Court Clarifies ERISA Benefits Disputes Discovery Rules

September 9, 2010 ( – A federal appellate court has ruled that parties in Employee Retirement Income Security Act (ERISA) benefit plan suits have limits on their pre-trial discovery rights about plan administrators with conflicts of interest.

The 10th U.S. Circuit Court of Appeals asserted that ERISA litigants are barred from such fact-finding when the issue is a plaintiff’s benefits claims, but that plaintiffs can do limited fact-finding when it comes to the actions of plan officials who are both insurer and administrator.

The appellate court said a district court judge in New Mexico should have given plaintiff Aileen Murphy the opportunity to convince the court to allow discovery into Metropolitan Life Insurance Co.’s conflict of interest as the insurer and administrator of the Deloitte & Touche Group Insurance Plan. The 10th Circuit sent the case back for a reconsideration of Murphy’s discovery request; the lower court had originally held that the conflict was obvious and therefore no discovery was needed.

In writing for the appellate court, Circuit Judge David M. Ebel said lower court jurists need to balance ERISA’s occasionally competing goals.

“While a district court must always bear in mind that ERISA seeks a fair and informed resolution of claims, ERISA also seeks to ensure a speedy, inexpensive, and efficient resolution of those claims,” Ebel wrote. “[W]hile discovery may, at times, be necessary to allow a claimant to ascertain and argue the seriousness of an administrator’s conflict, (the federal procedural rule governing discovery) although broad, has never been a license to engage in an unwieldy, burdensome, and speculative fishing expedition.”

Ebel said judges need to decide whether ERISA discovery in cases such as Murphy’s is really necessary – particularly when they may be able to rule on the issue of administrator conflict without it.

“The benefit of allowing detailed discovery related to the administrator’s financial interest in the claim will often be outweighed by its burdens and costs because the inherent dual role conflict makes that financial interest obvious or the substantive evidence supporting denial of a claim is so one-sided that the result would not change even giving full weight to the alleged conflict,” Ebel explained. “Similarly, a district court may be able to evaluate the effect of a conflict of interest on an administrator by examining the thoroughness of the administrator’s review, which can be evaluated based on the administrative record. And, without further discovery, a district court may allocate significant weight to a conflict of interest where the record reveals a lack of thoroughness.”

In her appeal, Murphy argued that the U.S. Supreme Court’s decision in Metropolitan Life Insurance Co. v. Glenn “changed the legal landscape” with respect to discovery in ERISA cases (see  Supreme Court Considers Conflict for Plan Administrators That are Also Payers).  However, Ebel said Glenn did not completely change the court’s standard for discovery in ERISA cases.

The case is Murphy v. Deloitte & Touche Group Insurance Plan, 10th Cir., No. 09-2028.