Klein v. Northwestern Mutual Life Insurance
2011 U.S. Dist. LEXIS 71586
S.D. Cal.2011Background
- Klein, a former litigation partner at Foley & Lardner, is insured under Northwestern's long-term disability plan administered by Standard.
- Northwestern denied Klein's disability claim after a medical event (quadruple bypass) and after a subsequent appeal, which BMI administrative unit upheld the denial.
- Klein filed an ERISA suit asserting denial of benefits and seeking both benefits and equitable relief, plus production of plan documents.
- The Scheduling Order directed a joint motion addressing four discovery issues, including the standard of review under a structural conflict of interest and the fiduciary exception to the attorney-client privilege.
- The court assumed an abuse-of-discretion standard for purposes of the motion and provided guidance on discovery related to structural conflict and the fiduciary exception.
- The court directed the parties to meet and confer to resolve remaining disputes, with potential for a second joint motion if unresolved.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review in structural conflict cases | Klein seeks review under abuse of discretion due to conflict. | Defendants contend abuse of discretion is appropriate; disclosure limited by conflict. | Abuse of discretion assumed for purposes of the motion. |
| Scope of discovery for structural conflict | Discovery should reveal extent/nature of conflict (malice, self-dealing, parsimonious granting). | Discovery should be limited; fishing expeditions disfavored. | Permissible discovery includes evidence of conflict, compensation, training, and statistics, but not all-encompassing fishing expeditions. |
| Fiduciary exception applicability to insurer fiduciaries | Insurance fiduciaries are subject to the fiduciary exception to attorney-client privilege. | Wachtel bars the fiduciary exception for insurers as plan administrator/payor. | Fiduciary exception applies to insurer ERISA fiduciaries. |
| Scope and timing of the fiduciary exception | Exception should apply to pre-final denial communications related to claim administration. | Exception should be constrained to communications seeking defense against personal liability. | Most pre-final-denial communications fall within the exception; post-final denial generally falls outside; individual communications require scrutiny. |
| Waiver and protective-order considerations | Defendants may have waived privilege by producing privileged documents and failing to recover them timely. | No clear waiver; issue not ripe for adjudication. | Waiver issue not ripe; parties to meet and confer on alleged waiver. |
Key Cases Cited
- United States v. Mett, 178 F.3d 1058 (9th Cir. 1999) (fiduciary exception governs when advice concerns plan administration)
- Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir. 2006) (conflict of interest affects review and scope of discovery; limits on outside-record evidence)
- Saffon v. Wells Fargo & Co. Long Term Disability Plan, 522 F.3d 863 (9th Cir. 2008) (quantifies consideration of conflict when reviewing benefits denial)
- Allen v. Honeywell Retirement Earnings Plan, 698 F. Supp. 2d 1197 (D.Ariz. 2010) (pre-final denial communications largely within fiduciary exception; factors for divergence)
- Smith v. Jefferson Pilot FinancialIns. Co., 245 F.R.D. 45 (D. Mass. 2007) (rejects broad application of exemption; supports beneficiaries' access to information)