Nolan v. Heald College, No. 07-15679 (9th Cir. Jan. 13, 2009)

| Jan 13, 2009 | Daily Developments in EEO Law |

Here’s a Ninth Circuit ERISA case that holds, in the wake of MetLife Ins. Co. v. Glenn, 128 S. Ct. 2343 (2008), that summary judgment ought to be harder to get in cases where a conflict of interest arguably contaminated the benefit decision.

Nolan v. Heald College, No. 07-15679 (9th Cir. Jan. 13, 2009):  The claimant, challenging termination of long-term disability benefits, introduced evidence of a potential conflict of interest: 

“Nolan twice appealed the decision, but MetLife denied both appeals in reliance on two independent physician opinions that MetLife had requested from Network Medical Review. Nolan thereafter filed this action under the Employee Retirement Income Security Act of 1974 (ERISA). The district court granted summary judgment in favor of MetLife, concluding that the abuse of discretion standard tempered with no skepticism applied, and that MetLife did not abuse its discretion in denying benefits . . . .

 “Nolan submitted evidence outside of the administrative record at summary judgment. The evidence bore on MetLife’s structural conflict of interest, and more specifically, suggested that Drs. Silver and Jares — the opinions of whom MetLife relied on to deny benefits — were biased in favor of MetLife.”

The court considered the evidence of bias outside the administrative record, citing Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 970 (9th Cir. 2006), but nonetheless granted summary judgment to the plan:

“The district court appears to have recognized that because MetLife operated under a structural conflict of interest, Abatie required the court to consider whether the abuse of discretion standard should be tempered with skepticism. See Abatie, 458 F.3d at 968-69. However, the district court concluded that the traditional rules of summary judgment did not apply in examining the evidence, rejected Nolan’s evidence of bias on the grounds that the evidence did not ‘demonstrate a prima facie case of misconduct,’ and determined that the abuse of discretion standard tempered with no skepticism applied. Thereafter, the district court concluded that MetLife did not abuse its discretion in denying benefits to Nolan because it was entitled to rely on the opinions of Drs. Jares and Silver that Nolan’s injuries were subject to the twenty four month benefits limitation and that she could perform sedentary work.”

Prior circuit law seemingly authorized district courts to treat summary judgment in ERISA benefits cases as, functionally, a paper trial on the merits.  But in the wake of MetLife, the panel reverses summary judgment and holds that the district court — at the Rule 56 stage — must not weigh evidence of bias but instead draw all inferences in favor of the non-movant: 

“We have previously held, however, that where the abuse of discretion standard applies in an ERISA benefits denial case, ‘a motion for summary judgment is merely the conduit to bring the legal question before the district court and the usual tests of summary judgment, such as whether a genuine dispute of material fact exists, do not apply.’ Bendixen v. Standard Ins. Co., 185 F.3d 939, 942 (9th Cir. 1999). Though the Bendixen court did not provide an explicit basis or citation for that conclusion, the conclusion followed in situations where the district court’s review was limited to the administrative record and the claimat was not entitled to a jury trial.”

*    *    *    *

“In this case, the evidence of bias that Nolan submitted, and which was outside of the administrative record, bore directly on the contours of the abuse of discretion standard, as it permitted an inference that Network Medical Review and Drs. Silver and Jares were biased in favor of MetLife. The district court apparently rejected that inference, but did so on summary judgment without applying any of the traditional rules of summary judgment (e.g., the requirement that evidence be viewed in the light most favorable to the non-moving party). Nor did the district court conduct a bench trial on the issue of bias, which in and of itself would have ensured a full bias inquiry. Instead, without evidentiary hearing or bench trial, the district court considered and rejected Nolan’s bias argument by weighing the documentary evidence of bias, and ignoring the protections that summary judgment usually affords the non-moving party. Though the district court would have been permitted to weigh such evidence after bench trial, weighing that evidence on summary judgment was improper in this case where the evidence was outside of the administrative record.”

Looks like MetLife could turn out to be an important precedent yet, even as the U.S. courts of appeals continue to toss off conflicting views on its meaning.  Nice reminder, also, that evidence of biased motives ought to be construed in favor of the non-movant, an important principle in employment discrimination cases.

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