Defending ERISA Conflict of Interest Discovery Requests Limiting - - PowerPoint PPT Presentation

Defending ERISA Conflict of Interest Discovery Requests

Limiting the Scope of Discovery, Preparing and Defending 30(b)(6) Depositions, and More

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THURSDAY, MARCH 27, 2014

Presenting a live 90-minute webinar with interactive Q&A Jack F . Fuchs, Partner, Thompson Hine, Cincinnati Cassie M. Springer, Partner, Springer & Roberts, Oakland, Calif.

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STRAFFORD PRESENTS: ERISA CONFLICT

OF INTEREST DISCOVERY REQUESTS

MARCH 27, 2014

Jack F. Fuchs, Esq. Thompson Hine LLP Suite 1400, 312 Walnut St. Cincinnati, OH 45202 513.352.6741 Jack.Fuchs@ThompsonHine.com www.thompsonhine.com

Faculty:

Cassie Springer, Partner Springer & Roberts LLP 410 – 12th Street, Suite 325 Oakland, CA 94607 510.992.6130 cassie@ssrlawgroup.com www.ssrlawgroup.com

5

DEPOSITIONS GOING TO CONFLICT OF INTEREST ALLOWED

Sizemore v. Pac. Gas & Elec. Ret. Plan, 952 F. Supp. 2d 894, 900 (N.D. Cal. 2013). The Court allowed two 1-day 30(b)(6) depositions and held that “Defendants' arguments against discovery are

• unavailing. The fact that the EBC handled the claim denial and the

Appeals Committee handled the appeals is not dispositive because the membership of the two committees overlaps, and because the members

• f both committees are all high-level officers at PG & E. Defendants'
• bjections that the discovery will have no probative value and would be

prejudicial to PG & E are unsubstantiated.” Joyner v. Cont'l Cas. Co., 2011 WL 6382567 (S.D.N.Y. Dec. 19, 2011). Plaintiff is entitled to a 30(b)(6) of Hartford on conflict issues, specifically on 1) the presence and “quality” of Defendants’ firewalls; 2) reliance on medical and vocational evidence favorable to it to the exclusion of evidence favorable to Plaintiff; 3) Defendant's insistence on an SSDI application while, in the same breath, denying the claimant is disabled; 4) selection and provision of records to the of the medical records reviewer and whether; and 6) Defendant's history of biased claims administration.

6

DEPOSITIONS GOING TO CONFLICT OF INTEREST ALLOWED (CON’T)

Durham v. Prudential Ins. Co. of Am., 890 F. Supp. 2d 390, 397 (S.D.N.Y. 2012). Relying in part on Joyner, the Court determined that a 30(b)(6) of Prudential was permissible, as “courts in this district generally require an ERISA plaintiff seeking additional discovery to show only a “reasonable chance that the requested discovery will satisfy the good cause requirement.” Lucas v. Liberty Life Assur. Co. of Boston, 2011 WL 6196720 (E.D. Pa. Dec. 12, 2011). Plaintiff is entitled to claims handler’s deposition on the questions of 1) why she relied on a medical opinion to the exclusion of Plaintiff’s physicians’ opinions; 2) why she did not acknowledge that the medical condition was unchanged; 3) why she failed to follow ERISA regulations.

7

DEPOSITIONS GOING TO CONFLICT OF INTEREST ALLOWED (CON’T)

Tretola v. First Unum Line Ins. Co., 13 CIV. 231 PAE, 2013 WL 2896804 (S.D.N.Y. June 13, 2013). In light of the Supreme Court’s commentary on Unum’s conflict of interest in MetLife v. Glenn, the court permitted “limited discovery” on Unum’s conflict of interest, including a 30(b)(6) deposition of a Unum representative. Benson v. Hartford Life & Acc. Ins. Co., 2011 WL 285831 (D. Utah

• Jan. 28, 2011). In this life insurance benefit case, the court applied

Murphy v. Deloitte & Touche Group Ins. Plan, 619 F.3d 1151 (10th Cir. 2010), to determine the propriety of discovery. Decedent passed away just two months after her policy was cancelled due to Hartford’s determination that she could return to work. The court noted that “[i]t is challenging for an ERISA plaintiff to explain the precise need for interrogatories and requests for production when the plaintiff is in possession of far less information than the defendant.” The court granted numerous discovery requests, including inquiries into the financial and statistical relationship between UDC and Hartford and a 30(b)(6) deposition for each company.

8

DEPOSITIONS GOING TO CONFLICT OF INTEREST ALLOWED (CON’T)

Jennifer A. v. United Healthcare Ins. Co., CV 11-1813 DSF PLAX, 2012 WL 762071 (C.D. Cal. Mar. 5, 2012). Noting that it is defendant’s burden to show why the discovery should not go forward. “From the Court’s examination of the record, Defendant's only apparent reason for seeking to quash the deposition is that it would rather not respond to conflict of interest-related questions in a deposition.” Allowing a 30(b)(6) on the relationship between the decision-maker and payor of claims.

9

DEPOSITIONS GOING TO CONFLICT OF INTEREST NOT ALLOWED

Verme-Gibboney v. Hartford Ins. Co., 2013 U.S. Dist. LEXIS 177553 (D.N.J. Dec. 16, 2013). Noting that “[d]iscovery outside the administrative record may be permitted if it is directed to an administrator's structural conflict of interest or procedural irregularities that occurred during the reviewing process.” Denying Rule 30(b)(6) deposition where arbitrary and capricious standard applies because “plaintiff ‘must allege a good faith basis of conflict of interest to warrant discovery.’” (Quoting Irgon v. Lincoln Nat. Life Ins. Co., C.A. No. 13-4731 (FLW), 2013 U.S. Dist. LEXIS 162703, 2013 WL 6054809, at *3 (D.N.J. Nov. 15, 2013). Motion denied where “Plaintiff did not cite to any portion of the administrative record to support her request for

• discovery. She also did not cite to any evidence of an ‘irregularity’ to

show there is a good faith belief that misconduct occurred.”

10

DEPOSITIONS GOING TO CONFLICT OF INTEREST NOT ALLOWED (CON’T)

Boxell v. Plan for Group Ins. of Verizon Communications, Inc., 2013 U.S. Dist. LEXIS 131621 (N.D. Ind. Sept. 16, 2013). Denying request for Rule 30(b)(6) deposition where claimant “Boxell had not identified a specific conflict or instance of misconduct or made a prima facie showing that there is good cause to believe that limited discovery will reveal a procedural defect.” Citing Nunnery v. Sun Life Fin. Distribs., 526 F. Supp. 2d 862, 869 (N. D. Ill. 2007). Disagreeing with outcome “does not equate to even a preliminary showing of misconduct, bias, or conflict of interest that might warrant discovery beyond the record on which the administrator relied." Id. Court held that “request to perform discovery outside of the administrative record will be denied.”

11

DEPOSITIONS GOING TO CONFLICT OF INTEREST NOT ALLOWED (CON’T)

Warner v. UNUM Life Ins. Co. of America, 2013 U.S. Dist. LEXIS 105067 (N.D. Ill. July 26, 2013). Holding that while Dennison v. MONY Life Retirement Income Sec. Plan for Employees, 710 F.3d 741, 747 (7th Cir. 2013), “softened” standard for discovery in benefits cases, discovery still not permitted in the run-of-the-mill case in the Seventh Circuit, and the two-part test established in Semien remains instructive. Under Semien, to

• btain discovery beyond the claims file in an ERISA benefits case

governed by the arbitrary and capricious standard, 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.

12

DEPOSITIONS GOING TO CONFLICT OF INTEREST NOT ALLOWED (CON’T)

Crawford v. Hartford Life & Acc. Ins. Co., 2011 WL 5237826 (S.D. Miss. Nov. 1, 2011). Holding that deposition requests should generally be denied, as “the information sought could just as effectively be provided in response to written discovery. The cost of a live deposition is prohibitive and would undermine ERISA’s goal of resolving claims efficiently and inexpensively.” In light of its decision, the court did modify its discovery order to permit additional interrogatories going to the conflict of interest.

13

TOP TIPS FOR AN ERISA DEPOSITION

14

In a post-MetLife v. Glenn world, depositions in employee benefit cases are more frequently allowed than ever, particularly when geared towards discovering information

• n an administrator’s

conflict of interest. Here are some tips for plaintiffs and defendants. Universal Tip: Don’t Be the Bieb

See “Slide 14 Video”

TO 10 PLAINTIFF’S DEPOSITION TIPS

15

• 10. Discover whether a firewall exists.

Ask questions aimed at discovering whether there is a firewall in place that ensures that company finances are not a factor in claims decision-making. The Court in MetLife v. Glenn noted this as a consideration on the issue of whether there is a conflict of interest, and an answer that “finances weren’t a factor” without an affirmative description

• f formal procedures designed to create such a wall

will be insufficient.

TOP 10 PLAINTIFF’S DEPOSITION TIPS

16

• 9. Don’t be afraid of “why.”

In Lucas v. Liberty Life Assur. Co. of Boston, 2011 WL 6196720 (E.D. Pa. Dec. 12, 2011), the court allowed a deposition on the questions of 1) why a claims decision-maker relied on a medical opinion to the exclusion of Plaintiff’s physicians’ opinions; 2) why she did not acknowledge that the medical condition was unchanged; and 3) why she failed to follow ERISA regulations. The likelihood that there will be a satisfactory answer to a decision not to follow ERISA regulations, for example, other than “I didn’t know about them,” is slim. Therefore, always ask the “why” questions when there have been clear violations of ERISA practices and procedures.

TOP 10 PLAINTIFF’S DEPOSITION TIPS

17

• 8. Use an “I don’t know” to

your advantage. Particularly when deposing a 30(b)(6) witness and receiving a lot of “I don’t know” answers to relevant questions, be sure to ask who would know the answer to the question, and get the name and contact information so that you can make an argument for the need for a further deposition. Also ask what the witness does remember about a particular event, as a lot of memory about other details reduces credibility that the witness only forgot the important details that you are seeking.

See “Slide 17 Video”

TOP 10 PLAINTIFF’S DEPOSITION TIPS

• 7. Request a Second Deposition if Necessary.

If you get a lot of “I don’t knows,” then it is time to request s second deposition of someone who has knowledge of the subjects contained in your 30(b)(6) Notice.

• 6. Be sure to “close the door” on any line of

questioning. As the court noted in Benson v. Hartford Life & Acc. Ins. Co., 2011 WL 285831 (D. Utah Jan. 28, 2011), ERISA plaintiffs are initially “in possession of far less information than the defendant.” Therefore, be aggressive about seeking all possibly relevant information in a deposition while you have the chance and close all doors of questioning. For example, don’t just ask what the deponent discussed in a key meeting, ask the names and positions of everyone else present, how long the meeting lasted, if anyone took notes, and if there were any follow-up conversations or e-mails.

18

TOP 10 PLAINTIFF’S DEPOSITION TIPS

19

• 5. Be the grown up. There is no excuse for losing your cool even

when opposing counsel seems to be trying to rattle you. Maintain control over the deposition and simply take a break if you feel like you’re about to lose it.

See “Slide 19 Video #1” See “Slide 19 Video #2”

TOP 10 PLAINTIFF’S DEPOSITION TIPS

• 4. Follow the money.

Ask about compensation structures. How are bonuses, compensation, and raises determined? Inquire on this point for the claims agent on up through the managers and directors of claims processing. Conflicts of interest can occur at the individual level, not just institutional.

• 3. Be Organized.

There is nothing worse than scrambling for a document in the middle of questioning. Make sure to have all of your documents organized, indexed, and available in electronic format (I prefer PDF with “sticky notes” attached electronically) so that you can quickly do a “Find” for a key word that you know is in the document you are seeking.

20

TOP 10 PLAINTIFF’S DEPOSITION TIPS

• 2. Policies, procedures, and training.

Ask if the claims personnel have manuals, guidelines, etc., to help them evaluate claims. How often are the manuals and guidelines updated or revised? Did the deponent receive training before handling claims? How long was the training? What was the scope of the training? How often, if at all, is there training or education after the initial training? What is the scope of supplemental training? Has the person received informal training or guidance at team meetings, for example? If so, ask him or her to describe the informal training or

• guidance. There can be substantial differences between what

the manager tells the claims handlers and what the official written policies say.

21

TOP 10 PLAINTIFF’S DEPOSITION TIPS

• 1. Don’t let them get away with work

product objections. As a general rule, a claim for benefits does not give rise to the concrete threat of litigation necessary to generate pre-lawsuit work product

• protections. Courts almost uniformly have held

that processing benefit claims and insurance claims is part of the routine business of employee benefits and therefore does not give rise to a concrete threat of litigation. Of course, if you write a letter saying if you don’t pay my client I’m going to file a class action lawsuit, then you’ve made a concrete threat of litigation. Even overt involvement of counsel may give rise to a threat of

• litigation. Therefore, consider ghost writing your

client’s claim and appeals.

22

TOP 10 EMPLOYER/MANAGEMENT/PLAN DEFENSE TIPS:

• 10. Tell your Rule 30(b)(6)

deponent/fiduciary client that there’s nothing more important than telling the truth. This is not just a legal and ethical duty, it’s wise policy. Telling the truth requires the fiduciary to prepare, studying plan documents, minutes, emails, and other documents relevant to the

• case. You need to prepare the

fiduciary to understand the key issues, what questions to expect, and what the truthful answers are. Keep in mind two points: (1) the fiduciary (almost) always had a reasonable basis for the decisions made and actions taken; and (2) truthful answers limit contradictory testimony.

23

See “Slide 23 Video”

TOP 10 EMPLOYER/MANAGEMENT/PLAN DEFENSE TIPS:

• 9. Prepare your deponent for

the special rules of deposition testimony. Explain to the fiduciary the many ways in which deposition testimony can be used. Individual questions and answers can be taken out of context and used in summary judgment or cross examination. The witness needs to focus on each question and each answer. The witness should follow this drill with each question and answer: “What exactly is the question? Do I know the answer to the question? State the answer to the question. Take a breath before I answer”

24

See “Slide 24 Video”

TOP 10 EMPLOYER/MANAGEMENT/PLAN DEFENSE TIPS:

• 8. Don’t hide the ball: Rule 30(b)(6)

deponents/fiduciaries should know their stuff and explain their actions. Lawyers should never adopt an “I don’t recall” strategy when the fiduciary is deposed or in a Rule 30(b)(6)

• deposition. Not only can such a

deposition be useless, if can be harmful when the fiduciary or plan moves for summary judgment. At trial, a good lawyer will use an “I don’t know” or “I don’t recall” deposition to shred the fiduciary’s credibility and

• competence. It’s worth the time and

effort to prepare the fiduciary to explain the essential decisions and events in the

• case. Usually you cannot bolster a weak

deposition with an affidavit from the deponent when you move for summary judgment and you do not want to pay for the plaintiff’s fees for taking a second deposition.

25

See “Slide 25 Video”

TOP 10 EMPLOYER/MANAGEMENT/PLAN DEFENSE TIPS:

• 7. Know your judge and how to handle objectionable

conduct by the other side. You need to determine in advance what to do if and when the other side tries to sabotage your deposition. In some jurisdictions, judges will make themselves available by phone to rule on issues that threaten to disrupt orderly discovery, waste time, and cause undue expense for the parties. Find out, through good local counsel if necessary, what your options are to obtain relief. Know beforehand whether you can inquire of an expert what was said at lunch or during deposition breaks. Be sure not to waste the court’s time unless you have a compelling case.

26

TOP 10 EMPLOYER/MANAGEMENT/PLAN DEFENSE TIPS:

• 6. Know how to depose a plaintiff’s expert witnesses.

Experts are often critical in fiduciary litigation. Thoroughly research the plaintiff’s expert, prior writings and testimony transcripts, and carefully study the expert’s report. Your deposition’s main goals are to pin down the expert’s opinions and conclusions, and to discredit them if possible. You need thorough preparation and a thoughtful strategy to accomplish these goals.

27

TOP 10 EMPLOYER/MANAGEMENT/PLAN DEFENSE TIPS:

• 5. Understand both the fiduciary exception to the attorney-

client privilege and the work product doctrine. In preparing witnesses for depositions, understand who is and who is not (and for what purpose) the deponent is a fiduciary for purposes of discussions held and documents shown in preparation for a deposition. Making privilege assumptions prior to the deposition can result in wavier, obstruction challenges, and other issues.

• 4. Shape discovery in advance.

In a post-Glenn world, be cognizant that depositions are occurring with more frequency. Responses to written discovery requests can be used to preclude both the possibility of and plaintiff’s legitimate need for a deposition. Think strategically in advance in order to accomplish both short-term and long-term litigation objectives.

28

TOP 10 EMPLOYER/MANAGEMENT/PLAN DEFENSE TIPS:

• 3. Study the Rule 30(b)(6) notice.

The attorney’s preparation is critical to a successful deposition, including the preparation for the topics identified. If questions are asked about matters that the notice did not cover, there is no need for the witness to guess as to the answers of the unidentified topic. Not only may plaintiff’s written discovery signal the questions that will be asked in the deposition, but the notice is a map that identify the topics as to which the deponent must be prepared and outside of which the deponent’s counsel can object. By studying these early signals, the plan, the administrative record, and the role of the deponent in the claims proceeding, the lawyer can efficiently prepare the witness and ensure truthful testimony.

29

TOP 10 EMPLOYER/MANAGEMENT/PLAN DEFENSE TIPS:

• 2. Preparation of the deponent/fiduciary.

Often deponents resist preparation because they believe that they are too busy. Working with the deponent to sufficiently and efficiently prepare for his/her deposition and to ensure that there is information responsive to each item of the Rule 30(b)(6) notice is key to a truthful and smooth deposition. Remember, the key work for defendants in defending depositions is the preparation that occurs leading up to the actual deposition.

30

TOP 10 EMPLOYER/MANAGEMENT/PLAN DEFENSE TIPS:

• 1. Understand the Plan.

Understand the Plan, the SPD (if different), and the claim at

• issue. If you cannot reconcile the documents with the claim, how

can you expect your deponent to do so in the deposition? At the end

• f the day, the Court is reviewing the fiduciary’s actions under the

terms of the Plan and ERISA.

31

See “Slide 31 Video”

HYPOTHETICAL

 Employer, Whaley, Inc., had a history of late payment of

life insurance premiums to insurer Kountonus, regularly paying them 3-4 months in arrears rather than when they were due on the first of each month.

 Kountonus did not object to receiving the late premiums,

and never sent a notice that the practice was not OK or that the policy would terminate.

 Employee Jack Cheever got very sick with cancer, yet

continued working until passing away on April 20, 2010.

 On May 10, 2010, Whaley, Inc., paid premiums, in arrears,

for the months of March and April 2010.

32

HYPOTHETICAL (CON’T)

 Jack’s widow, Minnie Cheever, applied for life insurance

benefits in early May 2010.

 Immediately after receiving the application, on May 11,

2010 Kountonus sent a letter to Whaley, Inc., stating that the policy had terminated as of March 1, 2010 because the last received premium was on February 8, 2010.

 On June 10, 2010, Kountonus also sent a letter to Ms.

Cheever, stating that she was ineligible for the life insurance benefit because the policy terminated due to the employer’s failure to pay premiums.

33

HYPOTHETICAL (CON’T)

 The policy provides as follows: We may end the

insurance of a Participating Unit if payment of premium on a premium due date (other than anniversary date) is not received within the grace period provided by the Policy. The notice must be in writing and be sent to the Participating Unit’s last address shown on our records. It must state when, not earlier than the expiration of the grace period, the termination will be effective.

34

HYPOTHETICAL (CON’T)

Another section of the policy provides three conditions for cancellation of the policy: 1. non-payment of premium; 2. number of participants drops below minimum number; 3. percentage of eligible insureds is less than a stated minimum participation percentage. It then goes on to state that: "If we cancel because of (1) above, the Policy will be cancelled at the end of the grace period. If we cancel because of (2) or (3) above, we will give you thirty-one (31) days written notice prior to the date of cancellation."

35

HYPOTHETICAL (CON’T)

Plaintiff Minnie Cheever filed suit, alleging that she was entitled to benefits under ERISA Sec. 502(a)(1)(B) owing to the fact that 1) Kountonus failed to provide written notice of the impending termination of the life insurance policy due to non-payment of premiums; and 2) Kountonus waived its right to collect timely premiums by its history of uncomplainingly accepting late premiums from Whaley, Inc.

36

HYPOTHETICAL (CON’T)

 Plaintiff sought and the court granted a 30(b)(6)

deposition going to Kountonus’s financial conflict

• f interest.

37

HYPOTHETICAL CON’T: PICKING A 30(B)(6) DEPONENT

 How should a plan administrator select the best

possible 30(b)(6) deponent on the issue of the administrator’s financial conflict of interest?

 WATCH OUT for the fiduciary exception to the

attorney-client privilege and work product

• privilege. See Solis v. Food Employers Labor

Relations Ass’n, 644 F.3d 221, 228 (4th Cir. 2011). But see United States v. Jicarilla Apache Nation, 131 S.Ct.2313 (U.S. 2011); Wachtel v. Health Net, Inc., 482 F.3d 225 (3d Cir. 2007); U.S.

• v. Mett, 178 F.3d 1058 (9th Cir. 1999).

38

HYPOTHETICAL CON’T: DEPOSITION TOPIC 1

The process, if any, used to reduce potential bias and promote accurate decisionmaking by Kountonus, including walling off decisionmakers from those interested in company finances; management checks that penalize inaccurate decisionmaking; compensation incentives for claims decisionmakers; audits or quality-control

• f Kountonus claims decisions.

39

HYPOTHETICAL CON’T: DEPOSITION TOPIC 2

 Plan Interpretation:

• How can the policy be interpreted consistently?
• How have these provisions been interpreted in the

past?

• What is the reasoning behind ignoring the Plan’s

requirement to sent a notice of impending termination of policy?

40

HYPOTHETICAL CON’T: DEPOSITION TOPIC 3

Collection of Premiums What is Kountonus’s practice and procedure for timely collection of premiums? What systems are in place for alerting Kountonus that a premium is overdue? How often has Kountonus accepted late premiums in all policyholders without discontinuing the policy? Going through each late payment from Whaley, why was it accepted late?

41