Protracted ERISA Discovery Fight Yields Evidence of “Independent” Reviewer Partiality

• “Independent” physicians warrant a hard look: ERISA administrators rely on the opinions of “independent” physicians to provide medical opinions on the validity of disability claims.

  • These physicians are usually supplied by a third-party medical reviewing company that to provide medical assessment of claims.

  • In Demer v. IBM Corp., the Ninth Circuit recognized that two physicians “earned a substantial amount of money . . . and [had] performed a substantial number of reviews” for administrator MetLife, which “raise[d] a fair inference that there [was] a financial conflict which influenced” their assessment.

  • Now a long-litigated case has illustrated the struggle (and worthwhileness) of obtaining the information needed to determine bias in reviewing.

• The set-up:

  • Ruby Chacko worked for AT&T for more than 20 years as a software engineer. She began experiencing severe pain in her eyes, neck, shoulders, and arms and blurred vision. She was diagnosed with bilateral dry eye syndrome, cervical radiculopathy, and hyperlipidemia.

  • Chacko received STD benefits and 3 months of LTD benefits before they were terminated because her administrator asserted she had not shown evidence of symptoms severe enough to impair her ability to work.

  • On appeal her file was reviewed by Dr. Howard Grattan, who opined after paper review that “the medical file does not include enough evidence to clearly indicate she would be placed at risk of further injury by performing modified work duties as previously outlined," and "there are not enough clinical findings to indicate the claimant would be unable to perform any type of work." Dr. Grattan has been subject to prior judicial criticism for his reviews.

  • Chacko filed suit. The claim was subject to “abuse of discretion” review.

• The discovery slog: Chacko served requests for production and interrogatory requests on AT&T on a range of conflict of interest topics and fireworks ensued.

  • Motion to Compel 1: AT&T opposed discovery wholesale and convinced a magistrate judge to deny discovery beyond “completeness of the administrative record.” But the District Court partially overturned that decision on reconsideration, holding that discovery into “financial conflicts of interest” was warranted under Demer.

  • Motion to Compel 2: A few months after that order the parties were back at it. AT&T hand-waived toward burden and overbreadth, but its core contention was that because its claims administrator—Sedgwick—had hired third-party medical reviewing company NMR, it had no obligation to produce anything showing Gratton’s neutrality and lack of bias. The magistrate judge held the prior order “clearly contemplated plaintiff conducting discovery of the type at issue here” and granted the motion.

  • Motion to Compel 3: AT&T struggled to get the message and faced yet another motion. This time it argued that it had asked Sedgwick and NMR for the information very nicely, but the companies said no and what could AT&T do? The Court found that AT&T had a right to obtain information from Sedgwick under its contracts and ordered production.

• The records tell the story: Chacko’s Motion for Summary Judgment shows the records received from AT&T told a story of conflicted interests.

  • AT&T reported that NMR reviewers analyzed 529 claims for AT&T from 2017-2019.

    • AT&T revealed that of these claims 39.95% were approved and 13% were “partially approved.” Elsewhere AT&T asserted that the percentage of NMR-reviewed cases that ultimately resulted in denial was 54.44%.

    • Chacko obtained at least the “conclusion pages” of Gratton’s prior reviews for AT&T and constructed a table showing that he had found claimants “not disabled” 82% of the time and “partially disabled” 5% of the time, with only 13% of claimant’s found “totally disabled.”

    • The court held that statistics “suggest[ed] that Dr. Grattan harbored a bias in favor of the Plan and that a moderate level of conflict of interest existed in the processing of plaintiff's LTD benefits claim” warranting some skepticism of AT&T’s decision and found multiple “procedural irregularities” that warranted further skepticism. The court granted judgment for Chacko.

• The takeaways:

  • The dogged pursuit of discovery into independent reviewer information is worth the effort, especially when prior courts have criticized the reviewer’s work.

  • AT&T has filed a Notice of Appeal. A published opinion could touch on numerous “skepticism” issues and perhaps reopen the Demer debate on how to weigh physician compensation in assessing conflicts.

  • A great result for Roberts Disability Law and Kantor & Kantor in California.