Summary
awarding $12 per day for total award of $2,292 based on lack of bad faith by defendant and minimal prejudice suffered by plaintiff
Summary of this case from Phipps v. Tileco Employee Benefit PlanOpinion
No. C 03-05785 CRB.
November 23, 2004
MEMORANDUM AND ORDER
The Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") gives a participant in an ERISA group health plan the option of electing "continuation coverage" under the plan for a limited period following certain events, including termination of employment ("COBRA coverage").See 29 U.S.C. §§ 1161(a), (b), 1162(2), 1163. Plaintiff, a former in-house attorney for Sun Microsystems, Inc. ("Sun"), alleges that defendant Sun unlawfully terminated his employment, failed to notify him of his COBRA rights, and unlawfully terminated his COBRA coverage.
The Court previously granted defendant Ceridian Benefit Service's motion for summary judgment on all claims, and granted Sun's motion with respect to the federal wrongful termination claims. Now pending before the Court for decision are plaintiff's two remaining federal claims: (1) the failure to timely notify plaintiff of his COBRA rights (Count 8), and (2) Sun's termination of his COBRA benefits (Counts 6 and 7).
UNDISPUTED FACTS
In November 2001, Sun laid off plaintiff Naren Chaganti ("Chaganti"). Shortly thereafter, Ceridian Benefits Services ("Ceridian"), the clerical administrator of Sun's COBRA plan, mailed to Chaganti's former address in Virginia notice of his COBRA rights. At that time, Sun had notice of Chaganti's current California address as such address was reflected in Sun's payroll records.Chaganti never received the notification of COBRA rights that Ceridian mailed to Virginia. In May 2002, after learning that Ceridian administered the COBRA plan for Sun, Chaganti telephoned Ceridian. Ceridian mailed Chaganti a notification of COBRA rights to his current address, and on June 2, 2002, Chaganti enrolled in Sun's COBRA plan. Ceridian thereafter mailed Chaganti an invoice for approximately $2200 for COBRA health coverage from November 2001 through June 2002. Chaganti timely paid the invoice under protest because he did not believe he should pay premiums for the period when he was unaware of his right to COBRA coverage.
Ceridian mailed Chaganti several notices that his premium payment for July was due on July 1 and that the grace period expired July 31. First, on June 19, 2002, Ceridian mailed Chaganti an invoice for the premium due for July. The invoice stated that the premium was due July 1 and that the grace period ended on July 31. Second, on July 19, 2002, Ceridian mailed Chaganti an invoice for the August premium. The invoice reflected that Ceridian had not received payment for the July premium and that the grace period for the July premium expired on July 31. Finally, on July 23 Ceridian sent Chaganti an additional notice that it had not yet received the July payment. The notice stated:
This is a reminder being sent as a courtesy to you. As of today, our records show that the full premium payment due for your COBRA continuation coverage, as shown below, has not yet been posted to your account.
. . . .
If full payment has not yet been remitted, please be reminded that it must be postmarked no later than the date your GRACE PERIOD ends. If payment is not made by the GRACE PERIOD ending date shown above, federal law requires that your COBRA continuation coverage be terminated as of the end of the last fully-paid period for lack of full and timely payment of premium. This requirement cannot be waived, and if your coverage is terminated due to lack of full and timely payment, it cannot be reinstated.
Despite these warnings, Chaganti did not mail July's premium by July 31; instead, on August 7, 2002, Ceridian received a premium payment that was postmarked August 3, 2002. That same day Ceridian mailed Chaganti a notice that his participation in the COBRA plan had been cancelled because of his failure to timely pay the July premium.
SUMMARY JUDGMENT STANDARD
Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). An issue is "genuine" only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party, and a dispute is "material" only if it could affect the outcome of the suit under governing law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). A principal purpose of the summary judgment procedure "is to isolate and dispose of factually unsupported claims." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'"Matsushita Elec. Ind. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986).
DISCUSSION
COBRA "authorizes a qualified beneficiary of an employer's health plan to obtain continued coverage under the plan when he might otherwise lose that benefit for certain reasons, such as the termination of employment."Geissal v. Moore Medical Conference, 524 U.S. 74, 76 (1998). The coverage must be identical to the coverage provided to similarly situated beneficiaries whose employment has not been terminated. See 29 U.S.C. § 1162(1). "The coverage must extend for at least the period beginning on the date of the qualifying event [for example, the date of the termination of employment]," id. § 1162(2), and can last at most 18 months. See id. § 1162(2)(A). Coverage may end earlier if the beneficiary fails to make a timely premium payment. See id. § 1162(2)(C). A premium payment is timely if it is made within 30 days after the due date. See id.
I. The COBRA notification claim
The law "requires plans to advise beneficiaries of their rights under COBRA . . . within 14 days of learning of a qualifying event." Geissal, 524 U.S. at 80 (citing 29 U.S.C. § 1166(a)). Sun has conceded that because Ceridian did not mail Chaganti's COBRA notice to his current address, Sun, as plan sponsor and administrator, did not provide Chaganti with the timely notice required by law. Accordingly, judgment in favor of Chaganti shall be entered on this claim.
II. The termination of COBRA benefits
Chaganti also challenges the termination of his COBRA continuation coverage. The first issue is whether there is a genuine dispute as to Chaganti's failure to timely pay the July premium. Sun's evidence establishes that Ceridian did not receive a July premium payment from Chaganti postmarked by July 31, 2002. After Chaganti paid for coverage from November 2001 through June 2001, the first payment Ceridian received was postmarked August 3, 2002.
Chaganti does not dispute that Ceridian received a payment from him postmarked August 3, 2002. He nonetheless appears to claim that in early July he mailed the July premium payment. He states in an affidavit filed August 12, 2004: "I sent two additional checks for the monthly amounts but in July or August 2002, COBRAServ terminated my benefits as of June 2002, and wrote to me that I sent one check late. They did not account for the other check." August 12, 2004 Affidavit at ¶ 12. This statement does not create a genuine dispute as to whether Ceridian received a timely July premium payment; Chaganti does not attest to when he sent the two additional checks.
In a subsequent affidavit Chaganti states that he has attached a copy of a check he mailed to Ceridian. August 16, 2004 Affidavit at ¶ 4. The check is made out to CobraServ in the correct premium amount and is dated June 30, 2002. This check, too, does not create a genuine dispute as to whether Ceridian received a timely July premium payment. Chaganti does not offer any evidence as to when he mailed this check; his affidavit merely states that he mailed it. Moreover, Chaganti does not claim that the check was cashed and he does not explain how, if he mailed the check to Ceridian, he has a copy of the front of the check. In any event, even if he did mail it, the undisputed evidence is that Ceridian never received the check. Although in one of his memoranda (but not in his affidavits) he suggests he mailed a check on July 2, it is undisputed that on July 19 and July 23 Ceridian mailed Chaganti notices that it had not received his July premium payment. No reasonable trier of fact could find from Chaganti's affidavit statements and the unexplained copy of the front of a check that Ceridian received a timely payment for Chaganti's July premium.
The next question then, is whether — notwithstanding Chaganti's late payment — Sun unlawfully terminated Chaganti's COBRA continuation coverage. The Court notes that neither party as addressed the standard of review to apply to this question. The Court will therefore review the decision de novo rather than for an abuse of discretion. See Kearney v. Standard Ins. Co., 175 F.3d 1084, 1088 (9th Cir. 1999) (en banc) (holding that a denial of benefits is reviewed de novo unless the benefit plan gives the fiduciary or administrator discretionary authority to determine eligibility for benefits).
Chaganti first argues that the termination was unlawful because the lump sum payment he made for the November 2001 through June 2002 premiums should have been applied to June 2002 and the following months; if it had, his coverage would not have been terminated for failure to pay the July premium. In other words, he claims that as a result of Sun's failure to provide him with timely notice of his COBRA rights, he had the right to begin COBRA coverage at the time he elected coverage in June 2002 — seven months after Sun terminated his employment.
Chaganti's argument is foreclosed by COBRA. "COBRA requires an employer to provide an employee with the option of electing continuation coverage under the same terms of the employer's health plan after some qualifying event which would otherwise end the employee's health insurance coverage." Disabatino v. Disabatino Brothers, Inc., 894 F.Supp. 810, 814 (D. Del. 1995). "The whole purpose of COBRA is to prevent gaps in health care coverage." Kytle v. Stewart Title Co., 788 F.Supp. 321, 323 (S.D. Tex. 1992) (citing Brock v. Primedica, Inc., 904 F.2d 295 (5th Cir. 1990)). Accordingly, COBRA coverage begins immediately on the date of the qualifying event, here, Chaganti's termination, see 29 U.S.C. § 1162(2), and lasts for a maximum of 18 months after the date of the qualifying event. Id. § 1162(2)(A). Nothing in COBRA permits a former employee to commence COBRA continuation coverage seven months after the qualifying event.
In Disabatino, for example, the employer failed to provide the plaintiff with notice of his COBRA rights for 384 days. The plaintiff argued that the employer should be required to provide him with COBRA continuation coverage beginning with the date the employer finally provided him with proper notice. 894 F.Supp. at 815. The district court disagreed and held that "the statutorily imposed period of eighteen months from the date of the qualifying event is the limit of the legally mandated employer's liability and normally should not be expanded." Id. at 815; see also id. (stating that courts "should be reluctant to award extraordinary remedies that put the plaintiff in a better position than he would have been in had the employer complied with ERISA's notice requirements, including those added by COBRA.").
Chaganti's reliance on Popovits v. Circuit City Stores, Inc., 185 F.3d 726 (7th Cir. 1999) is unavailing. In Popovits, the employer finally offered the plaintiff COBRA continuation coverage 17 months after it terminated her employment. The plaintiff elected retroactive coverage for the seven months commencing with her termination. The employer demanded, however, that the plaintiff pay for a full 18 months of retroactive coverage. Id. at 729. The court held that if the employer had in fact demanded payment for a full 18 months of coverage, it had violated COBRA by requiring the plaintiff to pay a premium greater than that required by employees seeking the same period of coverage. Id. at 731. A properly notified former employee who had elected COBRA coverage initially could have stopped such coverage once the former employee obtained her own insurance and therefore would not have had to pay for a full 18 months of coverage. Popovits is consistent with this Court's holding that Ceridian was not required to permit Chaganti to commence his COBRA continuation coverage seven months after Sun terminated his employment. The Popovits plaintiff agreed to pay for retroactive coverage beginning with the termination of her employment even though she was not offered COBRA coverage until 17 months after she lost her job. She merely sought to end the continuation coverage once she obtained her own insurance. Chaganti, in contrast, seeks to be placed in a better position than if he had been properly notified of his COBRA rights in the first place; if he had been so notified he would have had to pay for coverage beginning with the date of his termination regardless of whether he incurred any medical expenses during that period of coverage. No court has held that a plan is required to permit a former employee to commence COBRA continuation coverage several months after the event that qualified the employee for such coverage.
Chaganti next argues that Ceridian did not give him sufficient time to pay the retroactive premium payments for November 2001 through June 2002. COBRA provides that "[i]n no event may the plan require the payment of any premium before the day which is 45 days after the day on which the qualified beneficiary made the initial election." 29 U.S.C. § 1162(3). Chaganti elected coverage on June 2, 2002 and Ceridian gave him until July 17, 2002 to pay the retroactive premiums. July 17 is the 45th day after June 2; therefore, Ceridian did not require Chaganti to make any premium payments before the day which is 45 days after the election date. In any event, Chaganti made the payment and has coverage for November 2001 through June 2002. His coverage was terminated as of the end of June 2002 for his failure to make a timely July premium payment.
In his September 19, 2004 Memorandum Chaganti asserts for the first time that Ceridian "violated the law when it refused to take credit card and to charge the entire premium for the entire coverage period, as plaintiff offered to pay." September 19, 2004 Memorandum at 7. There is no evidence in the record that Chaganti ever offered to pay the entire 18 months premium by credit card. Moreover, nothing in ERISA or COBRA requires a plan to accept payment by credit card.
Finally, Chaganti appears to argue that his continuation coverage could not have been terminated because he was not sent his proof of insurance coverage, that is, his insurance card, until after Sun terminated his COBRA coverage. As support for this argument he cites Meadows v. Cagle's, Inc., 954 F.2d 686 (11th Cir. 1992) and Lincoln Gen. Hosp. v. Blue Cross/Blue Shield, 963 F.2d 1136 (8th Cir. 1992). Neither case helps Chaganti. In Meadows, the Eleventh Circuit held that when an ex-employee is incompetent to elect COBRA continuation coverage (in that case the ex-employee was in a coma), the plan sponsor must provide the person making the COBRA decision for the ex-employee copies of the official plan documents contemporaneously with the COBRA notice. 954 F.2d at 962. The court reasoned that "[u]nder normal circumstances, the person making a COBRA election will be the employee-beneficiary, who already possesses the requisite materials. However, it is highly unlikely that a spouse, other relative, or unrelated legal guardian acting for an incompetent beneficiary will likewise have access to the current plan documents."Id. As Chaganti is the employee-beneficiary, Meadows is inapplicable to this case.
Lincoln General Hospital is similarly inapposite. COBRA requires the plan administrator to give the ex-spouse of a covered employee notice of her COBRA continuation rights as a result of divorce from the covered employee. In Lincoln General Hospital, the administrator provided the covered employee with the notice of COBRA rights, but the employee did not provide the notice to his ex-spouse; instead, the employee elected coverage for his ex-wife and paid the first month's premium without notifying his wife. 963 F.2d at 1138. The plan administrator subsequently sent the ex-wife a premium notice, along with an identification card and a benefits booklet. No further premium payments were made and the COBRA coverage was terminated. Id. The Eighth Circuit held that the plan administrator's mailing of the premium notice, along with the identification card and a benefits booklet satisfied its COBRA responsibility to provide the ex-wife with notice of her COBRA rights.Id. at 1139-40. Lincoln General Hospital does not suggest that the notice of COBRA rights mailed to Chaganti on May 30, 2002 was ineffective because it was not accompanied by an insurance card.
In sum, the evidence in the record is undisputed that Ceridian did not receive a July premium payment postmarked by July 31, 2002. As Sun had properly applied Chaganti's earlier payments to the premiums for November 2001 through June 2002, Sun did not violate COBRA when it cancelled Chaganti's COBRA coverage as a result of his late payment of the July premium.
III. The amount of the judgment
As Sun has conceded that it violated COBRA's notice provision, the Court must now determine what amount, if any, to award Chaganti on this claim. ERISA provides that any administrator who fails to provide a participant or beneficiary with timely notice of COBRA rights "may in the court's discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure . . ., and the court may in its discretion order such other relief as it deems proper." 29 U.S.C. § 1132(c)(1).
Sun urges the Court not to impose any penalty. It contends that because Chaganti ultimately obtained coverage and therefore was not prejudiced, and because Sun did not act in bad faith the Court should exercise its discretion not to award money to Chaganti. See Kaiser Permanente Employees Pension Plan v. Bertozzi, 849 F.Supp. 692, 702 (N.D. Cal. 1996) (declining to impose section 1132(c) penalty because the defendant did not act in bad faith and defendant's ERISA violation did not prejudice plaintiff).
The Court concludes that Sun's failure to provide Chaganti with notice of his COBRA rights was not done in bad faith. It understood its COBRA responsibilities and retained Ceridian to administer its COBRA program, including providing employees with notice of their COBRA rights. Ceridian mailed Chaganti an appropriate notice, albeit to an out-of-date address. Thus, the COBRA violation was the result of a mix-up with respect to Chaganti's current address, as opposed to a deliberate refusal to acknowledge COBRA responsibilities.
The Court nonetheless concludes that a penalty is appropriate because Sun's omission caused Chaganti some prejudice. For several months Chaganti did not have any health insurance. While he concedes that he did not incur any provable medical expenses from November 2001 through June 2002 (other than $500 for unspecified medical treatment in India), this is due in part to his not seeking any medical care because of his lack of insurance.
In computing an appropriate penalty, the Court must first determine the period of the COBRA violation. See 29 U.S.C. § 1132(c) (authorizing a penalty in the amount of up to $100 a day from the date of the failure to comply with COBRA); Disabatino, 894 F.Supp. at 817 ("Section 1132(c)(1) authorizes the assessment of the civil penalty to commence with the date of the violation."). Sun terminated Chaganti's employment on November 5, 2001. Sun was required to give Chaganti notice of his COBRA rights within 14 days of the termination of his employment, see 29 U.S.C. § 1166(c); accordingly, Sun's violation of the COBRA notice provision began on November 20, 2001. Sun finally mailed Chaganti notice of his COBRA rights to his California address on May 30, 2002. Therefore, Sun's violation of COBRA lasted from November 20, 2001 through May 29, 2002 for a total of 191 days.
The Court recognizes that there is some dispute in the caselaw as to the amount of time a plan administrator who is also an employer has to notify a former employee of COBRA rights. See Anderson v. Royal Crest Dairy, Inc., 281 F.Supp.2d. 1242, 1251 (D. Col. 2003). As Sun has not addressed the issue, the Court will apply the shorter time period (14 days).
The Court in its discretion awards a penalty of $12 per day for a total penalty of $2292.00. This amount is approximately equal to the amount he paid retroactively for medical coverage from November 2001 through June 2002. This is an appropriate amount in light of Sun's lack of bad faith and the minimal prejudice suffered by Chaganti.
The Court declines Chaganti's request to award attorneys fees. The Ninth Circuit and Supreme Court have uniformly held that pro se litigants, including lawyers, may not recover attorneys fees under federal statutes authorizing an award of attorneys fees. See e.g., Kay v. Ehrler, 499 U.S. 432 (1991) (pro se attorney may not recover fees under 42 U.S.C. section 1988); Corrigan v. United States, 27 F.3d 436 (9th Cir. 1994) (taxpayer refund action); Carter v. Veterans Admin., 780 F.2d 1479 (9th Cir. 1986) (Freedom of Information Act claim); Hannon v. Security National Bank, 537 F.2d 327 (9th Cir. 1976) (Truth-in-Lending Act). As the Supreme Court stated in Kay:
A rule that authorizes awards of counsel fees to pro se litigants — even if limited to those who are members of the bar — would create a disincentive to employ counsel whenever such a plaintiff considered himself competent to litigate on his own behalf. The statutory policy of furthering the successful prosecution of meritorious claims is better served by a rule that creates an incentive to retain counsel in every such case.499 U.S. at 438. This reasoning applies equally to an ERISA case.
CONCLUSION
The undisputed evidence in the record demonstrates as a matter of law that Sun's termination of Chaganti's COBRA coverage was not unlawful. Accordingly, summary judgment on Chaganti's claims for unlawful termination of COBRA coverage must be granted in favor of Sun. Chaganti is entitled to judgment on his claim that Sun violated 29 U.S.C. section 1166(c) by failing to provide him with timely notice of his COBRA rights. The Court in its discretion awards Chaganti $2292.00 in penalties on this claim. Chaganti's remaining state law claims are dismissed without prejudice. See United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966).
IT IS SO ORDERED.