Free Response to Motion - District Court of Arizona - Arizona

1 2 3 4 5 6 7

Joseph E. Lambert (013923) JOSEPH E. LAMBERT, P.C. Mesa Commerce Center 1930 S. Alma School Rd. Ste. A-115 Mesa, Arizona 85210 (480) 755-0772 Attorney for Defendants

IN THE UNITED STATES DISTRICT COURT IN AND FOR THE DISTRICT OF ARIZONA

8 Carol Ann Wallace, 9 10 vs. 11 Intel Corporation as Administrator, Intel Corporation Long Term Disability Benefit 12 Plan and Matrix Absence Management, Inc., 13 Defendants. 14 15 Plaintiff,

No. CV-04-0492 PHX RCB RESPONSE TO PLAINTIFF'S MOTION FOR RECONSIDERATION OF PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DEFENDANT'S CROSS MOTION FOR SUMMARY JUDGMENT

Joseph E. Lambert, P.C. Attorney at Law ))))))))))))))))))))))))

1930 S. Alma School Road Suite A-115 Mesa, Arizona 85210 (480) 755-0772

Pursuant to the Court's Order of August 23, 2006, Defendants1 hereby submit their

16 Response to Plaintiff's Motion for Reconsideration of Plaintiff's Motion for Summary 17 Judgment and Defendant's Cross Motion for Summary Judgment ("Motion for 18 Reconsideration").2 19 The Ninth Circuit's recent decision in Abatie v. Alta Health & Life Insurance Co.,

20 ___ F.3d ___, 2006 WL 2347660 (9th Cir. Aug. 15, 2006), does not change the outcome of 21 the Court's previous analysis of the parties' cross motions for summary judgment. Nothing 22 in the record before the Court manifests a conflict of interests that would justify a 23 "Intel" refers to Defendant Intel Corporation as Administrator, Intel Corporation 24 Long Term Disability Benefit Plan; "Plan" refers to the Intel Corporation Long Term Disability Benefit Plan; "Matrix" refers to Defendant Matrix Absence Management, Inc.; 25 "Appeals Committee" refers to the Intel Disability Appeals Committee. 26 The caption of Plaintiff's Motion for Reconsideration implies that Plaintiff filed a timely motion for summary judgment and that Defendants responded with a cross motion 27 for summary judgment. The record demonstrates that Defendants filed a timely Motion for Summary Judgment several days before the deadline and that Plaintiff then filed a request 28 for extension of time to file her cross motion for summary judgment. Docket #59 at 1-2.
Case 2:04-cv-00492-RCB Document 62 Filed 09/05/2006 Page 1 of 8
2 1

1 heightened level of scrutiny under Abatie or its predecessors, or a different outcome on the 2 merits. 3 This is not a case where "an administrator has an incentive to pay as little as possible

4 to plan participants because the less money the [plan] pays out, the more money it retains in 5 its own coffers." See Abatie, 2006 WL 2347660 *7. By its terms, the Service Agreement 6 under which Matrix exercises unreviewable authority to grant a claimant Plan benefits, see 7 Defendant's Motion for Summary Judgment (Docket #44) at 3, entitles Matrix to a sum 8 certain per year, regardless of how robust or depleted the Plan's assets might be. Separate 9 Statement of Facts in Support of Defendants' Motion for Summary Judgment ("DSOF"), 10 Exh. 2, Attach. A ¶ VII. 11
Joseph E. Lambert, P.C. Attorney at Law ))))))))))))))))))))))))

The skepticism with which the district court in Abatie should have viewed the plan

12 administrator's decision simply is not justified in the case at bar. Cf. 2006 WL 2347660 *1. 13 The district court in Abatie erred by refusing to consider the treating physician's post14 determination declaration that the claimant was totally disabled, even though the plan 15 administrator first raised that issue in its final denial of benefits, thereby denying the 16 claimant an opportunity to provide the necessary proof of total disability. 2006 WL 2347660 17 *3. The district court in Abatie also erred by deferring to the obviously-conflicted plan 18 administrator's conclusion that the claimant's employer had failed to submit a timely 19 "waiver of premium application" required for a grant of benefits - in the face of evidence 20 that the waiver of premium application actually may have been submitted. 2006 WL 21 2347660 *2-3. Nothing in the case at bar would justify the skepticism with which the 22 district court should have viewed the plan administrator's decision in Abatie. 23 I. 24 Abuse of Discretion Is the Proper Standard of Review. Even though the case at bar does not reflect any actual conflict of interest, the Court's

1930 S. Alma School Road Suite A-115 Mesa, Arizona 85210 (480) 755-0772

25 December 2005 analysis and disposition was very much in line with the analytic approach in 26 Abatie. 27 The Ninth Circuit in Abatie did not abandon the established principles for considering

28 heightened scrutiny of a case involving an apparently-conflicted plan administrator. It
Case 2:04-cv-00492-RCB
-2Document 62 Filed 09/05/2006

Page 2 of 8

1 simply discarded the two-part test it had adopted in Atwood v. Newmont Gold Co., 45 F.3d 2 1317, 1322 (9th Cir. 1995), in favor of a straightforward approach that weighs a conflict of 3 interest as a factor in considering whether to give a plan administrator's decisions 4 heightened scrutiny. 2006 WL 2347660. Although this Court formulated its discussion of 5 heightened scrutiny in December to follow Atwood's two-step approach, Docket #59 at 9, its 6 analysis of the relevant evidence would have produced the same result without the two-step 7 approach. Indeed, the analytic touchstones discussed in Abatie are reflected in the Order 8 granting Defendants summary judgment. 9 On page 8 of the Order, for example, the Court quoted Bogue v. Ampex Corp., 976

10 F.2d 1319, 1325 n.29 (9th Cir. 1992), for the point that an administrator's pecuniary interest 11 in a benefits decision should strengthen a court's level of review, a point for which Abatie
Joseph E. Lambert, P.C. Attorney at Law ))))))))))))))))))))))))

12 relies on the Restatement (Second) of Trusts. 2006 WL 2347660 *8. Similarly, on page 15 13 of the Order, the Court recognized that it was "not limited to the administrative record in its 14 `heightened scrutiny' analysis, which inherently precedes any determination that the plan 15 administrator is entitled to deferential review."3 Docket #59 at 15 n.5. The Ninth Circuit 16 clarified its position on that same issue in Abatie. 2006 WL 2347660 *11. Finally, the 17 Court considered this case to present at least an appearance of conflict, "because Intel's 18 financial influence over Matrix under the Service Agreement renders Matrix susceptible to 19 the taint of Intel's conflict," and decided that "the fact of Intel's contract with Matrix is more 20 21 22 23 24 25 26 27 28 The parties too recognized early on that discovery outside the record could be conducted on the conflict of interests issue and negotiated express terms in the Court's Rule 16 Scheduling Order to provide for disclosure and discovery of "(1) whether a conflict of interest existed in Intel Corporation's roles as funding source and plan administrator and, if so, whether that conflict influenced the decision to deny Plaintiff benefits under the Plan . . . ." Docket #20 at 2. The Rule 16 Scheduling Order was filed on September 28, 2004, Docket #20, and Defendants produced a copy of the Service Agreement between Intel and Matrix the next day, Supplemental Statement of Facts in Support of Defendants' Motion for Summary Judgment ("DSSOF"), Exh. 8, Attach. A (incorrectly dated in DSSOF ¶ 36 and Exh. 8 ¶ 2 as September 29, 2005, see Attach. A to Exh. 8 (actual letter dated September 29, 2004). In their March 9, 2005 Responses to (Plaintiff's) Non-Uniform Interrogatories, Defendants identified the two individuals who ultimately provided declarations regarding the Service Agreement. DSSOF ¶ 37. Plaintiff never expressed a timely interest in deposing either of those individuals or any other person as to any alleged conflict of interest. DSSOF ¶ 38.
Case 2:04-cv-00492-RCB
-3Document 62 Filed 09/05/2006
3

1930 S. Alma School Road Suite A-115 Mesa, Arizona 85210 (480) 755-0772

Page 3 of 8

1 appropriately considered as one factor in determining whether the Administrator's decision 2 was actually tainted by conflict." Docket #59 at 10 n.2. The Court's approach was prescient 3 of that articulated by Abatie in overruling Atwood's two-step approach. 4 5 Going forward, plaintiffs will have the benefit of an abuse of discretion review that always considers the inherent conflict when a plan administrator is also the fiduciary, even in the absence of "smoking gun" evidence of conflict.

6 2006 WL 2347660 *10. 7 Notwithstanding the Court's prescience, the record still demonstrates that Matrix

8 alone had the unreviewable autonomy to grant Plaintiff benefits under the Plan, and nothing 9 in the record suggests that any portion of Matrix' payment as claims administrator was 10 linked to the number of claims accepted or denied or otherwise gave Matrix an incentive to 11 be parsimonious.4 Defendants' Reply in Support of Motion for Summary Judgment and
Joseph E. Lambert, P.C. Attorney at Law ))))))))))))))))))))))))

12 Response to Plaintiff's Cross-Motion for Summary Judgment ("Defendants' Reply") (filed 13 7/26/05) at 4-6. Even if a "structural conflict of interest" existed, there was and is no 14 evidence in this case "of malice, of self-dealing, or of a parsimonious claims-granting 15 history." See Abatie, 2006 WL 2347660 *9. This is not a case in which an administrator 16 gave a claimant inconsistent reasons for denial, failed to adequately investigate the claim, or 17 parsimoniously denied meritorious claims. Cf. id. Indeed, well over half of the claims for 18 Plan benefits are granted; over $1.8 million in Plan benefits was paid out in 2002; and over 19 $2.4 million in Plan benefits was paid out in 2003. DSOF ¶ 11. This is not a case in which 20 the record of claims administration or any other factor justifies heightened scrutiny. 21 The Court individually considered and rejected Plaintiff's arguments for heightened

1930 S. Alma School Road Suite A-115 Mesa, Arizona 85210 (480) 755-0772

22 scrutiny in December, much as it would have if Abatie had been applicable at that time. The 23 See Docket #59 at 10 n.2. Further, the mere fact that a third-party administrator is 24 paid to take on the Plan's authority to decide and administer claims cannot create a conflict of interest for that third-party administrator. If that is the case, then every third-party 25 claims administrator of an employer-paid benefits plan is "susceptible to the taint" of the employer's fiduciary interest to Plan participants in general in controlling the unjustified 26 depletion of plan assets. Likewise, any employer that takes on a fiduciary role in a selffunded plan would be saddled with an apparent conflict of interest, regardless of who 27 makes the claims decisions. Such a situation would give employers a significant disincentive to providing the benefit in the first place and cannot have been the 28 congressional intent.
Case 2:04-cv-00492-RCB
-4Document 62 Filed 09/05/2006
4

Page 4 of 8

1 Court analyzed Plaintiff's assertion that Defendants improperly limited the records provided 2 to Dr. Nachmanson - a physician retained to conduct an IME for eligibility under a separate 3 short-term disability plan before Plaintiff even applied for Plan benefits; the Court saw 4 nothing in the facts to justify heightened review. Docket #59 at 11-13. The Court 5 considered Plaintiff's assertion that Defendants had misstated the reasons for denial of Plan 6 benefits and ignored the medical evidence; the Court ultimately rejected that assertion as 7 well, noting that "an adverse decision does not by itself establish breach of fiduciary duty." 8 Docket #59 at 13-16. Finally, the Court analyzed and rejected Plaintiff's contention that 9 Matrix' failure to consider her Social Security disability award as dispositive of her claim 10 under the Plan was evidence of self-interested decision making. Docket #59 at 16-19. 11
Joseph E. Lambert, P.C. Attorney at Law ))))))))))))))))))))))))

The Court correctly concluded that the record did not manifest the kind of self-

12 interested conduct that might have justified a heightened level of scrutiny (even under 13 Abatie) and reviewed the record for abuse of discretion, but with due regard for the 14 "appearance of conflict" it perceived in Matrix' position. The results of the Court's analysis 15 are the same under the long-standing principles discussed in Abatie as they were when 16 expressed in the terms of Atwood's two-step approach. 17 II. 18 The Court Correctly Found that Defendants Did Not Abuse Their Discretion. Although an analysis for heightened scrutiny may look outside the administrative

1930 S. Alma School Road Suite A-115 Mesa, Arizona 85210 (480) 755-0772

19 record, the decision on the merits in an abuse-of-discretion case must still be made on the 20 administrative record. 21 22 23 The district court may, in its discretion, consider evidence outside the administrative record to decide the nature, extent, and effect on the decisionmaking process of any conflict of interest; the decision on the merits, though, must rest on the administrative record once the conflict (if any) has been established, by extrinsic evidence or otherwise.

24 Abatie, 2006 WL 2347660 *11. 25 Plaintiff's Motion for Reconsideration does not challenge the standard of review

26 applied by the Court, but rather seeks to persuade the Court that it misunderstood the 27 medical evidence in the administrative record. According to Plaintiff: "The only question on 28 reconsideration is whether it was reasonable to conclude that Ms. Wallace's headaches are
Case 2:04-cv-00492-RCB
-5Document 62 Filed 09/05/2006

Page 5 of 8

1 not supported by objective medical findings." Motion for Reconsideration at 2-3. In effect, 2 Plaintiff invites the Court to do exactly what the case law says it should not do when 3 reviewing for abuse of discretion: replace the Plan administrator's analysis with its own. In 4 reviewing the administrative record for clearly erroneous findings of fact,5 the Court must 5 6 7 8 9 10 11
Joseph E. Lambert, P.C. Attorney at Law ))))))))))))))))))))))))

avoid[] an overly intrusive process which would lead the courts into a morass of minutely detailed examinations of every decision by plan administrators. That kind of intrusive process would require fine-grained determinations about whether some added piece of evidence would be helpful, rather than more coarse-grained determinations about whether the evidence at hand would support the plan administrator's decision. Snow v. Standard Ins. Co., 87 F.3d 327, 333 (9th Cir. 1996).6 The Court must defer to a plan administrator's decision if there is "relevant evidence [that] reasonable minds might accept as adequate to support [the plan administrator's] conclusion even if it is possible to draw two inconsistent conclusions from the evidence." Snow, 87 F.3d at 331-32 (quoting Maynard v. City of San Jose, 37 F.3d 1396, 1404 (9th Cir. 1994)); see also Ehrensaft v. Dimension Works Incorporated Long Term Disability Plan, 120 F. Supp. 2d 1253, 1260 (D. Nev. 2000) ("It is not the duty of this Court to determine which doctors have the most credible opinions. . . . The fact that there are doctors' reports which conflict with the findings of the doctors' reports relied on by the administrator does not amount to an abuse of discretion."); Voight v. Metropolitan Life Ins. Co., 28 F. Supp. 2d 569, 576 (C.D. Cal. 1998) (citing Snow, 87 F.3d at 331-33 with approval). "The administrator need not be a modern Rhadamanthus; he need only refrain from being arbitrary or capricious." Snow, 87 F.3d at 333. Plaintiff argument for reconsideration is nothing more than a cut-and-pasted

12 13 14 15 16 17 18 19 20 21 22 23

1930 S. Alma School Road Suite A-115 Mesa, Arizona 85210 (480) 755-0772

Reliance on clearly erroneous findings of fact is one of the ways a plan 24 administrator may abuse its discretion. Taft v. Equitable Life Assurance Soc'y, 9 F.3d 1469, 1473 (9th Cir. 1994). 25 6 Although the Snow decision was reversed in 1999, that reversal was based solely 26 on the Standard Insurance plan's insufficiency to confer discretion on the plan administrator in the first place, not on the extent of deference afforded a plan 27 administrator's discretion once established. See Newcomb v. Standard Insurance Co., 187 F.3d 1004, 1005 (9th Cir. 1999); Snow v. Standard Insurance Co., 1999 WL 369799 (9th 28 Cir. 1999)(unpublished).
Case 2:04-cv-00492-RCB
-6Document 62 Filed 09/05/2006

5

Page 6 of 8

1 regurgitation of the facts and arguments presented in Plaintiff's Memorandum of Law in 2 Support of Her Cross-Motion for Summary Judgment and Response to Defendant's Motion 3 for Summary Judgment. Compare Docket #60 with Docket #48. Defendants responded to 4 those arguments in Defendants Reply, and the Court found "ample evidence in the record to 5 support Matrix's conclusion that there were no `objective medical findings,' as defined in 6 the plan." Docket #59 at 20. The Court "thoroughly reviewed the administrative record 7 submitted by the parties and [could] not say that the factual findings were so clearly 8 erroneous that Matrix abused its discretion in relying on them." Docket #59 at 21. 9 Although Plaintiff attempts to dissect and undermine a "for instance" the Court gave in 10 analyzing the administrative record, nothing in the Motion for Reconsideration supports the 11 notion that the Court erred in finding "no indication that Matrix relied on clearly erroneous
Joseph E. Lambert, P.C. Attorney at Law ))))))))))))))))))))))))

12 findings of fact in reaching its decisions." Docket #59 at 20. 13 III. 14 Summary and Conclusion. As observed in Defendants' Motion and Reply, the issue before the Court is not

1930 S. Alma School Road Suite A-115 Mesa, Arizona 85210 (480) 755-0772

15 whether Plaintiff suffers from the headaches she alleges, or even whether her condition is 16 by some definition - "disabling."7 The issue is whether Matrix or the Appeals Committee, 17 on the medical records available at the time their decisions were made, acted arbitrarily and 18 capriciously in applying the Plan's definitions of Disability and Objective Medical Findings 19 to Plaintiff's claim. 20 The evidence is unequivocal and could not support a conclusion contrary to that

21 reached by Matrix and the Appeals Committee. Even if it could, however, the evidence in 22 the record plainly was sufficient to support the decisions of Matrix and the Appeals 23 Committee, and that is sufficient under the applicable case law. The Court should grant 24 Defendants summary judgment because there is no evidence upon which the Court8 could 25 26 Defendants do not, as asserted by Plaintiff, "agree that Ms. Wallace suffers from disabling headaches." See Motion for Reconsideration at 2. That simply is not the issue 27 before the Court. 28
8 7

Any trial of the facts in this case would be before the Court. Docket #12 ¶ 14.
-7Document 62 Filed 09/05/2006

Case 2:04-cv-00492-RCB

Page 7 of 8

1 conclude that Matrix acted arbitrarily and capriciously in denying Plaintiff benefits under the 2 Plan or that the Appeals Committee acted arbitrarily and capriciously in declining to reverse 3 Matrix' decision. There is no genuine issue of material fact to be tried, and summary 4 judgment was and is appropriate under the applicable case law. 5 6 7 8 9 10 11
Joseph E. Lambert, P.C. Attorney at Law ))))))))))))))))))))))))

RESPECTFULLY SUBMITTED this 5 of September 2006. JOSEPH E. LAMBERT, P.C.

/s/ Joseph E. Lambert Attorney for Defendants CERTIFICATE OF SERVICE

I hereby certify that, on September 5, 2006, I electronically transmitted the foregoing document to the Clerk's Office using the CM/ECF System for filing and transmittal of 12 Notice of Electronic Filing to the following CM/ECF Registrants: 13 Eric G. Slepian SLEPIAN LAW OFFICE 14 3737 N. 7th St., Ste. 106 Phoenix, Arizona 85014 15 [email protected] Attorney for Plaintiff 16 17 18 19 20 21 22 23 24 25 26 27 28
Case 2:04-cv-00492-RCB
-8Document 62 Filed 09/05/2006

1930 S. Alma School Road Suite A-115 Mesa, Arizona 85210 (480) 755-0772

/s/ Joseph E. Lambert

Page 8 of 8