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.