Hager v. Rowan et al
Filing
124
Memorandum Opinion and Order...Hager denied any recovery from defendant based on (1) any claim for penalties for defendant's failure to notify Hager of termination of Hager's health insurance coverage (2) Hager's claim for recovery of attorney's fees against defendant and (3) Hager's request that he recover his costs of court. All claims by Hager against defendant that remain pending are DISMISSED. (Ordered by Senior Judge John McBryde on 8/1/2019) (wrb)
U.S. DISTRICT COURT
NORTIIERN IJJSTR ICT OF TEXAS
FILED
IN THE UNITED STATES DISTRICT C URT
NORTHERN DISTRICT OF TEXI\S
1
FORT WORTH DIVISION
DAVID L. HAGER,
Plaintiff,
vs.
DBG PARTNERS,
INC.,
Defendant.
§
§
§
§
§
§
§
§
§
AUG - 1 2019
CLERK, U.S. DISTRICT COURT
B:~~---r,::;;::;.:--
bcputy
NO. 4:16-CV-142-A
MEMORANDUM OPINION
and
ORDER
I.
Current Posture of the Case
On January 28, 2019, the court conducted a bench trial on
the issues the Fifth Circuit expected to be resolved when it
reversed certain rulings made by this court on August 28, 2017,
and remanded the action to this court, Hager v. DBG Partners,
Inc.,
903 F.3d 460, 471 (5th Cir. 2018).
Those issues are
(1) whether plaintiff, David L. Hager ("Hager"), should receive
statutory penalties from defendant, DBG Partners, Inc., by reason
of defendant's alleged failure to notify Hager of termination of
the healthcare plan carried by defendant for its employees, and,
if so, the nature and extent of such penalties, id. at 470-71,
(2) whether, in fact, defendant failed to notify Hager of such
termination,
(3) whether Hager should recover attorney's fees
from defendant, as Hager has requested in his complaint, and, if
so, the amount, id. at 471, and (4) whether Hager should recover
from defendant costs of court incurred in this action, id.
The Fifth Circuit affirmed this court's judgment of
dismissal as to all claims pleaded by Hager other than his claims
for recovery of attorney's fees and costs of court.'
It upheld
this court's denial of Hager's claim for compensatory damages for
violations of COBRA notice requirements.
Id. at 469-70. 2
Because Hager acknowledged before this court that he had received
notice of his right to continue his healthcare coverage under
COBRA, and failed to explain on appeal why that notice was
inadequate, the Fifth Circuit considered that issue forfeited.
Id. at 466-67.
Thus, this court's dismissal of that pleaded
claim was upheld.
Similarly, the Fifth Circuit upheld this
court's dismissal of Hager's pleaded claim of fraudulent
conversion of insurance premium payments he had provided to
defendant with the intent that defendant would forward the
1
Hager did not plead that he was entitled to a penalty, as discussed infra at 12.
'While the Fifth Circuit concluded that 29 U.S.C. § 1132(a)(3) did not authorize recovery of
compensatory damages for failure to comply with notice requirements, Hager v. DBG Pattners, Inc.,
903 F.3d 460, 469-70 (5th Cir. 20 18), it concluded that § 1132(a)( 1)(A) allows a plan participant to bring
a civil action described in § 1132(c) for an award of a diseretionaty penalty against an administrator that
does not comply with the COBRA notice requirements of29 U.S.C. § ll66(a)(4), on which 29 C.F.R.
§ 2955.606-4 elaborates, id. at 470. Because of its conclusion that "Hager maintained in the district court
that he was entitled to such a penalty," id., the Fifth Circuit held that this court abused its discretion when
it ruled that Hager was legally barred from obtaining a penalty award. The Fifth Circuit said "[w]e can
discern no barrier to the comt awarding the amount of Hager's medical expenses as a penalty." !d. at
471.
2
payments on to the health insurance carrier providing Hager COBRA
coverage.
Id. at 464.
As the Fifth Circuit held, Hager adequately alleged that
defendant did not fulfill its notice obligations under COBRA.
See Doc. 1 at 7,
, 23 & at 8, , 25 (there are two paragraphs 25
on pages 7-8 of the complaint) . 3
However, the court has a
concern with the Fifth Circuit's statement, having reference to a
penalty based on a failure, if any, of defendant to notify him of
termination of its health plan for its employees that had the
effect of terminating Hager's COBRA insurance coverage, that
"Hager maintained in the district court that he was entitled to
such a penalty."
Hager, 903 F.3d at 470.
While the record of
this court substantiates that Hager attempted to inject that
issue into the case before this court dismissed all his COBRA
claims, an overall view of the record discloses that there is no
way this court reasonably could have known when it dismissed all
of Hager's claims that he was actually making such a claim.
The court does not intend by anything stated in this opinion
to be critical of the handling by the Fifth Circuit of Hager's
appeal from this court's dismissal order.
The opinion of the
Fifth Circuit discloses that the Fifth Circuit conscientiously
3
The "Doc._" references are to the numbers assigned to the referenced items on the docket in
this Case No. 4: 16-CV-142-A.
3
studied the record before it and applicable legal authorities,
and made certain rulings in favor of defendant based on the
contents of the record and those legal authorities even though
defendant was unrepresented on the appeal and did not provide the
Fifth Circuit any assistance in evaluating accuracy or
completeness of the appellate record, nor did the Fifth Circuit
have the benefit of a defense counsel's assistance in bringing to
the Fifth Circuit's attention inferences beneficial to defendant
that might be drawn from the contents of the incomplete record
that had been provided to the Fifth Circuit for its consideration
in deciding the appeal.
As the Fifth Circuit noted in its opinion, defendant failed
to file a brief on appeal.
Consequently, the Fifth Circuit was
without any assistance in evaluating the integrity, from the
standpoint of the presentation of Hager's claims before this
court, of contentions Hager made before the Fifth Circuit.
That
was a subject of an exchange between this court and defendant's
counsel at the January 2019 bench trial, that went as follows:
THE COURT: Well, one of the problems I think that
developed in this case, Mr. Richerson, is your client
was not represented in the Fifth Circuit. No brief was
filed on behalf of DBG, and no lawyer appeared on
behalf of DBG, so the plaintiff had a free run to tell
the Fifth Circuit anything they wanted to tell the
Fifth Circuit, and they didn't have anybody answering
that.
4
Why did you not represent DBG in the Fifth
Circuit?
MR. RICHERSON: Well, Your Honor, that had nothing
to do with DBG. I was actually sick. I closed my
practice.
THE COURT: You were what?
MR. RICHERSON: I was sick and I closed my
practice, and I reopened it and I closed it again, and
during the time when my brief was due, it was basically
I was closing the practice and I just couldn't do it,
and that was really the only reason why.
I didn't want the client to suffer for it, but
that was the truth, and it was unexpected. Only two or
three cases were affected, but that was the absolute
reason. I just couldn't do it physically.
Doc. 120 at 190.
One of the adverse effects of the non-representation of
defendant in the appeal was noted by the Fifth Circuit in its
opinion when it discussed an August 16 meeting for a settlement
conference, which was followed by a proceeding in the courtroom.
Hager, 903 F.3d at 464.
The Fifth Circuit noted in its opinion
that "[a]fter the conference, the parties reported to the
courtroom; the proceeding that followed is not in the record."
Id.
(emphasis added).
This court has discovered that three
district court proceedings had not been transcribed and put of
record prior to Hager's appeal to the Fifth Circuit, with the
consequence that the Fifth Circuit did not have a complete record
of the proceedings of this court.
5
Those transcripts have been
prepared, are now of record, and appear as Docs. 79, 80, and 81
on this court's docket in this action.
If defendant had been
properly represented on the appeal, those absences from the
appellate record undoubtedly would have been called to the Fifth
Circuit's attention inasmuch as information important to the
defense was contained in two of those transcripts.
Particularly
pertinent were exchanges between the court and counsel for Hager
that are found in the transcript the Fifth Circuit referred to
when it said "the proceeding that followed is not in the record."
Hager, 903 F.3d at 464.
During that proceeding, the court and
counsel for Hager had the following exchange that defined the
issues that were before this coUrt for decision:
THE COURT: Let's see. As I recall, we're down to
the back end, that is, whether your client got proper
notice of termination of the coverage of the group
policy?
MR. O'KELLY: Correct, Your Honor.
THE COURT: And then if he did get notice -- if he
didn't get notice, did they make a reasonable effort to
give him notice. That would be an issue.
MR. O'KELLY: That would be the issue, yes, Your
Honor.
THE COURT: And then even if they didn't give him
notice, does he have any right to recover damages
because of that.
MR. O'KELLY: We have made -THE COURT: Is that kind of where we are?
6
MR. O'KELLY: You're right, Your Honor. I won't
respond, but you're right. You've identified the issues
correctly, Your Honor.
Doc. 80 at 4-5
(emphasis added)
This court's order of dismissal
was, according to the Fifth Circuit's rulings, correct as to the
third issue.
Because of this court's decision on the third
issue, it had no reason to decide the first two; however, the
court has now found, based on the record as it now exists, that
defendant in good faith tried to give Hager notice.'
The exchange quoted above occurred on August 16, 2017, the
last occasion for the parties to be before the court prior to the
August 21, 2017 proceeding that led to the court's announcement
that the case was being dismissed.
That exchange was consistent
with the following reasons that were stated on the record at the
time the dismissal was announced when the parties were before the
court on August 21, 2017:
THE COURT: I'm telling you now that I'm satisfied
that your client does not have any right to recover
compensatory damages based on any alleged failure of
the defendant to notify your client that the policy had
been terminated.
Is that what you want a record of?
'On August 28, 2017, the comt issued an order explaining and accomplishing the court's final
dismissal judgment. Doc. 69. In that order, the court explained that the comt was rejecting Hager's
claim for lack of notice of termination of the health insurance coverage because Hager had no right to
recover damages from defendant for any loss he might have sustained because of the lack of notice, id. at
18, which was consistent with the holding of the Fifth Circuit that even if defendant had failed to give
notice oftennination of the insurance coverage, it would not be liable to Hager for compensatory
damages, Hager, 903 F.3d at 469-70.
7
MR. O'KELLY: Well, if that's your finding,
need a record of that so I have something to
then I
THE COURT: Okay. That's what my finding is.
That hearing we had on August 8th of this year
clearly reflects what happened to the part of the claim
that had to do with failure to give him notice of his
entitlement to COBRA coverage. That's behind us.
And I'm telling you now that there's no point in
going to trial on the other one, that is, the alleged
failure to give proper notice of termination of the
plan. That's not going to get you any money, and
there's not much point in going to trial if you're not
going to win, if I don't have anything for the jury to
decide.
Doc. 74 at 28-29.
Of similar importance is information contained in the
transcript that is now of record as Doc. 81, which is a
transcript of a pretrial conference that was conducted in this
action on July 3, 2017.
Even though Hager had been ordered to
put in the joint pretrial order the parties to were to submit to
the court na full and complete statement of plaintiff's claims,
with specificity,•
doc. 19, attach. Special Pretrial
Instructions at 1, , 4(c), the joint pretrial order the parties
presented to the court in advance of the July 3, 2017 pretrial
conference said nothing about any claim by Hager for recovery of
8
any penalties; rather, the only description of any claims Hager
had under COBRA was stated by Hager as follows:
1.
follows:
Violation of 29 U.S.C. §1161 1166 (COBRA) as
a.
Failing to provide Plaintiff with timely
notifications of his right to elect COBRA coverage
within 30 days of Plaintiff's termination of
employment;
b.
Failing to notify Plaintiff or any covered
employee of cancellation of Plaintiff's health
insurance coverage at the time of termination of
coverage;
c.
Failing to notify or otherwise keep Plaintiff
properly informed of his COBRA coverage under
Defendant's group medical insurance plan.
Doc. 78, Ex. A at 2.
The court pointed out to Hager's counsel at the pretrial
conference the inadequacy of the pretrial order.
4-5, 15-16.
Doc. 81 at 2,
His counsel explained to the court what Hager
expected to recover based on the failure of defendant to notify
him of termination of his COBRA coverage, saying:
MR. O'KELLY: Well, under Cobra, if my client is
not getting coverage and incurs medical bills that
should have been covered but for the omissions of the
employer or the plan administrator, then the law is
pretty clear that he gets, not only his premiums, but,
also, the medical expenses he's incurred.
Doc. 81 at 15.
No mention was made of a claim for penalties.
The court ordered at the pretrial conference that the
parties prepare and file a revised joint pretrial order, and
9
directed that it "will have a detailed listing of plaintiff's
claims where the Court can read that and understand what
plaintiff's claims are."
Id. at 21-22.
The revised joint pretrial order (titled "Amended Joint PreTrial Order") that the parties provided to the court in response
to that directive described Hager's claims in some detail.
Doc. 78, Ex. B at 2-4,
§
4, ,, 1-16.
Hager's only claims
pertaining to liability by defendant to Hager for violations of
COBRA were stated as follows:
15. Defendant is liable for Plaintiff's medical
expenses incurred between June 1, 2015 and July 31,
2015.
16. Defendant is also liable for Plaintiff's
attorneys fees and costs that Plaintiff has incurred in
the pursuit of this action.
Id. at 3-4, , , 15-16.
Not once did Hager mention in his
description of his claims that he was seeking penalties from
defendant based on any set of facts or circumstances.
No mention
was made of penalties in any other section of the amended
pretrial order.
Nor was the Fifth Circuit provided for its consideration of
Hager's appeal copies of either the original or the first amended
proposed pretrial orders that failed to mention any claim for
penalties.
Doc. 78, Exs. A & B.
They were not in the case file
when the case was dismissed.
10
If defendant had been represented by an attorney in the
appeal to the Fifth Circuit, the attorney undoubtedly would have
called the foregoing matters to the attention of the Fifth
Circuit, which could well have caused the Fifth Circuit to
conclude that it did not have a complete record on appeal, and to
require Hager to produce transcripts of the proceedings and to
cause them to become parts of the appellate record.
Once the
Fifth Circuit had the complete record, it might well have
concluded, with the help of defense counsel if there had been
one, that Hager had not sufficiently informed this court that
Hager was making a claim for penalties based on defendant's
failure to notify Hager that it was terminating its health
insurance plan.
If the Fifth Circuit had reached such a
conclusion, it could have affirmed this court's dismissal. 5
'See DeVoss v. Sw. Airlines, Co., 903 F.3d 487,489 n.l (5th Cir. 2018)(declining to address a
claim because the plaintiff had failed "to provide any structured argument suppm1ing" the claim in the
district com1 or on appeal); Firefighters' Ret. Sys. v. Grant Thornton, LLP, 894 F.3d 665, 670 n.l8 (5th
Cir. 2018)("an argument not raised before the district court cannot be asse11ed the first time on appeal");
Burciaga v. Deutsche Bank Nat'l Trust Co., 871 F.3d 380,389 (5th Cir. 2017)(stating "[a] pa1ty must
press and not merely intimate the argument during the proceedings before the district court"); Maverick
Recording Co. v. Harper, 598 F.3d 193, 197 (5th Cir. 2010)(a pmty "waived her constitutional challenge
by failing to raise it [in the district court] in a manner that would allow the district court to rule on it");
lnt'l Women's Day March Planning Comm. v. Citv of San Antonio, 619 F.3d 346,356 (5th Cir.
20 I O)("If a party wishes to preserve an argument for appeal, the pmty must press and not merely intimate
the argument during the proceedings before the district court"); Kelly v. Foti, 77 F.3d 819, 823 (5th Cir.
1996)(holding that an issue is not preserved if it was not fairly presented to the district com1 and that the
"raising party must present the issue so that it places the opposing pa1ty and the court on notice that a
new issue is being raised").
11
If defendant had been properly represented by counsel on
appeal, its counsel would have called to the Fifth Circuit's
attention the same things this court called to the attention of
the parties by the order this court issued on November 20, 2018,
for the purpose of explaining to the parties in advance of a
proposed hearing that the court was unaware when the court
dismissed all of Hager's claims that Hager was making a claim for
penalties based on the alleged failure of defendant to notify
Hager of termination of the health insurance plan.
See Doc. 86.
The sequential discussion of pertinent events in this action that
are provided this court's November 20, 2018 order, as the action
pended in the district court before the court's August 2017
dismissal, demonstrates without any serious question that this
court had no reason to be aware at the time of the court's
August 2017 order of dismissal that Hager was asserting a claim
for penalties based on a failure of defendant to notify Hager of
termination of the health insurance plan.
Hager made no such claim in the complaint by which he
initiated this action in February 2016.
Doc. 86 at 3-4.
And,
there is persuasive basis for a contention that such a claim
would constitute a claim for Special Damages, as contemplated by
Rule 9(g) of the Federal Rules of Civil Procedure, which provides
12
that "[i]f an item of Special Damage is claimed, it must be
specifically stated."
See Doc. 86 at 15.
Rather than to reiterate what the court put in the
November 20, 2018 order on the subject of the unique
circumstances in this action that caused the court not to have
knowledge when the court dismissed all of Hager's COBRA claims
that Hager was making a claim of entitlement to penalties based
on defendant's alleged failure to notify him of termination of
the health plan, the court is inviting the reader of this opinion
to refer to and read the text under the heading "Unique
Circumstances in This Action" at pages 18-29 of the November 20,
2018 order.
Doc. 86 at 18-29.
Near the end of the November 20,
2018 order, the court explained, and directed, as follows:
This court agrees with the statement by the Fifth
Circuit that "Hager maintained in the district court
that he was entitled to such a penalty." Supra at 1-2.
However, the techniques used by plaintiff to maintain
that he had such an entitlement were so tenuous that
this court did not consider, or realize, that such an
issue was actually before this court for decision.
The court tentatively has concluded that those
techniques were such that they could form the basis for
a denial by the court of any penalties and attorneys'
fees, bearing in mind that a plaintiff has an
obligation to make known to the court in an appropriate
manner the claims on which he is asking the court to
make a ruling.
However, the court is directing plaintiff to
respond to the contents of this order if he disagrees
with, or wishes to comment on, any of the facts
13
recited, or conclusions expressed, by the court in the
order.
Id. at 29-30.
Hager did respond on December 30, 2018.
Doc. 96.
In that
response, Hager was critical of the court for preparing and
issuing the November 20, 2018 order; and he disagreed with this
court's conclusions.
However, he did not call the court's
attention in his response to any specific factual statement in
the order with which he disagreed.
Instead, he chose to use the
court's issuance of the November 20 order as a basis for a motion
for recusal under 28 U.S.C.
§
455(a), in which he attacked this
court for its preparation and issuance of the order.
Doc. 97.
The motion for recusal was filed shortly before the first setting
of the post-appeal trial of this action.
The court rescheduled
the trial to give it an opportunity to fully consider and rule on
the motion, doc. 99, which the court denied by order issued
January 11, 2019, doc. 102.
At the January 28, 2019 trial, the court gave Hager's
attorney an opportunity while he was testifying to put of record
any complaint he had relative to accuracy of the things this
14
court said in the November 20, 2018 order.
Doc. 120 at 186-87.
The following exchange occurred:
THE COURT:
.
Well, is there anything in the order I issued on
November 20, 2018 that I did not accurately describe
what happened in that order?
MR. O'KELLY: I don't believe so. I don't have the
order in front of me, I have not read it recently, but
I don't believe you have mischaracterized anything,
except the suggestion that I had failed to preserve the
issue of penalties, which I thought I had done by
asking for general relief in the original complaint and
then proceeding with the amendment to the joint
pretrial order so that that was preserved. That's -that's what I did.
Id. at 186.
The court anticipated, and dealt with, in the November 20,
2018 order the contention that the request in Hager's complaint
for "general relief" was sufficient to alert the court that he
was seeking penalties under COBRA.
Doc. 86 at 15-18; see also
supra at 12-13.
Of interest is the testimony counsel for Hager gave at the
January 28, 2019 trial concerning the events that led to the
inclusion in the second amended pretrial order of the mention by
Hager of a legal issue of penalties related to the alleged
failure of defendant to provide Hager notice of termination of
the health insurance.
The court's description of those and
related events is found at pages 7-11 of the November 20, 2018
15
order.
Doc. 86 at 7-11, , , 5-7.
As the court inferred from the
information the court had available at the time of that order,
the inclusion of the penalty language in the second amended
pretrial order came about through violations by Hager's counsel
of a court order.
Id. at 10-11.
Hager's attorney confirmed
during his testimony on January 28, 2019, the inferences the
court expressed in the November 20, 2018 order.
86.
Doc. 120 at 178-
Hager's counsel acknowledged by his testimony that he was
aware that the court had issued an order in response to his
motion for leave to add penalty language to the pretrial order
informing the parties that the language could be added if the
parties reached an agreement on that subject, but if they could
not reach an agreement, then Hager could reurge his motion for
leave.
Id. at 181.
He admitted that he put the penalty language
in the second amended pretrial order without conferring with
defendant's counsel because he was "trying to protect [his]
client to make sure [he] preserved all issues."
Id. at 182.
He
recognized that he had sought leave of court to put that in the
pretrial order, and said that he thought he had received leave of
court to do so.
Id. at 182-183.
The fact is that he had not
received leave.
In the course of the questioning, counsel again
explained his conduct by saying that "I was trying to preserve
the issues for the plaintiff."
Id. at 183-186.
16
Needless to say,
if, as Hager has contended, a general prayer for relief in
Hager's complaint had done the job, his attorney did not, in
violation of an order, have to sneak the claim into the wording
of a pretrial order to preserve it.
The mention of penalties by Hager's counsel in the second
amended pretrial order could well be what caused the Fifth
Circuit to say in its opinion that "Hager maintained in the
district court that he was entitled to such a penalty.•
903 F.3d at 470.
Hager,
Had defendant been properly represented before
the Fifth Circuit on the appeal, defense counsel could have
informed the Court of the irregularities that resulted in the
inclusion of the penalty language in the second amended pretrial
order, and the Fifth Circuit panel presiding over the case could
have taken that into account in its evaluation as to whether
Hager properly advised the district court of the existence of his
claim for penalties before the order of dismissal was issued.
Notwithstanding this court's belief that any claim by Hager
for penalties related to the alleged failure by defendant to give
Hager notice of termination of the health plan was not brought to
this court's attention sufficiently for this court to be aware of
it when this court dismissed Hager's COBRA claims, this court
understands and respects that the Fifth Circuit, by its reversal
and remand, has indicated its disagreement with this court's view
17
of that matter, with the result that this court accepts, as it
must, the decisions of the Fifth Circuit on that subject.
However, the court notes that the Fifth Circuit gave this court
discretion in deciding whether to award Hager penalties or
attorney's fees, and, if it did, the amount to be awarded as to
each.
And, this court is taking into account all the information
contained in this court's November 20, 2018 order and points made
in this opinion in making those decisions.
II.
The Notice of Termination Issue
The court now turns to the claim by defendant that it sent a
letter to Hager, notifying him that defendant would be ending the
Blue Cross health plan as of June 1, 2015, would no longer be
providing health benefits to its employees, and that Hager's
COBRA benefits could be affected.
Pl.'s Ex.
8; Def.'s Ex. 9.
That letter is the only thing on which defendant relied as
constituting notification to Hager that the continued insurance
coverage he obtained through COBRA was being terminated.
Defendant placed reliance on that letter in its post-hearing
memorandum filed in this court as providing appropriate
notification to Hager of his health insurance coverage.
at 2-4.
Doc. 122
Defendant did not provide any explanation as to why
there are two versions of the letter, one showing a date of
18
May 12, 2015, Pl.'s Ex. 8, and the other showing a date of May 5,
2 015 . ·
De f. ' s Ex. 9 .
While there is evidence that the person who ran defendant's
business thought the letter was mailed, doc. 80 at 24-25, there
was no direct evidence that the letter was actually put in the
United States mail for delivery to Hager.
The letter was
addressed to Hager's address shown on the information sheet on
the inside of the front cover of Hager's personnel file, which
Hager had the obligation to maintain as CFO of defendant.
Ex. 18.
Def.'s
In May 2015, Hager no longer lived at that address, but
lived at an address used in an earlier letter that defendant's
attorneys had prepared for defendant's CEO to sign relative to
the termination of Hager's employment.
Ex. 7.
Doc. 120 at 155-56; Pl.'s
Hager denied that he received the May 12, 2015 version of
the letter on the date shown on the letter.'
Doc. 120 at 22.
He
was not asked about the May 5, 2015 version of the letter, but he
did say that he did not receive during May, June, or July 2015
any notice from defendant that the insurance plan was to be, or
had been, terminated.
Id. at 29.
6
The pertinent qttestions and rather unusual answer were as follows:
Q. Exhibit 8, do you see it?
A. Yes.
Q. Okay. And did you ever receive this letter on May 12, 20 15?
A. No, sir.
Doc. 120 at 22:16-20.
19
A version of the letter that purports to be from
defendant to Hager concerning termination of the health insurance
coverage apparently is what the Fifth Circuit had in mind when it
expressed the conclusion that,
"alone, DBG's letter is
insufficient to support dismissal of Hager's claim."
F.3d at 468.
Hager,
903
Defendant's arguments to the contrary in its post-
hearing memorandum are not persuasive.
The court concludes that,
while the record contains evidence of defendant's good-faith
intent to inform Hager of its plan to terminate the health
insurance coverage, the court is not persuaded by defendant's
arguments that the termination-of-coverage letter is sufficient
to establish that Hager received notice that the health insurance
coverage was to be terminated.
Indeed, the Fifth Circuit held
that because of defendant's failure to file a brief, defendant
forfeited its contention that it had fulfilled its notice
obligations.
Id. at 467.
III.
Defendant Acted in Good Faith
The Fifth Circuit said in its opinion that Hager had pointed
to evidence suggesting that defendant did not act in good faith
20
on the matter of providing notice, and defined that evidence as
follows:
(1) DBG sent Hager's employment termination notice,
which was hand-delivered earlier than the health plan
termination notice, to the correct address; (2) Hager
exchanged text messages with Rowan about health
insurance, during which Rowan failed to mention the
plan's discontinuation; and (3) DBG deposited Hager's
premiums when it received them, and refused to refund
them for almost two years.
Id. at 468.
The court is persuaded by the evidence now in the record
that the evidence does not establish that defendant did not act
in good faith on the notice requirement.
defendant acted in good faith.
Rather, it shows that
Doc. 80 at 24-25; Doc. 120 at
157-58, 162-64.
The only text exchange this court has found in the record
shows that, by the time that exchange occurred, Hager already
knew that the healthcare insurance coverage had been terminated.
Pl.'s Ex. 1; Doc. 120 at 29-30.
The witness who testified on the subject of the giving of
notice by defendant to Hager of termination of the health
insurance was Todd Rowan ("Rowan"), who is the responsible person
at defendant, with the consequence that his motive and intent
becomes the motive and intent of defendant.
152-53.
21
Doc. 120 at 30:1-4;
He explained that the address used in the termination-ofemployment letter was different from the address used in the
notice-of-termination-of-insurance letters because the former was
prepared by an outside law firm' while the latter letters were
probably prepared by Derrick Moore, the Chief Financial Officer
for defendant who replaced Hager in that job.
158:1-5.
Doc. 120 at
The letter was found on Derrick Moore's computer.
at 163-164.
Id.
Rowan believed that the latter letter was mailed to
Hager by defendant's then-CFO.
Id. at 158, 164:6-10.
The
address used on the letter was the only address shown for Hager
inside his personnel file.
Def.'s Ex. 18.
Doc. 80 at 24-25; Doc. 120 at 162-63;
So far as Rowan knows, the letter was not
returned to defendant by the Postal Service.
4.
Doc. 120 at 162:1-
Rowan did not provide a copy of the letter to the attorneys
who had prepared the termination-of-employment letter.
158-59.
Id. at
He testified that, while he is no expert on Blue Cross,
they sent out the notice as soon as they knew they were going to
terminate the plan.'
Id. at 159:16-18.
'The letter shows that it went "Via Hand Delivery." Pl.'s Ex. 7. However, there is nothing in the
record to suggest that defendant's CEO, Rowan, had any part in the hand-delivery. More logically, it was
hand-delivered by the law firm which was responsible for preparation of the letter and causing it to be
signed by Rowan.
'The termination-of-insurance letter does not, as Hager contends in his post-hearing
memorandum, doc. 121 at 4, say that defendant is terminating Hager's COBRA coverage. Rather, it says
that defendant will be "ending its Blue Cross health plan" and "will no longer be providing health
(continued ... )
22
As to the premium payments, Rowan's impression is that the
premium payments Hager sent to defendant after May 12, 2015, were
forwarded by defendant, presumably by its checks, to Blue Cross.
Id. at 159:19-24 & at 160:1-8.
Though there was a period of time
before his premium payments were returned to Hager, defendant had
been trying to retrieve the funds from Blue Cross on behalf of
Hager for some period of time.
Id. at 160:14-21 & at 168:3-22.
Hager's personnel file with defendant has under an ACCO
fastener inside the front cover a form containing information
pertaining to Hager, which shows his address to be the Whittier
Lane address to which the notice-of-termination-of-insurance
letters were addressed.
Def.'s Ex. 18 (inside front cover).
Hager's employment application form, which is under Tab 2 of that
same file,
shows the same address.
Id. at Tab 2.
Also, an item
under Tab 4 shows his address to be on Whittier Lane.
Tab 4.
Id. at
There is nothing in the personnel file that shows a
change of address for Hager.
Id.
Hager testified that he had inserted a form in his personnel
file that showed his change of address.
Doc. 120 at 117-18.
He
was shown his personnel file, he looked through it, and said that
'( ... continued)
benefits to its employees" and that doing so "may affect your COBRA benefits please check with your
health plan provider for options regarding health benefits." Pl.'s Ex. 8 & Def.'s Ex. 9.
23
he could not locate in the file the change-of-address form he
said he put in it.
Id. at 118-19, 125.
Hager explained the handwritten entries on the contents
pages in the front of the personnel file--the top pages under the
ACCO fastener in the back cover of the file.
with the initials "DH" is his handwriting.
The handwriting
Doc. 120 at 128.
The
dates shown by his handwriting are either the date that the
particular document was put in the file or a date when he
reviewed the file to make sure that it was there.
Id.
The
change-of-address form would have been put under the
"Miscellaneous• tab [Tab 20] of the personnel file.'
128-29.
Id. at
If he had added something into the "Miscellaneous• part
of the file, he should have initialed the "Miscellaneous• line in
the contents section to indicate that he had done so.
are no initials or other entry on that line.
page under ACCO fastener in back cover.
his.
Id. at 129.
Id.
There
De£. 's Ex. 18 at 2d
The entries in green are
At the time of his change of address, he no
longer had an assistant, so he was doing all of the entries by
himself.
Id.
'Hager's testimony that he put the change-of-address form under the "Miscellaneous" tab is itself
incredible. The most-logical place for it to be put would be under the ACCO fastener in the front cover
of the file where personal information about Hager, including his home address, is found. The next mostlogical place to put such a form would be under Tab 10, which identifies its contents as "Employee
Information Form (including emergency contact information, allergies, any special conditions or needs)."
Def. 'sEx. 18 (top page under ACCO fastener in back cover of exhibit).
24
All of the entries on the contents part of his personnel
file that were made by Hager have entry dates in October 2013.
Ex. 18, top 4 pp. on the right side of the file, above Tab 1.
Hager's own testimony establishes that his claim that he put
a form in the file showing he had a change of address has a
credibility problem.
He earlier had testified that the last time
he resided at the Whittier Lane address, to which the
termination-of-insurance letters were addressed, was February 28,
2014, doc. 120 at 23:7-8, and that on March 1, 2014, he completed
the change-of-address form that any employee would complete when
they have a change of address, to show he had a new address,
id.
at 23:4-25 & at 24:1-6.
Thus, the evidentiary record indicates that if the
termination-of-insurance letter was sent to the address shown for
Hager in his personnel file as of May 2015,
it would have been
sent to Hager's former home address, 6812 Whittier Lane,
Colleyville, Texas 76034, which is the address to which the
letter was directed.
The court has reached that conclusion
because of the absence of credible evidence that there was a
change in the address for Hager noted in his personnel file at
any time between the date when the file was created with the
Whittier Lane address shown as his home address and the date when
the termination-of-insurance letters were prepared for mailing.
25
The court finds that the evidence does not establish that
defendant did not act in good faith.
Rowan's testimony is credible.
The court finds that
The court infers from Rowan's
testimony that he reasonably assumed that Hager's personnel file
would accurately reflect Hager's mailing address, and that
Hager's replacement as CFO proceeded on the same assumption when
he prepared the termination-of-insurance letter to be mailed to
Hager at the address shown in the personnel file.
The court
finds that Hager is incorrect in his contention that he caused
there to be a change of his home address in the personnel file
before the summer of 2015.
The testimony of Rowan leads the court to infer that Rowan
assumed, if he did not have personal knowledge, that the
termination-of-insurance letter was actually put in the mail to
Hager, that it was correctly addressed, and that the mailing was
successful because, so far as Rowan knew, the letter was not
returned.
The court finds that the delay on the part of
defendant in returning Hager's June and July health insurance
payments was not inappropriate considering that defendant was in
the process of trying to receive a return of the funds from the
insurer before reimbursing Hager.
The court finds that while
Rowan could see Hager's new address on the termination-ofemployment notice defendant's attorneys prepared for Rowan to
26
sign for delivery to Hager, Rowan had no reason to believe that
the correct mailing address would not be used in the terminationof-insurance letter that defendant's new CFO would be preparing
for mailing to Hager.
There is no reliable evidence that defendant did anything
that was intended to prevent Hager from having knowledge in May
2015 that the health insurance plan was to be terminated; rather,
the court is persuaded by the evidence that defendant made a
good-faith effort to inform Hager in May 2015 that the health
insurance was to be terminated.
However, the court is not using
the findings made by the court in this paragraph as the only
reason for denying Hager recovery of penalties or attorney's
fees, but the court is taking such findings into account, along
with other factors, in the rulings the court is making on those
subjects.
IV.
There Is No Valid Reason to Punish Defendant
The court has taken into account the Fifth Circuit's
explanations that the statutory penalties contemplated by COBRA
are "meant to be in the nature of punitive damages, designed more
for the purpose of punishing the violator than compensating the
participant or beneficiary.•
Hager, 903 F.3d at 471.
The court
finds that defendant did not engage in any conduct related to its
27
obligation to notify Hager of the termination of the health
insurance plan that would justify receipt by defendant of
punishment even if, in fact, Hager did not receive notice of the
defendant's intent to terminate the insurance plan.
Therefore,
the court is not awarding Hager any amount as a penalty related
to the notification of termination-of-insurance issue.
V.
Further Factors That Have Entered Into the Court's
Decision to Deny an Award of Penalties
A.
Failure of Hager to Properly Inform the Court Before the
COBRA Claims Were Dismissed That He Was Making the Penalty
Claim He Now Asserts
If it were a close question, and the court does not consider
that it is, the court would be influenced to rule as it is on the
penalty issue by the technique Hager and his counsel used in
putting of record whatever the Fifth Circuit had in mind when it
said in its opinion that "Hager maintained in the district court
that he was entitled to such a penalty."
Hager, 903 F.3d at 470.
Although Hager did put of record that he was entitled to a
penalty because of his alleged failure to receive notice from
defendant that it had terminated the insurance plan, the method
by which he had done so, as explained in some detail in this
court's November 20, 2018 order, doc. 86, was so tenuous that
this court did not understand when it dismissed Hager's COBRA
28
claims that the dismissal included a claim for penalties based
Hager's allegation that defendant did not properly inform Hager
that it was terminating the health insurance plan.''
If the
court had been aware that such a claim had been injected into the
case by Hager, the court probably would have nevertheless
dismissed the claim, but would have explained in the court's
Order Explaining and Accomplishing Dismissals, doc. 69, the
reasons for the dismissal, i.e., there was no valid reason to
punish defendant by imposing penalties on defendant, nor was
there any legal reason for imposing penalties in favor of Hager
on defendant because Hager had not brought to the court's
attention in a proper manner that he was making a claim for
penalties.
10
Hager admitted in his post-hearing memorandum that his contention that he called this court's
attention to his claim for civil penalties under COBRA is based on the inclusion in the Second Amended
Joint Pre-Trial Order of the language that is discussed at pages 9-11 of this coutt's November 20, 2018
order, doc. 86 at 9-11, and is further discussed in another pmt of this order, supra at 15-17. In that
version of the pretrial order, Hager's counsel put as a contested issue of1aw "[w]hether the Defendant is
liable to Plaintiff for reasonable attorney's fees and statutory penalties under COBRA for failure to notifY
Plaintiff of the early termination of health insurance plan?'' Doc. 35 at 9,, 12. As discussed at the
places mentioned above in this opinion and in the NovembeJ' 20, 2018 order, that contention was put in
the Second Amended Joint Pre-Trial Order by a technique that was contrary to an order the comt had
issued in response to a motion filed by Hager for leave to amend a pretrial order. Of interest, that same
pretrial order made no mention under the heading "Plaintiff's Pending claims" of any contention by
Hager that he had any right to recover penalties because of a failure by defendant to provide Hager notice
that the health insurance coverage was being terminated. Instead, Hager put under that heading its claims
of liability by defendant to Hager were for medical expenses and attorney's fees, with no mention of
penalties. Doc. 35 at 4,111115 & 16. As was true throughout this action before the court dismissed it,
Hager's only claim related to the alleged failure of defendant to give notice of termination of the health
insurance coverage was that defendant was liable to Hager for compensatory damages in the form of
medical expenses he incurred that were not covered by insurance and attorney's fees.
29
B.
Developments at the January 28, 2019 Trial
Developments at the January 28, 2019 trial of this action
provide further support for the court's decision not to award
penalties against defendant and in favor of Hager.
Hager
demonstrated at trial that he is determined to maximize his claim
against defendant, even to the extent of misrepresenting the true
extent of his financial loss; and, he failed to provide the
court-requested documentation concerning his medical expenses.
1.
Hager's Attempt to Maximize His Claim
Hager testified that he neither inquired nor requested of
any of his healthcare providers whether they would accept as
satisfaction of his account the amount his insurance company
would have paid them if his insurance had been in effect,
doc. 120 at 48:1-4; and that he has not been told that the
providers would not accept what the insurance company would have
paid,
id. 45:18-20.
He went so far as to misrepresent the
contents of an exhibit that on its face showed that the
healthcare provider offered to allow him to pay in satisfaction
of his account the amount the insurance company would have paid
if the insurance had been in effect.
Pl.'s Ex. lOA at 2.
Early in the trial, when Hager's counsel was questioning
Hager, in the course of proving up what Hager claimed his losses
were by reason of the cancellation of his health insurance, he
30
devoted significant time to offering false evidence that he
suffered a $785.93 loss by reason of the insurance company's
failure to pay Dallas ID Associates, PA, billings for services it
rendered to Hager in June 2015.
- 44:8.
Doc. 120 at 31:13 - 35:11; 36:24
The discussion started with reference to a multiple-page
exhibit identified as Plaintiff's Exhibit 10.
Id. at 31.
At the
suggestion of the court, Exhibit 10 was broken down into three
different exhibits, Plaintiff's Exhibits 10, lOA, and lOB.
at 33-34, 43.
Id.
Hager testified that Plaintiff's Exhibit lOA is a
statement from Dallas ID Associates saying that he owes Dallas ID
Associates the amount of $785.93.
Id. at 34:20 - 35:3.
Someone
had handwritten at the bottom of the first page of Exhibit lOA
the number $785.93, which was the total of the three charges
listed in print above that handwriting.
Pl.'s Ex. lOA.
The
exhibit also showed that the insurance had paid $173.06, $107.38,
and $74.54 as its payment obligations on the three charges by the
doctors, for a total of $354.98.
Id.
Page 2 of Exhibit lOA
quite clearly states that it is a statement asking Hager to pay
only $354.98, which is the dollar amount alongside the words "PAY
31
THIS AMOUNT" on page 2.
Id. at 2.
The following is handwritten
on page 2 of Exhibit lOA:
Mr. Hager,
Your BCBS termed 6/1/15.
Do you have other
insurance? If you DO have new insurance please provide
that information so we can bill.
If no new insurance
please pay the balance due.
The contracted rates have
been applied as a courtisy [sic]
Billing Dept
214-689-7806
Pl.'s Ex. lOA at 2.
When the handwritten note on Exhibit lOA is considered, and
the "PAY THIS AMOUNT" entry is taken into account, obviously the
$785.93 handwritten total at the bottom of the first page of the
exhibit was not put there by the healthcare provider, but,
instead, appears to have been put there by someone in Hager's
litigation camp.
Hager made a point throughout the trial that he
was not going to be limited in his attempted recovery by what the
insurance company would have paid to the healthcare providers,
but that he was going to insist on a recovery of the full amount
of the billings of the medical care providers.
With specific
reference to the Dallas ID Associates charges in the total amount
of $785.93, the following exchange occurred between the court and
Hager at the trial:
And then below that, it has a June 12 - I'm talking about lOa now -- has a June 12, 2015
THE COURT:
32
entry of $225, and a June 13, 2015 entry of $143, and
then it has, handwritten at the bottom, a total of $795
and -- $785.93.
Why does that differ from the number on
Exhibit 10, which is $417.93?
THE WITNESS: The Exhibit 10 did not -- I did not
have the Blue Cross benefit sheet for the amounts of
June the 12th of $225 or June 13th in the amount of
$143.
THE COURT: You don't have the Blue Cross document
pertaining to those?
THE WITNESS: No, sir.
THE COURT: Has anybody requested that you pay
those?
THE WITNESS: Yes. That's what lOa is, is it's an
invoice directly from the doctors saying that I owe
this amount.
Doc. 120 at 37:6-23.
Put simply, Hager testified falsely when he said that
Exhibit lOA is an invoice directly from the doctors saying that
he owes "this amount•
($785.93).
As page 2 of the exhibit
clearly states, he is being billed by the healthcare provider for
only $354.98, and he was told that the doctors were showing him
the courtesy of not asking him to pay any more than the insurance
company would have paid if his policy had been in effect.
Rather
than to take advantage of that offer, Hager repeatedly has
informed Dallas ID Associates as well as his other healthcare
providers that he "was pursuing getting them paid, and advised
33
them of this court action."
Id. at 38:6-7.
Hager's intent to
maximize whatever recovery he might make from defendant is
clearly disclosed by the following exchange that occurred at the
trial:
THE COURT: Okay. Mr. O'Kelly, the amount you gave
me earlier as a total amount, I believe you said
45,000-some-odd.
MR. O'KELLY: $45,605.49.
THE COURT: Is that a total of the Blue Cross Blue
Shield obligations for payment, or is that the total
bills of the healthcare providers?
MR. O'KELLY: That is the total of the bills that
the health care -- the health providers, Your Honor.
THE COURT: Okay. Well, I think the issue is how
much he lost by not having the insurance coverage, and
that would be the amount the insurance company would
have paid, if it had the coverage.
Is that correct?
THE WITNESS [HAGER} [interrupting}: No, sir, that
is not correct. The reason the insurance company pays
less is because the insurance company has bargained
with the provider for a discount. If insurance is not
involved, then the patient becomes responsible for 100
percent of the invoice.
THE COURT: Have you had any of these health care
providers indicate to you they want more than what the
insurance company would have paid them?
THE WITNESS: Yes, sir, because they are sending me
invoices.
THE COURT: Who indicated that to you?
THE WITNESS: They indicated it because they -34
THE COURT: Who indicated it to you?
THE WITNESS: All of the providers, sir.
THE COURT: Every provider that's listed on this
summary of plaintiff's medical expenses has told you
they won't accept from you what the insurance company
would have paid?
THE WITNESS: They have told me by sending me an
invoice for the full amount, yes, sir.
THE COURT: Have they told you they would not
accept what the insurance company would have paid?
THE WITNESS: No.
Id. at 44:9 - 45:20.
Hager failed to admit at trial that at least one of his
healthcare providers had informed him that it would be willing to
take in full satisfaction of his account what the insurance
company would have paid if he had insurance. 11
And Hager made
clear that he did not want the healthcare providers to accept in
satisfaction of his accounts what they could have received from
the insurance company.
That that is so is evidenced by the
itemization of the medical expenses for which he is seeking
payment from defendant shown on Plaintiff's Exhibit 57.
11
It shows
ln his post-hearing memorandum, Hager makes the statement: "[s]ome of the providers still
honored the BCBS contractual prices for Plaintiff and some did not after they were told coverage was not
in effect." Doc. 121 at 15. The record references he gave for that statement are "P. Ex. l 0, 13-14, 16,
19-20, 22-27." Presumably all of those numbers refer to exhibits. So far as the comt can tell, none of
those exhibits define what the healthcare providers actually would accept in satisfaction of the services
they provided for Hager. He fails to mention Exhibit 1OA, which clearly states that all it expects by way
of payment from Hager is what the insurance company would have paid.
35
for Dallas ID Associates that he is seeking payment from
defendant of the full charges of Dallas ID Associates for the
services they rendered, totaling $785.93, instead of the $354.98
that Dallas ID Associates told him in Exhibit lOA it would accept
in full satisfaction of its charges for services it provided him.
Hager continued in his attempts to mislead the court by the
statement in his post-hearing memorandum to the following effect:
Plaintiff's Exhibit 10 contains a statement and
handwritten note that Plaintiff received from Dallas ID
Associates, PA stating that Plaintiff was personally
responsible [for] charges of $785.09 (P. Ex. 10 p. 3,4;
TR. 3 5 : 1-11) .
Doc. 121 at B.
The document he refers to in the quoted language
as "Exhibit 10" actually is Exhibit lOA, and his reference to the
record of the trial is to his false testimony as follows:
Q (BY MR. O'KELLY} Mr. Hager, turning your
attention to what we've now marked Exhibit lOa, which
was actually page 3 and 4 of what was formerly marked
as Exhibit 10, can you identify this document?
A.
I can.
Q. What is it, please, sir?
A. This is an invoice dated October 9th, 2015,
from Dallas ID Associates showing that I now owed the
three amounts on that sheet totaling $785.93.
Doc. 120 at 34:20 - 35:3.
The foregoing directly contradicts the "PAY THIS AMOUNT,"
showing $354.98 as the amount to be paid by Hager, and the
36
handwritten note on the second page of Plaintiff's Exhibit lOA.
Hager even went so far in his post-hearing memorandum to explain
that the handwritten note on page 2 of Exhibit lOA (referred in
the following exchange as Exhibit 10)
meant something different
from what it said and that the "PAY THIS AMOUNT" asked him to pay
more than it said.
He stated the following:
Page 3 of Plaintiff's Exhibit 10 shows charges
totaling $785.93 for services rendered during the
Services Period. (P. Ex. 10, p. 3-4). On page 4 of this
exhibit, the Billing Department from Dallas ID
Associates provided a statement showing amounts
refunded to BCBS of $173.06, $107.38 and $74.54, with a
handwritten request to for Plaintiff to pay the
balance due because "your BCBS termed 6/1/15" ... "The
contracted rates have been applied as a courtesy."
Doc. 121 at 8-9.
Page 3 and 4 of what started out as Plaintiff's
Exhibit 10 ended up becoming Plaintiff's Exhibit lOA.
Doc. 120
at 34:20-23.
Those statements in Hager's post-hearing memorandum are so
flagrantly false that this court is urging each member of the
Fifth Circuit panel to review this case in the event of an appeal
to personally study Plaintiff's Exhibit lOA, and note the
handwritten entry of "$785.93" at the bottom of the first page of
the exhibit (which was page 3 of the originally marked
Plaintiff's Exhibit 10) and the entries in the printed part of
the second page of the exhibit (originally page 4 of Plaintiff's
Exhibit 10), which tells Hager that he is to "PAY THIS AMOUNT,"
37
and showing that the amount he is to pay is $354.98.
The
handwritten notice on the second page of Plaintiff's Exhibit lOA
could not have been any clearer that the healthcare providers
were giving Hager benefit of its contracted rates with the
insurance company when it explained why the amount he was to pay
was limited to what the insurance company had paid, but had
required repayment, when it said in the handwritten part "[if] no
new insurance please pay the balance due.
have been applied as a courtisy [sic] .•
The contracted rates
Pl.'s Ex. lOA at 2.
The court has no reason to believe that other of the
healthcare providers would not have accepted, and still accept,
the amount the insurance companies would have paid for their
services in full satisfaction of their charges for those services
if Hager had simply requested of the healthcare providers that
they accept such a payment.
His decision not to make such a
request of any of his healthcare providers and his
misrepresentations related to the contents of Plaintiff's Exhibit
lOA are factors, though not overriding factors,
that the court
considers appropriate to take into account, and has taken into
account, on the decision not to award the amount of Hager's
medical expense charges as a penalty.
Based on the information the court received through Hager's
presentation at trial, the court has calculated that, on average,
38
the health care providers whose billings for services rendered to
Hager have not been paid, would have been paid approximately
forty-seven percent of the charges presented to the insurance
company by the providers, which means that if the total amount
proved, $41,972.29,
12
as the amount submitted by the providers to
the insurance company for payment, the insurance company, using
the average, would have paid a total of $19,726.97.
If the court
were to award the cost of healthcare as penalties to Hager, it
would be limited to that amount.
Even then, the court would have
a concern that such an award would be in excess of the amounts
Hager would actually pay to the healthcare providers, bearing in
mind that the statute of limitations arguably has barred most of
the claims.
Tex. Civ. Prac. & Rem. Code
12
§§
16.004 & 16.051.
The court's calculations are based on what it determined from the record of what Hager proved
by testimony and documentation as to the healthcare provider charges and what the insurance company
paid based on claims resulting from those charges. The comt's calculations show that the total charges
by the healthcare providers was $41,972.29 and that the insurance company paid in response to claims
for those charges $19,726.97. Hager's summary shows a total of charges of$45,605.49. Pl.'s Ex. 57.
The comt concludes from its study of the record that Hager's summary incorrectly includes a $2,762.00
amount in the Texas Oncology total that duplicates a charge for that amount that is included in an earlier
billing, and incorrectly includes a $1,556 charge by Grapevine Emergency that was not proved by
testimony or document at trial. Id. The totals of the court's calculations could be slightly incorrect, but
the comt is comfmtable in finding that forty-seven percent is a fair approximation of the percentage of
healthcare charges that the insurance paid.
39
2.
Failure of Hager to Comply with a Court Order re
Producing Documents for the Court's Inspection in
Advance of the Trial or at the Trial
In the order initially scheduling the post-appeal trial, the
court included the following directive to Hager:
There are certain matters that the court
anticipates now could be important to the decisions the
court will be called upon to make after having had the
hearing, and the court expects cooperation of the
parties and counsel in causing information and material
pertaining to those matters to be presented to the
court in advance of the hearing and in causing persons
who can give testimony in respect to such matters to be
present at the hearing for that purpose.
Those things
are:
(1)
The court is requiring
plaintiff to provide to the court as
attachments to an appropriate pleading
to be filed by plaintiff in this action
by 4:00p.m. on November 15, 2018, all
documents of any kind or character,
including printouts of any documents
stored in computers, pertaining to any
of the medical expenses plaintiff
incurred after the healthcare plan was
terminated and before he became aware
that it was terminated. including all
medical expenses for which plaintiff has
sought recovery as damages in this
action.
The documents plaintiff is to
provide as attachments to such pleading
pursuant to this directive are all
communications between him and the
insurance company related to any of such
expenses.
Doc. 82 at 3-6 (emphasis added)
Hager provided certain documents to the court for review in
advance of the trial, but the court repeatedly learned during the
40
trial that Hager had failed to comply with the order.
Some of
the withheld items could have had a significant impact on the
effect of Hager's evidence relative to his medical expense
payment obligations.
While the court might have overlooked some
of those occasions, the court has located the following in the
transcript of the trial:
1.
Hager testified that he had received an invoice
about two weeks ago from Dallas ID Associates.
38:13-18.
Doc. 120 at
When the court made known its wish to see that
invoice, the following exchange occurred:
THE COURT: I had ordered you to produce all
of those things.
MR. O'KELLY: And I have forwarded your order
to the witness, and we gathered as much as we can.
I will look at the break for that document. The
witness may have it, and if he does, we'll be
happy to make it available, but THE COURT: Well, do you have a copy of what
you say THE WITNESS: Yes, I believe I do. It's one
that I received two weeks ago.
THE COURT: Well, Mr. O'Kelly, I expected you
to comply with the order when I ordered those
things produced, and if new ones came into
existence, that they be produced.
Id. at 39:6-16.
41
Hager further described the document under discussion,
by saying:
THE COURT: Did you receive a document similar
to plaintiffs Exhibit 10 pertaining to the $225
charge and the $143 charge on Exhibit lOa?
THE WITNESS: Your Honor, the document that I
received had all of the three charges as reflected
on Exhibit lOa.
THE COURT: Did you receive from Blue Cross
Blue Shield anything pertaining to the $225 and
$143 charges?
THE WITNESS: I'm sure that I did, but I could
not find them readily -- I could not readily find
them.
Id. at 39:23 - 40:1-7 (emphasis added).
Considering the discrepancies in the contents of
Exhibit lOA and the witness's testimony and post-trial
memorandum concerning that exhibit, the additional
documentation could have been important.
It was never
produced during the trial.
2.
Hager discussed a letter he sent to a collection
agency telling it that he would only deal directly with
North Texas Kidney Disease Associates, but that he did not
have that communication with him because it would be at his
home.
Id. at 69-70.
3.
Discussions relative to a Texas Oncology billing
that was not produced.
Id. at 77-78.
42
The following
exchange occurred in reference to the non-production of
those documents:
THE COURT: Do you know if that healthcare
provider, Texas Oncology, submitted to Blue Cross
Blue Shield for payment what you've included in
your exhibit list as the $12,566 charge? Was that
ever submitted by Texas Oncology to Blue Cross
Blue Shield?
THE WITNESS: Yes, Your Honor.
THE COURT: Is that refleGted in Exhibit 25?
THE WITNESS: I don't see it in there.
THE COURT: Is that somewhere in the
exhibits, Mr. O'Kelly?
MR. O'KELLY: No, Your Honor, it is not.
THE COURT: Why is it not in there?
MR. O'KELLY: I don't have it to put in.
I didn't receive it from the client, and I
don't believe I got anything from Texas
Oncology either.
THE COURT: Do you have anything on that
subject?
THE WITNESS: I'm sure that I do.
THE COURT: Do you have it with you in that
folder?
THE WITNESS: No, sir.
THE COURT: Well, is there a reason why
your attorney doesn't have it?
THE WITNESS: I provided my attorney with
final invoices and not necessarily the
initial billing from the provider to the
43
insurance company, and the subsequent refund
of those monies that was paid back from the
provider to Blue Cross, but I'm sure that I
have them. I have a stack of papers that are
very high.
THE COURT: Mr. O'Kelly, I have signed an
order requiring all those things to be produced.
MR. O'KELLY: Your Honor, I've done what I can
to comply with that order. I don't know what I
have not received to provide to -THE COURT: Well, he says he has those
documents.
MR. O'KELLY: Well, then I'm afraid there may
have been a miscommunication between me and the
client, but there was never an attempt to avoid
the requirements of your order.
THE COURT: Okay. Some of those documents
could be relevant to what we're doing, but we'll
have to move on if they are not here.
Id. at 76:23 - 78:11.
4.
Another example of the failure of the witness and
his attorney to comply with the order requiring that
documents be turned over to the court in advance of trial is
found at pages 92-93 of the trial transcript, where the
following exchanges occurred:
Q (BY MR. O'KELLY) Mr. Hager, let me ask you
sort of a general question. Did you notify these
providers that you were in litigation over these
costs?
A. I notified every one of the providers that
I was in litigation and that my intent was to get
them paid for saving my life.
44
Q. As a result of that communication, have
you received -- or following that communication,
have you received any further demands for payment?
A. No. I've kept them up to date with every
step of this process.
THE COURT: How did you communicate what
you've just described THE WITNESS: In ·-THE COURT: Let me finish my question. To the
healthcare providers. How did you communicate that
to the healthcare providers?
THE WITNESS: In written correspondence, Your
Honor.
THE COURT: Okay. Let me see that
correspondence, Mr. O'Kelly.
MR. O'KELLY: I do not have that. I have
not been presented that.
THE COURT: That's exactly what I had asked
for in an order.
MR. O'KELLY: That's correct. Your Honor. I do
not have that correspondence.
THE COURT: Do you have it with you?
THE WITNESS: No,
Id. at 92:5 - 93:7
sir,
I have it at home.
(emphasis added).
Interestingly, the very series of correspondence to
which the exchanges quoted above refers was thought by Hager
and his attorney to be significant enough to be referenced
in their post-hearing memorandum in support of Hager's
45
arguments that he should receive a significant penalty
award.
On page 8 of that memorandum, Hager and his attorney
made the following statements:
Approximately two weeks prior to the
hearing, Plaintiff contacted his providers
and told them that he was pursuing the
instant action in order to get them paid.
Plaintiff has consistently kept his providers
informed about the pending lawsuit, as his
desire to pay the providers that saved his
life. (TR 38:5-7; 102:8-13)
Doc. 121 at 8.
Yet, they intentionally ignored an order of
the court relative to those very documents.
5.
A similar-type exchange occurred at a later point
in the hearing.
The record reflects as to that exchange the
following:
THE COURT: Did you ever receive a bill from
Radiology Associates for any amount?
THE WITNESS: Yes.
THE COURT: When did you receive that?
I would have to go through my
records, Your Honor.
THE WITNESS:
THE COURT: Do you have it with you?
THE WITNESS: No,
it would be at home.
THE COURT: Do you have that,
MR.
O'KELLY: I do not,
Your Honor.
Doc. 120 at 103:15-24 (emphasis added).
46
Mr. O'Kelly?
* * * * *
Without seeing the withheld documents the court had directed
Hager and his attorney to provide to the court, there is no way
the court can evaluate the extent to which those documents could
have provided evidence that would bear further on Hager's effort
to maximize his damages.
They could well disclose that other
healthcare providers expressed, one way or another, a willingness
to accept less than the billed amounts in satisfaction of the
original charges for the services they rendered for Hager.
Considering the misrepresentations that Hager and his attorney
have made relative to the contents of Plaintiff's Exhibit lOA,
there is certainly reason to suspect that Hager would
hav~
withheld from his compliance with the court's order all other
documents that disclosed similar information relative to his
relationship with other healthcare providers.
VI.
The Court is Denying an Award of Penalties
Be all that as it may, for the reasons discussed above and
under this heading, the court has concluded that it should
exercise its discretion to deny Hager an award of any amount as a
penalty against defendant related to any failure on the part of
defendant to provide Hager notice of its intent to terminate the
health insurance plan that resulted in
47
~ermination
of Hager's
continuation of coverage obtained through COBRA.
Not only is
there no evidence that defendant engaged in any bad-faith conduct
related to the notice-of-termination issue, there certainly is no
evidence that defendant intentionally failed to provide notice.
The evidence suggests that defendant took steps to see that the
notice was provided, but for an unexplained reason apparently
failed to accomplish what it intended to accomplish.
Moreover, the court was disadvantaged when it decided to
dismiss Hager's COBRA claims because it had never been informed
in a proper manner by Hager that Hager was seeking penalties
related to his claim of lack of notification of termination of
the healthcare plan.
Instead, Hager said the court correctly
defined the issues to be decided even though the defined issues
Supra at 6-7.
did not include a penalty issue.
Perhaps the
court, through its own research, could and should have figured
out that if Hager and his attorney were alert to Hager's rights,
he would have been making a claim for penalties.
However, what
the court decisions that do not require a district court to make
a ruling on a claim unless the claim is clearly brought to the
attention of the court by the litigant, supra at 11 n.S, appear
to have in mind is that:
When, as occurred in this case,
pressing judicial business of the court prevents the court from
conducting the independent research it normally would conduct,
48
but, instead, requires it to rely on the litigant to properly
define for the court the exact nature and extent of the
litigant's claims, the district court has no obligation to
consider in its decision a claim that is not clearly brought to
the court's attention.
If this court had been given proper
notice that such a claim had been made, the court probably would
have dismissed it in any event, but would have provided an
adequate explanation for having done so, including the court's
conclusion that the record did not provide any reason for
imposing punishment by way of penalties on defendant.
Had the
court given an explanation as to why it was dismissing a
penalties claim, there is a possibility, indeed the prospect,
that the Fifth Circuit would have accepted the explanation, and
there would have been no reversal and remand.
Not only was there no evidence that defendant engaged in
bad-faith conduct, there certainly was no evidence that any
failure on its part to give notice of the termination was
intentional.
The conduct of Hager and his counsel described in
section V.B. above, while not decisive, has been taken into
account by the court in the exercise of the court's discretion to
deny an award of penalties against defendant.
Interestingly,
there is no evidence that Hager has paid a single penny on any of
the medical expenses he incurred in June or July 2015, nor does
49
the court have any confidence that he would use any recovery by
way of penalties awarded in this action to make payment to his
healthcare providers.
Also absent from the record is any
evidence that, if Hager had received timely notice, he would have
been able to obtain replacement health insurance, bearing in mind
that his treatment for cancer commenced in April 2015.
at.26:11-15.
Doc. 120
Perhaps the Affordable Care Act would cause
insurance to be available to treat a preexisting condition such
as Hager's cancer, but nothing in the record would support such a
conclusion.
While certain of the factors the court has taken
into account in the exercise of its discretion to deny Hager an
award of penalties would not, standing alone, cause the court to
rule as it is, the combination of those factors causes the court
to be satisfied that its ruling is the correct and proper one.
VII.
The Court is Denying an Award of Attorney's Fees
The court turns now to the question of whether Hager should
recover attorney's fees for the work done by his attorneys on his
behalf in the prosecution of this action.
For the reasons stated
below, the court has concluded that Hager should be denied any
recovery of attorney's fees.
The Fifth Circuit has suggested that the district court
consider the following five factors in its analysis of whether
50
the court should award a plaintiff recovery of attorney's fees
for work on a COBRA claim:
(1)
the degree of the opposing parties'
culpability or bad faith;
(2)
the ability of the opposing parties to
satisfy an award of attorneys' fees;
(3)
whether an award of attorneys' fees against
the opposing party would deter other persons acting
under similar circumstances;
(4)
whether the parties requesting attorneys'
fees sought to benefit all participants and
beneficiaries of an ERISA plan or to resolve a
significant legal question regarding ERISA itself; and
(5)
the relative merits of the parties'
positions.
Miles-Hickman v. David Powers Homes,
882
Inc., 589 F. Supp. 2d 849,
(S.D. Tex. 2008) (citations omitted).
In Miles-Hickman, the Court added, again relying on Fifth
Circuit authority, that:
No one of these factors is necessarily decisive, and
some may not be apropos in a given case, but together
they are the nuclei of concerns that a court should
address in applying§ 1132(g).
Id.
(citation omitted).
Considering each of those factors:
(1)
The court has found that defendant did not act in
bad faith on the subject of notice of termination of health
insurance, which is the only claim that has survived this
51
court's dismissal and the rulings of the Fifth Circuit.
While defendant could arguably have used more care in being
certain that notice of termination of insurance reached
Hager, the court does not consider that that level of
culpability is sufficient to justify an award of attorney's
fees to Hager against defendant.
(2)
The court is unable to find in the record anything
that would support a finding in favor of Hager on the
ability of defendant to satisfy an award of attorney's fees.
Bearing in mind that Hager had the obligation to establish
its entitlement to attorney's fees,
the absence of evidence
on this subject weighs against an award of attorney's fees.
(3)
The court is not persuaded that deterrence would
result from an award of attorney's fees against defendant
here, bearing in mind the court's findings that defendant
did nothing intentionally to prevent Hager from having
notification that insurance coverage was terminated, and
that defendant acted in good faith on the notice-oftermination-of-insurance issue.
(4)
The fourth factor is a nonissue in this case
because notice vel non to Hager
ot
termination of insurance
does not bear on any benefit of any other participant or
beneficiary of defendant's ERISA plan, nor does the outcome
52
of this case resolve a significant legal question regarding
ERISA itself.
(5)
As to the fifth factor, the court concludes that,
for all of the reasons why the court is denying a penalty
award to Hager, Hager's position is without merit but that
defendant's position has merit.
The court also adds factors not mentioned above that appear
to be pertinent to the request for recovery of attorney's fees in
this action.
The first-added factor pertains to the quality of the legal
representation provided by Hager's attorneys in this action.
For
the reasons given above, the legal representation provided to
Hager was such that this court did not know at the time this
court dismissed all of Hager's COBRA claims that Hager was making
the only COBRA claim as to which he was successful on his appeal
to the Fifth Circuit.
As a consequence, significant time has
been wasted by the court and unnecessarily devoted to the defense
of this action by defendant and its attorney.
The second is the lack of candor of Hager, personally or
through his attorney, to the court.
B. ) .
53
Supra at 28-47 (§ V.A. &
Having considered the pertinent factors,
the court concludes
to exercise its discretion to deny Hager recovery of any
attorney's fees from defendant.
VIII.
The Court Is Denying an Award of Costs of Court to Hager
Consistent with the requirements of Rule 54 (d) (1) of the
Federal Rules of Civil Procedure, the court is denying Hager, as
the non-prevailing party, recovery of costs of court.
IX.
Order
Therefore,
The court ORDERS that Hager be, and is hereby, denied any
recovery from defendant based on (1) any claim for penalties for
defendant's failure to notify Hager of termination of the Hager's
health insurance coverage,
(2) Hager's claim for recovery of
attorney's fees against defendant, and (3) Hager's request that
he recover his costs of court; and,
The court further ORDERS that all claims and causes of
action asserted by Hager against defendant that remain pending at
this time be, and are hereby, dismissed.
SIGNED August 1, 2019.
JOflN McBRYDE
. /
/
'Vtiited States Distr1f:. Judge
54
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