Discovery Archives - McKennon Law Group

Discovery in De Novo Review ERISA Cases: Court Grants Plaintiff’s Request for Bias Discovery Concerning Paper Reviewing Consultants

In ruling on an action to recover ERISA benefits, a court generally considers only the evidence contained in the administrative record. However, in certain circumstances, a plaintiff in an ERISA case may be able to introduce evidence outside of the administrative record either by way of discovery or a motion to augment the administrative record.The Ninth Circuit has established guidelines for when the admission of new evidence is appropriate. “[T]he district court should exercise its discretion to consider evidence outside of the administrative record ‘only when the circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.’” Opeta v. Nw. Airlines Pension Plan for Contract Emp., 484 F.3d 1211, 1217 (9th Cir. 2007) (emphasis in original).

Recently, in the matter of Kip Jones v. Life Insurance Company of North America, et al., 2020 WL 2126498 (D. Ariz.May 5, 2020), an Arizona District Judge granted the plaintiff’s request to conduct discovery related to the potential bias of the plan administrator’s medical experts that were utilized during the underlying claims review process. In Jones, the plaintiff filed a lawsuit against Life Insurance Company of North America (“LINA”) after it determined that he no longer met the policy’s definition of “disabled” and, as a result, terminated his life insurance waiver of premium benefit. LINA’s decision relied entirely on paper reviews from its reviewing experts. The plaintiff sought discovery into LINA’s relationships with the vendors that provided the reviewing experts and its history with the experts themselves.

In permitting the requested discovery, the Court recognized that the outcome of the case turned on the credibility of the experts and that “where an expert or the third-party vendor who supplies that expert has a long-standing relationship with or receives substantial compensation from a carrier or industry, and overwhelmingly renders opinions in their favor, such evidence might be important in accessing that expert’s bias and credibility.”

The Court also found that the plaintiff’s unchallenged representations about LINA’s relationship with its vendors and their experts raise a concern regarding the fairness of LINA’s claims handling and that this concern warranted discovery into LINA’s relationships with those vendors and the experts who rendered opinions upon which the decision to terminate plaintiff’s claim was based. In addition, the Court rejected LINA’s argument that the requested discovery was not proportional to the needs of the case because the plaintiff would neither win a large amount of money, nor vindicate vitally important personal or public values. The Court found that the life insurance waiver of premium benefit was a valuable benefit and that the plaintiff’s qualification for the benefit was an important issue at stake in the action.

Ultimately, the Court found that discovery into the potential bias of experts rendering opinions was relevant and met the high burden for discovery in an ERISA case. The Court explained:

LINA will be required to respond to discovery that delves into the number of times it retained and the amount of money it paid to third-party vendors in disability and LWOP claims and medical reviewers utilized here, LINA-generated performance evaluations of these vendors and medical reviewers, the number of times they concluded that a claimant could perform work, LINA-generated performance evaluations for LINA employee Mary Faltaous, and any guidelines and manuals used by LINA in evaluating this claim . . .. The Court finds that LINA has the resources to respond to the discovery requests and is the only party with access to the requested discovery. The Court further finds that the discovery ordered herein is relevant and proportional to the needs of the case and that the burden or expense of the discovery does not outweigh its likely benefit.
Id. at *5.

The plaintiff in Jones also sought to supplement the administrative record with a letter from his treating physician responding to LINA’s doctors’ record reviews. The plaintiff asserted that LINA had not provided him the opportunity to respond to the record reviews during the appeal process. LINA argued, among other things, that ERISA regulations do not contemplate the disclosure of reviewing doctors’ opinions prior to the appeal being decided. The Court rejected this argument and granted the plaintiff’s motion to supplement the administrative record. In granting the motion, the Court relied on Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666 (9th Cir. 2011), which found that failing to furnish medical reports violated ERISA by denying the claimant’s physicians the opportunity to submit written comments and perform additional examinations.

Although discovery in ERISA cases is generally limited, the Jones case establishes an important trend that, in certain circumstances, courts will permit discovery in de novo review cases to uncover insurance company bias. ERISA claimants seeking to conduct discovery into this issue can look to the Jones case as excellent support for allowing such discovery.

When Can a Disability Claimant Obtain Discovery in an ERISA Suit When the De Novo Review Standard Applies?

When it Goes to the Bias of an Insurer’s Consultants, that’s When a claimant who challenges a denial of disability or life insurance benefits by filing a court action under ERISA is generally not able to present evidence to the court that is not in the administrative record. The administrative record consists of all the medical records, documents and other information obtained by and submitted to the plan administrator during the initial stages of the claim and through the appeal process. Because courts are generally unwilling to consider any evidence which is not in the administrative record, plaintiffs are normally not entitled to legal discovery from the insurance company.

However, courts in the Ninth Circuit have carved out exceptions to the above discovery rule in de novo review cases. “[T]he district court should exercise its discretion to consider evidence outside of the administrative record ‘only when the circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.’” Opeta v. Nw. Airlines Pension Plan for Contract Emp., 484 F.3d 1211, 1217 (9^th Cir 2007) (emphasis added.).

In a recent decision by the U.S. District Court of Arizona, Coffou v. Life Insurance Company of North America, 2020 WL 1502104 (D. Arizona 2020), the court allowed discovery in an ERISA case relating to the plan administrator’s alleged use of biased experts when it denied a claim for waiver of premium benefits under a life insurance policy. In Coffou, the Plaintiff, Mary Coffou, filed a lawsuit against Life Insurance Company of North America (“LINA”) after it determined Ms. Coffou did not meet its definition of “disabled” and as a result, denied her a waiver of life insurance policy premiums. Ms. Coffou alleged that LINA intentionally denied her claim by hiring third-party vendors to supply a biased vocational expert and biased medical experts who had a history of providing findings to support LINA’s denial of claims.

While the court stated that compensating experts for work done is not in itself proof of bias, evidence such as a long-standing relationship or substantial compensation may be important to access an expert’s bias and credibility. In Coffou, the Court held as follows:

For several reasons, this case meets the exceptional circumstances test set out by Opeta. This is a case in which the carrier has an admitted structural conflict and a history of self-dealing, resulting in its claims practices being subject to an extensive national “market conduct study,” a 2013 Regulatory Settlement Agreement (“RSA”), and continued monitoring. In addition, Plaintiff’s claims would have been insurance contract claims prior to ERISA. Further, Plaintiff has pointed out that some of LINA’s experts, Drs. Grattan and Mobo, rendered opinions outside their area of expertise. And, Plaintiff has indicated that LINA provided its vocational consultant, Glenna Taylor, with the reports and limitations by its own experts, Drs. Mobo and Grattan, but did not provide all the medical records and report that Plaintiff used to support her claim. Also, LINA did not provide the SSA ALJ’s decision, the SSA claims file, or Plaintiff’s medical, vocational, and lay witness evidence.

LINA’s conduct puts this case outside the garden-variety “structural conflict of interest” scenario. Rather, LINA’s history and the unchallenged representations of Plaintiff that LINA provided its experts with its other experts’ reports, but not the entire record, raises concerns whether LINA’s structural incentive to minimize benefit payments distorts its obligation to fairly handle benefits claims. This warrants discovery into LINA’s relationships with its vendors and experts and into whether it was employing vendors and experts who would reliably do LINA’s bidding.

The Court concluded that discovery beyond the administrative record would be helpful to determine the credibility of LINA’s experts. LINA was ordered to respond to interrogatories relating to its relationship history with the subject third-party vendors and experts used to determine Ms. Coffou’s claim. Specially, LINA was required to respond to discovery that delved into the number of times it retained the subject third-party vendors and experts and what amount of money was paid to them, as well as the number of times its internal vocational expert has conducted assessments and concluded the claimant could perform work.

As Coffou demonstrates, while discovery in ERISA de novo review cases is limited, under the right circumstances the courts will allow discovery that will expose insurance company bias in the denial of ERISA life and disability insurance claims to protect insureds from having their claims improperly denied.

Discovery Disputes in ERISA Breach of Fiduciary Duty Cases: Do the Usual Limitations Apply?

Discovery Disputes in ERISA Breach of Fiduciary Duty Cases: Do the Usual Limitations Apply?

The Employee Retirement Income Security Act of 1974 (“ERISA”) manages many of the benefits people receive from their employers. These benefits include short-term and long-term disability insurance, health insurance, life insurance, accidental death and dismemberment insurance and pension plans. When a claim under an ERISA plan is denied, the beneficiary usually must file an administrative appeal with the Claims Administrator for the benefits. If, after filing an administrative appeal, the Claims Administrator still denies the claim, the beneficiary may sue the Claims Administrator to obtain the benefits in question. ERISA claims differ from more traditional law suits. A judge, not a jury, determines whether the beneficiary is entitled to damages and/or equitable relief. The parties generally cannot pursue written discovery or depose people with relevant information. The court typically decides the claim based on a review of the documents contained in the Administrative Record that had previously been submitted to the Claims Administrator during the administrative process.

Whereas the administrative process may be an effective method of channeling evidence and streamlining court proceedings, for certain types of claims, the process simply does not work well. All Claims Administrators have basic obligations to the beneficiaries under their plans. The Claims Administrator cannot put its own interests above those of the plan’s beneficiaries. When a Claims Administrator breaches that obligation, a beneficiary may bring a claim for a Breach of Fiduciary Duty under ERISA Section 502(a)(3). For example, a Claims Administrator may have misled a beneficiary into thinking they had $300,000 in life insurance benefits when, in fact, they only had $50,000 in benefits. This situation could arise for a variety of different reasons such as eligibility under applicable plan documents because of a beneficiary’s salary. The Claim Administrator’s misstatements may even be unintentional. The beneficiary has still been misled. In such a scenario, the beneficiary may bring a claim for a Breach of Fiduciary Duty. Depending on the nature of the deception, however, the beneficiary may not be able to obtain all needed evidence during the administrative review of the denial. The powerful tools of the discovery process may be required.

Thankfully for beneficiaries, courts reasonably acknowledge that such a limitation should not apply in the context of breach of fiduciary duty claims. For example, in Friemon v. Nat’l Carriers’ Conference Comm., 2018 WL 6171439 (E.D. Mo. 2018), Matheson Friemon sought discovery in a dispute with his former employer Union Pacific Railroad Company (“UPRR”). The underlying dispute arose out of whether Mr. Friemon was eligible for Supplemental Sickness Benefits (“SSB”) under UPRR’s employee benefit plans. Mr. Friemon alleged that UPRR maintained complete control over the application process for SSB, failed to inform him of the deadline to apply for those benefits and failed to provide him with the relevant paperwork for the application.

UPRR disputed its status as a fiduciary under the plan. Mr. Friemon sought discovery on the issue of UPRR’s status as a fiduciary. UPRR challenged Friemon’s right to obtain the discovery. The court ruled that Friemon could propound the discovery in question. The court reasoned that the restrictions to discovery in matters arising under ERISA do not apply to claims of an equitable nature. Claims that are equitable in nature “do not benefit from the administrative process.” Id. at *2 (internal quotations omitted). The court permitted Friemon to conduct his discovery.

Other courts have come to similar conclusions. One such example is Jensen v. Solvay Chemicals, Inc., 520 F. Supp. 2d 1349 (D. Wyo. 2007). In Jensen, plaintiffs worked for Solvay Chemicals, Inc. They accrued benefits under Solvay Chemical’s pension plan. Solvay Chemicals restructured its pension plan. Plaintiffs alleged that the restructuring of the pension plan froze their retirement benefits and lowered the rate of benefit accrual for older employees and employees who had worked for Solvay Chemicals for longer periods of time.

After bringing suit, Plaintiffs sought to propound discovery. Plaintiff filed a motion for permission to seek discovery as an exception to the general rule that ERISA plaintiffs can seek only very limited discovery. The motion went before a magistrate judge, who denied it. The plaintiffs appealed the decision to the district court judge, who overturned the magistrate’s decision. The magistrate had reasoned that “judicial review is limited to the administrative record and any outside discovery is not allowed, except in unusual circumstances.” Id. at 1352. The district court held that plaintiffs could propound their discovery because one of plaintiffs’ claims was for a breach of fiduciary duty. As the district court explained:

Case law does not constrain discovery under ERISA § 502(a)(3) actions. Id. The limited discovery ordered by [the magistrate] and proscribed by [the Tenth Circuit] is limited to claims arising under ERISA § 502(a)(1)(B). This is logical as these actions do not benefit from the administrative process. Courts are not required to give deference to plan committees or fiduciaries in § 502(a3) actions and therefore limitations to the administrative record are not required. Section 502(a)(3) actions are to enforce rights not arising under ERISA plans, but rather arising from ERISA itself. Therefore, a finding that claims arise from ERISA § 502(a)(3) reverts discovery into the traditional realm and is governed under traditional federal, circuit, and local procedure.

Id. at 1355-56; see also Kostecki v. Prudential Ins. Co. of Am., 2014 WL 5094004 (E.D. Mo. 2014) (granting a motion for leave to conduct discovery due to Plaintiff’s claims seeking equitable relief).

Making certain that the administrative record contains all relevant documents and information is very important to litigation of ERISA claims. However, sometimes, a beneficiary simply cannot obtain all needed evidence through the traditional administrative process. During these circumstances, a beneficiary can potentially seek discovery, depending on the nature of the claims brought before the court and the wrongs inflicted upon the beneficiary. Many claims are simply for the wrongful termination of benefits. Under those circumstances, a beneficiary may only be able to obtain limited discovery. See Jensen, 520 F.Supp.2d at 1352. However, a beneficiary can sometimes circumvent the traditional ERISA process in order to obtain the information needed and convince the judge that they are entitled to benefits. This is especially true in breach of fiduciary duty cases.

If your ERISA claim has been denied, knowing when to sue for breach of fiduciary duty in ERISA cases may be integral to the success of your claim. It is important to have experienced and highly qualified disability, health and life insurance attorneys, like those at the McKennon Law Group PC. Fill out our free consultation form today to set a time to discuss your claim with one of our attorneys, several of whom previously represented insurance companies and are exceptionally experienced in handling ERISA and Non-ERISA insurance claims.

Insurance Company Bias in ERISA Cases: Hartford’s History of Bias and Discovery of an Insurer’s Biased Claims Administration Process

The Employee Retirement Income Security Act (“ERISA”), a 1974 federal law, sets minimum standards for many employee benefit plans and serves to provide protection for individuals in these plans. Discovery in ERISA cases is often limited because the statute’s primary goal is to provide inexpensive and expeditious resolution to employee benefit claims. District courts are generally limited to the administrative record unless a so-called structural conflict of interest exists. Considering that insurers make benefit determinations on life, health and disability insurance claims and profit when an adverse decision is made, this scenario creates an inherent conflict of interest whenever an insurer administers a claim.

Courts find that a conflict of interest exists where the “entity that administers the plan, such as an employer or an insurance company, both determines whether an employee is eligible for benefits and pays benefits out of its own pocket.” Metro Life Ins. Co. v. Glenn, 554 U.S. 105, 108 (2008). Where this conflict of interest exists, the plaintiff may be entitled to discovery outside of the administrative record to determine the “nature, extent, and effect” the conflict may have had on the decision-making process. Burke v. Pitney Bowes Inc. Long-Term Disability Plan, 554 F.3d 1016, 1028 (9th Cir. 2008) quoting Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 970 (9th Cir. 2006).

In Black v. Hartford Life Insurance Co., 2018 WL 3872113 (D. Or. Aug. 14, 2018), the court considered the history of bias of Hartford Life Insurance Company (“Hartford”), a leading long-term and short-term disability insurance provider, in deciding whether to allow discovery of its history of biased claims administration. In its ruling, the court found Hartford had a history of biased claims administration based on its litigation history and allowed discovery into this area.

The plaintiff, David Black (“Black”), was employed by DMX Music as a customer service representative. He was diagnosed with Atypical Parkinson’s Disease and obtained Long Term Disability (“LTD”) benefits beginning in December 2005. Black’s LTD policy was insured by Hartford, which was responsible for determining the plaintiff’s eligibility for benefits and for paying benefit awards. He was granted an initial 24 months of LTD benefits based on his inability to perform the material duties of his “own occupation.” After the 24-month period ended, Black continued to receive benefits under the more stringent “any occupation” standard for approximately nine years. See id. at *1.

On November 20, 2015, Defendant Hartford’s Special Investigation Unit (“SIU”) investigated Black’s LTD claim based on online information that Black had started a business. Hartford hired a third-party vendor to conduct surveillance of Black, which showed him walking with a cane, using public transportation, going to the bank, getting his hair cut, shopping and carrying groceries. Hartford also discovered a YouTube video of Black playing in a band in May 2014. The SIU scheduled an interview with Black, which was conducted in March 2016 and hired a neurologist to examine him in June 2016. Based on the neurologist’s examination and review of Hartford’s surveillance footage, he concluded that Black did not have Atypical Parkinson’s disease. See id.

On August 31, 2016, Hartford wrote a letter to Black informing him his LTD benefits had been terminated. Black appealed, which was denied by Hartford. After Hartford’s denial of the plaintiff’s appeal, Black brought suit alleging that Hartford abused its discretion under ERISA when it decided to terminate his LTD benefits claim. Black then served discovery on Hartford and then filed a discovery motion to compel production, seeking three categories of documents: Hartford’s relationships with vendors HUB Enterprises (“HUB”), MES Solutions and/or MES Group (“MES”) and its neurologist, Dr. Robert Egan. Black asserted these areas of discovery would reveal a history of biased claims administration. See id. at *2.

The court noted that permitting “conflict” discovery is well within the discretion of the court and the Ninth Circuit has not endorsed imposing a threshold burden of production on the plaintiff before permitting discovery. See id., citing Burke v. Pitney Bowes Inc. Long-Term Disability Plan, 544 F.3d 1016, 1028 n. 15 (9th Cir. 2008). The court found that in other ERISA cases within the Ninth Circuit, Hartford has used HUB and MES several times to conduct biased investigations. See id.

For example, in Hertz v. Hartford Life & Accessories Insurance Co., 991 F.Supp.2d 1121, 1127 (D. Nev. 2014), Hartford hired HUB to conduct surveillance of the plaintiff in that case. There, the court recognized that Hartford knew its vendors had financial incentives to produce reports that would justify denying benefits. The district court in Hertz granted summary judgment in the plaintiff’s favor, concluding that Hartford’s conflict of interest improperly motivated its benefits decision. Id. at 1143. Similarly, in Caplan v. CAN Financial Corp., 544 F.Supp.2d 984, 991-93 (N.D. Cal. 2008), the Northern District of California considered Hartford’s reliance on a vendor it knew was incentivized to produce biased reports in order to maintain its financial relationship with Hartford. Likewise, a Central District of California court considered Hartford’s “well-established relationship” with MES, noting the increase over time in payments and LTD claim referrals from Hartford to MES. See Black, 2018 WL 3872113 at *2; Kurth v. Hartford Life & Acc. Ins. Co., 845 F.Supp.2d 1087, 1096 (C.D. Cal. 2012).

In the Black case, the court thus found that Hartford operated under a conflict of interest and had a history of biased claims administration. The court was ultimately persuaded by the fact that Hartford used the same vendors as were used in Hertz, Caplan and Kurth and exercised its discretion to allow Black to obtain the discover of Hartford’s financial relationship with its vendors. Black, 2018 WL 3872113 at *3.

The court then considered discovery regarding the performance and evaluation of six Hartford employees involved in terminating Black’s LTD benefits claim. The court noted that whether or not the performance of the employees involved was measured by reference to their ability to deny or terminate LTD claims directly related to whether Hartford’s conflict of interest biased its decision-making process. In Hertz, Hartford’s employees were “acutely aware” that Hartford evaluated them on that basis. Black, 2018 WL 3872113 at *3 citing Hertz, 991 F.Supp.2d at 1134. Evidence produced in that case showed the investigator responsible for terminating Hertz’s claim was evaluated based on her ability to close claims. Another district court found that Hartford’s performance reviews “may reveal a structural incentive for individual claims adjustors to deny disability claims.” Stout v. Hartford Life & Acc. Ins. Co., No. 11-6186 CW JSC, 2012 WL 4464605, at *2 (N.D. Cal. Sept. 25, 2012). The court found that Black’s requests were proportional with the needs of the case and that Black was entitled to discovery of performance evaluations and other incentive-related documents. The court reasoned that such documents have been used by other courts in similar cases as evidence of biased decision-making process. Black, 2018 WL 3872113 at *4.

Conclusion

When dealing with an insurer during an adverse claim decision, it may feel like the company does not have your best interests at heart. Because we litigate often against insurers who deny disability, life and health insurance claims, we know this to be true. While ERISA helps to set guidelines to protect beneficiaries, insurers like Hartford oftentimes overstep these bounds to benefit financially. The Black opinion helps to shed light on the ways insurers administer claims and allow financial bias to permeate their claims decisions. Insurers like Hartford hire biased vendors to render an adverse decision or incentivize employees of the insurers in an attempt to deny benefit claims. Discovery of this evidence may be helpful to determine whether the administrator abused its discretion when it made the benefits decision.

Can an ERISA Claims Administrator Engage in Post-Trial Discovery Regarding Benefit Issues? No, Says District Court

In what may be a matter of first impression, Judge Cormac J. Carney of the United States Federal District Court for the Central District of California denied Sun Life and Health Insurance Company’s Objections to Proposed Judgment in an ERISA long-term disability insurance claim case handled by McKennon Law Group PC. As detailed here, Robert J. McKennon and Scott E. Calvert of the McKennon Law Group secured a victory at trial for their client in an ERISA long-term disability insurance claim lawsuit against Sun Life, with the Court finding that Sun Life abused its discretion in denying Mr. Evans’ claim for long-term disability benefits. Following the Court’s instructions, Mr. Evans filed a “Proposed Judgment Following Trial.” Sun Life offered four separate objections to the Proposed Judgment, all of which were rejected by the Court. Sun Life first objected that Mr. Evans was not entitled to the full 24 months of benefits provided for by the Plan, because he was not disabled for the entire time. Sun Life relied on “an internet search performed by Sun Life’s counsel after” the trial. In rejecting Sun Life’s first objection, the Court noted that it was limited to the evidence found in the Administrative Record, and determined that “there is absolutely no evidence in the administrative record to suggest that Mr. Evans was employed during the 24 month period.” Further, the Court noted that “Sun Life had the opportunity to conduct discovery on this point prior to trial, yet failed to do so” and that “Sun Life made no attempt to either augment the administrative record, or move to have extrinsic evidence considered at trial.” Accordingly, the Court rejected Sun Life’s objection. Sun Life’s second objection was based on the allegation that it needed access to Mr. Evans’ tax returns so it could determine his income level during the relevant 24-month period. Using the same reasoning outlined above, the Court noted that “Sun Life has failed to develop the administrative record on this point” and provided “no reason why it could not have discovered such information prior to trial.” The Court therefore rejected Sun Life’s second objection. The third objection offered by Sun Life was that “Mr. Evans is not entitled to an award of prejudgment interest in excess of the rate for post-judgment interest set forth in 28 U.S.C. § 1961.” The Court criticized Sun Life for making this objection, noting that this issue will be properly addressed in Mr. Evans’ post-trial motion for attorneys’ fees, costs and pre-judgment interest that was not yet filed with the Court. Finally, the Court rejected Sun Life’s fourth objection “that Mr. Evans is not entitled to an award of attorneys’ fees,” again explaining that the issue of attorneys’ fees and costs was not yet before the Court, but would be addressed in Mr. Evans’ Motion for Attorneys’ Fees. In light of the Court’s decision to reject each and every objection offered by the Sun Life in response to the “Proposed Judgment Following Trial,” the Court awarded Mr. Evans $217,068.00, representing long-term disability benefits under the subject ERISA plan from June 1, 2008 to June 1, 2010.

Submission of the Claim File: Seal or Redact?

For most insurance litigation, the majority of the evidence used by both sides comes from the claim file, also known as the administrative record in ERISA cases. The claim file represents the insurance carrier’s written record of its handling and processing of an insurance claim. Obviously, this information is highly relevant whenever coverage or a claim is disputed. Moreover, in the case of life, health, or disability insurance cases, the claim file will also be full of personal and confidential information such as medical records and social security numbers.

The question becomes how best to utilize the information in the claim file during the course of litigation while still addressing the privacy concerns of a public court record. Generally, there are two courses of action. The first is to go through the entire record and redact any personal information, also known as “personal identifiers.” See Federal Rule of Civil Procedure 5.2(a). This can be a very time consuming and expensive process since the claim file can easily encompass several hundred or thousand pages. The second course of action is to submit the claim file under seal. This is usually the quickest, easiest and most cost effective choice when dealing with confidential medical information. The downside to this course of action is that counsel must demonstrate to the court a “compelling reason” to file records under seal. See Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003). Many federal courts have their own Local Rules regarding filing documents under seal. For example, in the Central District of California, Local Rule 79-5.1 provides:

L.R. 79-5.1* Filing Under Seal – Procedures . Except when authorized by statute or federal rule, or the Judicial Conference of the United States, no case or document shall be filed under seal without prior approval by the Court. Where approval is required, a written application and a proposed order shall be presented to the judge along with the document submitted for filing under seal. The proposed order shall address both the sealing of the application and order itself, if appropriate. The original and judge’s copy of the document shall be sealed in separate envelopes with a copy of the title page attached to the front of each envelope. Conformed copies need not be placed in sealed envelopes. Where under-seal filings are authorized by statute or rule, the authority therefor shall appear on the title page of the proposed filing. Applications and Orders to Seal, along with the material to be placed under seal, shall not be electronically filed but shall be filed manually in the manner prescribed by Local Rule 79-5. A Notice of Manual Filing shall also be electronically filed identifying materials being manually filed.

If you opt to file the claim file under seal, what constitutes a compelling reason to do so? At least one court in the Ninth Circuit has held that difficulty in redacting thousands of pages of documents does not, by itself, qualify as a “compelling reason.” In Nash v. Life Insurance Company of North America, 2010 WL 2044935 (Decided May 18, 2010), both parties submitted a joint motion to file a unredacted copy of the administrative record under seal, citing difficulty in redacting 4,500 pages of documents. The parties argued that redacting social security numbers, dates of birth, the names of minor children, and financial account numbers from the administrative record is “impracticable” However, despite being unopposed, the court nonetheless declined to grant the motion, stating:

Historically, courts have recognized a ‘general right to inspect and copy public records and documents, including judicial records and documents. Except for documents that are traditionally kept secret, there is a strong presumption in favor of access to court records. A party seeking to seal a judicial record then bears the burden of overcoming this strong presumption by meeting the compelling reasons standard. That is, the party must articulate compelling reasons supported by specific factual findings, … that outweigh the general history of access and the public policies favoring disclosure, such as the public interest in understanding the judicial process.

Id. (internal citations omitted). Although Nash is unpublished and can be factually distinguishable based on the contents of the claim file at issue, its holding should serve as a warning to future litigants to be wary about filing under seal. That does not mean that filing under seal is never appropriate. Instead, the lesson is to approach the court early in the litigation and seek permission to file under seal. The last thing any attorney wants to do on the eve of a motion filing deadline is to spend countless hours redacting documents.