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Salisbury v. Prudential Life Insurance Co. of America

United States District Court, S.D. New York

February 28, 2017

Katherine Salisbury, Plaintiff,
v.
Prudential Insurance Company of America, Defendant.

          MEMORANDUM & ORDER

          ALISON J. NATHAN, District Judge:

         Plaintiff Katherine Salisbury brings this action under the Employee Retirement Income Security Act ("ERISA") seeking long-term disability benefits under a plan administered by the Prudential Insurance Company of America ("Prudential"). The parties dispute the standard of review that applies in this case and the scope of permissible discovery. Before the Court is Defendant Prudential's "motion to set the standard of review as arbitrary and capricious." Dkt No. 33. For the reasons provided below, the Court concludes that de novo review shall apply. Additionally, the Court denies Salisbury's request for plenary discovery.

         I. Background

         Salisbury was employed by Jefferies Group, Inc. Compl. ¶ 6 (Dkt No. 4); Mot. at 1 (Dkt No. 34). Jefferies Group, Inc. issued a "Group Benefit Plan" under ERISA. Ex. A. at 5 (Dkt No. 34-1). The Plan named Prudential as the claims administrator for disability benefits. Ex. A at 2; Ex. Bat 5, 28 (Dkt No. 34-2).

         Salisbury brought a claim for long-term disability benefits under this plan. On March 23, 2015, Prudential denied Salisbury's claim for long-term disability benefits. Ex. C (Dkt No. 34-3). On October 15, 2015, Salisbury filed an appeal of this decision with Prudential. Id. According to the relevant Department of Labor regulations, Prudential then had 45 days to render a decision. 29 C.F.R. §§ 2560.503-l(i)(1), 2560.503-1 (i)(3). Before the end of this 45 day period, Prudential provided written notice to Salisbury stating that Prudential was extending the time to make an appellate determination. Ex. D (Dkt No. 34-4); Hack Deck Ex. E (Dkt No. 36-5). The sole justification for the extension was that additional time was "required to allow for review of the information in Ms. Salisbury's file which remains under physician and vocational review." Ex. D; Hack Deck Ex. E. On December 16, 2015, Salisbury filed the current lawsuit in this Court challenging Prudential's denial of her long-term disability benefits claim. Dkt No. 1. On January 13, 2016, Prudential issued its appellate decision affirming the denial of Salisbury's claim. Ex. E (Dkt No. 34-5).

         During the litigation of this case, the parties expressed differing views regarding the appropriate standard of review and the proper scope of discovery. The Court now resolves these issues.

         II. Discussion

          Prudential's motion asks the Court to both (1) set the standard of review as "arbitrary and capricious" and (2) reject Salisbury's request for extensive discovery. As explained below, because Prudential violated a Labor Department regulation governing the processing of employee claims under ERISA, the Court concludes that the standard of review is de novo. Additionally, the Court concludes that Salisbury's request for plenary discovery is improper, but notes that Salisbury may file a motion requesting specific pieces of discovery.

         A. The Standard of Review in ERISA Denial of Benefits Cases

          The main question before the Court is what standard of review should apply to Prudential's denial of Salisbury's claim for long-term disability benefits. "[A] denial of benefits challenged under [29 U.S.C.] § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). If the plan expressly vests discretion in the administrator, then the deferential "arbitrary and capricious" standard applies. Kinstler v. First Reliance Standard Life Ins. Co., 181 F.3d 243, 249 (2d Cir. 1999). "The plan administrator bears the burden of proving that the arbitrary and capricious standard of review applies." Id.

         Prudential contends that the arbitrary and capricious standard applies in this case because the Plan under which Salisbury brings her claim expressly vests discretion in the plan administrator. Mot. at 2. Salisbury responds with two reasons why de novo review should apply instead. First, Salisbury argues that the plan does not contain language vesting discretion in the plan administrator. Opp. at 4-10 (Dkt No. 35). Second, Salisbury argues that Prudential failed to comply with the Department of Labor's regulation governing the processing of her claim. Opp. at 1-3. For the reasons provided below, the Court agrees with Salisbury on the second ground and thus sets the standard of review as de novo.

         B. The Plan Expressly Vests Discretion in the Plan Administrator

         The arbitrary and capricious standard of review, as opposed to the de novo standard, applies when a "plan vests the administrator with 'discretionary authority to determine eligibility for benefits or to construe the terms of the plan.'" Frommert v. Conkright, 738 F.3d 522, 527 (2d Cir. 2013) (quoting Nichols v. Prudential Ins. Co. of Am., 406 F.3d 98, 108 (2d Cir. 2005)). Salisbury spends a significant amount of her brief arguing that de novo review applies because the Summary Plan Description ("SPD"), and not the plan itself, is the only document containing language vesting discretion in the plan administrator. Opp. at 4-10; see CIGNA Corp. v. Amara, 563 U.S. 421, 438 (2011) (holding that the summary plan description is not part of the plan and thus cannot create legal rights). Salisbury ignores, however, language within the plan itself that vests discretion in the administrator. Specifically, the plan at issue in this case states that "[b]enefits under this Plan will be paid only if the Plan Administrator (or its designee) decides in his discretion that the applicant is entitled to them." Ex. A. at 7. The Second Circuit has held that this language vests the administrator with discretionary authority, thus triggering application of the arbitrary and capricious standard. Roganti v. Metro. Life Ins. Co., 786 F.3d 201, 204-05 & n.2 (2d Cir. 2015). The Court therefore rejects Salisbury's first argument as to why the standard of review should be de novo.

         C. De Novo Review Applies Because Prudential Did Not Strictly Comply with the Department of ...


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