Free Reply in Support of Motion - District Court of Arizona - Arizona

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Eric G. Slepian Bar # 017495 SLEPIAN LAW OFFICE 3737 N. 7th Street, Ste. 106 Phoenix, Arizona 85014 Telephone (602) 266-3111 Attorney for Plaintiff UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA CAROL ANN WALLACE, Plaintiff, vs. INTEL CORPORATION as Administrator; INTEL CORPORATION LONG TERM DISABILITY BENEFIT PLAN; and MATRIX ABSENCE MANAGEMENT, INC., Defendants. NO. CV-04-0492-PHX-RCB REPLY TO DEFENDANTS' RESPONSE TO PLAINTIFF'S MOTION FOR RECONSIDERATION

CHANGE IN LAW This Court denied Carol Ann Wallace's Motion for Summary Judgment on her claim for Long Term Disability benefits brought before this Court pursuant to 29 U.S.C. § 1132. In the Order denying Ms. Wallace's Motion for Summary Judgment, this Court cited to and relied on the holding in Atwood v. Newmont Gold Co., 45 F.3d 1317, 1322

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(9th Cir. 1995). Based on Atwood, this Court reviewed Defendants' denial of Long Term Disability benefits for an abuse of discretion. The Court reasoned that Ms. Wallace did not provide "material, probative evidence" tending to show that the Administrator's apparent conflict of interest caused a breach of fiduciary duty owed to the beneficiary; and, because of the absence of said evidence, the burden does not shift to the Plan

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Administrator to demonstrate that its decision was not tainted by the apparent conflict. Because the Court found that the standard of review does not shift, the Court did not weigh Defendants' conflict as a factor in determining the claim. Order, p. 9. Subsequent to this Order, on August 15, 2006 the Ninth Circuit issued a decision in Abatie v. Alta Health and Life Insurance Co., ___ F.3d ____, 2006 WL 2347660 (9th Cir. August 15, 2006). In Abatie, the Court over-ruled Atwood in its entirety. The Circuit Court found that Atwood: a) incorrectly found that there is a back and forth burden shifting of the standard of review; b) ignored the Supreme Court's requirement (in Firestone Tire and Rubber Company v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 956 (1989)) that a reviewing Court weigh the conflict of interest issue in determining whether the Administrator abused its discretion; and c) wrongly placed upon the plan participant the burden of

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producing evidence of a Plan Administrator's motives and requiring production of "smoking gun" evidence to demonstrate a conflict of interest sufficient to trigger a de novo review. The Circuit Court found that the Atwood approach wrongly aligns incentives and that instead of the Administrator being encouraged to affirmatively demonstrate its impartiality and the reasonableness of its decisions, Plan Administrators

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were rewarded for suppressing dissent and denying claims with as little explanation as possible. The Court in Abatie explained that in ERISA claims such as that brought by Plaintiff herein, a reviewing Court is to consider the Administrator's conflict (e.g., nature, extent, and effect on the decision making process) when reviewing a decision for an

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abuse of discretion. The Court found that a beneficiary is entitled to discovery and explained that discoverable evidence may include whether independent medical

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examiners are neutral; whether the Administrator's employees have incentive to deny claims; whether Administrator's interpretations of the plan have been consistent among patients; whether the Administrator has minimized potential financial gain through the structure of its business; whether the Administrator has failed to credit a claimant's reliable evidence; whether the Administrator has repeatedly denied benefits to deserving participants by interpreting plan terms incorrectly or by making decisions against the weight of evidence in the record. (Id.) Thus, in exploring conflict of interest issues, the scope of discovery now exceeds the limitation outlined in Atwood and Gati v. Reliance Standard Life Ins. Co., 415 F.3d 978, 985 (9th Cir. 2005) (e.g., discovery expected to lead to substantial or "smoking gun evidence" ). PLAINTIFF'S MOTION FOR RECONSIDERATION SHOULD BE GRANTED

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Because this Court determined Ms. Wallace's claim based on Atwood and the progeny of cases the pre-date Abatie v. Alta Health and Life Insurance Co., ___ F.3d ____, 2006 WL 2347660 (9th Cir. August 15, 2006), and because Atwood is no longer good law, Plaintiff's Motion for Reconsideration should be granted. Based on the recent change in law, it appears that this Court's application of prior law to the facts herein

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cannot be sustained, particularly in regard to this Court's finding that: a) Ms. Wallace is not entitled to additional discovery to explore conflict of interest issues beyond that which was expected to lead to smoking gun evidence 1 ; b) that, absent smoking gun evidence of a conflict, the standard of review does not shift from abuse of discretion; and c) in conducting an abuse of discretion review, evidence of a conflict (less than

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smoking gun evidence) is not relevant in determining the claim.

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In opposition to Ms. Wallace's Motion for Reconsideration, the Defendants argue that even with the clarification of law set forth in Abatie, the correct standard of review is for an abuse of discretion, alleging that there is no evidence of a substantial conflict. Defendants write that Matrix alone had the unreviewable autonomy to grant Plaintiff benefits under the Plan, and nothing in the record suggests that any portion of Matrix' payment as claims Administrator was linked to the number of claims accepted or denied or otherwise gave Matrix an incentive to be parsimonious. Defendants also argue there is no evidence of malice, self dealing or parsimonious claims ­ granting. Defendants' arguments bolster Plaintiff's position that she is entitled to discovery. The "record" was created by Defendants. They chose whether to include or exclude evidence pertaining to possible conflict issues. As recognized by Judge Kleinfeld in his concurring decision

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in Abatie: ...a so called independent Administrator may have much more of an incentive to decide against claimants than an insurance company spending "its own money." Independent Administrators may want to show how tough they are on claims to better market their services to self-insured employers. Further, according to Defendants, if Matrix denies a claim, then Intel retains the

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sole discretion to determine whether to grant or deny benefits. Thus, Intel has a financial interest in the very claim in which it is making a determination. This pecuniary interest in the outcome is evidence of an apparent conflict, which must be considered in the Court's review of the claim.

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Plaintiff conducted limited discovery on the conflict of interest issue and adhered to Atwood by limiting same to that which she believed would lead to "smoking gun evidence."

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Regardless of the discovery, standard of review, and conflict of interest issues discussed in Abatie, this Court should not have denied Ms. Wallace's Motion for Summary Judgment and grated Defendant's Cross-Motion for Summary Judgment. The medical opinions in the record show that Ms. Wallace's headaches are disabling. See Defendants Statement of Facts, Exhibit 7, p. 006, 010, 013, 016, 021, 036A, 041. The medical evidence in the record contains abnormal diagnostic and physical findings. See Defendants Statement of Facts, Exhibit 7 and Plaintiff's Motion for Summary Judgment, Exhibits 2, 3, 5, 6, 7, 8, 11, 13, 15, and 18. Matrix and/or Core denied benefits based on a January 10, 2003 report from neurologist Dennis Nitz, M.D. (Defendants Statement of Facts, Exhibit 7, p. 2). However, according to the Plan documents and in accordance with ERISA, Intel was required to make a determination

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on the claim. Intel allegedly denied the claim based on the alleged findings of Intel's benefit review committee. However, there is no report from the review committee in the claim file. According to Abatie, in performing a review for abuse of discretion, except as it pertains to conflict issues, the review is limited to the "record." Accordingly, the affidavits that post date the final denial [e.g., May 2005 affidavit of Mark Antonson

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(Defendant's Statement of Facts, Exhibit 2); May 2005 affidavit of Dr. Fisher (Defendants Statement of Facts, Exhibit 4); May 2005 affidavit of Dr. Hendin (Defendants Statement of Facts, Exhibit 5); and February 2005 affidavit of Dr. Nachmanson (Defendants Statement of Facts, Exhibit 6)] are not to be considered. If we exclude the post hoc rationale continued within said affidavits from the record, there

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is no basis to sustain Defendants' denial of benefits. There are no documents provided by Defendants to show that the appeal committee reviewed Ms. Wallace's medical

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records or her appeal, nor is there any document setting forth the conclusions reached by said appeal committee. The declaration of Don Fisher dated March 1, 2005 stating that the appeals committee reviewed the claim file submitted by Matrix Absent Management Inc. is not part of the claim file. It was created after the commencement of litigation. In fact, said declaration supports a conclusion that there is no report from the appeals committee in the claim file and no contemporaneous written documents from an appeal committee member setting forth conclusions with citation to appropriate medical records. Similarly, the May 2005 affidavit of Mark Antonson is not part of the claim file. Said affidavit was prepared by Defendants during litigation. The content of the affidavit supports the conclusion that there is no report from a member of the appeal review committee in the claim file. Absent this evidence, there is nothing for the Court to

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review. In the Order denying Ms. Wallace's Motion for Summary Judgment, the Court states that the opinion of Defendants' consulting physician, Dr. Nachmanson is not relevant because Dr. Nachmanson reviewed the claim in regard to Short Term Disability benefits, not Long Term Disability benefits, Order, p. 14. However, the Court fails to

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note that Matrix and/or Core denied the Long Term Disability claim based on a repot from Dr. Nitz, and Dr. Nitz writes that there are no objective findings cited by Dr. Keith Nachmanson in his report of disability (Defendant's Statement of Facts, Exhibit 4). Because Dr. Nachmanson's report apparently became material to the opinion of Dr. Nitz in determining the Long Term Disability claim, a deposition was obtained of Dr.

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Nachmanson and it was discovered that the Administrator failed to provide Dr. Nachmanson with a complete copy of Ms. Wallace's medical records; and that the

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actual medical records contain objective findings to support the claim (Plaintiff's Motion for Summary Judgment, Exhibit 18). Thus, Matrix' and/or Core's reliance and Dr. Nitz's opinion is unreasonable. The Court also found that because treating physician Dr. Hetrick could not state the etiology of Ms. Wallace's headaches, Defendants' denial is reasonable. It is improper to isolate a specific quantum of evidence. One doctor's statement that he is unable to determine the etiology of the headaches does not result in an automatic "win" for Defendants. Dr. Hetrick is a neurologist. A review of treatment notes will show that Dr. Hetrick often did not perform a physical examination and, when he did, he generally limited same to neurological findings; and that the neurological findings were mostly within normal limits (e.g., Defendants Statement of Facts, Exhibit 7, pps. 31, 34, 51). Neurological findings are not relevant as Ms. Wallace's headaches

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are not neurologic, they are cervicogenic. It is unreasonable to ignore the treating physician records that reference physical examinations of the cervical and muscular areas, which examinations and studies reveal abnormalities which are expected to cause headaches, and instead rely on neurological findings. The opinions of the treating pain management physician and primary care physician cannot be ignored.

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CERVICOGENIC HEADACHES ARE NOT EXCLUDED FROM COVERAGE Section 4.03 of the Plan (Defendants Statement of Facts, Exhibit 1) contains a list of exclusions and limitations. In this list, there are 11 specific exclusions, none of which apply to headaches. Thus, there is a reasonable expectation of coverage for the impairment suffered by Ms. Wallace. Section 2.05 of the Plan defines disability as an

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illness or injury that is substantiated by objective medical findings (Id. at section 2.05). Section 2.14 states that objective medical findings do not include physicians opinions or

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third party opinions based solely on the acceptance of subjective complaints (Id. at section 2.14). Thus, according to the Plan terms, if there is some objective evidence, physician's opinions and subjective complaints also fall into the category of objective. Here, the Defendants did not consider the subjective complaints or physical opinions as part of the objective requirement . By excluding subjective complaints and physician opinions from the objective findings test, Defendants re-wrote the Plan terms. This is arbitrary and capricious. Abatie v. Alta Health and Life Insurance Co., ___ F.3d ____, 2006 WL 2347660 (9th Cir. August 15, 2006); Stahl v. Tony's Building Materials Inc., 875 F.2d 1404, 1406 (9th Cir. 1999). CONCLUSION Based on the aforementioned, it is respectfully requested that this Court, in light

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of Abatie v. Alta Health and Life Insurance Co., ___ F.3d ____, 2006 WL 2347660 (9th Cir. August 15, 2006) and the case record, reconsider it's Order denying Plaintiff's Motion for Summary Judgment and granting Defendants' Motion for Summary Judgment; and upon such reconsideration, find in favor of Plaintiff Carol Ann Wallace. At a minimum, the Order granting Defendants' Motion for Summary Judgment should be

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vacated and Plaintiff should be entitled to discovery. Respectfully submitted this 14th day of September, 2006.

_s/Eric G. Slepian____________ ERIC G. SLEPIAN

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CERTIFICATE OF SERVICE I hereby certify that on September 14, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF Registrants: Joseph E. Lambert, Esq. 1930 S. Alma School Road, Ste. A-115 Mesa, AZ 85210

s/ Genesia Conover SLEPIAN LAW OFFICE

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