Free Reply to Response to Motion - District Court of Arizona - Arizona

1 Jay A. Zweig (011153) Jeffrey B. Kuykendal (021878) 2 GALLAGHER & KENNEDY, P.A. 2575 E. Camelback Road 3 Phoenix, Arizona 85016-9225 (602) 530-8407 4 Attorneys for Defendants 5 6 7 UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA

8 Constance Ann Maynard, an individual,
! " # $ % &' ) * # &" # # #

9 10 vs.

Plaintiff,

NO. CV 04-0525-PHX-RCB DEFENDANTS' REPLY TO PLAINTIFF'S OPPOSITION TO DEFENDANTS' MOTION TO STRIKE

11 CNA Group Life Assurance Company, an Illinois Corporation; Continental Casualty 12 Company, an Illinois Corporation; Hewitt Associates, L.L.C., an Illinois Limited 13 Liability Company; and Hewitt Long Term Disability Plan, 14 Defendants. 15 16

(% #

Defendants CNA Group Life Assurance Company and Continental Casualty

17 Company (collectively "CNA") and Defendants Hewitt Associates, L.L.C. and Hewitt 18 Long Term Disability Plan (collectively "Hewitt") reply to Plaintiff's Opposition to 19 Defendants' Motion to Strike (the "Opposition"). Plaintiff misstates the facts, quotes 20 from documents out of context, and fails to support her arguments with any law. 21 Accordingly, Defendants respectfully request that this Court grant Defendants' Motion to 22 Strike.
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1 I. 2

The 2001 Changes to the Policy Are Part of the ERISA Policy Plaintiff begins the Opposition by alleging that Defendants have "reversed"

3 positions on the issue of whether information outside the administrative record could be 4 considered. Contrary to Plaintiff's allegations, Defendants have maintained throughout 5 that this matter should be decided under an abuse of discretion standard and therefore no 6 evidence from outside the administrative record is admissible. To support her argument 7 Plaintiff once again asserts that the 2001 changes to the subject ERISA policy should not 8 be part of the controlling policy. Unfortunately for Plaintiff, the Court has already 9 determined as a matter of law that the 2001 changes are part of the operative policy and 10 "[i]n abuse of discretion cases, evidence outside the administrative record is completely 11 inadmissible." See March 28, 2005 Order at 12 citing Newman v. Standard Insurance 12 Company, 997 F.Supp. 1276, 1280 (C.D. Cal. 1998). The Court made its decision despite 13 hearing the same arguments from Plaintiff that she makes now about the 2001 changes. 14 See Plaintiff's Memorandum of Points and Authorities in Support of Plaintiff's 15 Opposition to Defendants' Motion for Partial Summary Judgment Pursuant to FRCP 16 56(f) at 2-3; see also Plaintiff's Motion for Reconsideration 4-9; May 9, 2005 Order. 17 Accordingly, Plaintiff's incessant cries that the 2001 amendment to the policy should not 18 be considered part of the operative policy or opens the door to evidence from outside the 19 administrative record has been considered and denied as a matter of law. 20 Additionally, the public policy reasons behind limiting a Court's review to the

21 administrative record remain. If the Court were to consider evidence from outside the 22 administrative record, the Court would be in the position of determining whether CNA Case 2:04-cv-00525-RCB Document 103 -2-Filed 11/03/2005 Page 2 of 9

1 abused its discretion based, at least in part, on information that was not available to CNA 2 when it made its decision. An anomaly Courts seek to avoid. See Taft v. The Equitable
th 3 Life Assurance Society, 9 F.3d 1469, 1472 (9 Cir. 1993) ("[p]ermitting a district court to

4 examine evidence outside the administrative record would open the door to the 5 anomalous conclusion that a plan administrator abused its discretion by failing to 6 consider evidence not before it."). 7 II. 8 Plaintiff's Other Misstatements of Fact Two other statements made by Plaintiff in the Opposition must be corrected. In

9 footnote one to the Opposition, Plaintiff alleges that the 2001 changes to the subject 10 ERISA policy, which were effective January 1, 2001, were not "made" until January 1, 11 2002. Plaintiff is mistaken. Several changes were made to the subject ERISA policy 12 throughout the years. A change was made January 1, 2002, memorialized in "Rider #3." 13 See Exhibit B to Affidavit of Cheryl Sauerhoff dated June 6, 2005 page GKCNA­ 14 CM1335. However, that change is immaterial to the issues before the court and was the 15 change that led to counsel's error and Defendants' subsequent Notice of Errata filed 16 November 9, 2004. The operative change that granted discretionary authority to CNA 17 was made January 1, 2001. See Exhibit B to Affidavit of Cheryl Sauerhoff dated June 6, 18 2005 pages GKCNA­CM1339 to GKCNA­CM1357. Accordingly, footnote one of the 19 Opposition is inaccurate and misleading. 20 Additionally, as is becoming Plaintiff's pattern with each subsequent pleading,

21 Plaintiff's attempt to introduce additional documents and information from outside the 22 administrative record, like the Department of Insurances settlements, should not be Case 2:04-cv-00525-RCB Document 103 -3-Filed 11/03/2005 Page 3 of 9

1 considered by the Court. See footnote three to the Opposition and Plaintiff's Request for 2 Judicial Notice, filed October 22, 2005. This evidence should be stricken for the reasons
1 3 stated in Defendants' Motion to Strike filed October 11, 2005.

4 III. 5 6 7 8 9 10 11 12 13

The Affidavits, Documents and Statements of Fact Must be Part of the Administrative Record, However, They Are Not. Plaintiff makes a two-fold argument as to why the Affidavits, Documents and

Statements of Fact that Defendants seek to strike should not be stricken. First, Plaintiff argues that the Affidavits, Documents and Statements of Fact were part of the administrative record. Second, Plaintiff argues that they did not have to be part of the administrative record because they were "based on" documents that were part of the administrative record. Both arguments are unavailing. A. The Affidavits, Documents and Statements of Fact are not Part of the Administrative Record.

Plaintiff takes quotes from various letters out of context in an attempt to mislead

14 the Court and manufacture an argument that either Hewitt or CNA performed a second 15 appeal of Plaintiff's claim for LTD benefits. However, the facts indisputably show 16 17 Moreover, Courts have addressed the settlements and determined that, even assuming the Department of Insurance was not preempted by ERISA, the 18 settlements operate prospectively only and therefore do not affect existing disability policies. Firestone v. Acuson Corporation Long Term Disability Plan, 326 19 F.Supp.2d 1040, 1051 (N.D.Cal. 2004) (court held the opinion letter and notice would not rescind the terms of previously issued disability policies); Mitchell v. 20 Aetna Life Ins. Co., 359 F.Supp.2d 880, 889 (C.D. 2005) (Court followed the reasoning in Firestone holding that "it seems clearly correct that the Court cannot 21 simply rewrite the terms of the plan based upon this opinion letter, and even if Aetna's policy were revoked, the revocation would only apply prospectively and not 22 retroactively."). Case 2:04-cv-00525-RCB Document 103 -4-Filed 11/03/2005 Page 4 of 9
1

1 neither CNA nor Hewitt conducted a second appeal, and Plaintiff's appeal was completed 2 on January 18, 2002, when CNA affirmed the denial of her claim for LTD benefits. 3 CNA's January 18, 2002 letter denying Plaintiff's appeal clearly states: "[t]his

4 completes our review of Ms. Maynard's appeal. All administrative remedies have been 5 exhausted. This decision is final and binding." See Exhibit F to Affidavit of Cheryl 6 Sauerhoff dated June 6, 2005. Undeterred, Plaintiff and her counsel sent more 7 information and wrote further letters requesting information. Rather than ignore Plaintiff 8 and her counsel, CNA responded in substance, but maintained that the appeal was 9 complete and her administrative record remained closed. See Letter from Cheryl 10 Sauerhoff of CNA to Stuart Sandhaus dated February 28, 2002, attached as Exhibit P to 11 the Declaration of Stuart Sandhaus dated August 18, 2005 ("Ms. Maynard's 12 administrative record remains closed and no further appeal reviews are available through 13 CNA."); Letter from Cheryl Sauerhoff of CNA to Stuart Sandhaus with a copy to Loree 14 Krause Eucolono of Hewitt dated April 5, 2002, attached as Exhibit S to the Declaration 15 of Stuart Sandhaus dated August 18, 2005 ("Ms. Maynard's administrative record 16 remains closed and this decision is final and binding."). 17 Even the two letters offered by Plaintiff as evidence that CNA and Hewitt were

18 allowing a second appeal make clear that Plaintiff's appeal was complete, and her 19 administrative remedies had been exhausted. The letter from Cheryl Sauerhoff to Eileen 20 [sic] Grant dated January 14, 2003 provides: 21 22 In the appeal decision letter, the concluding paragraph informed Ms. Maynard via her attorney that `all administrative remedies have been exhausted and that this decision was final and binding.'
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1 2 3 4 5 6 7

*** We did receive a copy of the packet of information that was sent to Mr. Dale Gifford, CEO of Hewitt Associates LLC, with Mr. Sandhaus [sic] September 26, 2002 letter, and a copy of the December 9, 2002 letter Mr. Sandhaus addressed to Mr. Gifford. Ms. Maynard last worked in June of 2000. We have taken into consideration all information that was pertinent to that period of time in rendering the appeal decision of January 18, 2002. The fact that Mr. Sandhaus is producing information that addresses Ms. Maynard's condition in 2002 does not support her disability as of 2000. CNA stands by the disability determination and appeal ruling. There are no further appeal reviews available.

8 See Exhibit B to Plaintiff's Opposition to Defendants' Motion to Strike filed October 22, 9 2005. 10 11 12 13 14 15 16 17 18 Further, Ilene Grant's letter to Stuart Sandhaus dated January 20, 2003 states: It appears that on or about January 18, 2002, CNA provided you with a five-page final determination of benefits in which CNA advised that Ms. Maynard's administrative record was closed and the decision was final and binding. As you have been advised, Hewitt Associates, as Plan Administrator, delegated the review and appeals processed to CNA. As such, it is Hewitt's determination that all administrative review has been exhausted. Ms. Maynard may now pursue all remedies available at law including filing suit in federal court. *** As previously stated herein, and communicated by CNA on several occasions, Ms. Maynard has exhausted all of her administrative remedies. She may now pursue any available remedies in court should she decided to do so.

19 See Exhibit U to the Declaration of Stuart Sandhaus dated August 18, 2005. 20 As evidenced above, neither CNA nor Hewitt reopened the administrative appeal

21 process for Plaintiff. They did extend Mr. Sandhaus the courtesy of answering his letters 22 and providing him with requested information, but at no point wavered from the clearly Case 2:04-cv-00525-RCB Document 103 -6-Filed 11/03/2005 Page 6 of 9

1 stated position that Plaintiff's administrative remedies had been exhausted as of 2 January 18, 2002, and the decision to deny her LTD benefits was final and binding on 3 that date. Thus, Plaintiff's claims that the Affidavits, Documents and Statements of Fact 4 were part of the administrative record is unavailing. 5 Finally, to the extent Plaintiff takes issue with Defendants' above use of letters

6 outside the administrative record, Defendants are using those letters for the limited 7 purpose of correcting Plaintiff's misleading and inaccurate statements about an alleged 8 second appeal. Defendants are not offering those letters to further support the 9 appropriateness of their denial of Plaintiff's claim for LTD benefits. Further, 10 Defendants' use of those letters should not be considered a waiver of Defendants' right to 11 object to any evidence from outside of the administrative record to evaluate Defendants' 12 denial of Plaintiff's claim for LTD benefits. 13 14 15 B. It is Irrelevant that the Affidavits, Documents and Statements of Fact are "based upon" documents produced during Plaintiff's appeal for LTD benefits.

Plaintiff, without citation to any authority, states that because the Affidavits,

16 Documents and Statements of Fact are "based upon" documents produced during 17 Plaintiff's appeal for LTD benefits, that they should be admissible. Unfortunately for 18 Plaintiff, her position is directly opposed to well-settled law. See Kearney v. Standard
th 19 Insurance Co., 175 F.3d 1084, 1090-1091 (9 Cir. 1999); McKenzie v. General th 20 Telephone Company of California, 41 F.3d 1310, 1316 (9 Cir. 1994); Taft, 9 F.3d at

21 1472; see also March 28, 2005 Order. In fact, virtually all evidence that a party 22 would seek to introduce in an ERISA case would be "based upon" some other Case 2:04-cv-00525-RCB Document 103 -7-Filed 11/03/2005 Page 7 of 9

1 evidence in the administrative record. The position advocated by Plaintiff would 2 eviscerate the law prohibiting evidence from outside the administrative record in 3 ERISA cases decided under an abuse of discretion. 4 IV. 5 Conclusion The Court has determined that the standard of review is an abuse of discretion and

6 therefore the Affidavits, Documents and Statements of Fact, which are not in the 7 administrative record may not be considered to determine if Defendants abused their 8 discretion in denying Plaintiff's LTD benefits. Accordingly, Defendants respectfully 9 request that the Court strike the Affidavits, Documents, and Statements of Fact. 10 11 12 13 14 15 16 17 Electronically filed this 3rd day of November, 2005, with electronic copies to: 18 David F. Gomez, Esq. 19 Michael J. Petitti, Jr., Esq. GOMEZ & PETITTI, P.C. 2525 E. Camelback Road 20 Suite 860 21 Phoenix, Arizona 85016 Co-Counsel for Plaintiff 22 Case 2:04-cv-00525-RCB Document 103 -8-Filed 11/03/2005 RESPECTFULLY SUBMITTED this 3rd day of November, 2005. GALLAGHER & KENNEDY, P.A. By/s/ Jeffrey B. Kuykendal Jay A. Zweig Jeffrey B. Kuykendal 2575 E. Camelback Road Phoenix, Arizona 85016-9225 Attorneys for Defendants

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1 COPY of the foregoing mailed this 3rd day of November, 2005, to: 2 Stuart H. Sandhaus, Esq. 3 STUART H. SANDHAUS, A.P.C. Los Rios Historic District 4 31901 Los Rios Street San Juan Capistrano, California 92675 5 Co-Counsel for Plaintiff 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
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1308857/130-2669

/s/ Jan Vigorito