Free Trial Brief - District Court of Arizona - Arizona

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SCHLEIER, JELLISON & SCHLEIER, P.C. 3101 North Central Avenue Suite 1090 Phoenix, Arizona 85012 Telephone: (602) 277-0157 Facsimile: (602) 230-9250 E-mail: [email protected] [email protected] JAMES M. JELLISON, ESQ. #012763 BRADLEY H. SCHLEIER, ESQ. #011696 Attorneys for Plaintiff IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Jenny Ford, a single woman, Plaintiff, v. Motorola Inc., a Delaware corporation; Motorola, Inc. Involuntary Severance Plan administered by Ron T. Miller, Plan Administrator, Defendants. ) Case No.: CV 03-1271 PHX RGS ) ) ) PLAINTIFF'S SUPPLEMENTAL TRIAL ) BRIEF ) ) ) ) ) ) )

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Plaintiff Jenny Ford, by and through counsel, hereby submits her Supplemental Trial Brief. Since the filing of original Briefs in this matter, the Ninth Circuit Court of Appeals has decided the case of Abatie v. Alta Heath & Life Ins. Co., 458 F.3d 955 (9th Cir., August 15, 2006). Because Abatie more clearly defines ERISA standard of review concepts, and expounds on the issue of discovery in ERISA matters, Plaintiff deemed it appropriate to supplement her previous briefing with this new authority. DATED this 30th day of November, 2006. SCHLEIER, JELLISON & SCHLEIER, P.C. s/James M. Jellison James M. Jellison Bradley H. Schleier Attorneys for Plaintiff

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MEMORANDUM OF POINTS AND AUTHORITIES THE ABATIE DECISION While the instant case was pending decision, on August 15, 2006, the Ninth Circuit filed its decision in Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir. 2006), which overruled that portion of the holding of Atwood v. Newmont Gold Co., 45 F.3d 1317 (9th Cir. 1995) dealing with standard of review as being inconsistent with U.S. Supreme Court precedent. The main question faced in Abatie is what standard of review should be applied by District Courts in examining a plan administrator's decision to deny ERISA benefits when the administrator labors under a conflict of interest or when the process is irregular. Before getting to the holding in Abatie, some background regarding the ERISA benefit-denial standard of review if appropriate. When Congress enacted ERISA, it did not specify the standard of review the courts should apply when a plan participant challenges a denial of benefits. Instead, Congress expected federal courts to develop a body of common law to govern those claims and to determine an appropriate standard of review. See Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1 (1983). In 1989, the Supreme Court addressed the standard of review that courts must apply in reviewing ERISA cases in which plan administrators have denied benefits. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). In Firestone, the Court concluded that general trust principles applied when considering how District Courts should review ERISA denial of benefits cases. Id. at 110-11. When a plan does not confer discretion on the administrator "to determine eligibility for benefits or to construe the terms of the plan," a court must review the denial of benefits de novo "regardless of whether the plan at issue is funded or unfunded and regardless of whether the administrator or fiduciary is operating under a possible or actual conflict of interest." Id. at 115. But, if the plan confers discretionary authority as a matter of contract, then the standard of review shifts to abuse of discretion. Id.

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In Atwood v. Newmont Gold Co., 45 F.3d 1317 (9th Cir. 1995) the Ninth Circuit attempted to refine the Firestone standard of review in a cases where a structural conflict of interest was found to exist. Under the Atwood analysis, a plan participant could challenge the applicability of abuse of discretion review by presenting "material, probative evidence, beyond the mere fact of the apparent conflict, tending to show that the fiduciary's self-interest caused a breach of the administrator's fiduciary obligations to the beneficiary." Id. at 1323. If the participant did so, the burden then shifted to the administrator to prove that the conflict of interest did not affect its decision to deny benefits. If the plan could not carry that burden, the deciding court would give no deference to the administrator's decision to deny benefits, but would instead review the decision de novo. Id. The Abatie court, however, determined that the Atwood analysis failed to follow Firestone's principles and that it placed "an unreasonable burden on ERISA plaintiffs." Abatie, 458 F.3d at 967. Abatie seeks to clarify the standard by which a district court reviews a plan administrator's decision when the plan confers discretion on the administrator and there is a structural conflict of interest. The Abatie court read Firestone "to require abuse of discretion review whenever an ERISA plan grants discretion to the plan administrator, but a review informed by the nature, extent, and effect on the decision-making process of any conflict of interest that may appear in the record." Id. at 968. The Abatie court concluded that "[a] district court, when faced with all the facts and circumstances, must decide in each case how much or how little to credit the plan administrator's reason for denying the insurance coverage." Id. at 969. "An egregious conflict may weight more heavily (that is, may cause the court to find an abuse of discretion more readily) than a minor, technical conflict might." Id. "The level of skepticism with which a court views a conflicted administrator's decision may be low if a structural conflict of interest is unaccompanied, for example, by any evidence of malice, of selfdealing, or of a parsimonious claims-granting history." Id. at 969. "A court may weight a conflict more heavily if, for example, the administrator provides inconsistent reasons for denial,

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fails adequately to investigate a claim or ask the plaintiff for necessary evidence, fails to credit a claimant's reliable evidence, or has repeatedly denied benefits to deserving participants by interpreting plan terms incorrectly or by making decisions against the weight of evidence in the record." Id. at 969-70. The Abatie court concluded that this standard, which no longer requires a burden-shifting analysis, provides that "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." Id. "Moreover, a conflict administrator, facing closer scrutiny, may find it advisable to bring forth affirmative evidence that any conflict did not influence its decision-making process, evidence that would be helpful to determining whether or not it has abused its discretion." Id. Armed with the new standard, in Lawrence v. Motorola, Inc., 2006 WL 2460921 (D. Ariz. 2006), this Court has recently reversed a denial of disability benefits where the plan administrator (1) interpreted the plan so as to require a claimant to provide evidence of disability not specifically required by the plan, (2) automatically relied on the employer experts without crediting the witnesses for the claimant, and (3) failed to provide the claimant with requested documents, records, and other information relevant to the claim. Id. at 42-43. Based on a determination that the administrator had abused his discretion, this Court awarded the benefits which had been denied. Id. Also important to this case, the Abatie court concluded that "[t]here are . . . some situations in which procedural irregularities are so substantial as to alter the standard of review." Id. at 972. The Abatie court reiterated the viability of the principle that "procedural violations of ERISA do not alter the standard of review [from abuse of discretion to de novo review] unless the violations are so flagrant as to alter the substantive relationship between the employer and employee, thereby causing the beneficiary substantive harm." Id. "When an administrator engages in wholesale and flagrant violations of the procedural requirements of ERISA, and thus

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acts in utter disregard of the underlying purpose of the plan as well, we review de novo the administrator's decision to deny benefits." Id. Although Abatie provides more straight-forward guidance on the standard of review, Ms. Ford's argument regarding this last point remains intact: a plan administrator who denies benefits simply because he was directed to deny benefits from the employer's attorney and who does so without any investigation, cannot be said to have utilized any discretion such that an abuse of discretion standard should apply. II. THE APPLICATION OF ABATIE TO THE PRESENT CASE As stated above, even the new authority provided in Abatie supports de novo review by this Court where a plan administrator exercises no discretion and simply does "what [he] is told" by the entity funding the plan. However, even if this Court does not apply de novo review, evidence of the impact of the inherent conflict of interest in this matter is so overwhelming that it is clear that the plan administrator abused whatever discretion is found to have been utilized. The overwhelming facts which show an abuse of discretion are cited in the original briefing and include the following: · · · · · · Defendant Plan continues to argue that Ms. Ford resigned - without evidence of resignation; Defendant Plan continues to argue that Ms. Ford resigned even after it concluded that Ms. Ford merely notified Motorola, Inc. of a future intent to resign having obtained alternate employment; Defendant Plan argues that Ms. Ford's position was not eliminated even though Ms. Ford received a July 8, 2002 written notice that she was involuntarily terminated based on a restructuring and/or reorganization; Even though Ms. Ford provided the July 8, 2002 written notice to Defendant Plan as part of the administrative record, Defendant Plan did not include the written termination notice as part of the record; Defendant Plan offers no explanation why the July 8, 2002 written termination notice is excluded as part of the administrative record and why it was not considered by the Plan Administrator; No documents or other evidence in the record explains why or how the July 8, 2002 termination notice was erroneous;

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The decision to deny benefits was actually made by Motorola, Inc's in-house counsel who possesses a fiduciary duty to Motorola, Inc., and no fiduciary duty to plan participants; Nothing in the administrative record shows that Motorola, Inc.'s in-house counsel received any specific delegation from the Plan Administrator to make the decision in this case; In fact, the administrative record demonstrates that the Plan Administrator never affirmatively delegated any responsibility to Motorola, Inc.'s in-house counsel; No witness statements, correspondence, or other evidence is contained in the administrative record to support any factual or legal conclusion reached; Even though Ms. Ford requested copies of all witness statements and other supporting evidence considered by the Plan Administrator while the claim was being considered, none were provided; The administrative record demonstrates that the Plan Administrator was brand new to the position and did not understand his fiduciary role or responsibilities; The administrative record reveals that an important electronic mail message from the Plan Administrator has been altered, without any explanation from the Defendant Plan; Even though Defendant Plan had full access and possession of Ms. Ford's General Releases, the Plan failed to include these basic documents in the administrative record; The Plan Administrator simply "rubber-stamped" Motorola, Inc.'s in-house counsel's conclusions without any independent review, and signed the denial letter prepared by Motorola Inc.'s in-house counsel immediately and without change; The original benefits denial is based on the erroneous conclusion that Ms. Ford resigned, while the denial on appeal shifts to the equally erroneous explanation that Ms. Ford's position was not eliminated ­ again both positions unsupported by any attached witness statements, documents, or any other evidence; The administrative record demonstrates that the Defendant Plan did not even consider, or evaluate in any way, that portion of the Plan which provides that an employee who merely states a future intent to resign having obtained alternate employment remains eligible for the Plan's severance benefit. In failing to engage in this analysis, the plan administrator disregarded specific plan provisions that would provide for the benefit under the very facts of this case.

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Although Abatie provides new law, the arguments of Ms. Ford remain the same: whether this Court applies a de novo, or abuse of discretion review, the denial of benefits in this case cannot be sustained. III. THE LINGERING ISSUE OF DISCOVERY On March 30, 2005, this Court granted the Defendants' Motion For Protective Order, denied the Plaintiff's Motion To Compel, and denied the Plaintiff's Motion For Reconsideration on the discovery issue. In so Ordering, this Court concluded that its review of the

administrator's decision is for an abuse of discretion and that "any discovery is limited to the contents of the administrative record." Moreover, by this Court's Order, Plaintiff was precluded from any discovery into the issues of this case, including evidentiary issues that would have impacted on this Court's review of the matter in light of the inherent structural conflict of interest present. In Abatie, the court held that "[w]hen a plan administrator has failed to follow a procedural requirement of ERISA, the court may have to consider evidence outside the administrative record." 458 F.3d at 973-74. The court went further to hold that "when an administrator has engaged in a procedural irregularity that has affected the administrative review, the district court should `reconsider [the denial of benefits] after [the plan participant] has been given an opportunity to submit additional evidence.'" Id. Specifically, in Abatie, the court concluded that "the district court erred by refusing to consider the additional evidence [offered by plaintiff]. . ." Id. at 975. In this case, Ms. Ford was denied the opportunity to do any discovery, of any kind. While this Court may have ultimately declined to utilize any evidence obtained, Ms. Ford was never given the opportunity to even develop and present evidence in support of her positions in this matter, including evidence on her position concerning the proper standard of review. Accordingly, because this Court has not allowed Ms. Ford to develop the evidence which Abatie (as well as cases predating Abatie) so clearly provide for, this Court may not find against Ms.

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Ford without first providing the opportunity to engage in the requested discovery. This does not, however, prevent this Court from finding in Ms. Ford's favor, and against Defendants, as it was Defendants who have so steadfastly, and contrary to clear authority, held that Ms. Ford should not be entitled to engage in discovery of any kind. IV. CONCLUSION For all the foregoing reasons, Plaintiff respectfully request that, under any standard of review, this Court conclude that she is entitled to all severance allowances and benefits that have gone unpaid under the operative Plan and that this Court Order that said severance allowances and benefits as provided for under the Plan be awarded. DATED this 30th day of November, 2006. SCHLEIER, JELLISON & SCHLEIER, P.C. s/James M. Jellison James M. Jellison Bradley H. Schleier Attorneys for Plaintiff I hereby certify that on November 30, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Monica L. Goebel John B. Nickerson Steptoe & Johnson Collier Center 201 East Washington Street Suite 1600 Phoenix, Arizona 85004 Attorneys for Defendants I hereby certify that on November 30, 2006, I served the attached document by U.S. Mail on the following, who are not registered participants of the CM/ECF System:

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HONORABLE ROGER G. STRAND United States District Court Sandra Day O'Connor U.S. Courthouse, Suite 622 401 West Washington Street, SPC 57 Phoenix, Arizona 85003-2156 s/Michelle R. Leach

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