United States Court of Appeals For the First Circuit
No. 05-2877 DIANE DENMARK,
Plaintiff, Appellant,
v.
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Douglas P. Woodlock, U.S. District Judge]
Before
Lipez, Selya and Howard, Circuit Judges.
Jonathan M. Feigenbaum, with whom Phillips & Angley was on brief, for appellant. Jay E. Sushelsky and Melvin R. Radowitz on brief for American Association of Retired Persons, amicus curiae. Mala M. Rafik and Rosenfeld & Rafik, P.C. on brief for Massachusetts Employment Lawyers Association, amicus curiae. Richard Johnston on brief for Health Administration Responsibility Project, amicus curiae. Andrew C. Pickett, with whom Matthew D. Freeman, Ashley B. Abel, and Jackson Lewis LLP were on brief, for appellee. Lisa Tate, Teresa L. Jakubowski, Mark J. Crandley, and Barnes & Thornburg, LLP on brief for American Council of Life Insurers, amicus curiae.
May 6, 2009 SELYA, Circuit Judge. This appeal has generated thorny
questions involving the appropriate standard of judicial review
under the Employee Retirement Income Security Act (ERISA), 29
U.S.C. §§ 1001-1461. It is now before us for a second time. Our
initial encounter produced a proliferation of views: three separate
opinions from the three panelists, each of which grappled with the
methodological problem facing a reviewing court in regard to an
ERISA benefit-denial decision made by a plan administrator
operating as both adjudicator and payer of such claims. See
Denmark v. Liberty Life Assur. Co., 481 F.3d 16 (1st Cir. 2007)
(Lipez, J.); id. at 39 (Selya, J., concurring); id. at 41 (Howard,
J., dissenting). For ease in exposition, we refer to the three
constituent opinions comprising that splintered decision,
collectively, as "Denmark II."
Dissatisfied with the outcome, the plaintiff sought
rehearing and rehearing en banc. See Fed. R. App. P. 35; 1st Cir.
R. 35, 40. The en banc court withheld action on the petition until
the Supreme Court had decided Metropolitan Life Insurance Co. v.
Glenn, 128 S. Ct. 2343 (2008). Believing that Glenn had shed new
light on the standard of review, the panel withdrew its earlier
decision and requested supplemental briefing. See Denmark v.
Liberty Life Assur. Co., 530 F.3d 1020 (1st Cir. 2008) (per
curiam). By separate order, the petition for rehearing en banc was
denied as moot.
-2- The supplemental submissions, together with a welter of
helpful amicus briefs, led to a new round of oral argument. We
took the matter under advisement and now reaffirm our existing
abuse of discretion standard of review, albeit with certain
refinements. We nonetheless recognize that the ultimate resolution
of the case may be informed, under Glenn, both by the
aforementioned refinements and by the obtaining of further
information. Consequently, we vacate the judgment and remand to
the district court so that it may obtain that information and
reevaluate the case with the guidance supplied by Glenn and by this
opinion.
I. BACKGROUND
We presume the reader's familiarity with the facts of the
case as set forth in Denmark II. We rehearse here only those
events necessary to put this appeal, in its present posture, into
a workable perspective.
In 1996, a primary care physician diagnosed plaintiff-
appellant Diane Denmark as suffering from fibromyalgia. The
plaintiff, who was a group leader employed by GenRad, Inc.,
nonetheless continued to work. At the times relevant hereto, she
was covered under two interlocking, ERISA-regulated disability
insurance plans: GenRad's short-term disability plan (the STD Plan)
-3- and its long-term disability plan (the LTD Plan).1 Defendant-
appellee Liberty Life Assurance Company (Liberty) administered both
plans, albeit under different arrangements.
The employer self-funded the STD Plan. Under it, Liberty
provided an initial claims review and benefits determination. Its
decisions were appealable to the employer, which paid approved
claims from its own exchequer.
In contrast, Liberty underwrote the LTD Plan. Pursuant
to its terms, Liberty reviewed all claims, made the initial
benefits determinations, adjudicated any appeals, and paid approved
claims from its own coffers.
The plaintiff stopped working on October 3, 2001, and
applied for STD benefits. The STD Plan defines "disabled" to
include a person who is "unable to perform all of the material and
substantial duties of [her] occupation . . . because of an Injury
or Sickness." In an effort to satisfy this definition, the
plaintiff supported her claim with reports from three doctors: her
primary care physician, a cardiologist, and a rheumatologist.
After reviewing the tendered medical records and a job description,
Debra Kaye, a nurse employed by Liberty as a case manager,
requested that Dr. Clay Miller conduct a peer review. Based on Dr.
Miller's assessment, Liberty denied the claim.
1 In late 2001, Teradyne, Inc. acquired GenRad, but the plaintiff's right to coverage remained the same. For simplicity's sake, we refer throughout to GenRad.
-4- The plaintiff appealed this decision to her employer.
The appeal papers included a response from her primary care
physician disputing Dr. Miller's conclusions. The employer asked
Dr. Peter Schur to perform an independent medical examination
(IME). When Dr. Schur found the plaintiff disabled, the employer
agreed to pay her STD benefits.
In June of 2002, the plaintiff filed for long-term
benefits. An applicant qualifies as disabled under the LTD Plan
if, for the first two years, "as a result of Injury o[r] Sickness,
[she] is unable to perform the Material and Substantial Duties of
[her] Own Occupation" and thereafter "is unable to perform, with
reasonable continuity, the Material and Substantial Duties of Any
Occupation." Nurse Kaye reviewed the file, which contained medical
support for a finding that the plaintiff's symptomatology had
worsened as well as a completed activities questionnaire in which
she claimed to have severe restrictions on her ability to sit,
stand, walk, drive, and concentrate.
In her second review, Nurse Kaye discounted the IME
report, suggested that the plaintiff's condition was not as grave
as the completed questionnaire implied, and concluded that the
plaintiff did not qualify for LTD benefits. Thus, Liberty denied
the claim.
The plaintiff requested further review. Liberty
responded by, among other things, determining that her job involved
-5- light to sedentary work and hiring a private investigator to
surveil the plaintiff's activities. The sleuth furnished written
reports and photographs showing that the plaintiff was "very
active."
With this ammunition in hand, Liberty submitted the
entire file to Network Medical Review (NMR), a referral service
furnishing physicians to evaluate the functional abilities of
claimants. NMR forwarded the assignment to one of its
correspondents, Dr. John Bomalaski, who concluded that the
plaintiff was capable of working full-time in her (primarily
sedentary) position. On December 10, 2002, Liberty reaffirmed its
earlier denial of LTD benefits.
Nearly fourteen months later, an administrative law judge
ruled the plaintiff entitled to social security disability
benefits, see 42 U.S.C. § 405, retroactive to her last day of
actual work. The judge premised this decision on a subsidiary
finding that the plaintiff was disabled within the meaning of the
Social Security Act. See id. § 423(d); see also 20 C.F.R. §
416.920. Although the definition of disability under the Act
differed from the definition of disability under the LTD Plan, the
plaintiff transmitted this ruling, along with a further report from
her rheumatologist, to Liberty; based on these documents, she
sought reconsideration of the refusal to pay LTD benefits. Liberty
stood firm.
-6- II. TRAVEL OF THE CASE
On September 17, 2004, the plaintiff sued Liberty in a
Massachusetts state court. Liberty removed the action to the
federal district court. See 28 U.S.C. § 1441; see also id. § 1331.
The case proceeded on the plaintiff's claim under 29 U.S.C. §
1132(a)(1)(B).
The district court permitted the plaintiff to conduct
limited discovery anent Liberty's relationship with NMR and its
correspondent physicians as part of an effort to show that
Liberty's actions were influenced by a conflict of interest.
Liberty acknowledged that it had paid upwards of $2,000,000 to NMR
physicians between 2001 and 2003, and identified 1,204 files that
it had referred to NMR during that interval. But Liberty refused,
on burdensomeness grounds, to answer interrogatories regarding the
proportion of those files in which claims ultimately had been
allowed. As a sanction for this recalcitrance, the court drew an
inference that NMR had found against the claimants in all cases
and, thus, applied heightened scrutiny to Dr. Bomalaski's opinion.
Denmark v. Liberty Life Assur. Co. (Denmark I), Civ. No. 04-12261,
2005 WL 3008684, at *11 (D. Mass. Nov. 10, 2005).
In due season, the parties cross-moved for summary
judgment. Noting that the plan documents delegated discretionary
authority to Liberty, qua plan administrator, the court reviewed the
benefit-denial decision under this circuit's historic abuse of
-7- discretion standard. Id. at *9. Although the court acknowledged
the potential conflict of interest posed by Liberty's dual role in
making benefits determinations and paying claims,2 it found no
significantly probative evidence that the conflict had in fact
influenced Liberty's decisionmaking. Id. at *18. In discussing
that issue, the court opined that a bare structural conflict, in and
of itself, did not warrant the application of a less deferential
standard of review. Id. at *9.
The court proceeded to find the denial of LTD benefits
supported by substantial evidence and, thus, within the plan
administrator's discretion. Id. at *26. Accordingly, it granted
Liberty's summary judgment motion and denied the plaintiff's. See
id.
On appeal, the plaintiff pursued two lines of attack.
First, she contended that the district court had employed an
incorrect standard of review. Second, she contended that, whatever
the standard of review, the denial of LTD benefits was
insupportable. We have recounted the rest of the tale above: the
panel, by a divided vote, affirmed the district court's ruling; the
plaintiff petitioned for rehearing; the Supreme Court decided Glenn;
and the litigation then entered its current phase.
2 We call such instances structural conflicts, in contradistinction to actual conflicts (i.e., instances in which the fiduciary's decision was in fact motivated by a conflicting interest).
-8- III. ANALYSIS
The focal point of this appeal has become the standard of
judicial review. For that reason, we think it useful to rehearse
how the case law in that area has evolved.
Among its panoply of remedial devices for plan
participants, ERISA provides for suits to enforce rights conferred
under the terms of an ERISA-regulated plan. See 29 U.S.C. §
1132(a)(1)(B). Suits for the recovery of benefits come within the
ambit of this provision. Congress did not elucidate a standard of
judicial review applicable to such actions. The Supreme Court
filled this void when it decided Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101 (1989).
The Firestone Court noted that ERISA "abounds with the
language and terminology of trust law" and that Congress anticipated
the development of a "federal common law of rights and obligations
under ERISA-regulated plans." Id. at 110. Invoking trust
principles, the Court held that when an ERISA-regulated plan vests
discretion in the plan administrator, the latter's resolution of
benefits claims must be reviewed deferentially. Id. at 111. Absent
such a delegation of discretionary authority, a plan administrator's
decisions are to be reviewed de novo. Id. at 111-12.
In a brief aside, the Court observed that "if a benefit
plan gives discretion to an administrator or fiduciary who is
operating under a conflict of interest, that conflict must be
-9- weighed as a 'facto[r] in determining whether there is an abuse of
discretion.'" Id. at 115 (dictum; quoting Restatement (Second) of
Trusts § 187 cmt. d (1959)). For the next eighteen years, courts
struggled both with this dictum and with how to handle structural
conflicts of interest in ERISA cases. A number of different
approaches emerged.
This court clung to the classic abuse of discretion model,
taking account of the impact, if any, of a conflict in evaluating
whether a denial of benefits was arbitrary and capricious (and thus,
an abuse of discretion). See, e.g., Leahy v. Raytheon Co., 315 F.3d
11, 15-16 (1st Cir. 2002); Doe v. Travelers Ins. Co., 167 F.3d 53,
57-58 (1st Cir. 1999). Other circuits, however, adopted divergent
approaches. See Kathryn J. Kennedy, Judicial Standard of Review in
ERISA Benefit Claim Cases, 50 Am. U. L. Rev. 1083, 1135-72 (2001)
(collecting cases).
This compendium included a "presumptive neutrality"
approach, under which abuse of discretion review obtains except in
cases of actual conflict (that is, cases in which the plan
administrator's decision is shown to be conflict-driven). See,
e.g., Kobs v. United Wis. Ins. Co., 400 F.3d 1036, 1039 (7th Cir.
2005); Pulvers v. First Unum Life Ins. Co., 210 F.3d 89, 92 (2d Cir.
2000); Woo v. Deluxe Corp., 144 F.3d 1157, 1160-61 (8th Cir. 1998).
It also included a "combination of factors" approach under which
abuse of discretion review treats both actual and potential
-10- conflicts of interest as relevant factors. See, e.g., Abatie v.
Alta Health & Life Ins. Co., 458 F.3d 955, 965-69 (9th Cir. 2006);
Calvert v. Firstar Fin. Inc., 409 F.3d 286, 293 (6th Cir. 2005).
Several courts favored a "sliding-scale" approach. See, e.g., Pinto
v. Reliance Standard Life Ins. Co., 214 F.3d 377, 391-92 (3d Cir.
2000); Vega v. Nat'l Life Ins. Servs., Inc., 188 F.3d 287, 296 (5th
Cir. 1999) (en banc); Chambers v. Family Health Plan Corp., 100 F.3d
818, 825-26 (10th Cir. 1996); Doe v. Group Hosp'n & Med. Servs., 3
F.3d 80, 87 (4th Cir. 1993). One court preferred a six-step burden-
shifting approach. See Williams v. BellSouth Telecomms., Inc., 373
F.3d 1132, 1138 (11th Cir. 2004). Because our home-grown standard
was central to the decisions in both Denmark I and Denmark II, we
explore its parameters.
In Doyle v. Paul Revere Life Insurance Co., 144 F.3d 181
(1st Cir. 1998), we acknowledged that the Firestone dictum could be
read to imply a heightening of the standard of review for structural
conflict cases. Id. at 184. We noted, however, that market forces
were at work: employers are unlikely to contract with insurers who
acquire reputations for miserliness. Id. Thus, it seemed prudent
to adhere to the baseline abuse of discretion standard in cases
involving structural conflicts, but to give that standard "more
bite"; that is, a "special emphasis on reasonableness." Id. The
bottom-line inquiry should be "whether [the plan administrator] had
substantial evidentiary grounds for a reasonable decision in its
-11- favor." Id. This approach left the claimant free to show an actual
conflict — and if she succeeded in doing so, that showing would
influence the decisional calculus.
In Doe, 167 F.3d at 57-58, we supplied a gloss on Doyle,
explaining that reasonableness "is the basic touchstone" in all
benefit-denial cases. We again rejected a special standard of
review for structural conflict cases, observing that "gradations in
phrasing are as likely to complicate as to refine the standard."
Id. In any event, the requirement of reasonableness is flexible;
thus, that requirement may have "substantial bite" when a court is
faced with a specific decision on a specific set of facts. Id.
(explaining that reasonableness review necessarily takes cognizance
of conflicts).
In Pari-Fasano v. ITT Hartford Life & Accident Insurance
Co., 230 F.3d 415 (1st Cir. 2000), we stressed two points. The
first dealt with nomenclature; we made pellucid that the terms
"abuse of discretion," "arbitrary and capricious," and
"reasonableness" were functionally equivalent in the ERISA context.
Id. at 419. None of those terms heralded a heightened standard of
review for structural conflict cases. Id. Our second point
remarked the obvious: "the possible existence of a conflict of
interest would necessarily affect the court's determination of what
was reasonable conduct by the insurer under the circumstances." Id.
When Pari-Fasano speaks of the potential for conflict, we understand
-12- that usage as a reference to the existence of a structural conflict,
and not the possibility of finding an actual conflict or "improper
motivation." Id.3
Following this trilogy of cases, we consistently have
reviewed the resolution of benefits claims by structurally
conflicted plan administrators for abuse of discretion, taking into
account both the potential for conflict and the mitigating effect
of market forces.4 See, e.g., Buffonge v. Prudential Ins. Co., 426
F.3d 20, 28 & n.11 (1st Cir. 2005); Wright v. R.R. Donnelley & Sons
Co. Group Benefits Plan, 402 F.3d 67, 74 (1st Cir. 2005); Glista v.
Unum Life Ins. Co., 378 F.3d 113, 125-26 (1st Cir. 2004); Lopes v.
Metro. Life Ins. Co., 332 F.3d 1, 4-5 (1st Cir. 2003); Leahy, 315
F.3d at 16; Dandurand v. Unum Life Ins. Co., 284 F.3d 331, 335-36
(1st Cir. 2002).
This brings us to Glenn. There, the Supreme Court
reviewed a denial of benefits by an administrator that both passed
judgment upon and paid claims under an ERISA-regulated plan. The
3 Insofar as our later cases read this language as precluding consideration of a purely structural conflict in assessing the existence vel non of an abuse of discretion, that interpretation is inconsistent with Glenn, 128 S. Ct. at 2351. 4 In Leahy, we suggested that when a plan administrator's determination is actually motivated by a conflict of interest, "courts may cede a diminished degree of deference — or no deference at all — to the administrator's determinations." 315 F.3d at 16. When faced with such a case, we determined that the situation warranted de novo review. See Janiero v. Urological Surgery Prof'l Ass'n, 457 F.3d 130, 139-42 (1st Cir. 2006). We need not speculate here as to whether the holding in Janiero survives Glenn.
-13- denial had been upheld by the district court but set aside by the
Sixth Circuit under its "combination of factors" standard of review.
Picking up on the Firestone dictum, the Glenn Court
clarified what sort of relationships might suffice to create a
conflict of interest. It concluded that courts should take
cognizance of structural conflicts in ERISA cases; that is, that a
conflict exists whenever a plan administrator, whether an employer
or an insurer, is in the position of both adjudicating claims and
paying awarded benefits. Glenn, 128 S. Ct. at 2348-50. In reaching
that conclusion, the Court rejected the market forces rationale,
explaining that "ERISA imposes higher-than-marketplace quality
standards on insurers." Id. at 2350. The Court left open the
possibility that market forces might inform the significance of a
structural conflict in a given case. See id.
The Court then turned to the question of how best to weigh
structural conflicts. In charting this course, it held fast to the
standard of review previously announced in Firestone: abuse of
discretion. Id. (analogizing to trust law, which asks merely
whether a conflicted trustee has abused his discretion either
substantively or procedurally). The Court rejected burden-shifting
rules as a mechanism for ensuring proper judicial review of
decisions made by structurally conflicted plan administrators. Id.
at 2351.
-14- On a more affinitive note, the Court commented approvingly
that "when judges review the lawfulness of benefits denials, they
will often take account of several different considerations of which
a conflict of interest is one." Id. It likened this multi-factor
approach to that used in the administrative law context.5 Id. The
Court added that judges should weigh a conflict as they would weigh
any other pertinent factor; that is, when the relevant
considerations are in equipoise, any one factor, including a
structural conflict, may act as a tiebreaker. Id. In this regard,
the Court counselled judges to take account of both "the degree of
closeness" and "the tiebreaking factor's inherent or case-specific
importance." Id.
The Court acknowledged the resemblance between its
approach and the Sixth Circuit's "combination of factors" approach;
those approaches give a structural conflict some weight but, in the
absence of aggravating circumstances (say, evidence of arbitrariness
or of actual bias), do not treat it as a dispositive influence. Id.
at 2351-52.
5 Seizing on this comparison and the Court's use of the term "lawfulness," the plaintiff suggests that the Court created a new, less deferential standard of review. But the Court's articulation of how trust law informs the issue reveals the utter implausibility of this suggestion. See Glenn, 128 S. Ct. at 2350 ("Trust law continues to apply a deferential standard of review to the discretionary decisionmaking of a conflicted trustee, while at the same time requiring the reviewing judge to take account of the conflict when determining whether the trustee, substantively or procedurally, has abused his discretion.") (emphasis supplied)).
-15- The Court also described what kind of evidence might
impact the relative weight of an identified conflict:
The conflict of interest at issue here, for example, should prove more important (perhaps of great importance) where circumstances suggest a higher likelihood that it affected the benefits decision, including, but not limited to, cases where an insurance company administrator has a history of biased claims administration. It should prove less important (perhaps to the vanishing point) where the administrator has taken active steps to reduce potential bias and to promote accuracy, for example, by walling off claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decisionmaking irrespective of whom the inaccuracy benefits.
Id. at 2351 (citations and internal quotations marks omitted).
To complete the picture, the Court applied its newly
refined standard to the case before it. In so doing, the Court
assessed a litany of relevant factors, including the plan
administrator's structural conflict, its inconsistent positions
concerning a social security determination, its unexplained emphasis
on medical opinions favoring a denial of benefits, and its offhand
discounting of contrary medical opinions. Id. at 2352. The Court
concluded that "these serious concerns," together with the closeness
of the case and the presence of a structural conflict, supported the
decision to set aside the plan administrator's discretionary
judgment. Id.
The case at bar falls squarely within Glenn's precedential
orbit. Here, the LTD Plan contains a sufficient delegation of
-16- discretionary authority to trigger deferential review. See Denmark
II, 481 F.3d at 29; id. at 40 (Selya, J., concurring); id. at 41
(Howard, J., dissenting). That brings into play Glenn's baseline
principle, consistent with this circuit's prior precedent, that
judicial review of such a benefit-denial decision is for abuse of
discretion. See Glenn, 128 S. Ct. at 2350; see also Doe, 187 F.3d
at 56-57; Doyle, 144 F.3d at 184. In other words, where the plan
documents delegate discretionary authority to the plan administrator
(whether or not structurally conflicted), courts should review
benefit-denial decisions for abuse of discretion, considering any
conflict as one of a myriad of relevant factors. See Glenn, 128 S.
Ct. at 2351.
At this point, a red flag appears. Although the standard
of review articulated in our earlier cases comports generally with
Glenn, two aspects of our original approach require refinement.
First, the market forces rationale no longer allows a reviewing
court to disregard a structural conflict without further analysis.
See Glenn, 128 S. Ct. at 2349-50. That aspect of the Glenn decision
requires that structural conflicts be accorded weight — albeit not
necessarily dispositive weight — in the standard-of-review equation.
With that in mind, courts are duty-bound to inquire into what steps
a plan administrator has taken to insulate the decisionmaking
process against the potentially pernicious effects of structural
conflicts.
-17- Second, Glenn makes explicit what was implicit in our
earlier decisions: in cases in which a conflict has in fact infected
a benefit-denial decision, such a circumstance may justify a
conclusion that the denial was itself arbitrary and capricious (and,
thus, an abuse of discretion). See id. at 2351; McCauley v. First
Unum Life Ins. Co., 551 F.3d 126, 138 (2d Cir. 2008).
To sum up, our preexisting standard of review is largely
but not entirely harmonious with Glenn. While the refinements are
modest, this case is hair's-breadth close. Given that precarious
balance, even a slight adjustment in the mix of factors or in the
weight of a single factor may make a decisive difference. Hence,
we think it incumbent upon us to remand the case and permit the
district court, in the first instance, to reconsider its decision
in light of Glenn.6 Remand will allow full consideration of how
heavily this conflict should weigh in the balance. That is highly
desirable because, in performing a multi-factor analysis, "any one
factor will act as a tiebreaker when the other factors are closely
balanced." Glenn, 128 S. Ct. at 2351. We leave this reweighing to
the district court, and intimate no view as to the outcome.
Notwithstanding our decision to remand, our journey is not
yet at an end. The supplemental briefing touched upon discovery
issues, see, e.g., Appellee's Br. on Reh'g at 57-58, and at oral
6 In its original decision, the district court mentioned the structural conflict, but it considered it in only a glancing way. See Denmark I, 2005 WL 3008684, at *9.
-18- argument in this court the parties vigorously debated the
permissible scope of discovery, post-Glenn, in ERISA cases.
Denmark's counsel argued that she should be allowed "to engage in
normal discovery" (which he defined by reference to the discovery
that would be permitted in a personal injury suit arising out of a
traffic accident) and that denying such unfettered discovery would
be unfair and contrary to ERISA as seen through the prism of Glenn.
Counsel for Liberty took a markedly less ambitious view of discovery
in ERISA cases.
Given these disparate appraisals, we have a responsibility
to offer guidance to the parties and the district court. That
guidance entails a brief discussion about the scope of discovery in
ERISA cases.
ERISA benefit-denial cases typically are adjudicated on
the record compiled before the plan administrator. Because full-
blown discovery would reconfigure that record and distort judicial
review, courts have permitted only modest, specifically targeted
discovery in such cases. See Liston v. Unum Corp. Officer Sev.
Plan, 330 F.3d 19, 23 (1st Cir. 2003) (noting that "some very good
reason is needed to overcome the strong presumption that the record
on review is limited to the record before the administrator").
In some cases, a good reason has been found to exist when
a party makes a colorable claim of bias. See id. Targeted
discovery addressed to such an issue may shed new light on the
-19- motivation behind the plan administrator's decision without
expanding the panoply of materials on which that decision was based.
The majority opinion in Glenn fairly can be read as
contemplating some discovery on the issue of whether a structural
conflict has morphed into an actual conflict. See, e.g., Glenn, 128
S. Ct. at 2351. That is consistent with the Liston paradigm. But
any such discovery must be allowed sparingly and, if allowed at all,
must be narrowly tailored so as to leave the substantive record
essentially undisturbed.
In future cases, plan administrators, aware of Glenn, can
be expected as a matter of course to document the procedures used
to prevent or mitigate the effect of structural conflicts. That
information will be included in the administrative record and, thus,
will be available to a reviewing court. Conflict-oriented discovery
will be needed only to the extent that there are gaps in the
administrative record. If, say, the plan administrator has failed
to detail its procedures,7 discovery may be appropriate, in the
district court's discretion. Otherwise, discovery normally will be
limited to the clarification of ambiguities or to ensuring that the
documented procedures have been followed in a particular instance.
The case at hand falls into a special niche. Because the
denial of benefits and the commencement of suit both predated Glenn,
7 These are merely exemplars; we do not pretend to canvass the entire universe of possibilities.
-20- Liberty did not include in the administrative record any evidence
with respect to its conflict-ameliorating procedures. Given these
temporally awkward circumstances, we think that the district court,
in its discretion, may wish to afford the parties a limited
opportunity to flesh out the record (even if that entails further,
appropriately circumscribed, discovery).
IV. CONCLUSION
We need go no further. For the reasons elucidated above,
we vacate the judgment below and remand this case to the district
court for further consideration consistent with Glenn and with this
opinion. The district court is free to abrogate or modify the
discovery sanction previously imposed if it sees fit to do so.
One final point comes to mind. This may be an appropriate
time for the parties seriously to consider settlement. The district
court would be wise to explore that possibility.
Vacated and remanded. No costs.
- Concurring Opinion Follows -
-21- LIPEZ, Circuit Judge, concurring. I agree with my
colleagues that the focal point of this appeal was the standard of
judicial review in our circuit in the wake of Glenn. I also agree
with my colleagues that we should remand to the district court so
that it can evaluate the impact of Glenn on the merits of Denmark's
case. However, I am concerned that the majority's general comments
about the appropriate scope of discovery post-Glenn reflect a
particularly hostile attitude towards such discovery, and suggest
that the issue has already been resolved in this circuit. I write
separately to emphasize that it has not been resolved.
Although it is true, as the majority says, that "at oral
argument . . . the parties argued strenuously about the permissible
scope of discovery, post-Glenn, in ERISA cases," that issue was
raised sua sponte by members of the panel, not the parties. The
scope of discovery post-Glenn was never part of this appeal. It was
not briefed by the parties. They did not seek guidance on the
issue. Instead, it is the majority that is eager to use this case
to provide that guidance.
It may be appropriate, in some instances, to venture
beyond what is strictly required to decide a particular appeal and
provide such guidance. But the resort to dicta in this case is ill-
advised for two reasons. First, the issue of the permissible scope
of discovery post-Glenn is complex and fact-dependent.
Generalizations without context ignore that reality. Second, there
-22- are cases on our doorstep from the district courts that will require
us to decide these discovery issues as they should be decided --
with the benefit of district court analysis and briefing by the
parties.
The majority is correct that "Glenn fairly can be read as
contemplating some discovery on the issue of whether a structural
conflict has morphed into an actual conflict." The majority's
statement that "in future cases, plan administrators . . . can be
expected . . . to document the procedures used to prevent or
mitigate the effect of structural conflicts" is a reasonable
inference from Glenn's observation that the importance of structural
conflicts is lessened where the administrator "has taken active
steps to reduce potential bias and to promote accuracy." 128 S. Ct.
at 2351. It is also true, as the majority notes, that in this case
"the denial of benefits and the commencement of suit both predated
Glenn." Therefore, on remand, "the district court, in its
discretion, may wish to afford the parties a limited opportunity to
flesh out the record" with "appropriately circumscribed" discovery.
That general reference to "appropriately circumscribed"
discovery is fair enough. The problem arises with the majority's
characterizations of that appropriately circumscribed discovery.
The majority says that "any such discovery [on the issue of whether
a structural conflict has morphed into an actual conflict] must be
allowed sparingly and, if allowed at all, must be narrowly tailored
-23- so as to leave the substantive record essentially undisturbed." The
majority adds that
Conflict-oriented discovery will be needed only to the extent that there are gaps in the administrative record. If, say, the plan administrator has failed to detail its procedures, discovery may be appropriate, in the district court's discretion. Otherwise, discovery normally will be limited to the clarification of ambiguities or to insuring that the documented procedures have been followed in a particular instance.
These propositions reflect a grudging approach to post-
Glenn discovery that may not be justified. They are unnecessary for
our decision in this appeal. They have been fashioned without the
benefit of district court analysis or briefing by the parties.
Under these circumstances, courts "are far more likely . . . to
fashion defective rules, and to assert misguided propositions, which
have not been fully thought through." Pierre N. Leval, Judging
Under the Constitution: Dicta About Dicta, 81 N.Y.U. L. Rev. 1249,
1263 (2006). Accepted uncritically as law, such propositions can
skew the decision-making process of the district courts. It is
simply impossible to know in this case or in future cases the degree
of discovery that may be required to establish "whether a structural
conflict has morphed into an actual conflict." Such discovery might
be sparing or more expansive depending upon the preliminary showing
made by the plaintiff in a particular case. Decreeing in this case
that such discovery must be allowed sparingly, or confined to
certain categories, is an unwarranted signal that discovery into the
-24- existence of an actual conflict is disfavored.8 The district court
here, and our district courts generally, are fully capable of
sorting through, in the first instance, the complicated discovery
issues raised by Glenn, and they should not feel bound by the
hostile attitude towards discovery that is improvidently reflected
in dicta in the majority opinion. Those dicta are not binding on
the district courts or future panels of this court.
8 This case has its own discovery history. Denmark filed a motion in the district court seeking discovery related to the financial relationship between Liberty and its "independent" review agency, NMR -- specifically, the amount of money that Liberty had paid NMR, the number of cases Liberty had referred to NMR, and how many of those claims had been granted. The district court granted the motion and ordered Liberty to produce the information Denmark requested. See Denmark v. Liberty Life Assur. Co. of Boston, 481 F.3d 16, 32 (1st Cir. 2007). Liberty provided information regarding the amount it had paid NMR between 2001 and 2003 and the number of files it had referred to them during that time period, but refused to stipulate the number of cases in which benefits had been granted on the grounds that such a stipulation would be too burdensome. Id. As a sanction for Liberty's refusal to comply with its discovery order, the district court drew the inference that NMR had not found in favor of a single claimant in all of the Liberty files it had reviewed during the relevant time period. Id. The court then stated that, in light of this inference and to account for the effects of this conflict of interest, it would review the opinion of NMR's reviewing physician with "more bite." Id. Liberty protested this sanction in its supplemental briefing. See, e.g., Appellee's Br. on Reh'g at 57-58. Aware of this history, the majority says that the district court is free on remand to abrogate or modify the discovery sanction it previously imposed. I agree. However, exactly how the district court on remand should supplement, if at all, discovery already allowed should be left to the discretion of the district court without the unwarranted signals of the majority.
-25-