Sonnichsen v. Aries Marine Corp
MEMORANDUM RULING re 11 MOTION for Summary Judgment filed by Jeffrey S Sonnichsen, 15 Memorandum in Opposition to Motion filed by Jeffrey S Sonnichsen, 13 MOTION for Summary Judgment filed by Aries Marine Corp. Signed by Judge Tucker L Melancon on 11/17/09. (crt,Jordan, P)
U N IT E D STATES DISTRICT COURT W E S T E R N DISTRICT OF LOUISIANA L A F A Y E T T E -O P E L O U S A S DIVISION J e ffr e y S. Sonnichsen v ersu s A r ie s Marine Corp. C iv il Action No. 09-578 J u d g e Tucker L. Melançon M a g istr a te Judge Mildred E. Methvin
M E M O R A N D U M RULING Before the Court is a Motion for Summary Judgment filed by plaintiff, Jeffrey S. S o n n ic h se n [Rec. Doc. 11] and a cross Motion for Summary Judgment filed by defendant A rie s Marine Corporation [Rec. Doc. 13] and plaintiff's opposition thereto [Rec. Doc. 15]. For the following reasons, each of the motions will be denied in part and granted in part. I . FACTUAL BACKGROUND In March 2007, plaintiff was hired as a cook on offshore oil rigs for Aries Marine Corporation ("Aries Marine"). R. 1, ¶5. During his time of employment with Aries Marine, plaintiff was enrolled in an employee health benefits plan ("the Plan") administered by Aries Marine. The employee health benefits plan provided coverage to plaintiff for costs incurred as a result of medical treatment provided to him. Id at ¶6. Following his last offshore shift from which he returned on October 2, 2008, plaintiff received significant medical treatment, including a lumbar surgery performed by Dr. Harry C. Weiser on October 13, 2008. Id. at ¶¶ 7&8. Due to the surgery and post-operative treatment, Dr. Weiser completed a return to work/restrictions form stating that plaintiff was totally disabled and would be unable to return to work for approximately twelve weeks, until January 6, 2009. Id. Plaintiff alleges 1
that on October 10, 2008, he called and informed Aries Marine of his pending surgery and restriction from work by Dr. Weiser and faxed the restrictions form to Aries Marine. Id. at ¶9. Plaintiff further alleges that he never resigned from his employment with Aries Marine. Id. Dr. Weiser performed surgery on plaintiff on October 13, 2008 and plaintiff received post-operative medical care thereafter. Plaintiff was released to return to work on or about January 6, 2009. Id. at ¶ 10. Plaintiff received an election letter dated December 1, 2008 under the Comprehensive O m n ib u s Budget Reconciliation Act of 1985 (COBRA) entitled "Aries Marine Corporation Continuation Coverage Under the Group Health Plan ("COBRA Election Letter"). Plaintiff alleges in his Complaint that he received the COBRA election letter "on or about December 15, 2008." Id. at ¶ 11.1 The COBRA Election Letter, notified plaintiff that he had been terminated by Aries Marine and that coverage under the employee health benefits plan would expire retroactively to October 3, 2008 if he did not elect to continue health care benefits under COBRA. Id. at ¶ 11. Attached to the COBRA Election Letter was a COBRA election form entitled "COBRA Continuation Coverage Election Form" on which plaintiff could make a selection to continue receiving health care benefits for himself for a premium of $367.44 per month. Id. at ¶ 12. Plaintiff asserts that the COBRA election letter was the first notice that he was terminated on October 2, 2008, and the first notice of his COBRA election rights. Id. at ¶ 13. Plaintiff alleges that in November 2008, he received Explanations of Benefits ("EOBs") stating that his medical expenses were covered under the Plan. However in December 2008, he received EOBs stating that the Plan's coverage had terminated on October 2, 2008 and that coverage would not be provided to multiple
Plaintiff states in his motion that "he did not receive his COBRA rights until after at least December 1, 2008." R. 11, p. 11. 2
health expenses during and after October 2008. Id. at ¶ 14. Plaintiff alleges that by the time he received the COBRA Election Letter and Election Form, he had not received any income in over two months to prepare him to pay the COBRA premium or take measures to secure other health care benefits coverage. On or about February 26, 2009, plaintiff sent correspondence via certified mail to Group R e so u rc e s, the Plan's Administrative Service Agent that provided the EOBs to plaintiff, in o rd e r to place Group Resources on notice that plaintiff was appealing the decision for the f a ilu re of Aries Marine to timely provide plaintiff with COBRA election rights. Id. at ¶ 16. Plaintiff alleges he has not received a response from the appeal. Id. P la in tif f filed this action under ERISA, the Employee Retirement Income Security
Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., alleging that Aries Marine violated the ERISA provision for continuation of coverage under 29 U.S.C. § 1161, et seq. and for failing to provide him with timely notice of the qualifying event, his termination, and of his COBRA rights. Id. at ¶¶17-19. Plaintiff alleges that Aries Marine is liable for all medical expenses incurred since October 2, 2008 that would have been covered under the Plan and for all general damages. Id. at ¶¶ 21-25. Plaintiff also contends that Aries Marine is liable for penalties and attorneys' fees. Id. at ¶¶ 26-27.
II. SUMMARY JUDGMENT STANDARD A motion for summary judgment shall be granted if the pleadings, depositions and a f f id a v its show that there is no genuine issue as to any material fact and that the moving party is
e n titled to judgment as a matter of law. Fed. R. Civ. P. 56; Little v. Liquid Air Corp., 37 F.3d 1 0 6 9 (5th Cir. 1994)(en banc). Initially, the party moving for summary judgment must
d em o n strate the absence of any genuine issues of material fact. When a party seeking summary ju d g m e n t bears the burden of proof at trial, it must come forward with evidence which would e n title it to a directed verdict if such evidence were uncontroverted at trial. Celotex Corp. v. C a tre tt, 477 U.S. 317, 324 (1986). As to issues which the non-moving party has the burden of p ro o f at trial, the moving party may satisfy this burden by demonstrating the absence of evidence s u p p o r t i n g the non-moving party's claim. Id. If the moving party fails to carry this burden, his m o tio n must be denied. If he succeeds, however, the burden shifts to the non-moving party to sh o w that there is a genuine issue for trial.2 Id. at 322-23. O n c e the burden shifts to the respondent, he must direct the attention of the court to e v id e n c e in the record and set forth specific facts sufficient to establish that there is a genuine is s u e of material fact requiring a trial. Celotex Corp., 477 U.S. at 324; Fed.R.Civ.Pro. 56(e). The re sp o n d in g party may not rest on mere allegations or denials of the adverse party's pleadings as a means of establishing a genuine issue worthy of trial, but must demonstrate by affidavit or other a d m i s s ib le evidence that there are genuine issues of material fact or law. Anderson v. Liberty
Where the nonmoving party has the burden of proof at trial, the moving party does not have to produce evidence which would negate the existence of material facts. It meets its burden by simply pointing out the absence of evidence supporting the non-moving party's case. Celotex Corp., 477 U.S. at 325. To oppose the summary judgment motion successfully, the non-moving party must then be able to establish elements essential to its case on which it will bear the burden of proof at trial. A complete failure of proof by the non-moving party of these essential elements renders all other facts immaterial. Id. at 322. 4
L o b b y , Inc., 477 U.S. 242, 248-49 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144. 159 (1970); L ittle , 37 F.3d at 1075. There must be sufficient evidence favoring the non-moving party to s u p p o rt a verdict for that party. Anderson, 477 U.S. at 249; Wood v. Houston Belt & Terminal Ry., 9 5 8 F.2d 95, 97 (5th Cir. 1992). There is no genuine issue of material fact if, viewing the evidence in the light most favorable to the non-moving party, no reasonable trier of fact could find for the n o n -m o v in g party. Lavespere v. Niagara Mach. & Tool Works, Inc., 910 F.2d 167, 178 (5th C ir .1 9 9 0 ). If no issue of fact is presented and if the mover is entitled to judgment as a matter of law, th e court is required to render the judgment prayed for. Fed. R. Civ. P. 56©; Celotex Corp., 477 U .S . at 322. Before it can find that there are no genuine issues of material fact, however, the court m u s t be satisfied that no reasonable trier of fact could have found for the non-moving party. Id I I I. LAW & ANALYSIS A. COBRA NOTICE VIOLATION
C O B R A was enacted "to provide employees with an opportunity to continue to receive g ro u p health insurance after the occurrence of a `qualifying event.'" Myers v. King's Daughters C lin ic , 912 F.Supp. 233, 237 (W.D.Tex.1996), aff'd, 96 F.3d 1445 (5th Cir.1996). Therefore, C O B R A "require[s] an employer who sponsors a group health plan to give the plan's `qualified b e n e fic ia rie s' the opportunity to elect `continuation coverage' under the plan when the b e n e ficiaries might otherwise lose coverage upon the occurrence of certain `qualifying events,' inclu d ing the death of the covered employee, the termination of the covered employee's
e m p lo ym e n t (except in cases of gross misconduct), and divorce or legal separation from the c o v e re d employee." Geissal v. Moore Medical Corp., 524 U.S. 74, 79-80 (1998) (citing 29 U.S.C. § 1163); Degruise v. Sprint Corp., 279 F.3d 333, 336 (5th Cir.2002). "COBRA demands that the c o n tin u a tio n coverage offered to qualified beneficiaries be identical to what the plan provides to p la n beneficiaries who have not suffered a qualifying event." Geissal, 524 U.S. at 80 (quoting 29 U .S .C . § 1162(1)). S i g n if ic a n tly, "the statute requires plans to advise beneficiaries of their rights under C O B R A both at the commencement of coverage and within 14 days of learning of a qualifying e v e n t." 29 U.S.C. § 1166(a); see Degruise, 279 F.3d at 336. Under § 1166(a)(2), an employer has a duty to report most qualifying events, including the termination of employment, to its group h e a lth plan administrator within 30 days of the qualifying event. The plan administrator must then n o tif y the qualified beneficiary within 14 days of being notified of the qualifying event by the e m p lo ye r. 29 U.S.C. § 1166(c).3 In the Fifth Circuit, "the law requires only that the employer m a k e a good faith attempt to comply with COBRA's notification provision." Degruise v. Sprint C o r p ., 279 F.3d 333, 337 (5th Cir.2003). While the statute itself does not specify what exactly
When an employer is also the administrator of the health plan, several courts have construed 29 U.S.C. § 1166(a) & (c) to give the employer a total of 44 days in which to notify a terminated employee, regardless of when the administrator received notice of the employee's termination. See, e.g., Roberts v. Nat'l Health Corp., 963 F.Supp. 512, 515 (D.S.C.1997); 29 C.F.R. § 2590.606-4(b) provides in pertinent part: (2) In the case of a plan with respect to which an employer of a covered employee is also the administrator of the plan, ... the administrator shall furnish to each qualified beneficiary a notice meeting the requirements of paragraph (b)(4) of this section not later than 44 days after ... the date on which the qualifying event occurred.
w ill qualify as notice, numerous courts have held that mailing COBRA notification to an e m p lo ye e 's last known address satisfies the notification provision. Degruise, 279 F.3d at 337. A f te r notification, qualified beneficiaries have 60 days to elect continuation coverage. 29 U.S.C. § 1165(1). If a qualified beneficiary makes a COBRA election, continuation coverage dates from th e qualifying event, and when the event is termination or reduced hours, the maximum period of c o v e ra g e is generally 18 months. Id. § 1162(2)(A). "The beneficiary who makes the election must p a y for what he gets, however, up to 102 percent of the "applicable premium" for the first 18 m o n t h s of continuation coverage, and up to 150 percent thereafter." Id. § 1162(3). The
" a p p lic a b l e premium" is usually the cost to the plan of providing continuation coverage, regardless o f who usually pays for the insurance benefit. Id. § 1164. There is no dispute that Aries Marine is the Plan Administrator for its employees. F u r th e rm o re , the parties agree that plaintiff's termination from Aries Marine was a qualifying e v e n t, that he was not terminated for "gross misconduct," and that he was entitled to COBRA b e n e fits , if he elected to receive them. Therefore, Aries Marine was obligated to provide plaintiff w ith detailed written notice of the availability of COBRA benefits within 14 days of the October 2 , 2008 termination, that is, by October 16, 2008. It is also undisputed that Aries Marine's initial C O B R A notice to plaintiff was dated December 1, 2008.4 B . COBRA PENALTIES
Even assuming 29 C.F.R. § 2590.606-4(b) applies, supra, and Aries Marine had 44 days, or until November 16, 2008, to notify plaintiff, the December 1, 2008 notice was late under the statute.
T h e Court has discretion to impose a penalty for COBRA notice violations. See 29 U.S.C. § 1132(c)(1); Abraham v. Exxon Corp., 85 F.3d 1126, 1132 (5th Cir.1996). ERISA provides for a penalty of up to $110 per day for failure to meet COBRA notice requirements. The penalty p ro v isio n serves as an incentive to plan administrators to meet requests for information in a timely f a s h io n . Davis v. Featherstone, 97 F.3d 734 (4th Cir.1996). "In exercising its discretion to im p o s e penalties for violation of notice requirements, the court should take into consideration the p re se n c e or absence of good faith on the employer's part in putting forth its defense." 60A A m .J u r.2 d Pensions § 776 (citing Mlsna v. Unitel Communications, Inc., 41 F.3d 1124 (7th C ir.1 9 9 4 ); Protocare of Metropolitan N.Y., Inc. v. Mutual Ass'n Administrators, Inc., 866 F.Supp. 7 5 7 (S.D.N.Y.1994); Tucker v. General Motors Retirement Program, 949 F.Supp. 47 (D .M a ss .1 9 9 6 )); Bartling v. Fruehauf Corp., 29 F.3d 1062 (6th Cir.1994); Holford v. Exhibit D e sig n Consultants, 218 F.Supp.2d 901, 908 (W.D.Mich.2002). " P r e ju d ic e to a plaintiff caused by an administrator's failure to supply information is also a significant factor for the court to consider in awarding penalties," 60A Am.Jur. 2d, Pensions § 7 7 6 (citing Protocare of Metropolitan N.Y., Inc. v. Mutual Ass'n Administrators, Inc., 866 F.Supp. 7 5 7 (S.D.N.Y.1994); First Atlantic Leasing Corp. v. Tracey, 738 F.Supp. 863 (D.N.J.1990)), but a penalty can be imposed in the discretion of the court without a showing of actual prejudice or b a d faith. See Godwin v. Sun Life Assurance Co. Of Canada, 980 F.2d 323, 327 (5th Cir.1992); 6 0 A Am.Jur. 2d, Pensions § 776. "The whole intent of this discretion is, while avoiding D r a c o n ia n justice, to construct a remedy which regards the violation with sufficient seriousness
th a t it will not be repeated." Holford v. Exhibit Design Consultants, 218 F.Supp.2d 901, 908 (W .D .M ich., September 09, 2002). In support of his action for damages, plaintiff contends that he was "shocked" when he re c eiv e d the December 1 termination letter and that he was prejudiced after he acquired extensive m e d ic a l treatment that he believed would be covered under the Plan. R. 11. The record reveals that the Plan requires an employee electing coverage to contribute to a portion of the health-care p re m iu m which contribution is deducted from the employee's gross pay. Plan, pp. 23, 26. C o v e ra g e under the Plan ends at midnight on the date on which a covered employee's employment w ith Aries Marine terminates. Id. at p. 27. Ceasing active work due to illness or injury is deemed te rm in a tio n under the Plan unless the employee contacts his supervisor or the Plan Administrator to make arrangement to continue medical coverage which coverage may be continued for up to th re e months, provided the employee makes the required premium contributions. Id. T h e Court, on the basis of the entire record presented, finds that plaintiff has not shown e n title m e n t to a penalty. There is no dispute that plaintiff never contacted Aries Marine after he c e as e d active work on October 2, 2008 to make arrangement to continue his coverage, nor did he p a y any portion of the required employee premium contributions after October 2, 2008. The D e c em b e r 1, 2008 termination letter from Aries Marine expressly informed plaintiff of the o p p o rtu n ity to insure his medical expenses retroactively to the date he lost coverage, October 3, 2 0 0 8 . The letter explained that plaintiff could receive COBRA benefits by completing and re tu rn in g by mail the enclosed election form before the deadline on January 30, 2009 or 60 days
f ro m the date the COBRA notice was mailed to him. Plaintiff acknowledges he received the letter o n December 15 and does not dispute that he was aware of this right by that time. Inexplicably, h o w e v e r, plaintiff did not choose to continue coverage. Thus, the Court finds plaintiff's
a l le g a t io n s of prejudice unconvincing. Nowhere does plaintiff contend that he would have p u rc h a s e d coverage had he been properly notified under COBRA. See, Roberts v. National Health C o r p ., 963 F.Supp. 512, 515 (D.S.C.1997) (Employer's delay in delivering the COBRA notice did n o t harm the employee, because, if the employee had chosen continuation coverage, the first p re m iu m would apply retroactively to provide continuous coverage from the date of the qualifying e v e n t) . C. RECOVERY OF MEDICAL EXPENSES P la in tif f seeks recovery of "at least $30,158.80" in medical bills that he states were not c o v e re d by insurance due to Aries Marine's COBRA violation. Aries Marine maintains that the C o u r t should deny plaintiff any award because he failed to mitigate his damages when he chose n o t to pay the premiums which would allow him to elect insurance coverage retroactively under C O B R A . Aries Marine further asserts that the EOBs upon which plaintiff bases his claim for m e d ic a l expenses are unauthenticated and are otherwise inadmissible hearsay and should be s tric k e n from the record. " C o n g re ss ' purpose in enacting the ERISA disclosure provisions [was to] ensur[e] that the in d iv id u a l participant knows exactly where he stands with respect to the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 118 (1989). Congress not only wanted employees to have
th e option of continuous medical coverage; it also insisted that employees be fully informed of th e ir options when their coverage ends. See 42 U.S.C. § 300bb-1(a), -6. When COBRA violations resu lt in the loss of a qualified beneficiary's insurance coverage, courts have interpreted ERISA's c iv il enforcement statute as entitling the qualified beneficiary to compensatory damages in an a m o u n t equal to medical expenses minus deductibles and premiums that the beneficiary would h a v e had to pay for COBRA coverage.5 See Miles-Hickman v. David Powers Homes, Inc., 589 F .S u p p .2 d 849, 882 (S.D.Tex.,2008); Fisher v. Trutech, Inc., 2006 WL 3791977, at *3 (M .D .G a .2 0 0 6 ); Chenoweth v. Wal-Mart Stores, Inc., 159 F.Supp.2d 1032, 1042 (S.D.Ohio 2001); H a m ilto n v. Mecca, Inc., 930 F.Supp. 1540, 1555 n. 24 (S.D.Ga.1996). The Court will grant p lain tiff 's motion seeking recovery of his medical expenses incurred from the date his benefits e n d e d , October 3, 2008, through December 15, 2008, the date plaintiff finally received notification o f his termination and right to elect COBRA benefits but failed to apply for COBRA. Id. To that en d , the Court will require the parties to file a joint stipulation stating the amount of plaintiff's m e d ic a l expenses minus the deductibles and premiums he would have paid for COBRA coverage f ro m October 3 through December 15, 2008. D. RECOVERY OF ATTORNEY'S FEES The Court in its discretion may award attorneys' fees to a plaintiff that prevails on an E R IS A claim, including a claim of a COBRA violation. See 29 U.S.C. § 1132(g); Wegner v.
The civil enforcement statute provides that "the court may in its discretion order such other relief as it deems proper." 29 U.S.C. § 1132(c)(3). Courts have interpreted "other relief" as an award of medical expenses minus deductibles and premiums.
S ta n d a r d Ins. Co., 129 F.3d 814, 820-821 (5th Cir.1997) (ERISA § 502(g), applicable both to tria ls and appeals, provides that "the court in its discretion may allow a reasonable attorney's fee a n d costs ... to either party."). Although the decision to award attorneys' fees is discretionary, the c o u rt should consider the following five factors in its analysis: (1) the degree of the opposing p a rtie s' culpability or bad faith; (2) the ability of the opposing parties to satisfy an award of a t to r n e ys ' fees; (3) whether an award of attorneys' fees against the opposing party would deter o th e r persons acting under similar circumstances; (4) whether the parties requesting attorneys' fees s o u g h t to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant le g a l question regarding ERISA itself; and (5) the relative merits of the parties' positions." W e g n e r at 821. The Court has not found that Aries Marine acted in bad faith in failing to timely provide p l a in t if f with the detailed post-termination COBRA notice and therefore factor 1 weighs against g ra n tin g attorneys' fees. As to the second factor, however, it is axiomatic that Aries Marine is in a position far superior to plaintiff's in satisfying the amount of attorneys' fees incurred in this m atter and weighs in favor of awarding attorneys' fees. In determining the third factor, the Court m u st consider whether or not the award would deter Aries Marine from similar action. While there is no evidence that Aries Marine has failed to provide timely notice to any other former employee, t h e record indicates that plaintiff informed Aries Marine on October 10 th that he was about to u n d e rg o surgery and would be totally disabled for some time. Aries Marine failed to notify p lain tiff of his COBRA rights until 50 days later. Thus, the award of attorneys' fees would
p r o v i d e a deterrence of such action in favor of factor 3 and would also benefit other beneficiaries, w e ig h in g in favor of factor 4. Finally, as the Court has found that plaintiff's action has merit and th a t Aries Marine is in violation of COBRA's notice requirement, factor 5 weighs in favor of a tto rn e ys' fees. Thus, the Court finds that an award of attorneys' fees to plaintiff is appropriate in this case. In an ERISA case, the determination of attorneys' fees requires the district court to apply a two-step analysis. The court must first determine whether the party is entitled to attorneys' fees b y applying the five factors enumerated in Bowen. If the court concludes that the party is entitled to attorneys fees, it must then apply the loadstar calculation to determine the amount to be a w a rd e d . This calculation is accomplished by multiplying the number of hours expended on the m a tte rs at issue in the case by a reasonable hourly rate. Wegner at 822. Accordingly, the d e te rm in a tio n of attorneys' fees will be referred to the magistrate judge assigned to this action. V . CONCLUSION For the foregoing reasons, the parties' cross motions for summary judgment will be d e n ie d in part and granted in part in that plaintiff's claims against Aries Marine for violation of th e COBRA notice requirement, reimbursement of medical expenses and attorneys' fees will be G R A N T E D and Aries Marine's motion will be DENIED as to those claims, and Aries Marine's m o tio n to dismiss plaintiff's claim for penalties will be GRANTED and plaintiff's claim will be D E N IE D .
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