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Reinking v. Alyeska Pipeline Service Co.

May 6, 2009


The opinion of the court was delivered by: John W. Sedwick United States District Judge


[Re: Motion at Docket 55]


At docket 55, plaintiff Wendell W. Reinking ("Reinking") moves for an order compelling limited discovery regarding an alleged conflict of interest, which he claims affected the decision-making of defendants Alyeska Pipeline Service Co., Alyeska Pipeline Service Co. Pension Plan for Operating Company Employees ("Plan"), Alyeska Pipeline Service Co. Pension Plan Retirement and Trust Committee ("Committee"), Alyeska Pipeline Service Co. Separation Benefits Plan No. 516 ("Separation Plan"), and Alyeska Pipeline Service Co. Human Resources Department ("HR Department") (collectively "APSC") in denying his claim for benefits. APSC opposes the motion at docket 61. Reinking replies at docket 67. Oral argument was not requested and would not assist the court.


The background of this litigation is recited at docket 44 and will not be repeated here. Reinking moves for "an order permitting limited written discovery and 2 depositions" regarding APSC's alleged structural conflict of interest in denying his claims for benefits under ERISA-governed pension plans. Reinking alleges that his discovery requests, dated December 30, 2008, are relevant to this conflict and are supported by the conflict analysis articulated by the Ninth Circuit in Abatie v. Alta Health and Life Insurance Company*fn1 and, more recently, by the Supreme Court in Metropolitan Life Insurance Company v. Glenn.*fn2 APSC opposes Reinking's motion in part, arguing that "[a]ll but a handful of his discovery requests are improper [because]... (1) they are not actually connected to the alleged conflict of interest,... (2) they are overbroad and unduly burdensome,... and/or (3) they are objectionable for other reasons under the discovery rules."*fn3 Reinking counters that his discovery requests merely seek to "develop information relating to the financial liability problem the employer/administrator would have faced if it granted Reinking's request to be included in the pension benefit plan... [as well as] disclosures that might demonstrate the extent to which [APSC] considered that problem when it weighed Reinking's request or when [APSC] adopted the various amendments to its pension plan, which it relied upon to deny Reinking his benefits."*fn4

Reinking alleges that APSC operates under a conflict of interest because the company - as well as its employees, officers, and directors - stand to benefit from the denial of claims by "common law" employees who are improperly categorized as "leased" employees. Were APSC to approve claims by any such employees, Reinking argues, APSC would have to honor claims by all similarly situated employees, of which there are a large number. With respect to the Plan, Reinking contends that he was improperly classified as a "leased" employee when, in fact, he was a "common law" employee entitled to benefits by virtue of Burrey v. Pacific Gas and Electric Company.*fn5

Reinking also contends that, after Burrey, APSC amended the Plan in 2000, and again in 2002 specifically to prevent "leased" employees from obtaining benefits.*fn6 Reinking also argues that APSC addressed the entitlements of its "leased" employees under the Separation Plan at the same time it amended the Plan. At bottom, Reinking alleges that APSC's financial interest in denying the claims of all of its "leased" employees constitutes a structural conflict of interest, which Reinking is entitled to investigate.*fn7

APSC agrees that Reinking has alleged a possible conflict of interest, but contends that the facts do not support a finding that APSC operated under a structural conflict of interest that would give rise to extra-record discovery of the scope sought by Reinking. APSC argues that claims paid under the Plan and the Separation Plan cannot give rise to a structural conflict of interest for two reasons. First, because the Committee decides claims under the Plan, and those claims are paid out of the Pension Plan's Trust Fund ("Trust"), the company does not have a direct financial interest in the denial of claims. Similarly, because the HR Department decides claims under the Separation Plan, and those claims are paid out of the company's general assets, the company is not technically deciding whether to deny a claim. APSC also points out that because its contributions to the Trust are irrevocable and unclaimed funds do not revert to APSC, APSC does not have a financial interest in denying claims.

Reinking's requests consist of: 14 requests for admission ("RFA"), 12 interrogatories ("Interrogatory"), and 10 requests for production ("RFP"). APSC has agreed to respond to RFA Nos. 1-2 and 7-8, Interrogatory Nos. 1 and 4-6, and RFP Nos. 7 and 10. The parties have agreed that APSC will provide responses to these requests after this court renders a decision with respect to the remaining requests. APSC objects or declines to respond to the remaining requests on the ground that the requests are overbroad, vague, irrelevant, or not connected to the alleged conflict. Reinking's requests may be categorized as follows: (1) requests seeking information pertaining to APSC's other "leased" employees (Interrogatory Nos. 7-12, RFP Nos. 1-3 and 8); (2) authentication requests relating to documents produced by APSC (RFA Nos. 9-14); (3) requests seeking information pertaining to Plan amendments (Interrogatory Nos. 2-3, RFP Nos. 4-6); and (4) requests seeking Plan data from the 2007 calendar year (RFA Nos. 3-6, RFP No. 9).*fn8 The court considers the appropriate scope of discovery below.


When an ERISA-sponsored plan explicitly grants "the administrator or fiduciary discretionary authority to determine eligibility for benefits[,]"*fn9 "a deferential standard of review [is] appropriate."*fn10 However, where a plan administrator is operating under a possible conflict of interest, that conflict must be weighed as a factor by a reviewing court.*fn11 Although a district court reviewing a plan administrator's decision to deny a claim is generally limited to the administrative record, it is within the district court's discretion to permit discovery into the nature, extent, and effect of a plan's structural conflict of interest on the decision-making process.*fn12 The Supreme Court has found such a conflict where an employer or insurance company evaluates the claim and pays claims with its own funds.*fn13 Even when a plan's benefits are paid out of a trust, as here, a structural conflict exists that must be considered as a factor in determining whether a plan administrator abused its discretion.*fn14 APSC attempts to distance itself from a structural conflict of interest by putting the decision-making in the hands of a Committee and the HR Department. This distance may cushion the blow of, but does not eliminate, the potential conflict.*fn15

Although it is clear that some discovery is warranted regarding APSC's potential conflict of interest, the line between APSC's potential conflict and the merits of Reinking's claim is a blurry one.*fn16 In some cases district courts have allowed fairly broad discovery, while others grant only narrowly tailored discovery that pertains specifically to the alleged conflict of interest. As the court in Winterbauer v. Life Insurance Company of North America noted: "[t]o a large extent, the different outcomes reflect the courts' varying interpretations of Glenn itself."*fn17 The Glenn Court gave guidance on the scope of discovery when it set out a non-exhaustive list of factors, which mirror the types of material that an ERISA plaintiff might seek to discover, including, inter alia, (1) whether the administrator has a history of biased claims administration and (2) whether the administrator had taken active steps to reduce potential bias and to promote accuracy in its benefits decisions, either by walling off claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decision-making irrespective of whom the inaccuracy benefits.*fn18 In light of Glenn's guidance, it is logical to allow discovery on issues related to other relevant factors. In doing so, it is appropriate to respect the observation that the Glenn Court "made clear its view that it is neither 'necessary [n]or desirable for courts to create special burden-of-proof rules, or other special procedural or evidentiary rules, focused narrowly upon the evaluator/payor conflict."*fn19

APSC cites to an extensive body of post-Abatie case law, none of which is precedential,*fn20 in support of the general proposition that conflict discovery must be "narrowly tailored and cannot be a fishing expedition."*fn21 From this case law, APSC gleans a two-part test which the court "must" apply to determine the appropriate scope of conflict discovery: "(1) whether Reinking has demonstrated an actual - rather than theoretical - connection between the requested material and the alleged conflict of interest; and (2) if so, whether the requested discovery is adequately circumscribed and focused to avoid undermining ERISA's goal of providing efficient (inexpensive) and expedited review of benefit denial cases."*fn22 Reinking responds that the appropriate ...

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