Governmental Disability Plans Exempt from ERISA: New York Arbitrary-and-Capricious Review, Record-Only Adjudication, and Narrow “Good Cause” Discovery

1. Introduction

Amanda Martin v. Fed. Rsrv. Bank of Cleveland (6th Cir. May 7, 2026) addresses how courts review the denial of long-term disability (“LTD”) benefits under a Federal Reserve disability income plan that is exempt from ERISA as a “governmental plan,” yet contains a New York choice-of-law clause and grants the plan administrator’s delegate broad discretion to decide eligibility.

Plaintiff-Appellant Amanda Martin, a Federal Reserve Bank of Cleveland employee, sought LTD benefits alleging disabling long-haul COVID-19 symptoms (fatigue, migraines, brain fog, dizziness). The Plan’s administrator delegate, Matrix Absence Management, Inc. (“Matrix”), denied her claim and affirmed the denial on appeal after relying on multiple independent physician reviews.

The key issues on appeal were:

• Standard of review for a benefits denial under a non-ERISA governmental plan governed by New York law and conferring discretion on the decision-maker.
• Scope of discovery—whether the plaintiff could obtain open or limited discovery beyond the administrative record.
• Merits under deferential review—whether Matrix’s denial was arbitrary, capricious, or made in bad faith (Martin pursued “arbitrary” in particular).

2. Summary of the Opinion

The Sixth Circuit affirmed across the board:

• Standard of review: The district court correctly applied arbitrary-and-capricious review under New York contract law because the Plan grants Matrix discretionary authority and ERISA does not apply.
• Discovery: The district court did not abuse its discretion by denying open discovery and denying most limited discovery requests; Martin did not make a colorable showing of a conflict of interest or procedural irregularity sufficient to justify extra-record discovery.
• Merits: Matrix’s denial was not arbitrary because it offered a reasoned explanation grounded in the record, including Martin’s continued work through April 13, 2022 and medical notes indicating stability/improvement around the alleged disability onset date.

3. Analysis

3.1. Precedents Cited (and How They Shaped the Decision)

A. ERISA’s inapplicability and the turn to contract law

• O'Kelly v. Fed. Rsrv. Bank of Cleveland (6th Cir. 2023) was the doctrinal bridge: it held the Federal Reserve Bank is a federal instrumentality and the Plan is a governmental plan, so ERISA does not govern; New York contract law applies via the Plan’s choice-of-law clause; and arbitrary-and-capricious review applies where discretion is vested in the decision-maker. The Martin panel largely operationalized O’Kelly as controlling circuit guidance for the same Plan.
• Firestone Tire & Rubber Co. v. Bruch (1989) supplied the conceptual pivot: benefit denials pre-ERISA were governed by contract principles, so when ERISA is inapplicable, courts revert to state-law analogues (here, New York contract law).
• 29 U.S.C. § 1003(b)(1) and 29 U.S.C. § 1002(32) were used to classify the Plan as governmental and therefore excluded from ERISA’s coverage.

B. New York contract interpretation and deferential review when discretion is granted

• Greenfield v. Philles Recs., Inc. (N.Y. 2002) and W.W.W. Assocs., Inc. v. Giancontieri (N.Y. 1990) supported the baseline principle that clear, unambiguous written agreements are enforced according to their terms—here, the Plan’s explicit delegation of broad discretion.
• Welland v. Citigroup, Inc. (S.D.N.Y. 2003), aff’d (2d Cir. 2004), provided the specific New York rule applied: when a plan vests sole authority in the designated decision-maker, a denial may be set aside only if “made in bad faith, was arbitrary or was the result of fraud.”
• Gehrhardt v. Gen. Motors Corp. (2d Cir. 1978) supplied the “reasonable basis” formulation and the admonition that courts may not substitute their judgment for the plan decision-maker when discretion exists.

C. “Breach of fiduciary duty” labeling does not change the review lens

• Varity Corp. v. Howe (1996) was cited for the proposition that recharacterizing a denial of benefits as a fiduciary breach does not necessarily change the standard applied to the administrator’s decision. Martin thus reinforces that plaintiffs cannot avoid deferential review by pleading alternative theories when the gravamen is “wrongful denial.”

D. Discovery beyond the record: narrow procedural exception

• Moore v. Lafayette Life Ins. Co. (6th Cir. 2006) framed the Sixth Circuit’s rule: extra-record evidence is permissible only for procedural challenges (e.g., due process problems, alleged bias), and only when such a violation is at least “colorably established.”
• Wilkins v. Baptist Healthcare Sys., Inc. (6th Cir. 1998) (Gilman, J., concurring) was referenced in the same vein—limiting review to the record absent a justified procedural challenge.
• Metro. Life Ins. Co. v. Glenn (2008) was invoked by Martin to argue for broader conflict discovery; the panel distinguished it because Glenn’s classic structural conflict arises when the same entity both decides and pays claims. Here, the Plan did not allow the Bank to decide eligibility, and Matrix was not shown to be both adjudicator and payor.
• Johnson v. Conn. Gen. Life Ins. Co. (6th Cir. 2009) supported the “mere allegations are insufficient” principle for bias-based discovery.
• Biomed Pharms., Inc. v. Oxford Health Plans (N.Y.), Inc. (S.D.N.Y. 2011) supplied the “good cause” phrasing the district court used, which Martin failed to satisfy.
• Taylor v. Long Term Disability Income Plan for Emps. of Fed. Rsrv. Sys. (S.D.N.Y. 2025) was used as a directly analogous application of record-only review to Matrix determinations under the same Plan, emphasizing that it is inappropriate to judge Matrix on information it did not have when it decided.

E. Record-only review is consistent with how arbitrary-and-capricious review works (ERISA cases cited as instructive)

• Seiser v. UNUM Provident Corp. (6th Cir. 2005) and Killian v. Healthsource Providence Adm'rs, Inc. (6th Cir. 1998) were cited for the ERISA-context point that arbitrary-and-capricious review is typically confined to what the administrator considered—used here not to “import ERISA,” but to illustrate the functional logic of deferential review.
• Wagner v. First Unum Life Ins. Co. (2d Cir. 2004) likewise was referenced for limited, procedural-purpose extra-record development.

F. Merits: what makes a denial “reasoned” rather than arbitrary

• Likas v. Life Ins. Co. of N. Am. (6th Cir. 2007) provided the “reasoned explanation, based on the evidence” test—central to affirmance.
• Black & Decker Disability Plan v. Nord (2003) established that plan administrators need not give special deference to treating physicians and may credit conflicting evidence, though they may not arbitrarily refuse to credit reliable evidence.
• McDonald v. W.-S. Life Ins. Co. (6th Cir. 2003) supported the proposition that relying on one medical opinion over another can be non-arbitrary where explained.
• Williams v. Int'l Paper Co. (6th Cir. 2000), Kalish v. Liberty Mut./Liberty Life Assurance Co. of Bos. (6th Cir. 2005), and Evans v. UnumProvident Corp. (6th Cir. 2006) were cited as examples of when denials can be arbitrary (e.g., inadequate review, conflict plus lack of independent review). The panel used these as contrast: Matrix obtained multiple independent reviews and articulated a consistent rationale.
• Calvert v. Firstar Fin., Inc. (6th Cir. 2005) supported assessing the quality and quantity of evidence and the administrator’s explanation, reinforcing the sufficiency of Matrix’s denial letters.

G. Standards of appellate review and discovery discretion

• Frazier v. Life Ins. Co. of N. Am. (6th Cir. 2013) and Shelby Cnty. Health Care Corp. v. Majestic Star Casino (6th Cir. 2009) were cited for de novo review of legal questions and clear-error review of factual findings.
• Theunissen v. Matthews (6th Cir. 1991), Fisher v. City of Memphis (6th Cir. 2000), Cincinnati Ins. Co. v. Byers (6th Cir. 1998), and United States v. Hart (6th Cir. 1995) were used to frame abuse-of-discretion review for discovery rulings.

H. The “wrong standard” argument rejected

• Fabi v. Prudential Ins. Co. of Am. (E.D.N.Y. 2022) was distinguished because the plan there did not vest sole authority in a decision-maker; it involved conditions precedent to a death benefit rather than discretionary eligibility determinations.

3.2. Legal Reasoning

A. Step one: classify the Plan and select the governing law

The court began with ERISA’s governmental-plan exemption and the Federal Reserve Bank’s status as a federal instrumentality (consistent with O'Kelly v. Fed. Rsrv. Bank of Cleveland). With ERISA inapplicable, the court followed Firestone Tire & Rubber Co. v. Bruch to apply contract-law principles, and then honored the Plan’s New York choice-of-law clause.

B. Step two: apply New York’s discretionary-plan review standard

The Plan’s text granted Matrix “the broadest discretion permissible” and made its decisions “final and binding.” Under New York law (as articulated via Welland v. Citigroup, Inc. and Gehrhardt v. Gen. Motors Corp.), that allocation of discretion triggers an arbitrariness/bad-faith/fraud constraint—not de novo review of disability.

C. Step three: define the record and the permissible scope of discovery

Given deferential review, the court held it could not fairly evaluate “reasonableness” using evidence Matrix never had. As a result, open Rule 26 discovery was incompatible with the review function. Limited discovery could occur only upon a colorable procedural challenge (bias, conflict, due-process irregularity), per Moore v. Lafayette Life Ins. Co. and Johnson v. Conn. Gen. Life Ins. Co.. Martin’s assertions—physicians “on the consultant circuit,” alleged cherry-picking, and speculative conflict theories—did not cross that threshold.

Importantly, the panel narrowed Metro. Life Ins. Co. v. Glenn: the structural conflict Glenn addresses arises when the same entity decides and pays claims. Because the Plan’s structure separated eligibility determination (Matrix) from payment responsibility (and Martin did not establish a Glenn-type dual role), Glenn did not entitle her to conflict discovery on this record.

D. Step four: assess whether Matrix provided a reasoned explanation supported by evidence

On the merits, the court applied the “reasoned explanation” approach (from Likas v. Life Ins. Co. of N. Am.) and accepted that administrators may credit independent medical reviewers over treating physicians (from Black & Decker Disability Plan v. Nord), so long as they do not arbitrarily ignore reliable evidence.

Matrix’s denial letters identified the operative question: whether Martin was impaired as of April 13, 2022 (the date she stopped working) to meet the Plan’s “Total Disability” definition during the “Own Occupation Period.” Matrix relied on medical notes indicating an unremarkable exam and improved migraine control with Botox, the fact that Martin worked for months after the December 2021 infection, and multiple independent reviewers who found no disabling restriction as of the relevant date. That sufficed as a reasoned basis even if Martin’s treating doctors disagreed.

3.3. Impact

• Firmly cements a non-ERISA review framework for Federal Reserve LTD denials in the Sixth Circuit. As a published decision, Martin strengthens and systematizes the approach previously reflected in O'Kelly v. Fed. Rsrv. Bank of Cleveland: New York contract law + discretionary-plan deference + record-only review.
• Constrains plaintiffs’ ability to use ordinary civil discovery to “re-try” disability. Even when claims are pled as breach of contract and breach of fiduciary duty, courts will typically confine adjudication to the administrative record absent a substantiated procedural challenge.
• Narrows the practical reach of Glenn-style conflict arguments in delegated-administration structures. Where eligibility is decided by a delegate and the plaintiff cannot show the delegate also pays claims (or another concrete bias indicator), conflict discovery will be difficult to obtain.
• Signals what claimants must do in the administrative process. Because later discovery and extra-record supplementation are unlikely, claimants must build the strongest possible record during the claim and appeal (objective support where the plan requires it, functional restrictions tied to job demands, and contemporaneous documentation keyed to the asserted onset date).

4. Complex Concepts Simplified

• “Governmental plan” (ERISA exemption): ERISA generally governs employee benefit plans, but not plans established by government entities or federal instrumentalities. The Federal Reserve Bank is treated as such an instrumentality for ERISA purposes, so ERISA’s claim-processing and standards do not apply.
• “Choice-of-law” clause: A contractual term selecting which state’s law governs interpretation. Here, the Plan selects New York law, so New York contract principles control.
• “Arbitrary-and-capricious” review: A highly deferential standard. The court asks whether the decision had a reasonable basis and a reasoned explanation, not whether the judge would have reached the same medical conclusion.
• “Administrative record”: The set of documents the administrator had when deciding the claim (medical records, reports, letters). Under deferential review, courts usually restrict themselves to this record.
• “Structural conflict of interest” (Glenn): A common ERISA concern when the same entity both decides eligibility and pays benefits. The court held that absent that dual role (or comparable proof of bias), discovery into conflicts is not automatic.
• Treating physician vs. independent reviewer: Under Black & Decker Disability Plan v. Nord, there is no automatic “treating physician rule” requiring the administrator to prefer the treating doctor’s view.

5. Conclusion

Martin establishes (and in the Sixth Circuit’s published case law, reinforces) a clear operational rule for Federal Reserve governmental disability plans with discretionary clauses and New York choice-of-law provisions: courts apply New York contract law, review denials under a deferential arbitrary-and-capricious framework, and generally confine review to the administrative record. Discovery beyond the record is available only upon a colorable procedural showing—not on speculative conflict allegations or disagreement with medical weighing. On the merits, the decision underscores that a denial will be upheld where the administrator provides a reasoned explanation supported by record evidence, even in medically complex conditions such as long-haul COVID-19.