United States District Court, N.D. Illinois
March 18, 2004.
DAVID JACOBS, Plaintiff, v., XEROX CORPORATION LONG TERM DISABILITY INCOME PLAN, Defendant
The opinion of the court was delivered by: ARLANDER KEYS, Magistrate Judge
MEMORANDUM OPINION ORDER
David Jacobs went to work for the Xerox Corporation on December 31,
1996. In October 2001, he suffered multiple strokes and, as a result,
began a short-term disability leave of absence on October 3, 2001. The
next month, while Mr. Jacobs was out on leave, Xerox fired him, though
Mr. Jacobs continued to receive short-term disability payments through
March 3, 2002. Mr. Jacobs' disability continued beyond that date, and
he, therefore, sought long-term disability benefits from the Xerox
Corporation Long-Term Disability Income Plan, which provides disability
benefits to Xerox employees. The Plan denied his claim, and Mr. Jacobs
sued under § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B). In his
complaint, he also claims that the Plan failed to respond to his request
for documents in a timely fashion, thereby incurring penalties, under
29 U.S.C. § 1132(c). And, finally, he claims that Xerox terminated him
while he was on leave to avoid having to pay him long-term disability
benefits, thereby violating § 510 of ERISA,
29 U.S.C. § 1140.
On July 7, 2003, Judge Wayne Andersen, to whom the case was assigned,
entered an order referring the case to this Court for discovery
supervision. The case is now before the Court on a Motion to Quash filed
by the Plan. The Plan seeks to prevent Mr. Jacobs from taking the
deposition of the Plan Administrator (Lawrence Becker) and from
conducting any discovery into matters beyond the administrative record,
including but not limited to the question of how or why the Plan
Administrator arrived at his decision to deny benefits. The Plan also
seeks a protective order limiting discovery to matters contained in the
administrative record. Mr. Jacobs has requested oral argument on the
Plan's motion, but the Court will deny that request, given that the
parties' written submissions amply address the relevant issues.
Both sides seem to agree that resolution of the discovery motion
currently before the Court turns on whether the Court will ultimately
review the Plan Administrator's decision to deny benefits under an
arbitrary and capricious standard, or de novo. And the case law is in
accord. See, e.g., Perlman v. Swiss Bank Corp. Comprehensive Disability
Protection Plan, 195 F.3d 975, 981-82 (7th Cir. 1999)("Deferential review
of an administrative decision means review on the administrative record";
parties ARB allowed to take discovery and present new evidence in ERISA
cases subject to de novo judicial decisions, . . . but never where the
question is whether a decision is . . . arbitrary and capricious.")
(citations omitted). The Court turns first, therefore, to the question of
the applicable standard of review,
"[A] denial of benefits challenged under § 1132(a)(1)(B) is to be
reviewed under a de novo standard unless the benefit plan gives the
administrator or fiduciary discretionary authority to determine
eligibility for benefits or to construe the terms of the plan." Firestono
Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Bruch "makes
plenary review the default rule, that is, the rule to govern when the plan
documents contain no indication of the scope of judicial review."
Herzberqer v. Standard Insurance Co., 205 F.3d 327, 330 (7th Cir. 2000).
Thus, when the language of the plan is uncertain concerning the scope of
judicial review, plenary review is appropriate. Id. Herzberger instructs
that "the conferral of discretion is not to be assumed"; "[t]he employees
ARB entitled to know what they're getting into, and so if the employer is
going to reserve a broad, unchanneled discretion to deny claims, the
employees should be told this, and told clearly." Id. at 331, 333.
Here, the Plan satisfies the concerns spelled out in Hersberger;
indeed, Mr. Jacobs does not argue otherwise. He argues instead that,
despite the Plan language, a de novo standard applies here because (1)
the decision to deny benefits was a "mixed eligibility decision"; and (2)
the Plan Administrator was operating
under a conflict of interest when he decided to reject Mr. Jacobs'
claim. Both of these facts, he argues, take this case out of the
"default" plenary form of review.
The Court quickly rejects both of Mr. Jacobs' arguments on this issue.
The question of what standard of review would govern a mixed eligibility
and treatment decision that is, a decision relying on medical judgments
in order to make plan coverage determinations, see Fegram v. Herdrich,
530 U.S. 211, 228-29 (2000) is irrelevant because this case involved no
such decision. And, with respect to Mr. Jacobs' latter argument, the
Supreme Court has held to the contrary: "the de novo standard applies
regardless of whether the administrator or fiduciary is operating under a
possible or actual conflict of interest." Firestone, 489 U.S. at 115. "Of
course, if a benefit plan gives discretion to an administrator or
fiduciary who is operating under a conflict of interest, that conflict
must be weighed as a `facto[r] in determining whether there is an abuse
of discretion,'" Id. (quoting Restatement (Second) of Trusts § 187,
Comment'd (1959)). Thus, Mr. Jacobs' conflict of interest arguments,
though irrelevant for purpose of this motion, may be relevant when the
Court decides the merits of his denial of benefits claim. For now,
however, it is enough to note that the Court will ultimately review the
Plan Administrator's decision under a deferential standard, and that,
therefore, discovery and the presentation of new evidence is not
allowed. See Perlman, 195 F.3d at 981-982,
Mr. Jacobs next argues that, even If the Court finds that discovery
should be limited for purposes of his denial of benefits claim, it should
not be limited for purposes of his delay and interference with benefits
claims, Counts Two and Three of his Second Amended Complaint. To the
extent relevant to these claims, he argues, he should be entitled to
pursue discovery outside the administrative record. On this issue, the
Court agrees, and will, therefore, allow discovery regarding Mr. Jacobs'
interference with benefits claim and his claim that the Plan failed to
timely supply documents.
The Court turns now to the specific discovery requests challenged by
the Plan. The Plan first seeks to quash the notice of deposition for the
Plan Administrator, Lawrence Becker, At this time, the Court is convinced
that the only evidence Mr. Jacobs hopes to obtain from deposing Mr.
Becker relates to the manner in which he decided Mr. Jacobs' claim for
benefits. Because that is improper, the Court will grant the Defendant's
motion to quash the notice of that deposition.
The Plan next seeks to quash a set of interrogatories and a set of
document requests that Mr. Jacobs served. To the extent these discovery
requests seek information and documents concerning the plan's
decision-making, they must be barred. To this end, the Court strikes
interrogatory numbers 1, 2, 3, and 4. The Court also
strikes interrogatory 6, except to the extent it concerns communications
relevant to Counts Two and Three of Mr. Jacobs' Second Amended
Complaint. Additionally, the Court strikes document request numbers l,
3, 4, and 5; the Court will require the Plan to produce documents in
response to request number 2 (which seeks only plan documents), as well
as request numbers 7 and 8, but only to the extent relevant to Counts Two
and Three of the Second Amended Complaint.
The Court finds that review of the Plan Administrator's decision to
deny Mr. Jacobs' claim for long-term disability benefits must be
based on the administrative record, and not on evidence outside of that
record. Accordingly, the Court grants the Plan's Motion to Quash to the
extent explained in this Memorandum Opinion and Order. Mr. Jacobs'
request for oral argument is denied.
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