Green et al v. Baltimore City Board of School Commissioners

Filing 7

MEMORANDUM. Signed by Judge William M Nickerson on 1/22/2015. (bmhs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

ANNA D. GREEN, et al.
v.
BALTIMORE CITY BOARD OF
SCHOOL COMMISSIONERS

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Civil Action No. WMN-14-3132

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MEMORANDUM
Before the Court is a Motion to Dismiss, or in the
Alternative, for Summary Judgment filed by Defendant Baltimore
City Board of School Commissioners (the Board), ECF No. 4, and a
Motion for Summary Judgment filed by Plaintiffs Anna D. Green
and Carolyn Richards.
and ripe for review.

ECF No. 5.

The motions are fully briefed

Upon a review of the papers, facts, and

applicable law, the Court determines (1) that no hearing is
necessary, Local Rule 105.6, (2) the Board’s motion will be
denied and (3) the Ms. Green and Ms. Richards’ motion will be
granted.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs Anna Green and Carolyn Richards bring this
action under the Employee Retirement Income Security Act of 1974
(ERISA) as amended by the Comprehensive Omnibus Budget
Reconciliation Act of 1986 (COBRA) against their former

employer, the Board, which manages the Baltimore City Public
School System (the System).

Plaintiffs were employees of the

System who were recommended for termination and suspended
without pay.

When suspended, the System kept both Ms. Green and

Ms. Richards on the employee roster, but maintained their
workload at zero hours.

While still on the roster, the

Plaintiffs remained eligible for coverage under the System’s
health care plan.
enrolled.

In fact, they remained automatically

In general, a suspended employee of the System will

be removed from coverage if he or she is finally terminated,
fails to pay the premiums, or requests removal from coverage.
Ms. Green received her suspension letter on January 15th,
2013, which detailed the reasons why she was recommended for
termination, a notice that she was being suspended without pay,
and a note regarding procedure to learn more about her insurance
options.

At that time, the Board adjusted her hours to zero but

continued her medical insurance coverage under its Health
Maintenance Organization (HMO) without further notice to Ms.
Green.

Ms. Green first discovered that the Board continued her

insurance coverage when medical care was mistakenly billed
through the System plan rather than her new employer’s plan.

On

May 16, 2013, five months after she was notified that she would
be suspended and recommended for termination, Ms. Green sent an
e-mail to a System employee, stating that she wished to cancel
2

her coverage under the System’s plan, that she did not elect to
continue coverage, and did not know she was still being billed
for coverage.

ECF No. 4-5 at 2.

The System then terminated her

coverage and through CONEXIS, a contractor, sent an “Election
Form and Plan Alternatives Letter,” which established her date
of coverage loss as March 31, 2013.
There is no record from January 15th to May 16th of
communication between Ms. Green and the system regarding the
option of continuing her health care coverage after her
suspension beyond two bills dated April 4, 2013, for $704.56 and
May 8, 2013, for $662.16, assessments that reflect both the
employee and employer contributions to the insurance plan.
No. 4-7.

ECF

The suspension letter dated January 15 discusses

health insurance only to the extent that it states that “[Ms.
Green] may contact the Office of Benefits Management to discuss
the options available to you concerning the continuation of
benefit coverage.”

ECF No. 4-4 at 1.

A letter sent by the

System dated before the suspension letter notified Ms. Green
that her payroll location had changed and that if she “stop[ped]
receiving a paycheck, [she] must continue to pay [her]
healthcare premiums.”

ECF No. 4-3.

What constituted her

healthcare premiums, the letter did not elaborate further.
Ms. Richards received a similar suspension letter on
September 16, 2013, at which point her hours were taken down to
3

zero.

The Board, again without further communication, continued

Ms. Richard’s coverage under the System’s Blue Cross/Blue Shield
Preferred Provider Network (“PPN”) plan.

Ms. Richards, however,

chose to forego medical treatment in the belief that she did not
have continuing coverage under the System’s plan.
16.

ECF No. 5-4 ¶

Ms. Richards officially resigned her position on February

17, 2014.

On March 24, 2014, CONEXIS sent Ms. Richards a “COBRA

Continuation Coverage Elections Notice,” with the date of
coverage loss set at March 31, 2014.

ECF No. 4-10.

Then, on

April 2, 2014, the System issued an invoice in the amount of
$4076.59 for both the employer and employee contributions to the
insurance plan for the period covering September 16, 2013, to
February, 28, 2014.

ECF No. 4-11.

Plaintiffs then brought this action for failure to provide
timely notice and breach of fiduciary duty under the Employee
Retirement Income Security Act of 1974 (ERISA) as amended by the
Comprehensive Omnibus Budget Reconciliation Act of 1986, §
10002, Pub. L. No. 99-272 (codified as amended at 29 U.S.C. §§
1161-1168) (COBRA).

In lieu of an answer, the Board filed a

Motion to Dismiss or in the Alternative for Summary Judgment.
ECF No. 4.

Plaintiffs then filed a response to the Board’s

Motion and an independent Motion for Summary Judgment.
5.

4

ECF No.

II.

LEGAL STANDARD
The Board has filed a Motion to Dismiss or in the

Alternative Summary Judgment while Plaintiffs have filed as
their response a cross-motion for Summary Judgment.

Usually, in

evaluating a motion to dismiss filed pursuant to Rule 12(b)(6)
of the Federal Rules of Civil Procedure, the Court must accept
as true all well-pled allegations of the complaint and construe
the facts and reasonable inferences derived therefrom in the
light most favorable to the plaintiff.

See Ibarra v. United

States, 120 F.3d 472, 474 (4th Cir. 1997).

A court considers

only the pleadings when deciding a motion to dismiss.

If

matters outside the pleadings are presented and not excluded,
the motion must be considered under the summary judgment
standard of Rule 56.

See Villeda v. Prince George’s Cnty., 219

F. Supp. 2d 696, 698 (D. Md. 2002).

In this case, the parties

have submitted matters outside the pleadings, and the Court has
considered these matters.

Defendants’ motions shall be

considered a motion for summary judgment and decided
accordingly.
Summary judgment is appropriate if the record before the
court “shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317,
322-23 (1986).

See also Felty v. Graves-Humphreys Co., 818 F.2d
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1126, 1128 (4th Cir. 1987) (noting that trial judges have “an
affirmative obligation . . . to prevent factually unsupported
claims and defenses from proceeding to trial” (internal
quotation marks omitted)).

A fact is material if it might

“affect the outcome of the suit under the governing law.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

In

determining whether there is a genuine issue of material fact,
the Court “views all facts, and all reasonable inferences to be
drawn from them, in the light most favorable to the non-moving
party.”

Housley v. Holquist, 879 F. Supp. 2d 472, 479 (D. Md.

2011) (citing Pulliam Inv. Co. v. Cameo Properties, 810 F.2d
1282, 1286 (4th Cir. 1987)).
When both parties file motions for summary judgment, the
court applies the same standards of review.

ITCO Corp. v.

Michelin Tire Corp., 722 F.2d 42, 45 n. 3 (4th Cir. 1983) (“The
court is not permitted to resolve genuine issues of material
facts on a motion for summary judgment – even where . . . both
parties have filed cross motions for summary judgment.”).

The

role of the court is to “rule on each party’s motion on an
individual and separate basis, determining, in each case,
whether a judgment may be entered in accordance with the Rule 56
standard.”

Towne Mgmt. Corp. v. Hartford Accident and Indem.

Co., 627 F. Supp. 170, 172 (D. Md. 1985).

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III. DISCUSSION
COBRA imposes a statutory requirement that a plan
administrator notify any employee who is covered by its
insurance plan of his or her right to continue health insurance
coverage for up to eighteen months after a “qualifying event.”
See 29 U.S.C. § 1166 (notice requirement); id. § 1162
(continuation coverage); id. § 1163(2) (a “qualifying event” is
a termination or reduction in hours which, but for the
continuation coverage required under COBRA, would result in the
loss of coverage).

A plan administrator has 44 days in which to

notify the covered employee of his or her rights.

See id. §

1162(a)(2) (providing 30 days for employer to notify healthcare
administrator of qualifying event) and id. § 1166(a)(4)(A)(c)
(providing 14 days for administrator to notify employee of
continuation rights).

See also Barnett v. Perry, Civ. No. 11-

CCB-122, 2011 WL 5825987, at *6 (D. Md. Nov. 16, 2011).1

It is

undisputed that the Board is a plan administrator required to
give notice and that Plaintiffs were covered employees to whom
notice was due.

1

The Board in its motion, without citation, uses a 90 day notice
requirement. See, e.g., ECF No. 4-1 at 2. Whether the 90 or
the 44 day window is used, the analysis is the same: if the
“qualifying event” is Plaintiffs’ suspension, then the Board
violated COBRA notice requirements, but if it is when Plaintiffs
took an affirmative step to end their coverage, then the Board
did not violate COBRA.
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A. Counts I and III – Violations of 29 U.S.C. § 1166
While the parties agree that the System has an obligation
to Ms. Green and Ms. Richards to inform them of their COBRA
rights upon the occurrence of a “qualifying event,” the parties
dispute what constitutes the relevant qualifying event.
Plaintiffs argue that they experienced the same qualifying event
when each was suspended, had their hours set to zero, and were
required to pay both the employee and employer share of the
insurance premiums.

If their suspension is set as the relevant

“qualifying event” under COBRA, then the System grossly violated
its obligation, as it delayed sending notice to Ms. Green and
Ms. Richards by over six months.
The Board argues that Ms. Green and Ms. Richards
experienced unique qualifying events – Ms. Green when she emailed the System in May 2013 to request an end to her coverage,
and Ms. Richards when she officially resigned in March 2014.
Thus, in the Board’s view, the letters sent to each from CONEXIS
were well within the window required by COBRA – 32 days for Ms.
Green and 36 days for Ms. Richards.

The Board further argues in

support of its position that “the reduction of hours alone is
not a qualifying event triggering the notice requirement.

The

reduction of hours must be accompanied by a loss in coverage.”
ECF No. 4-1 at 9.

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The Board is correct in its summation of the law that a
reduction in hours alone is not sufficient to trigger its COBRA
duties.

The Board, however, too narrowly construes “loss of

coverage” as going from eligible to ineligible for coverage.

It

argues that because “the Board does not terminate insurance for
any of its employees, regardless if they are working zero hours,
until they have ensured that their employees have explicitly
sought termination of their benefits,” it is not obligated under
COBRA to send notice until that termination occurs.
at 11-12.

ECF No. 4-1

The Department of the Treasury – which is charged

with promulgating regulations for COBRA – defines “loss of
coverage” more broadly.

The regulation states that to lose

coverage “means to cease to be covered under the same terms and
conditions as in effect immediately before the qualifying
event.”

26 C.F.R. § 54.4980B-4(c).2

The regulation then defines

as a loss in coverage “[a]ny increase in the premium of
contribution that must be paid by a covered employee . . . for
coverage under a group health plan that results from the
occurrence of one of the events.”
2

Id.

It is undisputed that

The Board, in essence, acknowledges this as the correct
standard when, in analyzing Barnett, 2011 WL 5825987, supra, and
Aquilino v. Solid Waste Services, Civ. No. 2:07-cv-928-LDD, 2008
U.S. Dist. LEXIS 47168 (E.D. Pa. June 13, 2008), to support its
argument, the Board notes that “[t]o lose coverage under a group
health plan means to cease to be covered under the same terms
and conditions as in effect immediately before the qualifying
event” was “the language which the Barnett and Aquilino Courts
relied on to deny summary judgment.” ECF No. 4-1 at 11.
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Ms. Green and Ms. Richards saw an increase in the premium of
contribution once they were placed indefinitely on leave without
pay.

Prior to being placed on leave without pay, Ms. Green was

obligated to pay 5% of her insurance premiums and Ms. Richards
was obligated to pay 18.5%, while the System paid the remaining
insurance premiums.

Once they were suspended, Plaintiffs were

required to pay 100% of premiums, as assessed by the System in
the bills sent to Plaintiffs.

The increase in premiums

constituted a “loss in coverage” which was a direct result of
their reduction in hours.

The reduction of hours3 that occurred

when they were suspended without pay was, therefore, a
qualifying event.

As a result, the Board’s COBRA obligations

were triggered on January 15, 2013, for Ms. Green and September
16, 2013, for Ms. Richards.
The Board asserts that, through its handling of Ms. Green
and Ms. Richards’ cases, “[t]he Board’s actions were consistent
with the purpose of ERISA; that no employee is left without
coverage upon the occurrence of a qualifying event.”
at 12.

ECF No. 4

Their practice, though, does not fulfill the equally

important purpose of COBRA of providing sufficient notice such
3

The parties do not dispute that Ms. Green and Ms. Richards’
situation falls under the “reduction in hours” event eligible
under 29 U.S.C. § 1163(2). See ECF No. 4-1 at 8 (“It is
undisputed that Plaintiffs Green and Richards had their hours
reduced to zero while employed with City School.”) and ECF No.
5-1 at 13 (“When [the BCPSS placed Plaintiffs on leave without
pay], it reduced each Plaintiff’s hours to zero.”).
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that the employee “could make an informed and intelligent
decision whether to elect continuation coverage.”

Roberts v.

Nat’l Health Corp., 133 F.3d 916, 916 (4th Cir. 1998).

At the

time of their suspension notice, Ms. Green and Ms. Richards were
neither made aware that their insurance coverage would be
continued automatically nor were they informed that such
continuation would mean that they would be obligated to pay both
the employer and employee shares of the insurance premiums.

The

facts that coverage was presumed to continue and that Plaintiffs
would incur a significant financial obligation as a result are
so essential that making an informed decision regarding coverage
without those facts would be difficult if not impossible.

The

invitation in the suspension letter to “contact the Office of
Benefits Management to discuss the options available” fails to
even hint that the terms and conditions of coverage were to
change.

Therefore, the Board did not meet its notification

obligations under COBRA and the Court will grant summary
judgment to Plaintiffs on Counts I and III.
B. Counts II and IV – Violations of 29 U.S.C. § 1104
As to Counts II and IV, the Board seeks dismissal of the
Plaintiffs’ breach of fiduciary duty claims on multiple grounds.
First, the Board argues that “when bringing a claim for breach
of fiduciary duty under ERISA, the claim must rest upon an
‘interpretation and application of ERISA’ rather than be claim
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that rest [sic] upon the ‘interpretation and application of an
ERISA-regulated plan.”

ECF No. 4-1 at 13 (quoting Smith v.

Sydnor, 184 F.3d 356, 362 (4th Cir. 1999)).

It further argues

that if the issue is the “interpretation and application of an
ERISA-regulated plan” then Plaintiffs must have exhausted their
administrative remedies before filing their claim of breach of
fiduciary duty.

Although Plaintiffs have followed the Board’s

framework and countered that each of their claims are based in
ERISA and not an ERISA-based plan, the Board has miscast Smith
v. Sydnor.
The holding of Sydnor is that “the exhaustion requirement
does not apply to a claim for breach of fiduciary duty.”
F.3d at 357.

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The Board disregards this clear holding and

instead casts the relevant test of whether administrative
remedies need to be exhausted as whether the fiduciary breach
complaint is based in the application of ERISA or an ERISA-based
plan.

This test, however, was used in Sydnor not to determine

whether a fiduciary duty claim needed to go through
administrative procedures but instead to determine whether a
fiduciary claim was a re-casted denial of benefits claim.

Id.

at 362 (“In sum, [the precedent relied upon by the District
Court]4 and [prior 4th Circuit law]5 instruct us that a claim for

4

Drinkwater v. Metropolitan Life Ins. Co., 846 F.2d 821 (1st
Cir. 1988); Simmons v. Willcox, 911 F.2d 1077 (5th Cir. 1990).
12

breach of fiduciary duty is actually a claim for benefits where
the resolution of the claim rests upon an interpretation and
application of an ERISA-regulated plan rather than upon an
interpretation and application of ERISA.”).

The Board does not

argue, and the record does not support, an assertion that
Plaintiffs have asserted a re-casted denial of benefits claim.
As such, the rule in Sydnor that “the exhaustion requirement
does not apply to a claim for breach of fiduciary duty” applies
here.
Next, the Board argues that Counts II and IV should be
dismissed because Plaintiffs’ claim for damages benefits the
individual Plaintiffs and not the plan beneficiaries as an
entire group.

ECF No. 4-1 at 16.

Under ERISA, “damages for

breach of fiduciary duty inure to the benefit of the plan as a
whole rather than to individuals.”

Sydnor, 184 F.3d at 363; see

also Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134
(1985).

The Board argues that, because Counts II and IV state

that ”Defendant BOARD is liable to Plaintiff [Green/Richards]
for the actual damages sustained by Plaintiff,” ECF No. 1 ¶¶
40,51, Plaintiffs have asked this Court to grant relief to
Plaintiffs individually rather than to the plan as a whole.

In

their claim for relief, however, Plaintiffs include a request

5

Coyne & Delany Co. v. Blue Cross & Blue Shield, 102 F.3d 712
(4th Cir. 1996).
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for this Court to “[d]eclare all invoices and bills issued by
Defendant BOARD for unauthorized continuation of coverage after
a COBRA qualifying event are null and void and of no effect.”
Id. ¶ C.

The prayer also requests, for example, that this Court

“[d]eclare that Plaintiff Green suffered a qualifying event on
January 14, 2013, and that such qualifying event obligated
Defendant BOARD to honor and effectuate the rights granted and
due under COBRA.”

Id. ¶ A.

To grant such relief would

implicate all plan beneficiaries as that relief relates to the
Board’s practice of notifying suspended employees of their
rights.

The reading of the prayer for relief may be ambiguous

as to its reach, but as the Court is required to construe all
inferences to the benefit of Plaintiffs as the non-moving
parties, the Court finds that Plaintiffs have adequately pled
remedies that will benefit plan members as a whole and not just
the individual Plaintiffs.6
Finally, the Board spends a paragraph asserting that
“Plaintiffs have failed to assert how the Board breached any
duty to the entire plan under ERISA” and that “the alleged
actions by the Board do not amount to ‘misuse and mismanagement
of the plan assets’ as required by the Supreme Court.”
6

ECF No.

The Court notes that, although it disagrees with the Board’s
contention that Plaintiffs’ prayer for relief is not
sufficiently pled to benefit the whole plan, the Court, for
reasons discussed below, declines to find at this time that such
relief is appropriate.
14

4-1 at 16.

The Board cites Massachusetts Mutual to support the

proposition that an administrator only violates his fiduciary
duty through misuse and mismanagement of plan assets.

The Court

in Massachusetts Mutual, however, was describing the concerns of
lawmakers as it related to one of many duties charged to a
fiduciary.

473 U.S. at 141 (“A fair contextual reading of [11

U.S.C. § 1109] makes it abundantly clear that its draftsmen were
primarily concerned with the possible misuse of plan assets, and
with remedies that would protect the entire plan, rather than
the rights of an individual beneficiary.”).

In addition to that

duty, the Supreme Court also identified a broad range of duties
imposed on fiduciaries by ERISA, relating to “the proper
management, administration, and investment of fund assets, the
maintenance of proper records, the disclosure of specified
information, and the avoidance of conflicts of interest.”

Id.

at 143.
Plaintiffs have demonstrated a failure of one of those
specific duties, namely the disclosure of required information.
“[T]he duty to disclose material information is the core of a
fiduciary’s responsibility, animating the common law of trusts
long before the enactment of ERISA.”

Gross v. St. Agnes Health

Care, Inc., Civ. No. 12-ELH-2990, 2013 WL 4925374, at *15 (D.
Md. Sept. 12, 2013) (quoting Eddy v. Colonial Life Ins. Co. of
America, 919 F.2d 747, 750 (D.C. Cir. 1990)).
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“ERISA

administrators have a fiduciary obligation ‘not to misinform
employees through material misrepresentations and incomplete,
inconsistent, or contradictory disclosures.”

Griggs v. E.I.

DuPont de Nemours & Co., 237 F.3d 371, 380 (4th Cir. 2001)
(citation omitted).

Specifically, the fiduciary “is under a

duty to communicate to the beneficiary material facts affecting
the interest of the beneficiary which he knows the beneficiary
does not know and which the beneficiary needs to know for his
protection.”
cmt. d.).

Id. (quoting Restatement (Second) of Trusts § 173

In Gross, which is illustrative to the case at hand,

the plaintiff continued to pay premiums on her life insurance
for her divorced husband as an eligible spouse despite the fact
that divorced spouses were ineligible for coverage.

This Court

found that the defendant had violated its fiduciary duty as the
plaintiff continued to pay premiums in reliance on defendant’s
communications that her ex-husband was eligible for coverage
even though it was in possession of information that clearly
explained otherwise.
The plaintiffs in Gross and in the instant case chose a
course of action as a direct result of their plan administrators
making incomplete disclosures to them as beneficiaries.

The

Board asserts that the note in the suspension letters that
Plaintiffs “may contact the Office of Benefits” to discuss
options is a sufficient affirmative statement that met the
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Board’s fiduciary duty to provide information to its
beneficiaries. “May” suggests that pursuing further coverage was
an option, not automatically assumed, and both Ms. Green and Ms.
Richards made decisions regarding their coverage accordingly.
An “incomplete” disclosure such as the one made by the Board may
constitute a violation of a fiduciary duty as much as an
omission and, as discussed above, to say that the Plaintiffs had
the option of talking to someone in human resources about
continuing insurance options failed to indicate the real
financial obligation of automatically continuing healthcare
coverage, a material fact that would bear directly on the
interests of Ms. Green and Ms. Richards.7

As such, the Court

finds that the Board breached its fiduciary responsibility to
disclose how the System would handle continuing health insurance
coverage after Plaintiffs were suspended without pay.
A party may succeed on a claim for breach of fiduciary duty
if it demonstrates “(1) that a defendant was a fiduciary of the
ERISA plan, (2) that a defendant breached its fiduciary
responsibilities under the plan, and (3) that the participant is
in need of injunctive or other appropriate equitable relief to
remedy the violation or enforce the plan.”

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Adams v. Brink’s

The effect of the Board’s incomplete disclosures on Ms.
Richards is particularly acute, as she chose to forego medical
care under the belief that she was no longer covered by the
System’s health insurance.
17

Co., 261 F. App’x 583, 595 (4th Cir. 2008).

The Board does not

argue that it was not acting in a fiduciary capacity when it
communicated with Ms. Green and Ms. Richards, and the
outstanding bills assessed by the Board to Plaintiffs
demonstrate a need for relief under ERISA.

Thus, the Court will

grant Plaintiffs’ Motion for Summary Judgment on Counts II and
IV.
IV. CONCLUSION
For the reasons stated above, the Plaintiffs’ Motion for
Summary Judgment will be granted and the Court will issue a
declaration that Plaintiffs suffered a qualifying event on the
dates of their suspension, triggering Defendant’s obligations
under COBRA, and that all invoices and bills issued by Defendant
to Plaintiffs Green and Richards after the qualifying event are
null and void.8
______________/s/__________________
William M. Nickerson
Senior United States District Judge

DATE: January 22, 2015

8

Plaintiffs’ Proposed Order, ECF No. 5-2, includes declarations
that affect all plan beneficiaries, an award of attorneys’ fees,
and a monetary award. Because the Proposed Order contains
broader relief than requested in the Complaint and neither party
addressed in its briefing the scope of relief appropriate to
this action, the Court declines to grant further relief at this
time. If Plaintiffs believe further relief is necessary, they
may move the Court for such relief within 14 days of this Order.
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