[00:00:00] Speaker 01:
The next case on calendar for argument is Mendoza versus First Room Life.

[00:01:03] Speaker 01:
Good morning, council.

[00:01:05] Speaker 03:
Good morning, your honors. May it please the court. My name is Russell Petty. I'm representing the plaintiff and appellant, Mr. Mendoza.

[00:01:16] Speaker 03:
I'd like to reserve two minutes for rebuttal, but I always say that it never seems to work out. We'll give it another shot.

[00:01:28] Speaker 03:
As the court is aware, what we call a trial in an ERISA case really isn't a trial at all. The plaintiff, Mr. Mendoza, he's not allowed to testify. He's not allowed to call witnesses on his behalf to testify. He's not allowed to engage in cross-examination of Unum's witnesses. He's not allowed to introduce any evidence at all that's not part of the administrative record.

[00:01:56] Speaker 03:
I think we all agree that Mr. Mendoza is entitled to a trial at some point. And I submit that the courts and the regulators who created this process for resolving ERISA cases intended that the trial should be during the administrative process prior to litigation in the back and forth that this court in Putin decided that should be a back and forth conversation. where Mr. Mendoza learns the specific reasons why Unum believes his evidence of disability is insufficient so that he could respond with facts and arguments so that the case is ready to be heard by a district court, which is really acting as more of an appellate court, not taking any new information, but simply agreeing or disagreeing with the reasons for the denial given by the insurance company.

[00:03:00] Speaker 01:
Counsel, what case are you relying upon to support your argument that there should have been a trial in this case?

[00:03:09] Speaker 03:
Well, you mean a trial at the administrative?

[00:03:11] Speaker 01:
Well, whatever. You're arguing that the district court should have that evidence should have been presented, there should have been cross-examination. So tell me what case you're relying upon to support your argument that that was appropriate in this case.

[00:03:26] Speaker 03:
Your Honor, I'm sorry. I might have been misunderstood. I'm merely saying that the trial, what we call a trial, the point at which the evidence is contested, has to take place at some point. I'm not suggesting it should have taken place in front of the district judge. I'm saying it should have taken place in the conversation between Mr. Mendoza and his lawyer and Unum prior to litigation taking place.

[00:03:56] Speaker 01:
So what case are you relying upon to support? I'm assuming that you're saying because that didn't take place that this ruling is erroneous. Is that your basis for saying we should reverse this ruling?

[00:04:11] Speaker 03:
That is correct, Your Honor. And I'm relying primarily on Collier County. Harlech, Beverly Oaks, and those cases that state that the district court has to either approve or disapprove the insurance company's decision for the specific reasons given, and the insurance company is not allowed to raise new issues that weren't discussed below, and the district judge is not allowed to uphold the insurance company's decision for reasons that were not contained in the denial letter.

[00:04:49] Speaker 01:
Okay, on this record, what information are you asserting that the district court relied on that was not part of the insurance company's decision?

[00:05:02] Speaker 03:
Well, you know, I list three in our papers, but let me go with the one that I think is the most obvious, and that is the witness statements. In the course of the...

[00:05:14] Speaker 03:
of the appeal.

[00:05:16] Speaker 03:
Mr. Mendoza is a lawyer, provided five witness statements of people who knew Mr. Mendoza well.

[00:05:24] Speaker 03:
They knew him before his illness and they knew him after his illness. And they all testified with some degree of specificity as to how capable and robust he was an athlete prior to getting the illness. And then after the illness, he

[00:05:44] Speaker 01:
had lost such a tremendous amount of weight that he was hardly recognizable as the... So just so I understand you, you're complaining that the district court considered witness statements that the plaintiff submitted?

[00:05:59] Speaker 03:
No, I'm saying that this was submitted by the plaintiff, and going with my trial analogy, any cross-examination... of these witness statements should have taken place during the administrative process. And instead, Unum completely ignored these witness statements. As a matter of fact, and maybe Mr. Bernanke can do better than I can, but I can't find a place in the administrative record where anybody from Unum actually ever read those statements.

[00:06:30] Speaker 03:
They certainly didn't, you know, they had all sorts of things they could have done during the administrative process, claims handling tools, to adjudicate the reliability of those statements. They could have sent a field investigator out to talk to them. They could have given those witness statements to their medical professionals and say, is this consistent with the record? They could have conducted surveillance on Mr. Mendoza to see if what the witnesses were saying about his activities were true. But instead they did absolutely nothing. I'm sorry, Your Honor.

[00:07:00] Speaker 00:
I was going to ask, so the district court, I think, contextualized the witness statements to say they seem to be very similar to Mr. Mendoza's own statements, their lay statements, and they don't add much to the court's or UNAM's conclusion that the statements were out of step with the medical records. Why is it a new issue that the district court was relying on that was in that context? Why is that not the right way to look at it?

[00:07:29] Speaker 03:
Well, what the district court did, and you're correct, Your Honor, the district court said, well, I'm going to disregard these witness statements because, you know, none of them are real medical professionals except for one, and she doesn't have any psychiatric training, and they're inconsistent with the medical record.

[00:07:50] Speaker 03:
That's an overstatement. That's something that we should have, if that in fact is why the witness statements are unreliable, we should have learned about that during the administrative process. Unum had an obligation under Collier and Harlech. and Beverly Oaks to specifically state, look, this is why we're not accepting these witness statements as evidence of disability. We would have had an opportunity to conduct a, you know, a redirect to put in additional evidence showing that, no, this is not, these witness statements are reliable.

[00:08:24] Speaker 03:
Your reasons are wrong, and here's why. And that's the way it should have gone up to the district judge. Instead, what happened here is the There was complete silence on Unima's part with respect to these witness statements. And then for the very first time, once litigation came, Mr. Bernanke did an excellent job of coming up with, well, it's inconsistent here and this is different. And that should not have been done at the trial level. because that was too late at that point for us to respond factually.

[00:08:57] Speaker 03:
That should have been done during the administrative process, so we would have had an opportunity to understand Unum's arguments and factual contentions and have an opportunity to respond to that. That's the very point of Harlick and Collier.

[00:09:15] Speaker 00:
Let me ask you this.

[00:09:18] Speaker 00:
Maybe there's a little bit of a tension here, but The district court is also supposed to look at the record de novo, correct?

[00:09:26] Speaker 00:
And so kind of conduct a de novo analysis of the administrative record in looking at Unum's reasons for denial. And so one way of looking at it might be that the district court did, in fact, agree that the denial was appropriate on the basis of a new theory. But another one I think Unum's argument is, This is not a new theory. This is in the same context of Mr. Mendoza's own statements and why the allegations of fatigue and other things were inconsistent with what the medical records showed.

[00:10:01] Speaker 00:
So it's not a new denial, but it's conducting a de novo analysis of the record and contextualizing it that way.

[00:10:09] Speaker 03:
The district court is supposed to do de novo review, Your Honor, but the de novo review, I mean, it's just saying we're not going to give any...

[00:10:19] Speaker 03:
precedence to UNAM's decision, the district court is still not supposed to find some reason for upholding the decision.

[00:10:28] Speaker 00:
It's supposed to look at the specific reasons given by UNAM and either agree with those reasons and uphold the decision or else to... So the district court is not allowed to point to other evidence in the administrative record that supports UNAM's decision?

[00:10:45] Speaker 00:
In its de novo review analysis?

[00:10:47] Speaker 03:
Your Honor, I'm not saying that. What I'm saying is it's supposed to either uphold or overturn the specific reasons for the denial.

[00:10:57] Speaker 02:
Now, why isn't the specific reason here, counsel, that Mendoza's self-reported symptoms are disproportionate to his clinically unremarkable medical testing results? In other words, what he's been saying and claiming to be his disability is doesn't match with the clinical record. Why isn't that the reason? And the district court ruling was consistent with that reason.

[00:11:24] Speaker 03:
Here's my problem here. Let's look at Dr. Talai's report. Now, Dr. Talai did neuropsych testing on Mr. Mendoza and determined that he had a significant deficit in memory, higher functioning, that sort of thing. Now, the UNUM at trial for the first time. None of this happened during the administrative process. At the first time, UNUM said, well, wait a minute. We've got these two malingering scales that are elevated in the report.

[00:11:56] Speaker 03:
And so, therefore, Dr. Talai's conclusions are not to be accepted because Mr. Mendoza was obviously lying to her about the level of his symptoms. Now, That's untrue. Dr. Talai actually dealt with the elevated scales and explained in a report why that wasn't a factor. But that's an argument that should have been made during the administrative process. We should not be hearing that for the first time on appeal because we could have addressed it during the administrative process.

[00:12:31] Speaker 03:
We should have the right to introduce evidence with respect to allegations like that. And it was brought to our attention at a time where we no longer had that opportunity. Now, what happened there is precisely what happened in the Collier case. In the Collier case, the district judge said, well, you know, I can't accept the medical reports by the treating physicians because we believe that Ms. Collier is not telling the truth with respect to her symptoms.

[00:13:04] Speaker 03:
That was a new argument that had not been brought up during the administrative process. It was the reason why the judge denied Ms. Collier's case. And this court held that was improper because these suggestions, the argument that Ms. Collier was not telling the truth to her treating physicians is something that should have been raised during the administrative process. So she would have had an opportunity to respond to it. And it's simply improper given the what constitutes an ERISA trial where you're not allowed to testify, you're not allowed to introduce evidence.

[00:13:40] Speaker 03:
You shouldn't be hearing that for the first time at trial. You should be hearing that during the administrative process when you have an opportunity to address it.

[00:13:53] Speaker 01:
Let me ask you this. Was there enough evidence in the medical reports themselves that were considered by UNAM to support the decision

[00:14:03] Speaker 03:
The decision to deny, Your Honor?

[00:14:05] Speaker 01:
Yes.

[00:14:06] Speaker 03:
No, there were not, Your Honor. There was tremendous evidence of disability in some case.

[00:14:13] Speaker 01:
And I'd like to raise one point that... Before we leave that, isn't it up to the district court to look at the medical reports and decide whether or not there was sufficient evidence in those medical reports to support the decision that was made by the insurer?

[00:14:29] Speaker 03:
Yes.

[00:14:31] Speaker 03:
Your Honor, the issue is, yes, the district judge is supposed to look at the medical records and make a decision, but he could only, the district judge could only uphold Unum's decision for the specific reasons.

[00:14:44] Speaker 01:
But that's why I ask you, was there enough evidence in the medical reports to support the decision that was made?

[00:14:52] Speaker 03:
I don't believe, I don't believe.

[00:14:53] Speaker 01:
What was lacking?

[00:14:55] Speaker 03:
Well, Your Honor, I mean, it's not so much what was lacking. I mean, what all Unum did was pure paper file reviews. Now, this is a case, Your Honor, where no one disputes that Mr. Mendoza has psychiatric conditions, depression and anxiety. All of Unum's review for his physicians, you know, agreed that he has those. And it's a mystery to me how a physician agrees. knowing that someone has got these psychiatric problems and not disagreeing with it, can say without actually meeting the person and talking to them, well, you know, these psychiatric conditions aren't so bad as to impair you from performing your high-functioning job.

[00:15:35] Speaker 01:
There's no requirement that there be a physical examination, is there?

[00:15:39] Speaker 03:
There is no requirement, Your Honor, but I submit that a district judge should be very, and this court has said so, that courts should be very leery of of pure paper file reviews, especially in a case where you're dealing with a psychiatric condition and you're trying to ascertain the level of someone's impairment from a psychiatric condition that everyone agrees that he has. Your Honor, I see that I'm out of time, but there's one point that's not in the papers that I think is important I'd like to raise.

[00:16:15] Speaker 01:
If you didn't raise it in your papers, maybe we'll... I'll give you a minute for rebuttal, but if you didn't raise it in your papers, it's difficult for us to even consider it.

[00:16:24] Speaker 03:
Well, I mean, it's a fact, which is in the record. And that's, in fact, the amount of the weight loss that the witnesses saw corroborated by the medical records. But I appreciate it. I appreciate the one minute for rebuttal.

[00:16:38] Speaker 01:
Thank you, Your Honor.

[00:16:47] Speaker 04:
Good morning, Your Honors. Michael Bernanke for First Unum Wife Insurance Company. To start off, to answer Mr. Petty's question, Unum did review the witness statements. That can be found at 17ER4762. They just did not find them persuasive.

[00:17:04] Speaker 04:
I want to start off my presentation by emphasizing how thorough and well-reasoned the district court's opinion was in this case. It should only be reversed for clear error, and there simply wasn't clear error. It was a 30-page opinion. The first 15 pages of the order goes into factual detail about the administrative record in the claim, objectively, citing to the administrative record throughout, basically. The next two pages discuss the standard of review.

[00:17:36] Speaker 04:
Both sides agreed it was de novo standard of review. And then I think the final 13 pages goes into the various claims that Mr. Mendoza was making. The district court specifically broke those claims down into psychological claims, fatigue claims, physical claims, including the heart condition, and also cognitive claims. The district court then went through each of those categories, provided the evidence that plaintiff felt established disability, looked at what Unum had said in the appeal letter, and ultimately concluded that Mr. Mendoza did not meet his burden of proof of establishing disability under the long-term disability plan.

[00:18:17] Speaker 04:
This is exactly what this circuit has instructed that district courts are supposed to do in Abadi, in Kearney. And again, I think that if you look at this opinion, the thoroughness of it, The assessment given by the district court is exactly what this circuit has been demanding of the district courts in these ERISA cases.

[00:18:38] Speaker 04:
I would like to talk a little bit about Collier because I think that's becoming a problem in these cases. It's no coincidence that the appeal that was submitted in this action was 60 pages, 500 bullet points, thousands of medical records, and numerous witness statements. Under the ERISA regulations, the insurance company only has 45 days to respond. Then it can take another 45 days. So it's a compacted period. And I think there is this argument among the plaintiffs' bar that if they flood the zone with information and the insurance company does not go ahead and discuss all of that information in the denial letter, it has to be deemed admitted.

[00:19:23] Speaker 04:
That is not what Collier stood for. And that's not what happened in this case. I want to start by emphasizing that even if this court wanted to look at Collier, Collier involves something completely different than what the district court did in the underlying action. Judge Huff actually weighed the evidence. The only time she got into credibility was when she was looking at, for instance, as Mr. Petty mentions, weighing the difference between Dr. Hamilton, Mr. Mendoza's treating neurocognitive a psychologist who found that he was not disabled and did not have a cognitive problem against Dr. Talay, the physician retained by Mr. Mendoza's attorney during the appeal.

[00:20:09] Speaker 04:
Dr. Talay did a two-hour Zoom examination, or actually we don't know how long it was. She didn't review any medical records. In order to find a cognitive deficit, she had to assume that Mr. Mendoza had a superior intellect when Dr. Hamilton said it was just average. So when the district court, Judge Huff had to look at these two different reports that were dramatically different, basically, Judge Huff had to basically weigh the evidence. And part of weighing the evidence was looking at what Dr. Talay, the attorney appointed expert, did.

[00:20:43] Speaker 04:
And in that particular case, she only administered three tests. One of those was a malingering test. Mr. Mendoza's scales were elevated. Two of the five malingering test scales were elevated. It was perfectly appropriate for Judge Huff to consider it in terms of weighing the evidence, basically.

[00:21:03] Speaker 02:
Were those grounds, though, they were discussed by the district court, but your friend on the other side, his argument is that they also should have been discussed at the administrative level.

[00:21:12] Speaker 04:
And that goes back to my next point. It's interesting. I I don't think necessarily it would be a Collier violation if they weren't, but they were discussed. The way the ERISA process works is that they submit their appeal. We have medical reviews. We give those medical reviews to them so they can issue rebuttal reports from their physicians. One of the issues we found was the validity testing with Dr. Talao's reports. The other issue we said specifically in one of the medical reports was Mr. Mendoza's self-reported symptoms seemed greatly excessive compared to the actual medical evidence.

[00:21:49] Speaker 04:
They got a chance to provide a rebuttal. Then we put that in our final denial letter. So the underlying factual predicate, I disagree with, that we didn't give them notice that there was a potential issue. But the district court really didn't get into credibility. That's the important thing, basically. The district court was simply weighing the evidence, which is basically, what it's supposed to do under a de novo review. And I'd like to talk a little bit about Collier because I do think Collier has basically been misinterpreted and interpreted.

[00:22:21] Speaker 04:
I went back and I read the underlying briefing in Collier. I think the decision was right, but the language was a little bit loose in that appellate decision. And if you look at Collier, you had an insured who was an insurance agent. The insurance company sent her out for an IME. The insurance company found some questionable items about the claim, but ultimately determined that she did have restrictions and limitations. They then opined, but you could still do your job through, you know, workplace accommodations such as voice-activated software.

[00:22:52] Speaker 04:
So we don't think you meet the definition of disability under the terms of the plan.

[00:22:57] Speaker 04:
Now, when they proceeded to litigation, the plaintiff's counsel thought we were going to be having a discussion about whether or not the definition of disability in the policy requires, you know, workplace accommodations, who has the burden of proof, Those are inherently either legal or objective standards, basically. It has nothing to do with the insured's subjective complaints. When they got to litigation, the insurance company did a bait and switch. And by that, what I mean by that is the insurance company basically said, okay, we're still going to keep that argument, but also there's no objective evidence of your disability.

[00:23:33] Speaker 04:
And subjectively, basically, You know, we don't believe your self-reports because you're untruthful and all these other issues, basically. That was never raised in the actual denial letter. So there's a difference between coming up with a new rationale and what happened in Collier. Again, you had what people thought was going to be an objective discussion of workplace accommodations and who had the burden of proof and whether it came in within the definition of disability in the policy. And what happened in this case where a unit was consistent in saying the medical evidence doesn't support your claim restrictions and then points to certain things to basically support that proposition.

[00:24:15] Speaker 04:
So, for instance, when Mr. Mendoza says, I can't get out of bed. If you look at his declaration, I can't get out of bed. It wipes me out to take my dog out in the morning just to use the bathroom. I can't do anything the rest of the day. I can't remember anything. In some of his earlier interviews, I think he said he had to carry a notebook around with him, a notebook around with him, basically saying, you know, to remember things. What Unum ultimately concluded, though, was after reviewing that information, the medical information, he could work 40 hours a week, 52 weeks a year as a senior underwriter.

[00:24:53] Speaker 04:
So for them to say they're surprised in this particular case... that Unum did not believe his self-reports and they only learned about it in litigation does not withstand scrutiny. It just simply doesn't, basically.

[00:25:07] Speaker 00:
What about the witness statement issue that your friend on the other side raised? At least with Dr. Talay, there was some discussion about that report. But, you know, I think his point is none of it was mentioned in the denial about the witness statements. And so why does that not represent a Collier violation?

[00:25:25] Speaker 04:
Well, again, and I understand that.

[00:25:29] Speaker 04:
You have the witness statements. They were reviewed. I'm not I don't believe I went back and read the letter again. I don't believe they were referenced in the in the final denial letter.

[00:25:39] Speaker 04:
But that being said, it's only one part of the overall review of the claim. And I don't think that either Congress or the United States Supreme Court has WANTS TO TAKE THE ISSUE OF DISABILITY OUT OF DISABILITY ERISA DETERMINATIONS. AND BY THAT I MEAN WHAT THEY SEEM TO BE ARGUING IS, YES, THE EVIDENCE SUPPORTS THAT HE'S NOT DISABLED, BUT YOU FAILED TO MENTION THE WITNESS STATEMENTS IN THE DENIAL LETTER. THEREFORE, JUDGMENT SHOULD BE ENTERED ON OUR BEHALF. THAT DOESN'T MAKE ANY SENSE TO ME.

[00:26:10] Speaker 04:
MORE OVER, THE DISTRICT COURT DID CONSIDER THE WITNESS STATEMENTS AS PART OF ITS DENOVO REVIEW. SO THERE'S REALLY NO HARM THERE, BASICALLY.

[00:26:19] Speaker 04:
So I don't think I don't really think this is a Collier issue at all.

[00:26:23] Speaker 02:
So you had started off your argument by pointing to record sites in which the administrator did look at the witness statements. Can you repeat that?

[00:26:30] Speaker 04:
Yeah, if I can find that here in a second.

[00:26:35] Speaker 04:
If you look at 17 ER 4762, about two quarters down the way down the page.

[00:26:47] Speaker 04:
And so my final statement is I do think Collier was the correct decision. There was a new rationale, but I do think there was some loose language in Collier. And I think that's causing problems in these risk administrative claims down below. And I do hope if the court could clarify what Collier means by a new rationale, it might go a long way in avoiding- What standard would you replace it with?

[00:27:13] Speaker 02:
Or how would you refine the standard?

[00:27:15] Speaker 04:
I- I think a rationale, you know, you know it when you see it, basically, that a language. I think there's plenty of cases that have articulated a new rationale where it's obvious. So, for instance, in Harlick, the initial decision was to deny coverage because the facility wasn't an approved facility. This circuit reversed the insurance company, and then the insurance company came back and said, okay, but the treatment wasn't medically necessary. That's clearly a new rationale.

[00:27:46] Speaker 04:
They're diametrically opposed reasons for denying the claim, or not opposed, but completely different, basically. When you're talking about a new rationale, you're talking about a completely new explanation for why they're denying the claim, not pointing to evidence in support of the original denial. And that's what happened in our case.

[00:28:10] Speaker 04:
Any further questions?

[00:28:12] Speaker 01:
Here's not. Thank you, counsel.

[00:28:13] Speaker 04:
Thank you.

[00:28:14] Speaker 03:
Thank you, Your Honor. First, Your Honor, I'd like to point out that the site given where the witness statements were considered, there's nothing that says anybody read them. They're just journaling what's contained in the file there. With respect to the suggestion that UNM raise the elevated scales from Dr. Talay's report. Someplace they did not. The only physician to look at that would have been Dr. Brown.

[00:28:44] Speaker 03:
He's over at 4752. He never made any mention whatsoever of it. That's an issue that was raised for the first time in litigation. We never had a chance to respond to it. The suggestion is that Dr. Hamilton somehow didn't think that Mr. Mendoza was disabled. In fact, she said he had moderate to severe major depressive disorder and anxiety and clinically meaningful depression, which impacted his ability to focus above and beyond COVID memory change.

[00:29:18] Speaker 03:
There's no relation to Dr. SLP Lee, who also performed cognitive testing that showed a 20 to 40 percent reduction in Mr. Mendoza's higher cognitive function performance. My time is out. I'm happy to respond to any questions the court may have.

[00:29:38] Speaker 01:
It appears not. Thank you, counsel.

[00:29:40] Speaker 03:
Thank you, Your Honor.

[00:29:41] Speaker 01:
Thank you to both counsel for your helpful arguments. The case just argued is submitted for a decision by the court.