Medford v. Metropolitan Life Ins. Co.
| Decision Date | 10 February 2003 |
| Docket Number | No. CV-S-02-0955-JCM.,CV-S-02-0955-JCM. |
| Citation | 244 F.Supp.2d 1120 |
| Parties | Laverne Don MEDFORD, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, et al., Respondents. |
| Court | U.S. District Court — District of Nevada |
James R. Christensen — 003861, Brenske & Christensen, Las Vegas, for Medford, Laverne Don, Plaintiff.
Albert F. Pagni — 000987, Jones Vargas (Reno), Clark V. Vellis — 005533, Jones Vargas (Reno), Albert F. Pagni — 000987, Jones Vargas (Reno), Clark V. Vellis — 005533, Jones Vargas (Reno), Reno, for Metropolitan Life Insurance Company, Raytheon Company, Defendants.
This matter is before the court on defendants' Motion for Stay of Discovery and Motion for an Order Setting Forth a Briefing Schedule Pursuant to Local Rule 16-1(C)(1)(# 11) filed October 10, 2002. The court has considered defendants' motion, Plaintiffs Opposition to Defendants' Motion for Stay of Discovery and Motion for an Order Setting Forth a Briefing Schedule Pursuant to Local (sic) 16.1(C) (# 13), and defendants' Reply in Support of Motion for Stay of Discovery (# 17). Defendants inadvertently failed to attach the two exhibits referenced in the motion to the original motion filed with the court, and thereafter filed a supplement attaching the two exhibits on January 10, 2003(# 18).
This case involves the termination of long term disability benefits to an employee beneficiary. Plaintiff Laverne Don Medford ("Medford") worked for a company called E-Systems from 1975 until 1992 when he was placed on long term disability under the "E-Systems, Inc., Long Term Disability Income and Death Benefit Plan" ("E-Plan"), (Complaint.¶¶7, 8). Defendant Raytheon purchased E-Systems in 1996. Plaintiff continued to receive long term disability ("LTD") benefits until some time in calendar year 2000 when the defendant reviewed his claim and denied additional benefits. Id., H 9. The initial denial was made June 12, 2002. Plaintiffs administrative appeal was denied on November 17, 2000, which resulted in the termination of his LTD benefits. Id.
Plaintiff brought suit against defendants Metropolitan Life Insurance Company and Raytheon. The complaint alleges four state causes of action for: 1) breach of contract; 2) bad faith; 3) breach of Nevada's Unfair Claims Practices Act, Nev.Rev. Stat. § 686A.310; and 4) punitive damages, and two ERISA based claims for 1) wrongful denial of ERISA benefits under 29 U.S.C. § 1132 and 2) breach of fiduciary duty, by failing to afford basic due process guaranteed by at 29 U.S.C. § 1133 and regulations promulgated thereunder.
On July 17, 2002, defendants removed this case from state court. The parties submitted a stipulated Joint Discovery Plan and Scheduling Order, and shortly thereafter, on October 10, 2002, defendants filed the instant motion for stay of discovery and request for an order setting a briefing schedule pursuant to LR 16-1(c)(1) which provides that actions for review on an administrative record "shall be governed by the entry of an order setting forth a briefing schedule and such other matters as may be appropriate." Defendants argue that because this is an ERISA based action discovery is not warranted, and that this matter can and should be decided on the administrative record which has been provided to the plaintiff. For the reasons set forth below, the court concludes that plaintiff is not entitled to discovery on his state tort claims because they are clearly preempted by ERISA. However, because the court cannot determine at this early stage of the litigation what standard of review should be applied to the determination of this action, the court will allow some discovery on plaintiff s ERISA claims.
As a general rule discovery in civil cases is liberally allowed. The purpose of discovery is to ascertain facts in dispute, clarify the issues, and avoid surprise at trial. Rule 26 of the Federal Rules of Civil Procedure allows discovery "regarding any matter, not privileged, that is relevant to the claim or defense of any party" Fed. R.Civ.P. 26(b)(1). As long as the relevant information is "reasonably calculated to lead to the discovery of admissible evidence" the information sought to be discovered need not be admissible at the time of trial.
Defendants' motion argues that because the ERISA plans at issue vest the plan administrators with discretion to determine the award of benefits, the court's review of the decision to terminate LTD benefits must be reviewed by the court on an abuse of discretion standard. Citing Taft v. Equitable Life Assurance Society, 9 F.3d 1469, 1472 (9th Cir.1993) defendants argue that when reviewing a denial of benefits claim under an abuse of discretion standard the court may review only the evidence presented to the plan administrators at the time of the denial. Thus, the only discovery plaintiff is entitled to in this case is what was contained in the administrative record which defendants have already produced. Plaintiff relies upon Regula v. Delta Family-Care Disability Survivorship Plan, 266 F.3d 1130, 1145 (9th Cir.2001) to argue he is entitled to discovery "to determine his insurer's motivation" in suddenly terminating his LTD benefits. Additionally, plaintiff argues the plans at issue may not be subject to ERISA if they fall within the Department of Labor's "safe harbor" provisions. 29 CFR § 2510.3-l(j). Plaintiff therefore seeks discovery to determine if all of the safe harbor provisions have been met. Finally, plaintiff argues he is entitled to conduct discovery on his state tort claims for bad faith in violation of Nevada's Unfair Claims Practices Act, N.R.S. 486A.310 et. seq.
Defendants' argument focused principally on the appropriate standard of review which will determine the outcome of this litigation. It is well established that the scope of discovery in a denial of ERISA benefits case is linked to the standard of review. See, e.g., Regula v. Delta Family-Care Disability Survivorship Plan, 266 F.3d 1130, 1145 (9th Cir.2001); Taft, 9 F.3d at 1472. However, the task of the court here is to determine the scope of discovery, if any, that plaintiff may seek in discovery, not what standard of review should ultimately be applied to the outcome of this case.
Plaintiff argues he should be permitted to conduct discovery to determine whether the group insurance plans at issue are ERISA qualified. He asserts there is "the potential" that the plans at issue may not be subject to ERISA because of the "safe harbor" regulations which place some kinds of plans outside ERISA's purview.
"ERISA defines an employee benefit plan to include, among others, `any plan, fund, or program . . . established or maintained by an employer . . . for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance . . . medical, surgical or hospital care or benefits . . .'" Quails v. Blue Cross of California, Inc. 22 F.3d 839, 843-844 (9th Cir.1994), quoting, 29 U.S.C. §§ 1002(1), (3). Plaintiff argues he is entitled to discovery regarding whether the plans fall within the Department of Labor's "safe harbor" regulations distinguishing those plans "established or maintained by an employer" from those in which the employer's role is more limited. See 29 U.S.C. § 1002(1); 29 CFR § 2510.3-l(j). The Ninth Circuit has noted:
These regulations describe the circumstances under which a group insurance plan offered by an insurer to employees will not qualify as an ERISA employee benefit plan. Specifically, the regulations exclude those plans in which: (1) No contributions are made by the employer; (2) Employee participation is completely voluntary; (3) "The sole functions of the employer . . . are, without endorsing the program, to permit the insurer to publicize the program to employees . . . to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer;" and (4) The employer receives no consideration for its limited involvement in the plan.
Quails, at 843-844, quoting, 29 CFR § 2510.3-l(j) (citations omitted). (Emphasis in original).
"Unless all four of the above requirements are met, the employer's involvement in a group insurance plan is significant enough to constitute an `employee benefit plan' subject to ERISA." Id., quoting Kanne v. Connecticut General Life Ins., 867 F.2d 489, 492 (9th Cir. 1988). Plaintiff argues there is a "potential that Mr. Medford's disability insurance . . . is not subject to ERISA" under the regulations above. (Plaintiffs Opp. # 13, p. 3) However, even a cursory inspection of the plans shows they are employee benefit plans governed by ERISA. Article III of the E-Plan states that the employer "shall contribute such amounts . . . as it deems appropriate . . . to provide the benefits payable under this plan." Article VI of the E-Plan, provides that the employer, E-Systems, maintains the plan's trust fund, pays into the trust fund from time to time, and appoints the trustee. Thus, plaintiff cannot establish the "no contributions by employer" exclusion criteria, or establish that E-Systems only publicized the program and collected premiums. Similarly, Article VII of the R-Plan makes Raytheon both fiduciary, plan administrator, and responsible for all necessary administrative duties. The court finds that both the E-Plan and R-Plan are clearly employee benefit plans subject to ERISA.
Plaintiff has plead state law claims for breach of contract, bad faith, breach of Nevada's Unfair Claims Practices Act, Nev.Rev.Stat. § 686A.310, and punitive damages. Defendant argues plaintiff is not entitled to discovery on these claims because they are preempted by ERISA. The court agrees that these state law claims are preempted by ERISA and that plaintiff is therefore not entitled to discovery relevant to these claims. The Ninth Circuit has repeatedly stated "ERIS...
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