review of this issue, the Court does not find the 15 Magistrate Judge’s ruling denying Plaintiff’s motion to compel as 16 to the structural conflict-of-interest discovery to be clearly 17 erroneous or contrary to law. Plaintiff’s request for 18 reconsideration on this issue is DENIED. 19 2. Retained Expert’s Conflict of Interest 20 Plaintiff also seeks reconsideration of the Magistrate 21 Judge’s ruling denying discovery on financial conflict-of- 22 interest concerning the independent physician consultants. Mot. 23 at 5. Plaintiff argues this ruling is contrary to law, as it 24 “applies too narrow of a reading of the Ninth Circuit’s decision 25 in Demer v. IBM Corporation LTD Plan, 835 F.3d 893 (9th Cir. 26 2016).” Id. This Court agrees. 27 In Demer, the plaintiff similarly challenged the denial of 28 his disability benefits, and argued the Plan had two conflicts 1 of interests that warranted the court’s standard of review to be 2 “tempered by skepticism.” 835 F.3d at 899-900. First, MetLife 3 was both the claim administrator for the Plan and its insurer. 4 Id. at 900. Second, Plaintiff alleged there was a financial 5 conflict of interest surrounding physicians MetLife hired to 6 review the medical record. Id. 7 The Ninth Circuit addressed these two issues separately. 8 First, it noted the district court found MetLife had a 9 structural conflict of interest because it both evaluated the 10 claims and funded the claims. Id. Yet the district court did 11 not temper its standard of review with skepticism, because 12 MetLife “had taken affirmative steps to reduce potential bias 13 and promote accurate claim determinations.” Id. Although 14 Plaintiff challenged the district court’s reasoning, the Ninth 15 Circuit neglected to resolve this first issue. Instead, it 16 found that even if the district court’s ruling was correct, 17 “some skepticism [was] warranted here because of the financial 18 conflict” surrounding the Independent Physician 19 Consultants(“IPCs”). Id. at 901. 20 In addressing the second question, the Ninth Circuit 21 clarified that a financial conflict of interest “is distinct 22 from the purported structural conflict of interest.” Id. In 23 other words, even if MetLife lacked any structural conflict of 24 interest, that did “not preclude MetLife from having a conflict 25 of interest based on an IPC’s financial interest.” Id. The 26 court held that Plaintiff’s evidence that the IPC’s earned a 27 substantial amount of money from MetLife each year and had also 28 performed a substantial number of reviews for MetLife, “raise[d] 1 a fair inference that there is a financial conflict.” Id. at 2 902. It therefore found this evidence should be considered in 3 reviewing MetLife’s decision for an abuse of discretion. 4 In the March 16 Order, the Magistrate Judge distinguished 5 Demer, since unlike here, the Demer Plan had “the same entity 6 [as] the claim administrator and plan insurer.” Order at 4. It 7 is true that here the Plan does not have an underlying 8 structural conflict of interest, since the claim administrator 9 and plan insurer are two separate entities. However, the 10 Magistrate Judge’s decision to distinguish Demer because it had 11 an underlying structural conflict of interest, runs contrary to 12 law. Whether the Plan has an underling structural conflict of 13 interest is irrelevant to the question of an alleged financial 14 conflict of interest. Demer, 835 F.3d at 901. That the Plan 15 does not have an underlying structural conflict of interest, 16 does not preclude it from having a financial conflict. Id. 17 The Magistrate Judge further distinguished Demer because 18 there the plaintiff had presented the court with “evidence of a 19 conflict of interest.” Order at 4. Indeed, the court in Demer 20 placed the burden on the plaintiff “to produce evidence of a 21 financial conflict sufficient to warrant a degree of 22 skepticism.” 835 F.3d at 902. Here, the Plaintiff has not done 23 so. Instead, Plaintiff asks the court to allow discovery on 24 this issue so that it can then produce evidence of a conflict of 25 interest. Mot. at 6. Unpersuaded, the Magistrate Judge ruled 26 that “if that were the standard . . . discovery would always be 27 permissible.” Order at 4. This Court disagrees. 28 As Plaintiff notes, Demer was an appeal on a motion for 1 summary judgment. Mot. at 6. Therefore, the plaintiff in that 2 case had already “obtained the information about the reviewing 3 doctors through discovery at the district court.” Id. If the 4 plaintiff had not been permitted to engage in such discovery, he 5 would not have been able to meet the evidentiary burden 6 concerning a conflict of interest at the summary judgment stage. 7 It is for that reason that courts within this circuit have 8 allowed discovery of potential IPC’s financial conflicts. See 9 e.g., Wojno v. Cigna Grp. Ins., No. cv 10-07238-JAK JEMX, 2011 10 WL 3236025, at *2 (C.D Cal. July 21, 2011)(allowing discovery 11 because plaintiff had explained the relevance of payment 12 information to the IPC’s credibility). In fact, the Ninth 13 Circuit has held that consideration of evidence outside of the 14 administrative record is permissible “to determine the 15 appropriate weight to accord the conflict of interest factor” in 16 an ERISA action alleging that LTD benefits were wrongfully 17 terminated. Wilcox v. Wells Fargo and Co. Long Term Disability 18 Plan, 287 F. App’x 602, 603 (9th Cir. 2008). Finally, although 19 not binding authority, this Court is persuaded by the Northern 20 District of California’s recent decision in Dimry v. Bert 21 Bell/Pete Rozelle NFL Retirement Plan, et al., (ECF No. 34) 22 which allowed financial discovery for the same reason raised by 23 Plaintiff here. No. 19-CV-05560-JSC, 2020 WL 1865192 (N.D. Cal. 24 Apr. 14, 2020)(holding in light of Demer, that “the Plan should 25 produce its agreements with the independent physicians (as well 26 as compensation) as those agreements might reveal a financial 27 incentive to rule in favor of the plan.”). 28 Therefore, the Court finds the Magistrate Judge’s ruling WAG □□□ UV YVELOVIUVEAINIT LYS MVOC OE POU □□□ UO VIO
1 denying Plaintiff’s motion to compel as to discovery of a 2 | potential financial conflict to be contrary to law. Plaintiff’s 3 request for reconsideration on this issue is therefore GRANTED. 4 5 Til. ORDER 6 For the reasons set forth above, the Court GRANTS in part 7 and DENIES in part Plaintiff’s Request for Reconsideration. 8 IT IS SO ORDERED. 9 Dated: April 27, 2020 10 kA 1 teiren staves odermacr 7008 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28