Skip to content Prado v. Allied Domecq Spirits and Wine Group Disability Income Policy. ? Defendant Granted Summary Adjudication Because Collateral Estoppel Prevented Re-litigation of Standard of Review; Plaintiff Afforded Leave to Conduct Discovery Re: Conflict of Interest


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August 2010

Prado v. Allied Domecq Spirits and Wine Group Disability Income Policy. ? Defendant Granted Summary Adjudication Because Collateral Estoppel Prevented Re-litigation of Standard of Review; Plaintiff Afforded Leave to Conduct Discovery Re: Conflict of Interest

Plaintiff Cannot Re-litigate Standard of Review Issue on Remand, but May Conduct "Limited Discovery" of Nature and Extent of Plan Administrator's Conflict of Interest, and Discovery into Plan Documents and Relevant Information

(U.S.D.C., N.D.Cal., August 2, 2010) ____ F.Supp.2d ____

In an ERISA action for denial of disability benefits, Liberty Life Assurance Company of Boston ("Liberty"), the plan administrator, moved for summary adjudication on the applicable standard of judicial review.  Plaintiff Antonio Prado ("Plaintiff') concurrently filed a motion to augment the administrative record and for leave to conduct discovery.  The U.S. District Court for the Northern District of California ruled on both motions.

Background – Prado I
Plaintiff previously filed suit in 2005, alleging failure to extend benefits under an ERISA plan.  In that case, the Northern District Court granted summary judgment for Plaintiff (Prado v. Allied Domecq Spirits and Wine Group Disability Income Policy, No. 05-2716, 2008 WL 191985 (N.D. Cal. Jan. 22, 2008) ("Prado I"). Liberty was the plan administrator and funding source for benefits, operating under a structural conflict of interest.  The Court held Liberty's conflict of interest, as well as other factors, supported the finding Liberty abused its discretion in denying Plaintiff's claim. Id. at 20. The district court held Plaintiff was unable to perform his "own occupation" for the first twenty-four months of his injury, and remanded the matter to Liberty to decide whether Plaintiff should receive benefits beyond the twenty-four month period due to an inability to perform "any occupation." Id. at 21. After remand, Liberty denied Plaintiff's claim, finding insufficient objective evidence of disability from "any occupation."

In this action ("Prado II"), Plaintiff sued for (1) review of denial of ERISA benefits; (2) violation of California Insurance Code §10111.2; and (3) failure to produce records under 29 U.S.C. § 1332.

Standard of Review
Liberty moved for summary adjudication on the judicial standard of review.  In his opposition, Plaintiff argued for de novo review on the grounds that Liberty did not establish the plan documents conferred discretionary authority.  This issue was litigated and decided in Prado I, the district court holding the plan conferred discretion to Liberty to decide benefits claims.  Based on the doctrine of collateral estoppel,  in Prado II, the district court held the prior holding in Prado I controlling on this issue. 

The district court rejected Plaintiff's additional argument for de novo review, that because Liberty failed to deny the claim within the deadlines provided by 29 C.F.R. § 2560.503-1(i)(1)(i) and (i)(3)(i), which require a plan administrator reviewing an appeal of a benefit denial notify claimant of its decision within forty-five days of the appeal request, or where there are special circumstances, within an additional forty-five days (if administrator notified claimant within the first forty-five days of special circumstances necessitating this extension).  Plaintiff (citing Jebian v Hewlett-Packard Co. Emp. Benefits Org. Income Prot. Plan, 349 F.3d 1098, 1110 (9th Cir. 2003)) argued Liberty did not send a request which included the special circumstances necessitating an extension of an additional 12 days.  Unlike Jebian, here there was only a 12 day delay, during which time there was an "ongoing, good faith exchange of information between the administrator and claimant," Plaintiff did not allege Liberty violated the plan terms, and the Department of Labor regulation cited from Jebian is not applicable because the key language has since been excised. 

Evidence Beyond the Administrative Record
Plaintiff sought to augment two categories of documents: (1) documents relating to Liberty's structural conflict of interest; and (2) documents Plaintiff claims Liberty was obligated to produce during its claim review.  Plaintiff sought from Liberty:  plan documents, the insurance policy, documents showing discretion, documents showing the plan complied with legal requirements, all policies and procedures containing standards for how Liberty evaluates claims, the medical bases for evaluation, how Liberty conveys standards to adjusters, standards for how Liberty evaluates whether adjusters comply with its policies, and all writings "relevant" to Plaintiff's claim. 

The district court allowed Plaintiff to conduct limited discovery into the nature, extent, and effect of Liberty's conflict on its decision-making process, but indicated its order was not a "fishing license."  In addition to allowing limited discovery into the conflict of interest, the Court permitted Plaintiff to conduct discovery of the Plan documents and all relevant claim information under 29 C.F.R. §2560.503-1(m)(8).  

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This opinion may be cited as precedent now.  The result in this case could change, however, if the decision is modified by the issuing court, or is appealed to the Ninth Circuit Court of Appeals.

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Tamar Karaguezian