Wilson v. Rockline Industries, Inc.

Filing 96

MEMORANDUM OPINION. Signed by Honorable Jimm Larry Hendren on April 1, 2010. (src)

IN THE UNITED STATES DISTRICT COURT W E S T E R N DISTRICT OF ARKANSAS F A Y E T T E V I L L E DIVISION S A M WILSON v. C i v i l No. 08-5191 DEFENDANT PLAINTIFF

R O C K L I N E INDUSTRIES, INC. M E M O R A N D U M OPINION

N o w on this 1st day of April, 2010, comes on for consideration t h e prayer of plaintiff's Complaint for damages as a result of a v i o l a t i o n of the Consolidated Omnibus Budget Reconciliation Act of 1 9 8 5 ("COBRA"), and from the submissions of the parties, and the e v i d e n c e adduced during the jury trial of this matter, the Court f i n d s and orders as follows: 1. Wilson I n this employment discrimination case, plaintiff Sam ("Wilson") alleged that Rockline Industries, Inc.

( " R o c k l i n e " ) was liable to him for age discrimination, wrongful t e r m i n a t i o n in violation of Arkansas law, and violation of COBRA. W i l s o n ' s age discrimination and wrongful termination claims w e r e tried to a jury, but the COBRA claim is a matter for the Court t o decide. 2. W i l s o n ' s COBRA claim is that Rockline failed to provide

h i m and his family notice of their rights under COBRA upon his termination. C O B R A provides that [ t ] h e plan sponsor of each group health plan shall p r o v i d e . . . that each qualified beneficiary who would l o s e coverage under the plan as a result of a qualifying e v e n t is entitled, under the plan, to elect, within the e l e c t i o n period, continuation coverage under the plan.

29 U.S.C. § 1161.

Continuation coverage must extend eighteen 29 U.S.C. § 1162(2)(A).

m o n t h s from the qualifying event.

O n e such qualifying event is "[t]he termination (other than by r e a s o n of such employee's gross misconduct). . . of the covered e m p l o y e e ' s employment." Pursuant to 29 29 U.S.C. § 1163(2). § 1166, an employer of a covered

U.S.C.

e m p l o y e e must notify the administrator of a group health plan about the qualifying event of termination within 30 days, and the

a d m i n i s t r a t o r must notify the beneficiary of his COBRA rights. P u r s u a n t to 29 U.S.C. § 1132(c), an administrator who fails to c o m p l y with 29 U.S.C. § 1166(a)(1) "may in the court's discretion b e personally liable to such participant or beneficiary in the a m o u n t of up to $100 a day from the date of such failure or

r e f u s a l , and the court may in its discretion order such other r e l i e f as it deems proper." 3. T h e parties agree that Wilson experienced a qualifying

e v e n t , and that Rockline is liable for some amount of statutory d a m a g e s under COBRA, as each submitted proposed findings of fact a n d conclusions of law, and a proposed precedent for the Judgment i n this case, that included such damages 1. T h e y disagree on the amount of the penalty. Wilson contends

1 Rockline does not assert that some individual within its organization, or some outside plan administrator, is liable for the statutory penalty, appearing instead to concede that it bears that liability. This may be because it is the plan sponsor and there is no designated administrator, making Rockline liable under 29 U.S.C. § 1002(16(A)(ii). Regardless of the reason, the Court finds that Rockline has conceded its liability, contesting only the amount of that liability.

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for a penalty of $75 per day for 676 days (i.e., until trial of the c a s e ) , or $50,700.00. Rockline contends for a penalty of $25 per

d a y until May 28, 2008, when the jury found Wilson would have been t e r m i n a t e d for legitimate reasons, or $2,450.00. 4. calculated The on Court the finds of that an statutory damages should be

basis

eighteen-month

period,

because

c o n t i n u a t i o n coverage would have been available to Wilson for that l e n g t h of time had he been offered the opportunity to elect such coverage. right to The point of giving a terminated employee notice of the elect to continuation continue he is the not coverage coverage afforded is to afford to him the

opportunity employment.

available that

him

during he is

When

opportunity,

p r e j u d i c e d for the entire time period when he could have had the coverage. Prejudice to the plaintiff is one consideration in

d e t e r m i n i n g statutory penalties under 29 U.S.C. § 1132(c).

Kerr v.

C h a r l e s F. Vatterott & Co., 184 F.3d 938, 948 (8th Cir. 1999). There is, however, no logical basis to extend statutory

d a m a g e s beyond the eighteen month time period, as requested by Wilson. O n the other hand, there is no basis in the evidence to s h o r t e n this time period, as requested by Rockline. Although

R o c k l i n e contends that its reasons for discharging Wilson amount to " g r o s s misconduct," the jury found the stated reasons were not R o c k l i n e ' s real reasons for discharging Wilson, finding instead t h a t he was terminated in violation of Arkansas public policy for

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writing a letter to the Food and Drug Administration informing them t h a t Rockline was shipping contaminated product. Consistent with the jury's verdict, the Court concludes that R o c k l i n e failed to give Wilson notice of his COBRA rights because h e was a whistleblower, not because of any good faith belief that i t had a legitimate reason to terminate him. The fact that Wilson

w o u l d later have been terminated for legitimate reasons does not r i g h t the wrong, because those reasons came to light several months a f t e r the end of the one-month period for giving COBRA notice. 5. T h e Court has considered whether Rockline is entitled to

a cut-off of statutory penalties as of the date the jury found it w o u l d have terminated Wilson for other reasons, and concludes that i t is not. T e r m i n a t i o n alone does not excuse a plan administrator from making continuation event coverage available. the Termination to make is a

qualifying

which

triggers

requirement

such

c o v e r a g e available.

It is only termination for gross misconduct

t h a t will excuse the plan administrator from making such coverage available. T h e term "gross misconduct" as used in COBRA has not been g i v e n a definitive judicial gloss, and the Eighth Circuit Court of A p p e a l s has described it, in Johnson v. U.S. Bancorp Broad-Based C h a n g e , 424 F.3d 734, 739 (8th Cir. 2005), as a "rather nebulous term." The court there upheld a plan administrator's decision that

v i o l a t i o n of company computer policy amounted to gross misconduct

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because it was so defined in the plan and because of the deference d u e to a plan administrator's interpretation of plan language. the case at bar, neither the language of the plan, nor In the

a d m i n i s t r a t o r ' s interpretation of it, are shown by the evidence. I n a strong dissent in Johnson, Judge Bye recites numerous d e f i n i t i o n s of gross misconduct, which rely on concepts such as f l a g r a n t , extreme, shameful, outrageous, unconscionable, shocking, wanton. In the Court's view, the conduct for which the jury found R o c k l i n e would have terminated Wilson on May 28, 2008, is not gross m i s c o n d u c t , for two reasons: * T h e r e was no evidence that Wilson misused any of the

w o r k - r e l a t e d documents he sent to his home computer, or that he r e v e a l e d their contents to third parties or otherwise violated any d u t y of confidentiality to Rockline or to the employees who might h a v e been referred to in those e-mails. * T h e r e was evidence that Rockline routinely tolerated

v i o l a t i o n s of its computer policy, which militates against any f i n d i n g that such violations were gross misconduct. T h e Court concludes that Rockline is not entitled to a cut-off o f statutory penalties as of May 28, 2008. 6. F i n a l l y , the Court must determine the appropriate amount This consideration is informed by

o f statutory damages per day.

t h e fact that Wilson was given pretextual reasons for termination, b u t was actually terminated for whistleblowing. It follows that

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COBRA coverage was denied to Wilson for whistleblowing, an improper r e a s o n , and the Court finds that the full daily amount sought by W i l s o n , $75.00, is appropriate. 7. period, When the this rate is that multiplied Wilson is by the eighteen-month to statutory

Court

finds

entitled

d a m a g e s for Rockline's COBRA violation in the sum of $40,950.00. An award of this amount will be included in the Judgment to be e n t e r e d contemporaneously in this case. I T IS SO ORDERED. /s/ Jimm Larry Hendren JIMM LARRY HENDREN U N I T E D STATES DISTRICT JUDGE

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