Slipchenko v. Brunel Energy, Inc. et al
Filing
86
MEMORANDUM AND ORDER entered GRANTING IN PART AND DENYING IN PART 54 MOTION to Certify Class, GRANTING IN PART AND DENYING IN PART 71 MOTION for Summary Judgment. A Status Conference is set for 9/16/2013 at 10:00 AM in Courtroom 11B before Judge Lee H Rosenthal. (Signed by Judge Lee H Rosenthal) Parties notified.(leddins, )
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
TAMARA SLIPCHENKO, on behalf
of herself and all other persons
similarly situated,
Plaintiffs,
v.
BRUNEL ENERGY, INC., et al.,
Defendants.
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CIVIL ACTION NO. H-11-1465
MEMORANDUM AND ORDER
The plaintiffs, Tamara Slipchenko, David R. Boswell, and Valorie Barton,1 worked for
Brunel Energy, Inc., a Houston-based energy company that is a subsidiary of Brunel International
N.V. (together, “Brunel”). The plaintiffs sued Brunel on behalf of themselves and similarly situated
present and former employees, alleging that Brunel failed to provide required notices of their right
to continued health care coverage under the Consolidated Omnibus Budget Reconciliation Act of
(“COBRA”) and to premium reduction under the American Recovery and Reinvestment Act of 2009
(“ARRA”). In their second amended complaint, the plaintiffs allege violations of the Employee
Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1166(a)(1), (a)(2), and (a)(4), and of the
ARRA, Pub. L. No. 111-5, § 3001(a)(1)(A), (a)(7)(A), (B), (C), 123 Stat. 115, 455, 458–60 (codified
as amended at 26 U.S.C. § 6432).
The plaintiffs moved for class certification under Rule 23. (Docket Entries No. 54, 55).
1
The plaintiffs’ initial complaint, (Docket Entry No. 1), named Tamara Slipchenko as the
representative plaintiff. The plaintiffs later filed an amended complaint, (Docket Entry No. 36), adding David
R. Boswell as a representative plaintiff. The plaintiffs filed a motion for leave to amend to add Valorie
Barton as a named plaintiff, (Docket Entries No. 50, 51). This court granted the plaintiffs’ motion to amend,
(Docket Entry No. 82). A second amended complaint names the three plaintiffs as class representatives,
(Docket Entry No. 83).
They defined the proposed class as Brunel employees “who elected coverage provided by British
United Provident Association Limited (“BUPA”), together with their spouses and other covered
dependents who were participants or beneficiaries in the Brunel Group Health Plan at any time from
April 15, 2009 until the present.” (Docket Entry No. 55, at 1). Three categories of claims are at
issue. The first is claims based on Brunel’s alleged failure to provide the initial COBRA notice.
The second is claims based on Brunel’s alleged failure to provide notice and benefits after an
employee has a “qualifying event.” The third is claims based on Brunel’s alleged failure to provide
notice of rights and payment-reduction benefits under the ARRA.
Brunel responded opposing certification. (Docket Entries No. 60, 61, 65). After the
discovery deadline, the plaintiffs also moved for summary judgment, which Brunel opposed.
(Docket Entries No. 71, 72, 78, 80).
Based on the pleadings; the motions, responses, replies, and surreplies; the records; and the
applicable law, the plaintiffs’ motion for summary judgment is granted in part and denied in part.
Specifically, the plaintiffs’ motion for summary judgment is:
•
denied as to Boswell;
•
granted for the remaining plaintiffs as to Brunel’s liability for failing to provide
initial notice;
•
granted for Barton as to Brunel’s liability for failing to provide notice and benefits
after a qualifying event; and
•
denied in all other respects
The plaintiffs’ motion for class certification is granted in part and denied in part. The
following class is certified under Rule 23(b)(3): All employees of Brunel who elected coverage
2
provided by British United Provident Association Limited (“BUPA”), together with their spouses
and other covered dependents who were participants or beneficiaries in the Brunel Group Health
Plan at any time from April 15, 2009 until the present. The following issues are certified for class
treatment:
•
Brunel’s liability for failure to provide COBRA initial notice;
•
Brunel’s liability for failure to provide notice and benefits following a qualifying
event; and
•
Brunel’s conduct and intent toward the class as a whole in committing the alleged
statutory violations.
The named plaintiffs are appointed as class representatives. A status and scheduling
conference is set for September 16, 2013, at 10:00 a.m. in Courtroom 11-B.
The reasons for these rulings are explained below.
I.
Background
A.
The Claims
Brunel’s clients are companies that have projects requiring individuals with specialized
knowledge for relatively short periods. Brunel places such individuals with its client companies to
work on specific projects. Brunel enters into short-term employment contracts with the individuals
it hires for its clients’ projects, but the employees work directly with the clients. When the project
is finished, the individual’s employment with Brunel is usually terminated. If the same individual
is hired to work on another project, Brunel and the individual enter into a new employment contract.
(Docket Entry No. 83, at 9–10).
During their employment with Brunel, the plaintiffs were insured under the Brunel Group
3
Health Plan (the “Plan”) and elected coverage under BUPA. (Id. at 5). They allege that Brunel
failed to provide them and other similarly situated employees with notice of their right to elect
COBRA coverage when they first began participating in the Plan; failed to provide notice of their
right to continue coverage when their employment was terminated, which the plaintiffs argue was
an event qualifying them for continued COBRA coverage; failed to offer a premium reduction to
eligible individuals; and failed to notify employees of their eligibility for premium reduction. (Id.
at 15–19).
COBRA gives workers who lose health coverage due to a qualifying event the opportunity
to elect continued coverage from their group health plan for a limited time. See 29 U.S.C. §§ 1161,
1166. COBRA requires an employer to notify an eligible employee twice: first, when the employee
begins participating in a group health plan; and second, when the employee notifies the employer
that a qualifying event has occurred. Id. The ARRA provides eligible individuals with a right to
reduced premium payments for healthcare coverage they receive through COBRA. See Pub. L. No.
111-5, § 3001(a)(1)(A), 123 Stat. 115, 455 (codified as amended at 26 U.S.C. § 6432).2 The ARRA
also requires an employer to notify an eligible employee of this right when he or she is notified of
the right to elect continued coverage under COBRA after a qualifying event. See Pub. L. No. 111-5,
§ 3001(a)(7)(A)(I), 123 Stat. 115, 458–59 (codified as amended at 26 U.S.C. § 6432).
In their second amended complaint, (Docket Entry No. 83), the plaintiffs sought class
certification to obtain the following relief:
2
Section 3001(a) of the ARRA was amended by § 1010 of the Department of Defense
Appropriations Act, Pub. L. No 111-118, § 1010, 123 Stat. 3409, 3472–73 (2009); § 3 of the Temporary
Extension Act of 2010, Pub. L. No. 111-144, § 3, 124 Stat. 42, 43–45 (2010); and § 3 of the Continuing
Extension Act of 2010, Pub. L. No. 111-157, § 3, 124 Stat. 1116, 1117 (2010), to extend eligibility for the
premium reduction program to involuntary terminations that occurred before May 31, 2010.
4
(1) an injunction requiring Brunel to allow qualified beneficiaries to elect COBRA
coverage in the Brunel Health Plan; (2) an injunction appointing an independent
administrator to bring the Brunel Group Health Plan into compliance with COBRA
and ARRA and providing them with the ARRA subsidy where appropriate; (3) a
declaration that Plaintiffs and the Class are entitled to the benefits they would have
received had they been provided the opportunity to elect COBRA continuation
coverage during the Class period; and (4) statutory penalties against Brunel and the
Brunel Group Health Plan for the failure to provide the statutory notices required by
COBRA and ARRA.
(Docket Entry No. 83, at 4). The plaintiffs also sought attorneys’ fees and prejudgment and
postjudgment interest. (Id. at 20).
B.
The Named Plaintiffs
1.
Tamara Slipchenko
Brunel employed Tamara Slipchenko from August 2008 until March 2010. She worked as
an Environmental and Regulatory Advisor at Exxon/Mobil Development Company. During her
Brunel employment, she received health coverage under the Plan. (Id. at 10). Brunel alleges that
it fired Slipchenko based on its belief that she had received reimbursements she was not entitled to
and then refused to return the overpaid amount. When Slipchenko’s employment was terminated,
she asked Brunel for information about COBRA. In response, Brunel told her that employees who
elected coverage under BUPA were not eligible for COBRA coverage. (Id. at 11–12).
In December 2010, Slipchenko was diagnosed with Hodgkin’s lymphoma requiring medical
treatment. (Id. at 12). At some point after Brunel fired her, Slipchenko was able to get health
coverage from another insurance company, Health Net. (Id.). In February 2011, Slipchenko
contacted the Department of Labor about her COBRA eligibility and was told that because Brunel
had terminated her employment, she was eligible for both continued coverage and for premium
reduction under the ARRA. (Id. at 12–13). The Department of Labor sent Brunel a letter dated
5
March 3, 2011 directing it to provide Slipchenko with a COBRA package within 10 days. (Id. at
13). Brunel initially failed to comply. Approximately three months later, with one month of
eligibility left, Brunel offered Slipchenko COBRA coverage. (Id. at 14).
In this lawsuit, Slipchenko alleges that Brunel failed to provide her initial notice of her
COBRA rights when she began participating in the Plan in August 2008 and failed to give her notice
of her COBRA and ARRA rights when her employment ended in March 2010. (Id. at 10–11).
2.
David R. Boswell
David R. Boswell was employed by Brunel from March 2007 to July 2010 as an Offshore
Installation Technical Foreman. He received health coverage under BUPA. (Id. at 14). Boswell
was apparently insured under a different plan than the other potential class members. He was
covered by the BUPA Gold Plan, and was the only Brunel-employed American citizen covered by
that plan. (Docket Entry No. 60, at 7 (citing Ex. 1, Decl. of Bob Glover, Gen. Mgr. — Am., Brunel
Energy, Inc.)). Boswell alleges that Brunel failed to provide him with an initial notice of his
COBRA rights and with a notice of his right to continued coverage under COBRA once his
employment was terminated. (Docket Entry No. 83, at 14). Boswell’s employment was terminated
after the May 31, 2010 deadline for ARRA coverage.3
3.
Valorie Barton
Valorie Barton was employed by Brunel from November 2009 to November 2010 as a
Contract Administrator at Exxon/Mobil Global Services Company. She received health coverage
under BUPA. (Id.). Barton alleges that Brunel failed to provide her with an initial notice of her
COBRA rights and with notice of her right to continued coverage once her employment was
3
See supra n.2.
6
terminated. (Id. at 14–15). She alleges that Brunel did not offer her a COBRA package until over
nine months after it terminated her employment. (Id. at 15). Her employment ended after the May
31, 2010 deadline for ARRA coverage.4
II.
The Legal Standard for Class Certification
To certify a class under Rule 23, plaintiffs must show that their proposed class meets the
requirements of Rule 23(a) and the requirements of at least one Rule 23(b) subsection. See FED. R.
CIV. P. 23. The plaintiffs seek certification under Rule 23(b)(1), (b)(2), or (b)(3). (Docket Entry
No. 55, at 1).
Before granting certification, a court must conduct a rigorous analysis to determine whether
the plaintiffs have met the Rule 23 requirements. Benavides v. Chi. Title Ins. Co., 636 F.3d 699, 701
(5th Cir. 2011); Castano v. Am. Tobacco Co., 84 F.3d 734, 740 (5th Cir. 1996). “Frequently that
rigorous analysis will entail some overlap with the merits of the plaintiff’s underlying claim. That
cannot be helped. The class determination generally involves considerations that are enmeshed in
the factual and legal issues comprising the plaintiff’s cause of action.” Wal-Mart Stores, Inc. v.
Dukes, — U.S. —, 131 S. Ct. 2541, 2551–52 (2011) (alterations, citations, and internal quotation
marks omitted); see also Castano, 84 F.3d at 744 (“Going beyond the pleadings is necessary, as a
court must understand the claims, defenses, relevant facts, and applicable substantive law in order
to make a meaningful determination of the certification issues.”). The certification issue is not
whether the plaintiffs will ultimately prevail on the merits of their claims. The certification ruling
does not turn on the strengths and weaknesses of the claims and defenses. Rather, the court must
examine the issues and the evidence that will be used to establish the claims and defenses to
4
See supra n.2.
7
determine that the issues can be resolved and the evidence can be presented on a class-wide basis.
FED. R. CIV. P. 23(c)(1) committee n. (2003). The party seeking certification bears the burden of
showing that the Rule 23 requirements are satisfied. Comcast Corp. v. Behrend, — U.S. —, 133 S.
Ct. 1426, 1432 (2013); Erica P. John Fund, Inc. v. Halliburton Co., 718 F.3d 423, 428 (5th Cir.
2013) (citing Wal-Mart, 131 S. Ct. at 2551), aff’g Archdiocese of Milwaukee Supporting Fund, Inc.
v. Halliburton Co., 2012 WL 565997 (N.D. Tex. Jan. 27, 2012), on remand from Erica P. John
Fund, Inc. v. Halliburton Co., — U.S. —, 131 S. Ct. 2179 (2011); Benavides, 636 F.3d at 701;
Allison, 151 F.3d at 408; Castano, 84 F.3d at 740.
III.
Analysis
A.
Rule 23(a)
The threshold question is whether the proposed class meets the four Rule 23(a) requirements:
(a)
Prerequisites. One or more members of a class may sue or be sued
as representative parties on behalf of all members only if:
(1)
the class is so numerous that joinder of all members
is impracticable;
(2)
there are questions of law or fact common to the class;
(3)
the claims or defenses of the representative parties are
typical of the claims or defenses of the class; and
(4)
the representative parties will fairly and adequately
protect the interests of the class.
FED. R. CIV. P. 23(a).
1.
Numerosity
There must be so many members in the proposed class that “joinder of all members is
impracticable.” FED. R. CIV. P. 23(a)(1). “‘[A] plaintiff must ordinarily demonstrate some evidence
or reasonable estimate of the number of purported class members.” Pederson v. La. State Univ., 213
F.3d 858, 868 (5th Cir. 2000) (quoting Zeidman v. J. Ray McDermott & Co., 651 F.2d 1030, 1038
8
(5th Cir. 1981)). There is no bright-line or hard-and-fast rule as to how many putative class
members is enough. In some jurisdictions, numerosity is presumed satisfied if there are 40 or more
members. See Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995)
(“[N]umerosity is presumed at a level of 40 members . . . .”); Cox v. Am. Cast Iron Pipe Co., 784
F.2d 1546, 1553 (11th Cir. 1986) (“[G]enerally less than twenty-one is inadequate, more than forty
adequate, with numbers between varying according to other factors.” (citation and internal quotation
marks omitted)); Humphrey v. United Way of Tex. Gulf Coast, 2007 WL 2330933, at *4 (S.D. Tex.
Aug. 14, 2007) (“Generally, a class size of more than forty members satisfies the numerosity
requirement.”). A larger number may fail the numerosity requirement if joining them all is
practicable. See, e.g., Trevizo v. Adams, 455 F.3d 1155, 1162 (10th Cir. 2006) (holding that the
district court’s denial of certification for a class of 84 members was an “appropriate judgment call”
and not an abuse of discretion). “‘[A] party seeking class certification must . . . be prepared to prove
that there are in fact sufficiently numerous parties. . . .’ Mere speculation as to the number of class
members — even if such speculation is ‘a bet worth making’ — cannot support a finding of
numerosity.” Hayes v. Wal-Mart Stores, Inc., — F.3d —, 2013 WL 3957757, at *5 (3d Cir. 2013)
(quoting Wal-Mart, 131 S. Ct. at 2551; Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 596 (3d Cir.
2012)).
The plaintiffs’ proposed class consists of Brunel employees who participated in the Plan and
received healthcare coverage under BUPA beginning in April 2009. (Docket Entry No. 55, at 1).
In their class certification motion, the plaintiffs estimated the proposed class to “consist of at least
50 members.” (Id. at 8). Brunel presented evidence that 67 individuals, including employees,
independent contractors, and their dependants, have been covered by BUPA since April 2009.
9
(Docket Entry No. 60, at 5). This is obviously more than 40.
The crux of the numerosity requirement is that joinder be impracticable. The putative class
members are readily identifiable from Brunel’s records. As noted, the Brunel employees who
received BUPA healthcare coverage during the relevant period have three categories of claims. As
to the first category, there are 67 individuals whose claims are based on a failure to provide the
initial notice of COBRA rights, according to the records the plaintiffs rely on. As to the second
category, there are fewer than 30 individuals who can assert that they also failed to receive the notice
and COBRA benefits required after a qualifying event. And as to the third category, on the present
record, only Slipchenko appears to have a claim that she did not receive the notice of eligibility for
premium reduction.
Joinder is not practicable as to the approximately 67 individuals asserting that Brunel failed
to send the initial notice of COBRA rights. Brunel’s records show that these approximately 67
individuals are geographically dispersed, including in different countries. (See Docket Entry No.
60, Ex. 1, Brunel BUPA Spreadsheet). The number, geographic dispersion of the potential class
members, and difficulty in effecting service in multiple countries make joinder impracticable. See,
e.g., Simms v. Jones, — F.R.D. —, 2013 WL 3449538, at *6 (N.D. Tex. July 9, 2013) (“To make
[the numerosity] determination, courts turn to several factors, including ‘size of the class, ease of
identifying members and determining their addresses, facility of making service on them if joined
and their geographic dispersion.’” (quoting Garcia v. Gloor, 618 F.2d 264, 267 (5th Cir. 1980)));
McWaters v. Fed. Emergency Mgmt. Agency, 237 F.R.D. 155, 162 (E.D. La. 2006) (“[T]aking into
account of a reasonable estimate of the number of purported class members, their geographical
dispersion, and the ease with which they may be identified, the class is so numerous that joinder of
10
all plaintiffs is impracticable.” (citing Zeidman, 651 F.2d at 1038)). Of this group of 67, 20 to 30
individuals can also allege that they were entitled to additional notice and COBRA benefits after
qualifying events. Any individuals who could assert a claim based on ARRA premium reductions
are also in the first group of 67.5 That is, those who could assert the second and third categories of
claims are subsets of those who might assert the first category of claims. As noted, joinder is
impracticable for these putative class members.
The plaintiffs have shown that Rule 23(a)(1) is satisfied.
2.
Commonality and Typicality
Under Rule 23(a), the plaintiffs must demonstrate that “there are questions of law or fact
common to the class” and “the claims or defenses of the representative parties are typical of the
claims or defenses of the class.” FED. R. CIV. P. 23(a)(2)–(3). Both typicality and commonality
“serve as guideposts for determining whether under the particular circumstances maintenance of a
class action is economical and whether the named plaintiff’s claim and the class claims are so
interrelated that the interests of the class members will be fairly and adequately protected in their
absence.” Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 157 n.13 (1982). Commonality
requires the plaintiffs “to demonstrate that the class members ‘have suffered the same injury.’”
Wal-Mart, 131 S. Ct. at 2551 (quoting Falcon, 457 U.S. at 156). “That common contention,
moreover, must be of such a nature that it is capable of class-wide resolution — which means that
determination of its truth or falsity will resolve an issue that is central to the validity of each one of
5
As noted, on the present record, it appears that Slipchenko is the only individual among the putative
class members with such claims. Such a claim would require a qualifying event that consisted of termination
of employment during the period covered by the ARRA. To the extent there are individuals with additional
claims, the number of such individuals is so small — far fewer than the 20 to 30 individuals who experienced
a qualifying event of any type — that disputed issues about their claims can be resolved on an individual
basis.
11
the claims in one stroke.” Id.
Under the Supreme Court’s decision in Wal–Mart, “Rule 23(a)(2)’s commonality
requirement demands more than the presentation of questions that are common to the class because
‘any competently crafted class complaint literally raises common questions.’” M.D. ex rel.
Stukenberg v. Perry, 675 F.3d 832, 840 (5th Cir. 2012) (quoting Wal-Mart, 131 S. Ct. at 2551).
“[T]he members of a proposed class do not establish that ‘their claims can productively be litigated
at once,’ merely by alleging a violation of the same legal provision by the same defendant . . . .” Id.
(quoting Wal-Mart, 131 S. Ct. at 2551). “Thus, the commonality test is no longer met when the
proposed class merely establishes that there is at least one issue whose resolution will affect all or
a significant number of the putative class members.” Id. (emphasis, citation, and internal quotation
marks omitted). “Rather, Rule 23(a)(2) requires that all of the class member’s claims depend on a
common issue of law or fact whose resolution will resolve an issue that is central to the validity of
each one of the class member’s claims in one stroke.” Id. (alteration, emphasis, citation, and internal
quotation marks omitted).
The plaintiffs’ claim that Brunel violated ERISA by failing to provide initial notice of their
COBRA rights is common to all potential class members. Other ERISA claims are limited to the
putative class members who experienced a qualifying event. Brunel presents competent evidence
showing that only 22 of the 67 proposed class members experienced an event qualifying them for
continued coverage under COBRA and requiring a second notice of COBRA rights. (Docket Entry
No. 60, at 5). The plaintiffs allege that 26 members of the proposed class experienced a qualifying
event during the relevant period. (Docket Entry No. 61, at 7). Even assuming that 26 — not 22 —
employees experienced a qualifying event, that means that approximately half the potential class
12
members do not have a claim that depends on such an event. But commonality does not require that
all claims be common to all class members. One common claim is enough. See, e.g., Simms, 2013
WL 3449538, at *6 (explaining that “a single common question of law or fact can suffice” to satisfy
commonality (citing Wal-Mart, 131 S. Ct. at 2556)).6
The initial-notice claim is common to all 67 putative class members and is capable of
class-wide resolution. The qualifying-event notice claim is common to a subset of the larger group
and is similarly capable of class-wide resolution. The proposed class meets the commonality
requirement of Rule 23(a)(2) as to these two categories of claims.
Rule 23(a)(3) requires a showing that “the claims or defenses of the representative parties
are typical of the claims or defenses of the class.”
FED. R. CIV. P. 23(a)(3). “The typicality
requirement focuses less on the relative strengths of the named and unnamed plaintiffs’ cases than
on the similarity of the legal and remedial theories behind their claims.” Bertulli v. Indep. Ass’n of
Cont’l Pilots, 242 F.3d 290, 297 n.32 (5th Cir. 2001) (quoting Jenkins v. Raymark Indus., Inc., 782
F.2d 468, 472 (5th Cir. 1986)) (internal quotation marks omitted); see also Woodard v. Andrus, 272
F.R.D. 185, 191 (W.D. La. 2010) (“The test for typicality is not demanding and it focuses on the
general similarity of the legal and remedial theories behind the plaintiffs’ claims.” (citing Shipes v.
6
See also LaBauve v. Olin Corp., 231 F.R.D. 632, 668 (S.D. Ala. 2005) (“‘[I]t is not necessary that
all of the questions raised by arguments are identical; it is sufficient if a single common issue is shared by the
class.’” (quoting Weiss v. La Suisse, 226 F.R.D. 446, 449 (S.D.N.Y. 2005))); In re Currency Conversion Fee
Antitrust Litig., 224 F.R.D. 555, 562 (S.D.N.Y. 2004) (“[T]he commonality requirement does not require that
each class member have identical claims as long as at least one common question of fact or law is evident.”);
see also Smith v. Family Video Movie Club, Inc., 2013 WL 1628176, at *11 (N.D. Ill. Apr. 15, 2013)
(“Plaintiffs have failed to demonstrate that their individual claims, other than their claim regarding the
calculation of overtime pay, are common to the class and capable of classwide resolution. Consequently,
even though they have identified one claim that satisfies Rule 23(a)(2)’s commonality requirement, this issue
in and of itself does not predominate the otherwise individual claims . . . . In fact, the location and
manager-dependent nature of the remainder of Plaintiffs’ claims destroys Rule 23(b)(3) predominance.”).
13
Trinity Indus., 987 F.2d 311, 316 (5th Cir. 1993); Jenkins, 782 F.2d at 472))). The class
representative’s claims must “have the same essential characteristics of those of the putative class.”
James v. City of Dallas, 254 F.3d 551, 571 (5th Cir. 2001), abrogated on other grounds by M.D. ex
rel. Stukenberg, 675 F.3d at 839–41.
The named plaintiffs assert that they meet the typicality requirement because all class
members’ claims “stem from Defendants’ failure to provide COBRA coverage and satisfy the
COBRA notice requirements.”
(Docket Entry No. 55, at 13). But many of the putative class
members did not experience a qualifying event and do not have a claim based on the lack of COBRA
notification or benefits triggered by such an event. Other factors also distinguish some of the named
plaintiffs’ claims. For example, Boswell received medical coverage under the BUPA Gold
healthcare plan; other potential class members were covered under the BUPA International
healthcare plan. (Docket Entry No. 60, at 9). Both Boswell and Barton had their employment
terminated after May 31, 2010, which disqualifies them for premium reduction under the ARRA.
Finally, Brunel contends that because it terminated Slipchenko’s employment for cause, her claims
are not typical of the putative class members.
Because Boswell was covered under BUPA Gold, issues affecting his COBRA rights may
differ from those affecting the rest of the putative class. It also appears that neither Boswell nor
Barton can assert viable ARRA claims because their employment was terminated after that statute’s
applicable dates.7 The circumstances of Slipchenko’s termination also raise issues about whether
7
It is unclear whether second amended complaint purports to assert such claims for Boswell and
Barton. The factual allegations section states that neither Barton or Boswell received required notices
concerning the ARRA. (Docket Entry No. 83, ¶¶ 4–5). The second amended complaint lists causes of action
for failure to provide ARRA notices and benefits for eligible employees, but does not address whether
Boswell or Barton would have been eligible employees or entitled to notice of ARRA rights based on the
dates of their employment and termination. (See id., ¶¶ 59–64).
14
her claim is typical. The parties dispute whether she suffered a qualifying event. But each of these
three individuals has claims arising from the initial-notice violation of ERISA § 606(a)(4), 29 U.S.C.
§ 1166(a)(4) that are typical of the class. As to the COBRA rights following a qualifying event,
Brunel has not disputed that Barton’s termination was a qualifying event or that her claim is typical
of the other putative class members who experienced a qualifying event and have COBRA
notification and benefits claims. That is enough for typicality.
3.
Adequacy
The plaintiffs must “fairly and adequately protect the interests of the class.” FED. R. CIV. P.
23(a)(4). “Resolution of two questions determines legal adequacy: (1) do the named plaintiffs and
their counsel have any conflicts of interest with other class members; and (2) will the named
plaintiffs and their counsel prosecute the action vigorously on behalf of the class?” Hanlon v.
Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998). The record reflects no apparent conflicts or
inability or unwillingness of the named plaintiffs to participate. Brunel argues that some of the
named plaintiffs’ injuries are different than those of the rest of the putative class and that Slipchenko
faces an affirmative defense based on the circumstances of her job termination. (Docket Entry No.
60, at 11). These arguments challenge commonality and typicality, not adequacy of representation.
(See id. at 10–11). The adequacy requirement is satisfied.
B.
Rule 23(b)
In addition to satisfying all the Rule 23(a) requirements, a proposed class must satisfy at least
one of the Rule 23(b) categories. The plaintiffs cited each of the three sections of Rule 23(b) in
seeking certification.
1.
Rule 23(b)(1)
15
Certification under Rule 23(b)(1) does not apply because the record does not show that
requiring the plaintiffs to litigate individually would create inconsistent or varying adjudications that
would establish incompatible standards of conduct for the defendants. See FED. R. CIV. P.
23(b)(1)(A). Nor is there a limited fund or other circumstance supporting a finding that individual
litigation would impair the ability of nonparties to protect their interests. See FED. R. CIV. P.
23(b)(1)(B).
2.
Rule 23(b)(2)
Certification under Rule 23(b)(2) requires that “the party opposing the class has acted or
refused to act on grounds that apply generally to the class, so that final injunctive relief or
corresponding declaratory relief is appropriate respecting the class as a whole.” FED. R. CIV. P.
23(b)(2). Rule 23(b)(2) applies only when:
a single injunction or declaratory judgment would provide relief to each member of
the class. It does not authorize class certification when each individual class member
would be entitled to a different injunction or declaratory judgment against the
defendant. Similarly, it does not authorize class certification when each class
member would be entitled to an individualized award of monetary damages.
Wal-Mart, 131 S. Ct. at 2557. The plaintiffs’ second amended complaint includes requests for
injunctive and declaratory relief. The parties dispute whether this relief predominates over the
money damages they also seek.
In Wal-Mart, the Supreme Court clarified that “the mere ‘predominance’ of a proper (b)(2)
injunctive claim” is insufficient for certification under Rule 23(b)(2). Id. at 2559. The Court also
noted that the “Advisory Committee’s statement that Rule 23(b)(2) ‘does not extend to cases in
which the appropriate final relief relates exclusively or predominately to money damages’” does not
mean that Rule 23(b)(2) “extend[s] to cases in which the appropriate final relief relates only partially
16
and nonpredominantly to money damages.” Id. (emphasis and citations omitted). And the Court
emphasized that “[i]n the context of a class action predominantly for money damages,” Rule
23(b)(2) certification is impermissible because the “absence of notice and opt-out violates due
process.” Id. at 2559 (citing Phillips Petrol. Co. v. Shutts, 472 U.S. 797, 812 (1985)).
The Department of Labor ruling on the inadequacy of Brunel’s notice and Brunel’s
corrective actions appear to have resolved important issues related to the claim for injunctive and
declaratory relief. (Docket Entry No. 60, Ex. 2, June 15, 2012 Letter from Dep’t of Labor to
Brunel). It is unclear that class members will benefit more than they already have if the court issues
an injunction or a declaratory judgment. See, e.g., Casa Orlando Apts., Ltd. v. Fed. Nat’l Mortg.
Ass’n, 624 F.3d 185, 200 n.62 (5th Cir. 2010) (“[C]ertification under rule 23(b)(2) is appropriate
only if members of the proposed class would benefit from the injunctive relief they request.”
(quoting In re Monumental Life Ins. Co., 365 F.3d 408, 416 (5th Cir. 2004))); see also Maldonado
v. Ochsner Clinic Found., 493 F.3d 521, 525 (5th Cir 2007) (affirming the denial of certification
when the named plaintiffs would not benefit from injunctive relief); Langbecker v. Elec. Data Sys.
Corp., 476 F.3d 299 (5th Cir. 2007) (vacating a Rule 23(b)(2) certification involving ERISA
investments because “many potential class members” would not benefit from the requested
injunction). The primary benefit is the penalties and attorneys’ fees sought.
Whether the plaintiffs’ claim for money damages defeats Rule 23(b)(2) certification turns
on whether the statutory penalties are incidental to injunctive or declaratory relief. “In Allison v.
Citgo Petroleum Corp., 151 F.3d 402, 415 ([5th Cir.] 1998), the Fifth Circuit held that a (b)(2) class
would permit the certification of monetary relief that is ‘incidental to requested injunctive relief or
declaratory relief,’ which it defined as ‘damages that flow directly from liability to the class as a
17
whole on the claims forming the basis of the injunctive or declaratory relief.’” Wal-Mart, 131 S.
Ct. at 2560 (emphasis omitted). “Such ‘incidental damage should not require additional hearings
to resolve the disparate merits of each individual’s case; it should neither introduce new substantial
legal or factual issues, nor entail complex individualized determinations.’” Id. (quoting Allison, 151
F.3d at 415).
In Wal-Mart, the Court held that defendants are entitled to “individualized
determinations of each employee’s eligibility for backpay,” and thus “the necessity of [litigating
individuals’ claims] will prevent backpay from being ‘incidental’ to the classwide injunction.”8 Id.
at 2560–61; see also Nationwide Life Ins. Co. v. Haddock, 460 F. App’x 26, 29 (2d Cir. 2012) (per
curiam) (“In the case at bar, if plaintiffs are ultimately successful in establishing Nationwide’s
liability on the disgorgement issue, the district court would then need to determine the separate
monetary recoveries to which individual plaintiffs are entitled from the funds disgorged. This
process would require the type of non-incidental, individualized proceedings for monetary awards
that Wal-Mart rejected under Rule 23(b)(2).”); Ellis v. Costco Wholesale Corp., 657 F.3d 970,
986–87 (9th Cir. 2011) (concluding that the district court erred in certifying a class under Rule
23(b)(2) “by focusing on evidence of Plaintiffs’ subjective intent, instead of on whether the
monetary relief could be granted absent individualized determinations of each employee’s eligibility
for monetary damages.” (alteration, citation, and internal quotation marks omitted)).
Brunel argues that the statutory penalty damages the plaintiffs seek are not incidental to the
8
The Wal-Mart Court also disapproved of a “Trial by Formula” approach that would take a sample
set of the class members, as to whom liability for sex discrimination and the backpay owing as a result would
be determined in depositions supervised by a master. The percentage of claims determined to be valid would
then be applied to the entire remaining class, and the number of (presumptively) valid claims thus derived
would be multiplied by the average backpay award in the sample set to arrive at the entire class recovery.
131 S. Ct. at 2561. This court need not decide whether such an approach is permissible in this case because
the plaintiffs have not proposed a sampling-based method to determine penalties for COBRA violations.
18
injunctive relief and require individualized inquiry. Brunel argues that these damages depend on
the court’s discretion and turn on whether a defendant’s conduct shows harmfulness or bad faith and
whether each plaintiff seeking penalties has suffered prejudice as a result. The plaintiffs argue that
there is no requirement of prejudice to justify statutory penalties.
The Ellis v. Costco case is instructive. The district court in that case had found before WalMart was decided that Rule 23(b)(2) had been satisfied based on the plaintiffs’ statements that their
predominant goal in the suit was to obtain injunctive relief. 657 F.3d at 978. The district court
rejected Costco’s arguments that the plaintiffs’ claims for punitive and compensatory damages
precluded certification under (b)(2). Id. After Wal-Mart, the Ninth Circuit held that the district
court’s (b)(2) analysis could not stand. The Wal-Mart Court had rejected the predominance test the
district court used. “Instead of considering the amount of the damages sought or the subjective
intent of the class members seeking relief to determine if injunctive relief ‘predominates,’ the
relevant inquiry is what procedural safeguards are required by the Due Process Clause for the type
of relief sought.” Id. at 986–87 (citing 131 S. Ct. at 2557–58)).
The Ninth Circuit reversed and remanded for the district court to decide whether the
proposed class could be certified under Rule 23(b)(2) under Wal-Mart. The Ninth Circuit instructed
the district court that if it “determines that a (b)(2) class may be certified consistent with this
opinion, it may consider whether Plaintiffs’ claim for punitive damages may properly be sought by
a (b)(2) class.” Id. at 987. The district court had found that “claims for punitive damages are
suitable for certification under 23(b)(2), because such claims focus on the conduct of the defendant
and not the individual characteristics of the plaintiffs.” Id. (alterations, citation, and internal
quotation marks omitted). “Whether punitive damages are warranted is based on the employer’s
19
state of mind, i.e., if ‘[t]he employer [acted] with “malice or with reckless indifference to the
plaintiff’s federally protected rights.”’” Id. (quoting Kolstad v. Am. Dental Ass’n, 527 U.S. 526, 535
(1999) (quoting 42 U.S.C. § 1981a(b)(1))). The Ninth Circuit explained that the district court could
“consider whether punitive damages are an allowable ‘form[ ] of “incidental” monetary relief’
consistent with the Court’s interpretation of 23(b)(2) because they do not require an individualized
determination.” Id. (quoting Wal-Mart, 131 S. Ct. at 2560).
The Ninth Circuit contrasted the punitive damages claims, which turned on the defendants’
conduct and intent toward the class as a whole, with compensatory damages and backpay claims,
which required individualized determinations. Id. at 988. Wal-Mart made clear that “‘claims for
individualized relief (like the backpay at issue here) do not satisfy [Rule 23(b)(2)],’” because the
“‘key to the (b)(2) class is the “indivisible nature of the injunctive or declaratory remedy
warranted.”’” Id. at 987 (alteration in original) (quoting Wal-Mart, 131 S. Ct. at 2557). Rule
23(b)(2) could not be used to certify a class seeking relief such as compensatory damages or back
pay, which do not turn on the defendants’ conduct or intent toward the class as a whole but instead
depend on and require individualized determinations for each class member. The Ninth Circuit
ordered the district court to “consider whether a class may be certified under (b)(3) to address
Plaintiffs’ compensatory damages and backpay claims.” Id. at 988.
The statutory provision at issue, § 1132(c), leaves the decisions whether to impose a penalty
and, if so, how much, to the court’s discretion. The statute allows the court to impose a penalty and
sets a cap. The court must consider different factors in making the decision. Some factors turn on
the defendant’s conduct affecting all employees. Others, such as prejudice to plaintiffs, are
individualized inquiries. Whether to award statutory penalties for the notice violations at issue
20
depends heavily on the nature and culpability of the defendant’s conduct toward the class as a whole.
A primary factor for statutory penalties is whether the employer acted in bad faith. See Kreutzer v.
A.O. Smith Corp., 951 F.2d 739, 743 (7th Cir. 1991); Moothart v. Bell, 21 F.3d 1499, 1506 (10th
Cir. 1994); Agosto v. Academia Sagrado Corazon, 739 F. Supp. 2d 90, 99 (D.P.R. 2010) (citing
Kerkhof v. MCI WorldCom, Inc., 282 F.3d 44, 56 (1st Cir. 2002)); Berrios–Cintron v. Capitol Food,
Inc., 497 F. Supp. 2d 266, 271 (D.P.R. 2007). But the bad-faith showing may also turn on Brunel’s
conduct toward individual class members, which weighs against finding that the damages are
incidental to injunctive relief.
The penalty inquiry also turns in part on whether individual class members were prejudiced.
Although each plaintiff’s prejudice “is not a prerequisite to an award of civil penalties,” it is “one
factor, albeit a significant one, out of the factors which district courts may consider in exercising
their discretion whether to award penalties.” Kascewicz v. Citibank, N.A., 837 F. Supp. 1312, 1322
(S.D.N.Y. 1993); see also Rodriguez v. Int’l Coll. of Bus., 364 F. Supp. 2d 40, 49 (D.P.R. 2005) (“A
showing of prejudice or bad faith is not a prerequisite to the imposition of statutory penalties for
failing to inform an employee of the right to continued coverage, but in the court’s discretion, these
factors may be given dispositive weight.”); Kelly v. Chase Manhattan Bank, 717 F. Supp. 227, 233
(S.D.N.Y.1989) (“[P]enalties will not be imposed on a plan administrator absent a showing by the
plaintiff that he has suffered some degree of harm . . . .”). Some courts have framed the inquiry
around whether the employer can avoid or mitigate penalties by showing an absence of prejudice
to the plaintiff.9 Other courts find that the individual plaintiff’s ability to show prejudice is
9
See, e.g., Chestnut v. Montgomery, 307 F.3d 698, 704 (8th Cir. 2002) (“The employer’s good faith
and the absence of harm are relevant in deciding whether to award a statutory penalty.”).
21
important to deciding statutory penalties.10 Under either formulation, courts consider prejudice to
the individual employee. That weighs in favor of rejecting certification under Rule 23(b)(2).
Brunel’s purported reason for failing to provide the required notices was a uniform belief that
BUPA-covered employees were not entitled to COBRA benefits. This reason for Brunel’s conduct
applies to the class as a whole. But in addition to considering Brunel’s conduct and intent, this court
may also consider prejudice to the individual plaintiffs. As a result, only part of the decision
whether to impose a penalty is incidental to injunctive relief and susceptible of class wide proof and
resolution. The award and amount of any such penalty must also account for bad faith toward, and
prejudice suffered by, the individual class members, which is neither incidental nor classwide.11
Brunel argues that its failure to comply with COBRA notice requirements does not warrant
imposing any penalty and that the lack of harm to individual class members would eliminate or at
least reduce the amount of any damages award. Because the statutory penalty provision makes an
award a discretionary decision turning in part on individual prejudice to the employee, both Brunel
10
See, e.g., Sonnichsen v. Aries Marine Corp., 673 F. Supp. 2d 466, 473 (W.D. La. 2009) (declining
to award a penalty because “on the basis of the entire record presented . . . plaintiff has not shown entitlement
to a penalty. . . . [T]he Court finds plaintiff’s allegations of prejudice unconvincing. Nowhere does plaintiff
contend that he would have purchased coverage had he been properly notified under COBRA”);
Miles-Hickman v. David Powers Homes, Inc., 589 F. Supp. 2d 849, 880 (S.D. Tex. 2008) (denying penalties
because “[a]s to prejudice” the plaintiff “fail[ed] to meet her burden” to show that the defendant’s violation
caused “a level of prejudice sufficient to warrant imposition of a penalty”); see also Ferguson v.
Vice-President of Human Res., 2001 WL 34070237, at *5 (S.D. Tex. Aug. 13, 2001) (“The court concludes
that th[e] statutory penalty should be $100.00 per day or $9,200.00. Ferguson was prejudiced by defendants’
conduct because she went without health insurance from September 17, 1999, through December 1, 1999,
a time when she was pregnant and incurring medical expenses. During this time Ferguson did everything
reasonably possible to obtain information about her rights under COBRA.”).
11
The statutory language confirms the individualized aspect of the penalty decisions. “Although the
notice requirement imposes on the plan administration the obligation to give notice to a spouse or beneficiary
under the employee’s plan, a district court may assess a penalty separately only as to a single participant not
as to all beneficiaries under the participants’ plan.” Curbelo-Rosario v. Instituto de Banca y Comercio, Inc.,
248 F. Supp. 2d 26, 31 (D.P.R. 2003) (citing 29 U.S.C. § 1132(c)(1); Wright v. Hanna Steel Corp., 270 F.3d
1336 (11th Cir. 2001)).
22
and the individual class members must be given a chance to show the presence or absence of
prejudice. See Wal-Mart, 131 S. Ct. at 2559; see also Ellis, 657 F.3d at 986–87 (“Instead of
considering the amount of the damages sought or the subjective intent of the class members seeking
relief to determine if injunctive relief ‘predominates,’ the relevant inquiry is what procedural
safeguards are required by the Due Process Clause for the type of relief sought.” (citing Wal-Mart,
131 S. Ct. at 2557–58)). Deciding whether to award penalties, and if so, how much, are the type of
individualized choices that the Wal-Mart Court held could not be made under Rule 23(b)(2).
In sum, it is unlikely that certification under Rule 23(b)(2) is proper. Class members will
benefit from injunctive relief ordered by this court only slightly, and the penalties sought are not
incidental to injunctive relief. Certification must satisfy Rule 23(b)(3).
3.
Rule 23(b)(3)
Under Rule 23(b)(3), class certification is appropriate when “the court finds that the
questions of law or fact common to class members predominate over any questions affecting only
individual members, and that a class action is superior to other available methods for fairly and
efficiently adjudicating the controversy.” FED. R. CIV. P. 23(b)(3). “The predominance inquiry is
‘more demanding than the commonality requirement of Rule 23(a)’ and requires courts ‘to consider
how a trial on the merits would be conducted if a class were certified.’” Maldonado, 493 F.3d at
525 (quoting Bell Atl. Corp v. AT&T Corp., 339 F.3d 294, 301–02 (5th Cir. 2003)). “Rule 23(b)(3)
requires a showing that questions common to the class predominate, not that those questions will
be answered, on the merits, in favor of the class.” Amgen Inc. v. Conn. Ret. Plans & Trust Funds,
— U.S. —, 133 S. Ct. 1184, 1191 (2013). “The superiority requirement is simply that ‘class action
is superior to other available methods for the fair and efficient adjudication of the controversy.’”
23
Doiron v. Conseco Health Ins. Co., 279 F. App’x 313, 317 (5th Cir. 2008) (per curiam) (quoting
FED. R. CIV. P. 23(b)(3)). “Determining whether the superiority requirement is met requires a factspecific analysis and will vary depending on the circumstances of any given case.” Madison v.
Chalmette Ref’g, L.L.C., 637 F.3d 551, 555 (5th Cir. 2011).
The issues common to all putative class members are Brunel’s liability for failing to provide
initial notification of COBRA rights and whether statutory penalties are appropriate for this failure
based on Brunel’s conduct toward all class members. Approximately 20 to 30 putative class
members also share common issues arising from Brunel’s failure to give COBRA notice and benefits
following a qualifying event.12 This lawsuit follows the Department of Labor action. Based on
Brunel’s own acknowledgment that COBRA applied to the BUPA members, there is little work
needed in this litigation to resolve Brunel’s liability for failing to provide initial notice or the notice
and benefits following a qualifying event. And, as explained below, plaintiffs Slipchenko and
Barton are entitled to summary judgment on Brunel’s liability for failure to provide the initial
COBRA notices.
12
This issue may require individualized determination to the extent Brunel asserts an affirmative
defense that an individual did not suffer a qualifying event due to termination for “gross misconduct,” which
the COBRA statute specifically exempts from the definition of qualifying event and for which a former
employee is not entitled to COBRA rights. Brunel has asserted such an affirmative defense to Slipchenko’s
claim. Brunel has reserved the right to assert such an affirmative defense against other former employees in
the event this court grants class certification. (Docket Entry No. 78, at 2). The “predominance of individual
issues necessary to decide an affirmative defense may preclude class certification.” In re Monumental Life,
365 F.3d at 420. “[W]hile it is well established that the existence of a defense potentially implicating
different class members differently does not necessarily defeat class certification, it is equally well established
that courts must consider potential defenses in assessing the predominance requirement.” Myers v. Hertz
Corp., 624 F.3d 537, 551 (2d Cir. 2010) (citing Brown v. Kelly, 609 F.3d 467, 483 (2d Cir. 2010)). Although
Brunel argues that Slipchenko was guilty of gross misconduct, and that her claims are not typical of other
putative class plaintiffs, Brunel has not argued or presented allegations or evidence that the gross-misconduct
exception would apply to other putative class members. Thus, even to the extent they turn on individualized
determinations, the potential and unidentified affirmative defenses raised by Brunel do not indicate that
individualized determinations would predominate. Brunel’s affirmative defenses do not preclude class
certification under Rule 23(b)(3).
24
The disputed issues are affirmative defenses as to some plaintiffs and statutory penalties.
Although statutory penalties are in part an individual as opposed to a class issue, see, e.g.,
Sonnichsen, 673 F. Supp. 2d at 473; Miles-Hickman, 589 F. Supp. 2d at 880; Ferguson, 2001 WL
34070237, at *5, this does not defeat (b)(3) certification. While prejudice is an individualized
inquiry, Rule 23(b)(3) “does not require a plaintiff seeking class certification to prove that each
element of her claim is susceptible to classwide proof.” Amgen, 133 S. Ct. at 1196 (alterations,
emphasis, citations, and internal quotation marks omitted). “It would drive a stake through the heart
of the class action device, in cases in which damages were sought rather than an injunction or a
declaratory judgment, to require that every member of the class have identical damages.” Butler v.
Sears, Roebuck & Co., — F.3d —, 2013 WL 4478200, at *5 (7th Cir. Aug. 22, 2013). “If the issues
of liability are genuinely common issues, and the damages of individual class members can be
readily determined in individual hearings, in settlement negotiations, or by creation of subclasses,
the fact that damages are not identical across all class members should not preclude class
certification.” Id. The individualized issues that arise in determining prejudice do not outweigh the
common issues surrounding Brunel’s conduct and intent toward the class as a whole. To the extent
there are individualized statutory-penalty considerations, they do not predominate over class issues.
Brunel argues that no plaintiff will be able to show prejudice. The basis for this assertion
as an obstacle to Rule 23(b)(3) certification is unclear.
See Amgen, 133 S. Ct. at 1196
(“‘[I]ndividualized questions of reliance’ that hypothetically might arise when a failure of proof on
the issue of materiality dooms [a] fraud-on-the-market class . . . . do not undermine class cohesion
and thus cannot be said to ‘predominate’ for purposes of Rule 23(b)(3).” (citation omitted)). To the
extent Brunel argues that a potential failure of proof on prejudice precludes (b)(3) certification, the
25
argument is unpersuasive.
The proposed class is appropriate for certification under Rule 23(b)(3) in part. The initialnotice ERISA claims are appropriate for class treatment. The individuals who share the initialnotice ERISA claims cannot practicably be joined because of their geographic and global dispersion,
making class treatment superior to other dispute-resolution methods. The plaintiffs have shown that
litigating on a classwide basis is superior to litigating individual suits asserting initial notice claims.
The ERISA claims based on rights following a qualifying event are also appropriate for class
treatment, although a smaller subset of individuals have such claims. Damages issues are also
certifiable to the extent they turn on Brunel’s conduct and intent toward the entire class. To the
extent that bad faith or prejudice to individual plaintiffs affects whether or how much statutory
penalty should be imposed, these individualized considerations do not predominate over the class
issues or preclude a finding of superiority. Finally, the very small subset of the individuals who are
also entitled to ARRA rights can litigate those claims in the same suit, but class certification is not
necessary or appropriate for these claims.
The plaintiffs’ motion for class certification is granted in part and denied in part. It is
granted as to the class of approximately 67 individuals with BUPA coverage to resolve Brunel’s
liability for failure to provide COBRA initial notice and notice and benefits following a qualifying
event, and to resolve issues of Brunel’s conduct in committing the alleged violations that apply in
assessing penalties.
C.
Appointing Class Counsel
Before appointing class counsel, the court “must consider”:
(I)
the work counsel has done in identifying or investigating potential claims in
the action;
26
(ii)
(iii)
(iv)
counsel’s experience in handling class actions, other complex litigation, and
the types of claims asserted in the action;
counsel’s knowledge of the applicable law; and
the resources that counsel will commit to representing the class[.]
FED. R. CIV. P. 23(g)(1)(A). In addition, the court “may consider any other matter pertinent to
counsel’s ability to fairly and adequately represent the interests of the class.” FED. R. CIV. P.
23(g)(1)(B). Although Brunel does not challenge the experience or qualifications of counsel, the
court must satisfy itself that the appointment of plaintiffs’ counsel as class counsel would be in the
best interests of the class. See FED. R. CIV. P. 23(g)(2).
The plaintiffs have retained two law firms, Cohen Milstein Sellers & Toll, PLLC and
Campbell Harrison & Dagley, LLP. The plaintiffs seek appointment of Cohen Milstein as lead
counsel and Campbell Harrison as liaison counsel. Both firms have extensive experience litigating
complex cases, and the court is fully satisfied that the firms meet the criteria set out in Rule
23(g)(1)(A). Although the plaintiffs do not detail their attorneys’ efforts in identifying or
investigating potential claims, “it is clear from [the] plaintiffs’ filings that they have expended more
than a minimal amount of time and resources researching their client[s’] allegations.” Gross v.
United States, 106 Fed. Cl. 369, 383 (2012) (applying a rule analogous to 23(g)(1)(A)). That the
firms are plaintiffs’ choice of counsel and that Brunel has asserted no opposition to the appointment
of these firms also weighs in favor of appointment. See, e.g., Barrie v. Intervoice-Brite, Inc., 2006
WL 2792199, at *13 (N.D. Tex. Sept. 26, 2006), vacated on other grounds by Luskin v. IntervoiceBrite Inc., 261 F. App’x 697 (2008) (per curiam).
The court is satisfied that both firms could fairly and adequately represent the class. But the
plaintiffs have not explained why appointing both lead and liaison counsel is necessary or
appropriate in this relatively small case involving a relatively small number of potential class
27
members. Appointment of liaison counsel may be appropriate in complicated class actions, such
as when a putative class has possibly diverging interests or dissimilar claims. See, e.g., Michelle v.
Arctic Zero, Inc., 2013 WL 791145, at *4 (S.D. Cal. Mar. 1, 2013) (denying a motion to appoint
liaison counsel because the plaintiffs did not “address whether the interests of the class diverge or
are dissimilar”); Medlock v. Taco Bell Corp., 2009 WL 1444343, at *7 (E.D. Cal. May 19, 2009)
(appointing liaison counsel, in addition to interim lead counsel, to represent the possibly diverging
interests of a putative class which had brought some separate, “non-overlapping” claims). The
motion to appoint both lead and liaison counsel is denied at this time, without prejudice to
reassertion pending a more complete showing of the need for both and discussion of alternative
arrangements that might be better suited for the circumstances of this case.
IV.
The Motion for Summary Judgment
A.
The Legal Standard
Summary judgment is appropriate if no genuine issue of material fact exists and the moving
party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a). “The movant bears the burden
of identifying those portions of the record it believes demonstrate the absence of a genuine issue of
material fact.” Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 261 (5th Cir. 2007) (citing Celotex
Corp. v. Catrett, 477 U.S. 317, 322–25 (1986)).
If the burden of proof at trial lies with the nonmoving party, the movant may satisfy its initial
burden by “‘showing’ — that is, pointing out to the district court — that there is an absence of
evidence to support the nonmoving party’s case.” Celotex, 477 U.S. at 325. Although the party
moving for summary judgment must demonstrate the absence of a genuine issue of material fact, it
does not need to negate the elements of the nonmovant’s case. Boudreaux v. Swift Transp. Co., 402
28
F.3d 536, 540 (5th Cir. 2005). “A fact is ‘material’ if its resolution in favor of one party might affect
the outcome of the lawsuit under governing law.” Sossamon v. Lone Star State of Tex., 560 F.3d
316, 326 (5th Cir. 2009) (quotation omitted). “If the moving party fails to meet [its] initial burden,
the motion [for summary judgment] must be denied, regardless of the nonmovant’s response.”
United States v. $92,203.00 in U.S. Currency, 537 F.3d 504, 507 (5th Cir. 2008) (quoting Little v.
Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (per curiam) (en banc)).
When the moving party has met its Rule 56(a) burden, the nonmoving party cannot survive
a summary judgment motion by resting on the mere allegations of its pleadings. The nonmovant
must identify specific evidence in the record and articulate how that evidence supports that party’s
claim. Baranowski v. Hart, 486 F.3d 112, 119 (5th Cir. 2007). “This burden will not be satisfied
by ‘some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated
assertions, or by only a scintilla of evidence.’” Boudreaux, 402 F.3d at 540 (quoting Little, 37 F.3d
at 1075). In deciding a summary judgment motion, the court draws all reasonable inferences in the
light most favorable to the nonmoving party. Connors v. Graves, 538 F.3d 373, 376 (5th Cir. 2008).
B.
Analysis
The plaintiffs argue that they are entitled to judgment as a matter of law on all claims,
including those based on Brunel’s failures to provide initial notice of COBRA rights and notice of
COBRA and ARRA rights to employees who had a qualifying event, and those claims based on
Brunel’s failure to provide substantive COBRA or ARRA benefits to those employees who had
qualifying events. The plaintiffs also argue that this court can impose statutory damages for the
notice violations as a matter of law based on the present record. Brunel argues that summary
judgment is not proper because its affirmative defense against Slipchenko — that her employment
29
was terminated because of her gross misconduct — turns on disputed factual issues. (Docket Entry
No. 72). Brunel argues that the affirmative defense as to Boswell precludes summary judgment
because there is a fact dispute about whether he was entitled to COBRA rights under the BUPA
Gold Plan, which was for non-U.S. employees. Brunel also argues that fact disputes preclude
deciding penalties or damages on summary judgment. (Docket Entry No. 78).
The plaintiffs argue in response that the present record eliminates fact disputes as to their
entitlement to penalties and damages. They also argue that Brunel’s affirmative defenses fail as a
matter of law; that the record eliminates fact disputes about their entitlement to penalties and
damages; and that, in any event, Brunel’s failure to provide initial notice or notice or benefits for
those under covered BUPA plans who suffered qualifying events is undisputed. (Docket Entry No.
72, 80).
Summary judgment is inappropriate as to Boswell. The parties agree that Boswell was
covered by a different plan — the BUPA Gold Plan — than the other plaintiffs. The significance
of this fact is unclear. Brunel argues that this plan, for non-U.S. employees, did not entitle Boswell
to the rights of other BUPA plan members. (Docket Entry No. 78, at 7 n.7). The plaintiffs argue
that this fact is immaterial because Boswell was employed in the U.S. and was entitled to the same
rights as the rest of the plaintiffs. (Docket Entry No. 72, at 22). The court cannot conclude based
on the present record whether and to what extent this fact affects the outcome, or whether and to
what extent Boswell worked for U.S. versus non-U.S. entities during that period and whether that
affects the outcome. (See, e.g., Docket Entry No. 78, at 7 n.7 (“Boswell was apparently placed on
BUPA Gold because he was supposed to be working in Qatar through Brunel International’s Qatar
office. Instead, he worked overseas through the U.S. office.”)). The plaintiffs’ motion for summary
30
judgment is denied at this time as to Boswell.
The remaining plaintiffs are entitled to partial summary judgment on the initial notice claims.
Brunel does not dispute that it failed to provide initial notice. It disputes only whether statutory
penalties should be imposed and, if so, in what amount. The penalties sought are not mandatory.
A court may award a statutory penalty of up to $110 per day against an employer who fails to
provide adequate COBRA notice. 29 U.S.C. § 1132(c)(1). In awarding penalties under § 1132(c),
district courts in the Fifth Circuit look at the presence or absence of good faith on the part of the
employer and the presence or absence of prejudice to the plaintiff. See Sonnichsen, 673 F. Supp.
2d at 473. The primary factor is whether the employer acted in bad faith. While prejudice to the
plaintiff is not required to award statutory penalties, it is a significant factor. If the defendant acted
in bad faith, a showing that a plaintiff was harmed by not receiving notice may justify a stiffer
penalty than the conduct alone warranted. But the defendant might show that despite some evidence
of bad faith, the absence of harm to the plaintiffs should reduce the penalty. At bottom, the penalty
is discretionary and fact-specific.
The record shows that Brunel is liable as a matter of law for violating the initial notice
requirement. But the present record is insufficient to decide whether statutory penalties are
appropriate or in what amount. The disputes about Brunel’s corrective actions, Brunel’s compliance
with the Department of Labor’s instructions, the presence or degree of Brunel’s bad faith, and the
presence or extent of prejudice to the plaintiffs preclude summary judgment on the penalty awards
sought. Summary judgment is granted to the extent that Brunel is liable for violating the initial
notice requirement. It is denied as to the amount of statutory penalties, if any.
For the claims based on qualifying events, summary judgment is denied as to Slipchenko.
31
Fact disputes about whether Brunel terminated her employment for gross misconduct preclude
summary judgment. An employee terminated for gross misconduct is not entitled to COBRA notice
or benefits. See 29 U.S.C. § 1163(2). “There are no regulations in effect that define ‘gross
misconduct’ for purposes of COBRA, nor is gross misconduct defined in the COBRA statute itself
or the employer’s health care plan at issue.” Boudreaux v. Rice Palace, Inc., 491 F. Supp. 2d 625,
633 (W.D. La. 2007). “Gross misconduct may be intentional, wanton, willful, deliberate, reckless
or in deliberate indifference to an employer’s interest. It is misconduct beyond mere minor breaches
of employee standards, but conduct that would be considered gross in nature.” Collins v. Aggreko,
Inc., 884 F. Supp. 450, 454 (D. Utah 1995); see also Paris v. F. Korbel & Bros., Inc., 751 F. Supp.
834, 838 (N.D. Cal. 1990) (defining gross misconduct as “conduct evincing such willful or wanton
disregard of an employer’s interests as is found in deliberate violations or disregard of standards of
behavior which the employer has the right to expect of his employee, or in carelessness or
negligence of such a degree or recurrence as to manifest equal culpability, wrongful intent, or evil
design, or to show an intentional and substantial disregard of the employer’s interests or the
employee[’]s duties and obligations to his employer.”).
If Brunel terminated Slipchenko’s
employment for gross misconduct, Brunel would not have been required to provide notice or
benefits under COBRA (or the ARRA) because such a termination would not have been a qualifying
event.
Brunel argues that Slipchenko’s conduct leading up to her job termination amounts to gross
misconduct. (Docket Entry No. 78, at 12–16). Slipchenko argues that this is a post hoc
rationalization, emphasizing that the documents relating to her job termination do not refer to “gross
misconduct” and that the Department of Labor eventually found that her termination was a
32
qualifying event. (Docket Entry No. 80, at 9–10). But Slipchenko does not appear to dispute that
she was fired shortly after the employer she was placed with discovered that she was receiving two
reimbursements for her housing costs, one from Brunel and one from the employer. Slipchenko
does not appear to dispute her failure to disclose the alleged double payment or to return the excess
amount when it was discovered. Based on these facts, and given the lack of clear statutory or
caselaw guidance on the meaning of “gross misconduct,” summary judgment is improper. Fact
disputes remain as to whether Slipchenko’s employment termination was a qualifying event. The
motion for summary judgment is denied as to her COBRA and ARRA notice and benefits claims.
Barton, on the other hand, appears entitled to summary judgment on her COBRA qualifying
event claims.13 Brunel does not dispute that Barton’s employment termination was a qualifying
event. (Docket Entry No. 72, at 8). Brunel was required to provide Barton notice and coverage but
failed to do so. Summary judgment is not appropriate, however, as to Barton’s claims for damages
or penalties for the failure to provide notice or coverage. It is unclear from the present record
whether and to what extent the failure to provide notice of or access to continuation of coverage
harmed Barton. She has not identified evidence showing that she sought insurance after her Brunel
employment ended. (Docket Entry No. 78, at 23–24). She does not argue that she purchased more
expensive insurance on the private market. Unlike Slipchenko, she does not allege that she sought
medical treatment when she was eligible for coverage continuation, or that her medical expenses
were higher because she was uninsured.14 Based on Barton’s allegations and evidence, there are
13
Barton is not covered by the ARRA because the date Brunel terminated her employment was after
the dates covered by that statute.
14
Cf. O’Shea v. Childtime Childcare, Inc., 2002 WL 31738936, at *7 (N.D.N.Y. Dec. 2, 2002)
(“During this time period [between jobs but while eligible for COBRA benefits and continuation of coverage],
O’Shea was diagnosed with and treated three times for a gastrointestinal disorder for which she was without
33
factual issues about the extent to which she was prejudiced by the failure to provide notice of her
COBRA continuation rights. The motion for summary judgment is granted as to liability for
COBRA notice and benefits violations, but is denied as to damages or penalties.15
In sum, the plaintiffs’ motion for summary judgment is:
•
denied as to Boswell;
•
granted for the remaining plaintiffs as to Brunel’s liability for failing to provide
initial notice;
•
granted for Barton as to Brunel’s liability for failing to provide notice and benefits
after a qualifying event; and
•
V.
denied in all other respects
Conclusion
The plaintiffs’ motion for class certification is granted in part and denied in part. This court
orders that this case may proceed as a class action under Rule 23(b)(3) of the Federal Rules of Civil
Procedure. The named plaintiffs are appointed as class representatives. The following class is
certified: All employees of Brunel who elected coverage provided by British United Provident
Association Limited (“BUPA”), together with their spouses and other covered dependents who were
participants or beneficiaries in the Brunel Group Health Plan at any time from April 15, 2009 until
insurance coverage. Thus, O’Shea was prejudiced by defendants’ failure to provide the required notice.”
(citation omitted)); Holford v. Exhibit Design Consultants, 218 F. Supp. 2d 901, 909 (W.D. Mich. 2002)
(describing “foregone health care treatments” as prejudice to the employee who did not receive the required
COBRA notice).
15
This ruling is subject to Brunel’s reservation that it may “assert affirmative defenses against
[Barton’s] claims” if this court allows her to join this suit. (Docket Entry No. 78, at 2). This court has
allowed Barton to join this suit, but Brunel has not supplemented its pleadings or summary judgment response
to raise affirmative defenses against Barton. Moreover, Brunel’s response challenges summary judgment on
the grounds that fact disputes preclude ruling as a matter of law as to penalties and/or damages, not liability
34
the present. The following issues are certified for class treatment:
•
Brunel’s liability for failure to provide COBRA initial notice;
•
Brunel’s liability for failure to provide notice and benefits following a qualifying
event; and
•
Brunel’s conduct and intent toward the class as a whole in committing the alleged
statutory violations.
The motion for summary judgment is granted in part and denied in part. A status conference
is set for September 16, 2013, at 10:00 a.m. in Courtroom 11-B.
SIGNED on August 30, 2013, at Houston, Texas.
______________________________________
Lee H. Rosenthal
United States District Judge
35
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