Opinion
CAUSE NO. 99-1081 C T/K
June 2, 2003
B. Gary and J. Dankert, Ice Miller, Indianapolis, IN.
B. Cynthia and A. Leiferman, Austin, TX.
B. W. Scott, Montross Townsend Montross, Indianapolis, IN.
Gary J. Dankert, Ice Miller, Indianapolis, IN.
Cynthia A. Leiferman, Austin, TX.
W. Scott, Montross Townsend Montross, Indianapolis, IN.
ENTRY ON SCHUCHMAN'S MOTION TO COMPEL DISCOVERY AND TRUSTMARK INSURANCE COMPANY'S CROSS MOTION TO COMPEL DISCOVERY
This case involves an alleged wrongful denial of benefits under a group health insurance policy covered under ERISA. At issue is the proper scope of discovery that governs an ERISA case. Defendant/Counter-Plaintiff Barry Schuchman ("Schuchman") claims that the denial of benefits by the plan administrator should be reviewed by the District Court de novo, permitting him to conduct discovery outside of the administrative record. Plaintiff/Cross-Defendant Trustmark Insurance Company claims that the decision to deny benefits should be reviewed under the deferential arbitrary and capricious standard, limiting discovery to the administrative record. The parties' cross motions to compel discovery are fully briefed and before the Court for a ruling.
I. Background
Schuchman is an employee of SARCO, an Indianapolis company specializing in recycling. As a SARCO employee, Schuchman, his wife Defendant/Counter-Plaintiff Sandra Schuchman ("S. Schuchman"), and their children were covered under a group health insurance policy issued by Trustmark. [Countercl., ¶ 1]. The terms and conditions of the health insurance policy were set forth in Trustmark's Group Insurance Contract ("Plan"). [Compl., ¶ 2].
According to the Plan's terms, the "benefit payment is subject to the determination by us [Trustmark] that the service, drug or supply is Medically Necessary." [Def.'s Ex. 5, p. 4]. The Plan further provides that Trustmark "has full, exclusive and discretionary authority to determine all questions arising in connection with this Contract including its interpretation." [Id. at p. 39]. Trustmark contends that it has final decision-making authority on all claims submitted by payment. [Trustmark Opp., p. 2].
In August 1997, S. Schuchman was diagnosed with advanced-stage ovarian cancer. Trustmark covered S. Schuchman's claims for conventional chemotherapy and surgery. [Countercl., ¶ 2]. In early 1998, S. Schuchman's physicians requested that Trustmark pre-certify her availability of benefits for participation in a clinical research trial testing in ovarian cancer. This treatment is known as high dose chemotherapy with peripheral stem cell or bone marrow transplant ("HDC/PSCR"). In denying the request for pre-certification, Trustmark determined that the proposed treatment was not "medically necessary" as defined by the Plan. [Trustmark Opp., p. 2; Countercl., ¶ 3]. In making this determination, Trustmark claims it forwarded case materials to "three independent medical oncologist for review, who concluded the treatment was investigational and experimental in nature." [Trustmark's Opp., p. 2]. Trustmark subsequently denied Schuchman's appeal.
Trustmark filed suit seeking a declaratory judgment against Schuchman, individually and in his capacity as the personal representative for the estate of his deceased wife, alleging that it properly denied the requested benefits under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et. seq. [Compl., ¶¶ 1-2, 12]. Schuchman filed a counterclaim asserting ERISA violations for denying the disputed claim, a federal estoppel claim, a myriad of claims arising under Texas state law, and also sought a declaratory judgment. [Countercl., ¶¶ 14-59].
S. Schuchman eventually died of complications due to ovarian cancer. [Docket No. 118].
The parties filed cross motions for summary judgment. On August 7, 2001, the Court denied Schuchman's motion for summary judgment and concluded that the Plan was an "employee welfare plan" governed under ERISA, and that Trustmark has standing to pursue its declaratory judgment. In addition, the Court granted in part and denied in part Trustmark's partial motion for summary judgment, holding that all of Schuchman's state law claims were preempted by ERISA, and that Schuchman's federal estoppel claim and request for a declaratory judgment were not preempted and may proceed. [See Docket No. 118]. In addition, Schuchman's ERISA claims are still viable.
The focus of the discovery dispute concerns Schuchman's interrogatories, requests for production, and a Rule 30(b)(6) notice of deposition seeking a deponent to testify about the Plan, including the review and appeals process, the facts relied upon in rendering a decision, and other related issues. [Def.'s Exs. 1-3]. Trustmark objected to this discovery, claiming that the Court's analysis is limited to the administrative record, and thus the discovery was over broad. [Trustmark Opp., p. 3]. Schuchman filed a motion to compel in order to obtain responses to this discovery. [Docket No. 130].
Trustmark also served interrogatories on Schuchman seeking information on his federal estoppel claim. Schuchman asserted several objections, including that the interrogatories were overly broad and invaded the attorney-client privilege and work product doctrine. [Trustmark Mot., Ex. A]. As a result, Trustmark filed a cross motion to compel discovery.
For the reasons set forth below, Schuchamn's motion to compel discovery is DENIED. Likewise, Trustmark's motion to compel discovery is DENIED.
II. Discussion
A. Schuchman's Motion to Compel Discovery
1. Discovery on the Parties' ERISA claims
Schuchman served interrogatories, requests for production, and notice of deposition seeking information regarding his ERISA claim and the denial of benefits. Trustmark objected to this discovery, claiming that the Court's decision was limited to the administrative record, and thus no further discovery was permitted under ERISA. [See Pl.'s Exs. 1-4]. In determining whether Trustmark has properly asserted objections to Schuchman's discovery requests, the Court must ascertain the proper standard of review of the parties' ERISA claims. Schuchman seeks a de novo review, allowing him to discover and review items beyond the administrative record to determine whether benefits were wrongfully denied. [Defs.' Br., p. 3]. On the other hand, Trustmark urges the Court to adopt the deferential arbitrary and capricious standard, limiting the Court's review to the administrative record and prohibiting any further discovery. [Trustmark Opp., p. 3].
A court reviews a plan administrator's denial of benefits de novo unless the plan gives the administrator discretionary authority to determine eligibility for benefits. See Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101 (1989) (denial of benefits must be reviewed de novo unless "the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan"); Hackett v. Xerox Corp. Long-Term Disability Income Plan, 315 F.3d 771, 773 (7th Cir. 2003) (same). Where the plan grants discretionary authority to the plan administrator, a court reviews the decision under the deferential arbitrary and capricious standard. See Hess v. Hartford Life Accident Ins. Co., 274 F.3d 456, 461 (7th Cir. 2001). An arbitrary and capricious standard of review of a discretionary ERISA administrative decision "is specifically limited to an examination of the administrative record generated by the plan administrator." Hughes v. Life Ins. Co. of North America, 112 F. Supp.2d 780, 782 (S.D.Ind. 2000), citing Perlman v. Swiss Bank Corp. Comprehensive Disability Protection Plan, 195 F.3d 975, 982 (7th Cir. 1999) (where an ERISA plan provides the plan administrator with discretion to decide claims, courts should review such decisions under a deferential standard and the parties should not take additional discovery). See also Trombetta v. Cragin Fed. Bank for Sav. Employee Stock Ownership Plan, 102 F.3d 1435, 1438 n. 1 (7th Cir. 1996) ("The only relevant materials at the time [a district court rules on summary judgment are] the materials that were before the [plan administrator] when it reached its decision."). The burden is on the plan administrator to prove that a grant of discretionary authority exists. See Neurological Resources, P.C. v. Anthem Ins. Companies, 61 F. Supp. d 840, 848 (S.D.Ind. 1999), citing Kinstler v. First Reliance Standard Life Insurance Co., 181 F.3d 243 (2d Cir. 1999).
The Seventh Circuit clarified the Firestone standard in Herzberger v. Standard Insurance Co., 205 F.3d 327 (7th Cir. 2000). In that case, the court upheld the presumption of plenary review, except where the language of the policy "indicates with the requisite if minimum clarity that a discretionary determination is envisaged" or where the "nature of the benefits or the conditions upon it will make reasonably clear that the plan administrator is to exercise discretion." Id. at 331. The Herzberger court suggested the following "safe harbor" language to ensure discretionary review of a policy: "Benefits under this plan will be paid only if the plan administrator decides in his discretion that the applicant is entitled to them." Id. An ERISA plan "that contains such language will not be open to being characterized as entitling the applicant for benefits to plenary judicial review of a decision turning him down." Id., citing Cozzie v. Metropolitan Life Ins. Co., 140 F.3d 1104, 1107 (7th Cir. 1998).
In the case at bar, Trustmark states that the Plan contains two provisions that resemble the "safe harbor" language recommended in Herzberger and result in a discretionary review. First, under the "Medically Necessary" section, the Plan provides that the "Benefit payment is subject to the determination by us that the service, drug, or supply is Medically Necessary." [Pl's Ex. 5, p. 4]. Second, under the "Miscellaneous Provisions" section, the Plan states that "The Company has full, exclusive and discretionary authority to determine all questions arising in connection with this Contract including its interpretation." [Id., p. 39]. In response, Schuchman claims that this language does not vest Trustmark with discretionary review since it does not give the plan administrator any discretion to decide benefits. [Def.'s Br., p. 4].
The Court finds that the two provisions in the Policy confer the plan administrator (here Trustmark) sufficient discretion to invoke the arbitrary and capricious standard of review. Participants of the Policy are given adequate notice that it is within the discretion of the plan administrators to approve or deny benefits based on a medical necessity. Although the Plan did not set forth the verbatim "safe harbor" language suggested in Herzberger, that court "did not mandate the use of [the safe harbor] language, instead finding it sufficient for the plan to contain language that . . . indicates with the requisite if minimum clarity that a discretionary determination is envisaged." Quinn v. Non-Contributory Nat. Long Term Disability Program, 113 F. Supp.2d 1216, 1220 (N.D.Ill. 2000), quoting in part Herzberger, 205 F.3d at 331. (Internal quotations omitted). See also Deal v. Prudential Ins. Co. of America, 222 F. Supp.2d 1067, 1069 (N.D.Ill. 2002) ("an absence of the `safe harbor' language does not require plenary review if the plan indicates with the requisite clarity that a discretionary determination is envisaged.").
In his reply brief, Schuchman questions the identity of the Plan administrator. [Reply, p. 3]. The Trustmark Insurance Company Plan documents define "Company" and "us" as being Trustmark itself. [Def.'s Ex. 5]. For purposes of these motions, the Court assumes, without holding, that Trustmark itself is the Plan administrator.
In any event, the Plan clearly reserves the right to determine what treatment is "medically necessary" and the benefit afforded (if any) distributed. Trustmark also reserves the "full, exclusive and discretionary authority" to interpret the Plan's provisions. [Def.'s Ex. 5]. In a similar instance, the Seventh Circuit found discretionary review appropriate where the plan granted the administrator "the right to interpret the terms and provisions of the Benefit Plan and to determine any and all questions arising under the Benefit Plan. . . ." Ross v. Indiana State Teacher's Ass'n Ins. Trust, 159 F.3d 1001, 1008 (7th Cir. 1998). See also Dreiman v. PSI Energy, Inc., 2002 WL 31427445, *1 (S.D.Ind. 2002) (clause reserving "the right to interpret and regulate the Plan with discretionary authority" sufficient to invoke deferential standard); Parker v. Nyhart Co., Inc., 2000 WL 33281118, *7 (S.D. Ind. 2000) (arbitrary and capricious standard applied where administrator had "the power and duty to do all things necessary or convenient to effect the intent and purposes of the Plan, including construing the Plan, which construction shall be final and binding; correcting any defect, supplying any omission, or reconciling any inconsistency in the Plan in such manner and to such extent as it shall deem expedient to effectuate the Plan; and determining all questions that may arise under the Plan, including questions of eligibility to participate in the Plan and the benefits provided by the Plan."); White v. Employee Retirement Plan of Amoco Corp., 2000 WL 1221635, *3 (N.D.Ill. 2000) (plan giving administrators the authority to "interpret the Plan, to determine applicable facts, and to decide all matters arising under the Plan, including the right to exercise discretion to remedy possible ambiguities, inconsistencies, and omissions" resulted in discretionary review); Neurological Resources, P.C. v. Anthem Insurance Companies, 61 F. Supp.2d 840, 852 (S.D.Ind. 1999) (applying arbitrary and capricious standard of review where Plan stated that administrator "has the responsibility to interpret and construe the provisions of the Plan" and "to determine eligibility to participate in the Plan"); Chojnacki v. Georgia-Pacific Corp., 108 F.3d 810, 815 (7th Cir. 1997) (arbitrary and capricious review appropriate where a plan specified that the administrator was "responsible for interpretations of this plan."); Gallo v. Amoco Corp., 102 F.3d 918, 921 (7th Cir. 1996), cert. denied, 521 U.S. 1129 (1997) (concluding that decisions of administrator who possessed "the discretion to interpret" a plan were entitled to deferential review).
In support of his position that a de novo review is appropriate, and thus discovery outside of the administrative record is permitted, Schuchman states that "there are complex medical issues present, there is a potential conflict of interest in the decision-making process, an issue exists regarding the application of the proper standard of review, the decision to deny benefits involves interpretation of a plan term or procedural irregularities exist with respect to interpretation of [a] term or with respect to irregularities in compliance with ERISA regulations." [Defs.' Br., p. 5]. Schuchman also alleges that Trustmark failed to comply with the Plan's provisions, that other insurance carriers paid for the same procedure sought by Schuchman, and that a bone marrow transplant is not an "experimental" treatment. [Id. at pp. 8-10]. However, Schuchman fails to provide persuasive authority for these propositions. Many of the cases Schuchman cites as persuasive authority predate Herzberger. Schuchman also relies on cases arising from courts outside of the Seventh Circuit. Perhaps most important, as noted above, the fact of the matter remains that Trustmark retained the right to interpret these Plan provisions.
Since the Plan administrator here has authority to determine whether a treatment is "medically necessary," and that review of this decision is subject to the arbitrary and capricious standard, the discovery Schuchman seeks outside the administrative record is inappropriate. See, e.g., Perlman v. Swiss Bank Corp. Comprehensive Disability Protection Plan, 195 F.3d 975, 981-82 (7th Cir. 1999) (court found that the standard of review was deferential, therefore "[t]here should not have been any inquiry into the thought processes of [the insurance company's] staff, the training of those who considered [plaintiff's] claim, and in general who said what to whom within [the insurance company]").
Accordingly, with regard to Schuchman's discovery on the parties' ERISA claims, Schuchman's motion to compel discovery is DENIED.
2. Discovery on Schuchman's non-ERISA claims
Schuchman states "there is no legal basis to deny [him] the right to conduct discovery" on the federal estoppel claim. [Def.'s Br., p. 11]. Indeed, this Court's August 7, 2001 entry denied Trustmark's motion for summary judgment on this claim. [Docket No. 118]. However, Schuchman fails to articulate which discovery requests he contends relate to this claim. The Court will not scour the record when ruling on motions for summary judgment. Nor will the Court do so when addressing discovery issues. See, e.g., Hall v. Bodine Elec. Co., 276 F.3d 345, 354 n. 4 (7th Cir. 2002) ("court is not required to scour the record in search of evidence to defeat a motion for summary judgment"); Peters v. Renaissance Hotel Operating Co., 307 F.3d 535, 547 n. 10 (7th Cir. 2002) ("it is not the responsibility of this court to ferret through the record for support for [plaintiff's] arguments"). As a result of this deficiency, the Court must deny Schuchman's motion to compel discovery.
Finally, Schuchman may not conduct discovery on the state law claims because they were dismissed via Trustmark's partial motion for summary judgment in the Court's August 7, 2001 entry. The Court found these claims were preempted by ERISA. Thus, any discovery conducted on these claims is irrelevant. See, e.g., Yurman Design, Inc. v. Chaindom Enterprises, Inc., 2000 WL 1871715, *3 (S.D.N.Y. 2000), citing Rule 26(b) (court found plaintiff's discovery requests were no longer relevant since its claims of fraud and copyright infringement had been dismissed). Accordingly, with regard to discovery on Schuchman's non-ERISA claims, Schuchman's motion to compel discovery is DENIED.
B. Trustmark's Cross Motion to Compel Discovery
Trustmark filed a cross motion to compel discovery seeking responses to its interrogatories regarding Schuchman's federal estoppel claim. The interrogatories Trustmark served amount to "contention" interrogatories in that they quote specific allegations in Schuchman's counterclaim and asked Schuchman to identify representations made by Trustmark that support each allegation. [Trustmark Ex. A]. Trustmark contends that Schuchman's responses are deficient in that, among other things, Schuchman "refused to identify the facts and circumstances supporting his claims of estoppel. . . ." [Trustmark's Mot. ¶ 7]. Schuchman objected to these interrogatories, claiming they are overly broad, unreasonably cumulative, burdensome, and invaded the attorney-client privilege and work product doctrine. [Trustmark's Ex. A]
As Schuchman correctly notes, Trustmark's motion to compel fails to specifically state the particular deficiency of any of Schuchman's responses to the eight interrogatories. Rather, without citing to any particular interrogatory, Trustmark simply states that Schuchman's objections to the interrogatories are "meritless," and that its interrogatories "are insufficient for [it] to determine the alleged basis of Schuchman's estoppel claim. . . ." [Trustmark's Mot., ¶ 8; Trustmark's Br., pp. 3, 5]. As a result, the Court is faced with the rather difficult task of sifting through Trustmark's interrogatories and Schuchman's responses thereto and trying to determine which interrogatory and sub-part Trustmark claims is deficient. While discovery into a party's allegations made in a pleading is certainly within the scope of Rule 26(b), Trustmark's failure to specify which interrogatory response and sub-part thereto is deficient results in a summary denial of its motion to compel. The Court simply will not engage in this subjective task or craft Trustmark's argument in this respect. See, e.g., Harris v. New York City Police Dept., 2002 WL 442120, *1 (S.D.N.Y. 2002) (court denied motion to compel "because plaintiff has not submitted the discovery requests and responses in issue and has not explained with any kind of specificity why, in his view, the responses are defective."); Preston v. Settle Down Enterprises, Inc., 90 F. Supp.2d 1267, 1282-83 (N.D.Ga. 2000) (motion to compel discovery which was phrased in general terms was denied for lack of specificity); Glaxo, Inc. v. Torphram, Inc., 1996 WL 411487, *3 (N.D.Ill., 1996) (denying Defendant's motion to compel based upon "lack of specificity"); Arons v. Lalime, 167 F.R.D. 364, 368 (W.D.N.Y. 1996) ("motion to compel further discovery was denied primarily because . . . it failed to identify with specificity the discovery requests and responses at issue").
Accordingly, Trustmark's motion to compel discovery is DENIED.
As a practical matter, Trustmark should inform Schuchman which interrogatory responses are deficient. The parties are encouraged to informally resolve their discovery disputes without Court intervention. This is precisely the type of dispute that should be resolved informally. In this regard, Schuchman's objections that these relatively standard interrogatories are overly broad, unreasonably cumulative, and burdensome are not likely to be well received by the Court if this discovery dispute resurfaces. Moreover, any objections based on the attorney-client privilege or the work product doctrine must be accompanied by a proper privilege log.
III. Conclusion
Schuchman's motion to compel discovery is DENIED. Likewise, Trustmark's cross motion to compel discovery is DENIED.
So ordered.