Hanysh et al v. Buckeye Extrusion Dies, Inc.
Filing
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Opinion and Order. Plaintiffs' Motion for summary judgment (Related doc # 12 ) is denied. Defendant's Motion for summary judgment (Related doc # 11 ) is denied. Plaintiffs to show cause why they are entitled to a trial by jury. Plaintiffs' brief shall be limited to no more than five pages and shall be filed by 9/14/2012. Judge Christopher A. Boyko on 9/5/2012. (H,CM)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
MICHAEL HANYSH, ET AL.,
Plaintiff,
Vs.
BUCKEYE EXTRUSION DIES, INC.,
Defendant.
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CASE NO.4:11CV528
JUDGE CHRISTOPHER A. BOYKO
OPINION AND ORDER
CHRISTOPHER A. BOYKO, J:
This matter is before the Court on Plaintiffs Michael and JoAnne Hanysh’s Motion for
Summary Judgment (ECF # 12) and Defendant Buckeye Extrusion Inc.’s Motion for Summary
Judgment (ECF # 11). For the following reasons, the Court denies both Defendant’s and
Plaintiffs’ Motions.
The underlying facts in this case are not in dispute, having been stipulated to by the
parties. Plaintiffs Michael and JoAnne Hanysh reside in Trumbull County, Ohio and Defendant
Buckeye Extrusions, Inc. is an Ohio corporation. Michael Hanysh was an employee of Buckeye
and was laid off on January 5, 2009. On January 9, 2009, Buckeye issued a letter to Hanysh
informing him that he was eligible for continuing medical coverage with Anthem Blue Cross and
Blue Shield Insurance Co., (“Anthem”) under the Consolidated Omnibus Reconciliation Act
(“COBRA”), for a period of 18 months at a premium of $1,084.44 per month. That same day,
Hanysh elected to continue his coverage and timely paid the monthly premium from January
2009 through June of 2009. In July 2009, Buckeye informed Hanysh that the premiums for
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continuing COBRA coverage increased to $1288.50. Hanysh timely paid the increased premium
rate from July through December 2009. In January 2010, Buckeye informed Hanysh he did not
need to pay the premium for the month due to an anticipated government payment. Hanysh
subsequently paid the premium for February 2010. Around this time, Buckeye informed Hanysh
that, in fact, Hanysh needed to make the premium payment for January 2010. Hanysh made the
January 2010 premium payment.
Around the same time, Hanysh filed a complaint with the United State Department of
Labor (“DOL”). Shortly thereafter, the DOL informed Buckeye that Buckeye was not subject to
federal COBRA law because it employed less than twenty employees. On March 23, 2010,
Buckeye informed Hanysh of the DOL’s determination and further informed Hanysh that as a
result, Hanysh’s hospitalization coverage would cease April 14, 2010. Anthem retroactively
terminated Hanysh’s coverage effective January 14, 2010.
Plaintiff JoAnne Hanysh applied for and received Anthem Individual coverage. On May
11, 2010, Hanysh was informed by Anthem that he had the option to enroll for Anthem
Individual coverage, which he declined to pursue. On May 19, 2010, Buckeye reimbursed
Hanysh $7007.21 for premium payments he made. On July 10, 2010, Buckeye sent Hanysh a
check for $3,865.50 and on July 1, 2010 for an additional $837.53.
The parties further stipulate that Hanysh was one of the four founders of Buckeye and
served the company as President, Vice-President, and Secretary on a rotating basis from 1982
until Buckeye’s subsequent sale in October 2008. Hanysh was an owner and officer of Buckeye
prior to its sale, and participated in the decision to acquire Anthem coverage.
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Plaintiffs’ Motion for Summary Judgment
According to Plaintiffs’ Motion for Summary Judgment, due to Plaintiffs’ reliance upon
Defendant’s representations that they had medical coverage under COBRA, Plaintiffs incurred
healthcare expenses for the months of January, February and April 2010 in the amount of
$16,657.14. Plaintiffs’ have paid $5,565.14 and the Cleveland Clinic has reduced the amount
owed by $9,492.00. At present, Plaintiffs’ owe $1,600.00 in unpaid medical bills. Therefore,
Plaintiffs’ have incurred a total of $7,165.14 in medical expenses relying upon Defendant’s
misrepresentations that Plaintiffs’ had medical coverage.
Defendant’s Motion for Summary Judgment
Defendant contends it made no material misrepresentations on Plaintiff Michael Hanysh’s
eligibility. Defendant informed Plaintiff he was eligible based on Anthem’s representation that
Hanysh was eligible. According to Defendant, it was Anthem who was responsible for
determining eligibility under the terms of Buckeye’s contract with Anthem for employee health
insurance. Also, Defendant contends Michael Hanysh possessed superior knowledge of the
Anthem insurance policy because Hanysh, as a former President of Buckeye’s predecessor,
participated in the selection of Anthem as the health insurer for Buckeye’s predecessor. The
policy Hanysh bargained for in 1985 was essentially the same policy in effect when Hanysh sold
the company in 2008 and throughout Hanysh’s layoff. Thus, Hanysh knew or should have
known that COBRA eligibility was solely within the determination of Anthem and not
Defendant. Therefore, Hanysh unreasonably relied upon the representations of Defendant.
Defendant also contends Plaintiffs’ failed to mitigate their damages by not obtaining gap
coverage when notified that they were ineligible for COBRA coverage and notice that gap
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coverage was available. Defendant also contends Plaintiffs made material misrepresentations
that they could not obtain insurance coverage when they were, in fact, insured, and have
misrepresented the amounts of their damages.
LAW AND ANALYSIS
“The court shall grant summary judgment if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” See
Fed. R. Civ. P. 56(a). The burden is on the moving party to conclusively show no genuine issue
of material fact exists, Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Lansing Dairy, Inc. v.
Espy, 39 F.3d 1339, 1347 (6th Cir. 1994); and the court must view the facts and all inferences in
the light most favorable to the nonmoving party, Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986). Once the movant presents evidence to meet its burden, the
nonmoving party may not rest on its pleadings, but must come forward with some significant
probative evidence to support its claim. Celotex, 477 U.S. at 324; Lansing Dairy, 39 F.3d at
1347. This Court does not have the responsibility to search the record sua sponte for genuine
issues of material fact. Betkerur v. Aultman Hosp. Ass’n., 78 F.3d 1079, 1087 (6th Cir. 1996);
Guarino v. Brookfield Township Trs., 980 F.2d 399, 404-06 (6th Cir. 1992). The burden falls
upon the nonmoving party to “designate specific facts or evidence in dispute,” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986); and if the nonmoving party fails to make the
necessary showing on an element upon which it has the burden of proof, the moving party is
entitled to summary judgment. Celotex, 477 U.S. at 323. Whether summary judgment is
appropriate depends upon “whether the evidence presents a sufficient disagreement to require
submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.”
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Amway Distribs. Benefits Ass’n v. Northfield Ins. Co., 323 F.3d 386, 390 (6th Cir. 2003) (quoting
Anderson, 477 U.S. at 251-52).
Equitable Estoppel
Under applicable Sixth Circuit precedent the elements of equitable estoppel are: “1)
conduct or language amounting to a representation of material fact; 2) awareness of the true facts
by the party to be estopped; 3) an intention on the part of the party to be estopped that the
representation be acted on, or conduct toward the party asserting the estoppel such that the latter
has a right to believe that the former's conduct is so intended; 4) unawareness of the true facts by
the party asserting the estoppel; and 5) detrimental and justifiable reliance by the party asserting
estoppel on the representation.” Bloemker v. Laborers' Local 265 Pension Fund, 605 F.3d 436,
442 (6th Cir.2010). “The second element requires the plaintiff to demonstrate that the
defendant's actions “contain[ed] an element of fraud, either intended deception or such gross
negligence as to amount to constructive fraud.” Id. citing Crosby v. Rohm & Haas Co., 480 F.3d
423, 431 (6th Cir.2007).
“A mistake may show negligence, but does not reach to ‘affirmative misconduct’ required
for estoppel.” Ashcraft v. Shenango Furnace Co., 56 F.Supp.2d 895, 905 (N.D.Ohio,1999), citing
Shah v. Immigration and Naturalization Service, 60 F.3d 829 (TABLE), 1995 WL 399071, *4
(6th Cir.1995); see also Wille v. City of Moraine, 1996 WL 1061506, *28 (S.D.Ohio 1996)
(stating “mistake does not provide a basis for the application of equitable estoppel”).
There is no dispute among the parties that Plaintiffs can demonstrate elements one and
three of their equitable estoppel claims. The parties dispute elements two, four, and five
regarding Defendant’s knowledge of the true facts, Plaintiffs’ unawareness of the true facts and
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reliance on the alleged misrepresentations.
Based on the stipulated facts, it is clear that there was no intentional fraudulent or
deceptive misrepresentation by Defendant. Both Plaintiffs and Defendant regarded Plaintiffs as
covered under COBRA for at least twelve months. It is undisputed that an outside agency, i.e.the Department of Labor (“DOL”)- first informed all parties that Plaintiffs were not covered. Up
until that time, Defendant informed Plaintiffs they were eligible and informed them periodically
of premium increases. It was only after Plaintiffs complained to the Department of Labor that
Defendant was subsequently informed Plaintiffs were not covered under COBRA. Upon notice
by the DOL, Defendant promptly informed Plaintiffs and reimbursed them for funds Plaintiffs’
expended.
However, the inquiry does not end with a determination that no fraudulent or deceptive
misrepresentation occurred. While the Sixth Circuit has held there must be an element of fraud
or deception in the misrepresentation, which this Court holds is not present, the Sixth Circuit has
also held the second element may be satisfied by demonstrating gross negligence amounting to
constructive fraud.
“Gross negligence under Ohio law is defined as the ‘failure to exercise any or very slight
care” or “a failure to exercise even that care which a careless person would use.’” Wright v.
County of Franklin, Ohio 2012 WL 3060929, 20 (S.D.Ohio) (S.D.Ohio,2012) quoting Thompson
Elec. ., Inc. v. Bank One, Akron, N.A., 37 Ohio St.3d 259, 265 (1988). “Constructive fraud may
be found from the relation of the parties to a transaction, or from circumstances and surroundings
under which it takes place.” Ohio Bureau of Workers' Compensation v. MDL Active Duration
Fund, Ltd. 476 F.Supp.2d 809, 823 (S.D.Ohio,2007) citing Hanes v. Giambrone, 14 Ohio
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App.3d 400, 406 (1984); Lake Hiawatha Park Ass'n v. Knox County Agricultural Soc., 28 Ohio
App. 289, 291 (1927). “Constructive fraud does not require fraudulent intent.” Wright, at 20,
citing Lake Hiawatha, 28 Ohio App. at 291. “Constructive frauds are therefore assumed to have
been committed by acts without regard to motive.” Id. citing Hanes, 14 Ohio App.3d at 406. The
Sixth Circuit has defined constructive fraud as follows:
“Constructive fraud is a breach of legal or equitable duty which, in spite of the
fact that there is no moral guilt resulting from the breach of duty, the law declares
fraudulent because of its tendency to deceive others, to violate public or private
confidence, or to injure public interests. Constructive fraud may be found merely
from the relation of the parties to a transaction or from circumstances and
surroundings under which it takes place. It is said that constructive fraud is a term
that means, essentially, nothing more than the receipt and retention of unmerited
benefits.”
U.S. v. Lichota 351 F.2d 81, 90 (6th Cir. 1965)
Given the stipulated facts of this case, and construing the facts and inferences in favor of
the non-movant, the trier of fact could determine that Defendant’s misrepresentation that
Plaintiffs were eligible for COBRA coverage rises to the level of gross negligence. The number
of persons employed by Defendant was solely within Defendant’s knowledge. Coupled with the
importance of health care coverage and the employers unique relationship with an employee (or
ex-employee in the context of COBRA) in providing coverage under the employer’s health plan,
the consequences of a mistake are potentially catastrophic to an unemployed individual who
reasonably relies on the employer’s representation.
The plain language of Defendant’s insurance contract with Anthem places the
responsibility for complying with federal and state law squarely upon Defendant (Art. 5F).
Defendant is also responsible for communicating with employees about their eligibility. (Art 3J,
5D). Under the terms of the contract, Anthem expressly disclaims any warranties or
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representations that the Defendant’s health plan complies with state and federal laws. As the
stipulated facts represent, it was Defendant who represented to Plaintiffs that they were eligible
for COBRA coverage for eighteen months. It was Defendant who received the communication
from the DOL that Defendant was not subject to the requirements of federal COBRA. It was
Defendant who notified Plaintiffs that they were not eligible for federal COBRA coverage in a
letter dated March 23, 2010. The letter further informed Plaintiffs their hospitalization would
end April 14, 2010.
The Court also notes that in a letter to the DOL dated March 4, 2010, Defendant informed
DOL it had only fourteen employees. Thus, Defendant was aware, prior to being informed by the
DOL on March 23, 2010, that it had less then twenty employees.
Based on the above, the Court holds that Defendant’s argument that it was Anthem and
not Defendant that determined eligibility does not preclude Plaintiff’s claim for equitable
estoppel. It was Defendant who made the misrepresentations, therefore, it is Defendant who may
be estopped from denying coverage.
The Court also holds that Plaintiffs’ knowledge of the terms of the Anthem insurance
policy does not preclude recovery. As discussed above, the policy requires Defendant comply
with federal and state law and requires Defendant communicate with employees on the eligibility
for coverage under the employer’s health plan. Also, Defendant possessed the knowledge on the
numbers of employees it had; Plaintiff would not have been privy to such knowledge. As the
parties stipulated, it was on the basis of the number of employees that DOL informed Defendant
it was not subject to federal COBRA requirements. Thus, Plaintiffs’ could not have known the
true facts.
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Finally, there are genuine issues of fact as to the amount of damages Plaintiffs incurred
and their duty to mitigate damages, precluding summary judgment for either party on these
issues. The parties do not dispute Plaintiffs were offered continuation coverage that would have
run from the time their COBRA coverage ended, thus ensuring no gap in coverage. Michael
Hanysh decided not to purchase such coverage. According to Hanysh, the reason he declined the
coverage was due to the high premium and deductible. While there exists a duty to mitigate
damages under COBRA, that duty exists so long as it does not present an “undue risk, burden or
humiliation” on the party who possesses the duty to mitigate. See Holford v. Exhibit Design
Consultants 218 F.Supp.2d 901, 907 (W.D.Mich.,2002) citing Hamilton v. Mecca Inc., 930
F.Supp. 1540, 1555 (S.D.Ga.1996). The Court holds that it is for the trier of fact to determine
whether Plaintiffs’ decision to decline continuation coverage constitutes a failure to mitigate.
Therefore, for the foregoing reasons, the Court denies both movants’ Motions for
Summary Judgment.
The Court further orders Plaintiff to show cause why they are entitled to a trial by jury as
demanded in their Complaint. Plaintiffs’ brief shall be limited to no more than five pages and
shall be filed no later than September 14, 2012.
IT IS SO ORDERED.
s/ Christopher A. Boyko
CHRISTOPHER A. BOYKO
United States District Judge
Dated: September 5, 2012
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