No Statutory Penalties for Failure to Participate in Litigation Discovery

ERISA imposes a statutory penalty of $110 per day if a plan administrator fails to provide certain plan documents at the request of a plan participant.  See 29 U.S.C. § 1132(c)(1).  A court has held that a refusal to produce such documents in response to a litigation discovery request does not trigger the statutory penalties.  See Kujanek v. Houston Poly Bad I, Limited, No. 10-20664 (5th Cir. Sept. 27, 2011).

Standard for Discovery in ERISA Cases With a Conflict of Interest

In Murphy v. Deloitte & Touche Group Ins. Plan, 2010 WL 3489673 (10th Cir. Sept. 8, 2010), the Tenth Circuit Court of Appeals discussed the scope of discovery permitted where there exists a dual role conflict of interest, meaning that the plan administrator or fiduciary also funds the ERISA plan. The court set forth the general rule  that claims under ERISA are limited to a review of the administrative record and discovery outside the administrative record generally is inappropriate.  The court held that an exception permitting “extra record discovery” may be permitted when there is a dual conflict of interest.

   In articulating the standard for applying the exception, the court court cautioned that neither party “should be allowed to use discovery to engage in unnecessarily broad discovery that slows the efficient resolution of an ERISA claim. In fact . . . discovery related to a conflict of interest may often prove inappropriate.” Id. at *8.  The plaintiff bears the burden of showing that a extra-record discovery is appropriate.

   The court articulated factors to be considered by the court that mitigate against board discovery: (1) ERISA "seeks to ensure a speedy, inexpensive, and efficient resolution of those claims” and while discovery may be necessary to allow a plaintiff to ascertain and argue the seriousness of the administrator’s conflict, the rules permitting discovery (Federal Rule of Civil Procedure 26(b)) is not “a license to engage in an unwieldy, burdensome, and speculative fishing expedition” and (2) “in determining whether a discovery request is overly costly or burdensome in light of its benefits, the district court will need to consider the necessity of discovery.” Id. at *9. The court provided examples when the burden and costs of discovery outweighs the benefits: (a) when the administrator's “financial interest is obvious” (b) when “the substantive evidence supporting a denial of a claims is so one-sided that the result would not change even giving full weight to the alleged conflict,” and (c) when a district court is able to evaluate the thoroughness of the administrator’s review based on the administrative records. Id.

ERISA Documents Relied on for Benefit Determination - When They Must Be Provided

During an administrative appeal of a denial of plan benefits, a plan administrator must provide to claimant documents relied upon during the initial benefit determination but is not required to provide any additional documents considered during the appeal if the documents do not contain new factual information. The Tenth Circuit in Metzger v. Unum Life Insurance Co., 476 F.3d 1161 (10th Cir. 2007), based its decision on the court’s interpretation of 29 C.F.R. § 2560.503-1(h)(2)(iii). The court stated that subsection (h)(2)(iii) requires a plan administrator to produce only those documents relied upon during the initial benefit determination and not the documents generated during the appeal process. If, however, the documents generated during that appeal contain new factual information, they must be provided to the plaintiff. The court reasoned that any other interpretation of subsection (h)(2)(iii) would permit the claimant to submit additional rebuttal documents during the appeal, which was not the intent of the regulations where no new facts were considered during the appeal. The court noted that its conclusion was consistent with the regulations because, in cases where a medical judgment is involved, subsection (h)(3)(iii) requires the plan administrator to consult with a health care profession. If the plan administrator were required to produce these documents prior to reaching a final decision on the appeal, the plaintiff would then be permitted to submit rebuttal expert reports, thereby creating an unnecessary cycle of submission, review, re-submission and re-review.