Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 1 of 18
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`UNITED STATES DISTRICT COURT
`
`DISTRICT OF NEVADA
`*'k~k
`
`Case No. 2:12-cv—O0416—MMD—GWF
`
`ORDER
`
`(Deffs Motion for Summary Judgment —
`dkt. no. 85; P|f.’s Motion for Summary
`Judgment — dkt. no. 87)
`
`REGINA C. HONEY, individually and as
`natural parent of ADDISON M. HONEY, a
`minor, and LUCAS R. HONEY, a minor;
`ADAM D. HONEY, individually and as
`natural parent ofADDlSON M. HONEY, a
`minor, and LUCAS R. HONEY, a minor,
`
`v.
`
`Plaintiffs,
`
`DIGNITY HEALTH, a California non—profit
`corporation, doing business as ST. ROSE
`DOMINICAN HOSPITAL-SIENNA
`CAMPUS; CONEXIS BENEFIT
`ADMINISTRATORS LP, a Texas limited
`partnership; CONEXIS LLC, a California
`limited liability partnership; PAYFLEX
`SYSTEMS, USA, INC., a Nebraska
`corporation; DOE Entities I-V; and ROE
`individuals VI-X.
`
`
`
`Defendants.
`
`I.
`
`SUMMARY
`
`This dispute involves the notification provisions of the Consolidated Omnibus
`
`Budget Reconciliation Act (“COBRA”). Plaintiffs Regina C. Honey, Addison M. Honey,
`
`Lucas R. Honey, and Adam D. Honey (collectively, “Plaintiffs”) allege that Defendant
`
`Dignity Health (“Dignity”) failed to provide timely and adequate notice regarding Plaintiffs’
`
`right
`
`to continue participation in Dignity’s group health plan following Dignity’s
`
`termination of Regina’s employment. Plaintiffs allege they suffered various harms due to
`
`the delayed notice, and request the maximum statutory damages detailed in section
`
`502(c) of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132(c).
`
`

`
`Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 2 of 18
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`Before the Court are the parties’ cross motions for summary judgment (dkt. nos.
`
`85, 88), and Plaintiffs’ Motion for Leave to File a Sur—Rep|y (dkt. no. 103). For the
`
`reasons discussed below, the Motion for Leave to File Sur—Reply is granted, and the
`
`parties’ cross motions for summaryjudgment are granted in part and denied in part.
`
`II.
`
`BACKGROUND
`
`The following facts are undisputed. Dignity provides health, vision, and dental
`
`insurance coverage to its employees through an “employee welfare benefit plan” (the
`
`‘‘Plan'’), as that term is used in 29 U.S.C. § 1002(1). (Dkt. no. 85-1, Ex. A.) Dignity is both
`
`the “sponsor” and the “administrator” of the Plan, as those terms are used in 29 U.S.C. §
`
`1002(16).
`
`(Dkt. no. 85.) Until December 31, 2010, Dignity contracted with Defendant
`
`Conexis, LLC (“Conexis") to administer Dignity’s compliance with COBRA's notification
`
`provisions for the Plan. (Dkt. no. 86, Ex. B.) After December 31, 2010, Dignity contracted
`
`with Defendant Payflex Systems, USA, Inc. (“Payf|ex") for the same services. (Dkt. no.
`
`86, Ex. 0.)
`
`Dignity hired Regina on April 8, 2008, to work as a registered nurse. (Dkt. no. 88-
`
`1
`
`‘fl 2.) Regina participated in Dignity’s group health, vision, and dental plans with
`
`Addison as a covered beneficiary. (Id.) Adam was also a covered beneficiary for the
`
`dental portion of the Plan only. (Id.) Because Regina and Adam were not married until
`
`December 31, 2010, Adam was covered under the Plan as a Legal Domiciled Adult. (Id.)
`
`A.
`
`Regina’s First Termination
`
`In March, 2010, Regina began experiencing signs of pre—term labor and her
`
`doctor ordered bed rest. (Id. 11 4.) Regina requested leave between March 26 and April
`
`12, 2010, to comply with the doctor’s orders. (Id.) However, when Regina attempted to
`
`return to work after her symptoms had subsided, she was instructed not to come in, and,
`
`on April 22, 2010, Dignity informed Regina that her employment and benefits were
`
`terminated (the "First Termination”).
`
`(Id. 1] 5.) Regina received a COBRA notification
`
`regarding her right to continue her health care benefits on May 19, 2010. (Id.)
`
`III
`
`

`
`Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 3 of 18
`Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 3 of 18
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`B.
`
`Regina’s Second Termination
`
`After filing a successful grievance against Dignity over the First Termination,
`
`Dignity reinstated Regina, and Regina returned to work on June 10, 2010.
`
`(Id.
`
`11 6.)
`
`However, on June 14, 2010, Regina again experienced symptoms of pre-term labor and
`
`her doctor again ordered bed rest for the remainder of her pregnancy and for a six-week
`
`postpartum period. (Id. 1111 7, 9.) Regina remained on bed rest until her son, Lucas, was
`
`born on July 27, 2010. (Id.)
`
`At the end of her postpartum period, Regina informed her employer that she was
`
`medically cleared to begin working again on September 7, 2010, but she was never
`
`scheduled to return to work.
`
`(Dkt. no. 88-4.) in the following days, Regina attempted
`
`several
`
`times
`
`to reach a representative in Dignity’s Human Resources
`
`(“HR”)
`
`Department regarding her return to work, but she was unable to do so. (Dkt. no. 88-1 1111
`
`11-14.) Regina also attempted to add Lucas to the Plan, but she could not access her
`
`self-service benefits account. (Id. 11 12; Dkt. no. 85-2, Ex. D, 45:1-47:21.) On September
`
`22, 2010, Regina was finally able to speak to someone in HR, who informed her that
`
`Dignity had retroactively terminated both her employment and her benefits, with effective
`
`dates of June 22, 2010, and June 30, 2010,
`
`respectively.
`
`(Dkt. no. 88-1 11 15.) On
`
`September 28, 2010, Regina received correspondence from Dignity dated September
`
`15, 2010, formally notifying her of her termination. (Id. 1116; Dkt. no. 88-6.)
`
`C.
`
`Regina’s Attempts to Procure COBRA Notice
`
`During her September 22, 2010, conversation with Dignity’s HR representative,
`
`Regina stated that she had yet to receive a notification or information regarding her
`
`continued benefits under COBRA; she expressly requested the notification, conveying
`
`the urgency she felt as a result of medical bills related to her high-risk pregnancy. (Dkt.
`
`no. 88-1 11 15.) The September 28, 2010,
`
`termination letter included an attachment
`
`explaining the availability of COBRA coverage. (Dkt. no. 85-2, Ex. E.) However, the letter
`
`did not provide a form for Plaintiffs to elect COBRA coverage. (/d.) Rather, the letter
`
`simply stated that enrollment information would be sent separately. (Id.) On September
`
`3
`
`

`
`Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 4 of 18
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`30, 2010, Regina again called and left a message for Dignity‘s HR representative,
`
`informing her that no COBRA notification had arrived.
`
`(Dkt. no. 88-1 11 17.) Regina
`
`received no response. (Id.)
`
`On November 2, 2010, Regina and Adam attended a union meeting to discuss
`
`the issues surrounding her termination.
`
`(Id.
`
`11 18.) At that meeting, Regina informed
`
`Dignity’s representatives that she still had not received a COBRA notice. (Id. 11 19.) One
`
`of those representatives, Ms. Spencer, promised to look into the matter.
`
`(/d.) On
`
`November 8, 2010, Regina followed up with Ms. Spencer by email regarding her inquiry.
`
`(Id. at 11 21.) The following week, on November 15, 2010, Ms. Spencer wrote back and
`
`informed Regina that “[a]fter researching the COBRA issue, you were contacted based
`
`on the records. Unfortunately, there is really nothing else I can do." (Dkt. no. 88-8.)
`
`Regina made several more attempts to procure the COBRA notice. (Dkt. no. 88-1 1111 22-
`
`25.) On November 30, 2010, Regina received an email from Dignity’s HR representative,
`
`which stated, “[w]e are contacting Conexis right now to have them issue the missed
`
`Cobra notification.” (ld.; Dkt. no. 88-12.)
`
`D.
`
`The COBRA Notices
`
`Conexis issued the required COBRA notification in connection with Regina’s
`
`Second Termination in a correspondence dated December 7, 2010. (Dkt. no. 85-2, Ex.
`
`F.) Although the correspondence was addressed “[t]o Participant and/or any Covered
`
`Dependents,” the correspondence listed only Regina and Addison as participants and/or
`
`beneficiaries. (Id.) Additionally, the coverage premiums were set out only for Regina and
`
`Addison. (Id.) The notice did make a request to “[p]lease verify our records are accurate
`
`and make changes as necessary;” however,
`
`the notice was silent about Adam and
`
`Lucas. (ld.)
`
`On January 18, 2011, Regina. contacted Conexis to elect benefits for herself and
`
`Addison.
`
`(Dkt. no. 88-1 11 27.) However, Regina was informed that Conexis was no
`
`longer Dignity’s co—administrator and that she needed to contact Payflex. (/d.) Regina did
`
`so, and was told that she was not
`
`in Payflex’s system.
`
`(/d.) Payflex then issued a
`
`4
`
`

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`Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 5 of 18
`Case 2:12—cv—00416—MMD—GWF Document 114 Filed 06/16/14 Page 5 of 18
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`separate COBRA notice on January 24, 2011.
`
`(Id.
`
`11 28.) Like the Conexis notice, the
`
`Payflex notice only described coverage options for Regina and Addison. (ld.; dkt. no. 88-
`
`16.)
`
`E.
`
`Regina’s Reinstatement
`
`On May 1, 2011, Regina, her union, and Dignity entered into a settlement
`
`agreement, resolving Regina's grievance regarding her Second Termination. (Dkt. no.
`
`85-2, Ex. H.) Under the Agreement, Dignity reinstated Regina's employment, paid
`
`Regina $600.00 to cover out—of—pocket medical expenses, and paid or wrote off all
`
`Plaintiffs’ outstanding medical bills for the period between Regina's Second Termination
`
`and her reinstatement. (Id.; Dkt. no. 85-2 at 173.)
`
`F.
`
`This Lawsuit
`
`Plaintiffs filed their First Amended Complaint (the “FAC”) on March 22, 2013,
`
`claiming violations of COBRA’s notice provisions and breach of fiduciary duties. (Dkt. no.
`
`45.) The Court dismissed the breach of fiduciary duty claim pursuant to the parties’
`
`stipulation. (Dkt. no. 91.) The parties also stipulated to dismiss with prejudice Defendants
`
`Conexis and Payflex.
`
`(Dkt. nos. 102, 105.) Plaintiffs and Dignity now both move for
`
`summary judgment on the remaining claim for failure to provide the required COBRA
`
`notification.
`
`(Dkt. nos. 85, 88.) Plaintiffs have also filed a motion seeking the Court’s
`
`permission to file a Sur-Reply to Dignity’s Motion for Summary Judgment. (Dkt. no. 103.)
`
`Ill.
`
`MOTION FOR LEAVE TO FILE SUR-REPLY
`
`Plaintiffs request permission to file a Sur-Reply in response to an alleged attack
`
`on Regina’s credibility in Dignity’s Reply to its Motion for Summary Judgment. The
`
`disagreement involves whether Regina elected COBRA coverage after she obtained
`
`adequate notice, or whether she allowed the coverage to lapse.
`
`In its various filings, Dignity has consistently argued that Plaintiffs could not have
`
`suffered prejudice because, even after they received COBRA notice, they did not elect
`
`coverage. Dignity offers as support Regina’s deposition testimony that she let the
`
`coverage lapse and began negotiating a reinstatement in February 2011. (Dkt. no. 85.)
`
`5
`
`

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`Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 6 of 18
`Case 2:12—cv—OO416—MMD—GWF Document 114 Filed 06/16/14 Page 6 of 18
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`In response, Plaintiffs offered Regina’s affidavit, attesting to the fact that she had elected
`
`COBRA coverage on the last day before the deadline.
`
`(Dkt. no. 93-1.) Dignity then
`
`argued, in its Reply, that the affidavit was insufficient to create a question of material fact
`
`about Plaintiffs’ election of coverage because the affidavit was self-serving and
`
`contradicted deposition testimony. (Dkt. no. 95); see Kennedy v. A/lied Mut. Ins. Co., 952
`
`F.2d 262, 266 (9th Cir. 1991). Plaintiffs’ Sur-Reply confronts Dignity's claim that Regina's
`
`affidavit was inaccurate and includes an email chain between Dignity, Payflex, and the
`
`Plan’s insurance provider confirming that Regina elected COBRA coverage on the last
`
`day of eligibility and discussing Regina’s election in light of her reinstatement. (Dkt. no.
`
`103, Ex. 1.)
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`Although a Sur-Reply should not have been necessary, the Court will allow its
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`submission and consider the evidence attached. There is no doubt that the email chain
`
`could have been included with Plaintiffs’ Opposition or Reply. Dignity had argued in its
`
`Motion for Summary Judgment and in its Opposition to Plaintiffs’ Motion for Summary
`
`Judgment that Plaintiffs had not elected COBRA coverage. (Doc. nos. 85, 92.) Moreover,
`
`Regina’s deposition testimony was available to Plaintiffs, and Plaintiffs should have been
`
`aware of the contradictory testimony. The email chain, however, cannot come as a
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`surprise to Dignity because it
`
`involves Dignity’s own agents and representatives
`
`discussing Regina’s COBRA election. Indeed, Dignity itself produced the email chain in
`
`discovery.
`
`In
`
`short, Dignity argued that Plaintiffs never elected coverage while
`
`possessing contradictory information in which its own agents confirmed that Plaintiffs
`
`had elected coverage. Thus,
`
`the Court does not see how considering this evidence
`
`would prejudice Dignity. The Court will allow the Sur-Reply and consider Plaintiffs’
`
`proffered evidence.
`
`lV.
`
`CROSS MOTIONS FOR SUMMARY JUDGMENT
`
`A.
`
`Legal Standard
`
`The purpose of summaryjudgment is to avoid unnecessary trials when there is no
`
`dispute as to the facts before the court. Nw. Motorcycle Ass’n v. U. S. Dep’t of Agric., 18
`
`6
`
`

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`Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 7 of 18
`Case 2:12—cv—00416—MMD—GWF Document 114 Filed 06/16/14 Page 7 of 18
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`§
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`F.3d 1468, 1471 (9th Cir. 1994). Summaryjudgment is appropriate when “the pleadings,
`
`,
`
`depositions, answers to interrogatories, and admissions on file,
`
`together with the
`
`affidavits,
`
`if any, show there is no genuine issue as to any material fact and that the
`
`movant is entitled to judgment as a matter of law." See Celotex Corp. v. Catretz‘, 477 U.S.
`
`317, 330 (1986) (citing Fed. R. Civ. P. 56(0)). An issue is “genuine” if there is a sufficient
`
`evidentiary basis on which a reasonable fact-finder could find for the nonmoving party
`
`and a dispute is “material” if it could affect the outcome of the suit under the governing
`
`law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). Where reasonable
`
`minds could differ on the material facts at issue, however, summary judgment is not
`
`appropriate. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995). In evaluating a
`
`summary judgment motion, a court views all facts and draws all inferences in the light
`
`most favorable to the nonmoving party. Kaiser Cement Corp. v. Fishbach & Moore, Inc.,
`
`793 F.2d 1100, 1103 (9th Cir. 1986).
`
`The moving party bears the burden of informing the court of the basis for its
`
`motion,
`
`together with evidence demonstrating the absence of any genuine issue of
`
`material fact. Celotex, 477 U.S. at 323. Once the moving party satisfies Rule 56’s
`
`requirements,
`
`the burden shifts to the party resisting the motion to “set forth specific
`
`facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256. The
`
`nonmoving party “may not rely on denials in the pleadings but must produce specific
`
`evidence, through affidavits or admissible discovery material, to show that the dispute
`
`exists," Bhan v. NME Hosps.,
`
`lnc., 929 F.2d 1404, 1409 (9th Cir. 1991), and “must do
`
`more than simply show that there is some metaphysical doubt as to the material facts."
`
`Bank of Am. v. Orr, 285 F.3d 764, 783 (9th Cir. 2002) (internal citations omitted). “The
`
`mere existence of a scintilla of evidence in support of the plaintiff’s position will be
`
`insufficient.” Anderson, 477 U.S. at 252. Although the parties may submit evidence in an
`
`inadmissible form, the Court may only consider evidence which might be admissible at
`
`trial in ruling on a motion for summaryjudgment. Fed. R. Civ. P. 56(c).
`
`28
`
`///
`
`

`
`Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 8 of 18
`Case 2:12—cv—OO416—MMD—GWF Document 114 Filed 06/16/14 Page 8 of 18
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`B.
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`Analysis
`
`The sole claim remaining from Plaintiffs’ FAC is for violations of COBRA’s notice
`
`provisions. As the material facts are generally undisputed and the statutory penalty for
`
`any violation is left solely in the discretion of the district court, disposition of the case on
`
`summary judgment is appropriate. The two issues presented in the parties’ competing
`
`motions for summary judgment are (1) whether Dignity’s actions violated COBRA’s
`
`provisions, and (2) if so, what statutory penalty, if any, should be levied.
`
`Plaintiffs assert
`
`that summary judgment
`
`is warranted because Regina and
`
`Addison were not provided adequate COBRA notice until at least December 7, 2010,
`
`and Lucas and Adam were never provided with the required notice. Contrarily, Dignity
`
`argues that there was no statutory violation because the December 7, 2010, notice was
`
`legally sufficient for all members of the Honey household. Dignity also argues that
`
`summary judgment should be granted in its favor because its actions were not taken in
`
`bad faith and Plaintiffs suffered no prejudice. Because of the extent of Dignity’s delay,
`
`the Court determines that Dignity did not comply with COBRA’s notification requirements
`
`and is liable for statutory violations. However, the statute does not provide for all of the
`
`remedies Plaintiffs seek.
`
`1.
`
`Violation of COBRA’s notice requirements
`
`COBRA requires that employers give former employees the opportunity to elect
`
`the continuation of the employer’s group health plan at the employee's own cost for a
`
`maximum of eighteen (18) months following the occurrence of “qualifying events.” 29
`
`U.S.C. §§ 1161, 1162(2)(A)(i); see Gaskell V. Harvard Coop. Soc’y, 3 F.3d 495, 498 (1st
`
`Cir. 1993).
`
`COBRA applies to employers employing more than 20 employees. 29
`
`U.S.C. §1161(b). The parties do not dispute that Dignity is subject
`
`to COBRA’s
`
`requirements.
`
`COBRA additionally requires that employees and “qualified beneficiaries” receive
`
`notice of their right to continue their health coverage under an employer's plan both
`
`when coverage commences under the plan — not
`
`in dispute here — and after a
`
`8
`
`

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`Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 9 of 18
`Case 2:12—cv—00416—MMD—GWF Document 114 Filed 06/16/14 Page 9 of 18
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`“qualifying event,” such as termination of employment for a reason other than an
`
`employee’s gross misconduct. 29 U.S.C. §§ 1163(2), 1166(a)(1),
`
`(a)(4). After a
`
`qualifying event, an employer has thirty (30) days to notify a plan administrator, who then
`
`has fourteen (14) days to notify a terminated employee and qualified beneficiaries of
`
`their right
`
`to continue coverage under the plan. Although the case law is divided
`
`regarding the deadlines applicable to employers who are also plan administrators, recent
`
`decisions have relied on a letter from the Department of Labor expressing its opinion that
`
`such employers should have forty—four (44) days to notify a terminated employee of his
`
`or her rights under COBRA. See Roberts v. Nat’! Health Corp., 963 F. Supp. 512, 515
`
`(D.S.C. 1997). The Department of Labor also recently proposed a rule establishing the
`
`44-day deadline for employer-administrators. 29 C.F.R. § 2590.606—4(b)(2).
`
`COBRA does not specify what constitutes adequate notice to plan participants,
`
`see 29 U.S.C. §§ 1162, 1165, and courts hold that “a good faith attempt to comply with a
`
`reasonable interpretation of the statute is sufficient.” Smith v. Rogers Galvanizing Co.,
`
`128 F.3d 1380, 1383 (10th Cir. 1997). Generally, a COBRA notice must provide
`
`sufficient information to “allow the qualified beneficiary to make an informed decision
`
`whether to elect coverage.” McDowell v. Krawchison, 125 F.3d 954, 958 (6th Cir. 1997).
`
`Thus, courts have typically required the notice to contain information necessary to
`
`understand the substance of the benefits provided,
`
`the duration of benefits, and the
`
`applicable payment obligations. See Rodriguez v. Int’! College of Bus. & Tech., Inc, 364
`
`F. Supp. 2d 40, 47 (D.P.R. 2005).
`
`The date of Regina’s “qualifying event” was June 22, 2010 —— the date her
`
`termination was made effective. Dignity was therefore compelled to provide the requisite
`
`COBRA notice by August 5, 2010.‘ Dignity does not assert that it provided notice by this
`
`likely precedes the date when Dignity
`‘The Court notes that this date most
`decided to terminate Regina's employment. Thus, even if Dignity provided the COBRA
`notice to Regina immediately after it decided to terminate her employment, the notice
`would still be delayed under the statutory deadline.
`
`9
`
`

`
`Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 10 of 18
`Case 2:12—cv—OO416—MMD—GWF Document 114 Filed 06/16/14 Page 10 of 18
`
`_)
`
`C3\'DOJ\lO3U'lJ>0Ol\)
`
`date, but simply argues that the December 7, 2010, notice was sufficient to comply with
`
`the statutory requirements. However, a 168—day delay cannot constitute a “good faith
`
`attempt to comply with a reasonable interpretation of the statute,” especially when
`
`Regina repeatedly informed Dignity of its failure to provide the notice. See Smith v.
`
`Rogers Galvanizing, 128 F.3d at 1383. Consequently, Dignity’s actions constitute a
`
`violation of COBRA’s provisions.
`
`Further, Dignity’s argument that summaryjudgment should be granted in its favor
`
`based on the lack of bad faith and Plaintiffs’ prejudice is misplaced. Nothing in the
`
`statute requires a showing of prejudice or bad faith to establish a violation of §
`
`1132(c)(1). Rather, courts have examined bad faith and prejudice as mitigating factors in
`
`exercising their discretion to impose varying amounts of penalties. See, e.g., Paris v. F.
`
`Korbel & Bros.,
`
`lnc., 751 F. Supp. 834, 839-40 (N.D. Cal. 1990). Thus, the lack of bad
`
`faith and prejudice does not absolve a statutory violation. The Court, however, will
`
`consider these factors in determining what level of penalty to apply.
`
`2.
`
`Statutory Penalties
`
`Dignity’s violation, however, does not entitle Plaintiffs to the full penalties they
`
`seek. The Court must address (1) whether Plaintiffs may claim penalties under §
`
`1132(c)(1)(B); (2) whether plaintiffs other than Regina may assert independent claims;
`
`and (3) what penalties to assess with respect
`
`to each plaintiff who may assert
`
`independent claims.
`
`a.
`
`Penalties under § 1132(c)(1)(B)
`
`Plaintiffs claim entitlement
`
`to separate penalties under both 29 U.S.C. §
`
`1132(c)(1)(A) and (B) for Regina, Addison, Lucas, and Adam, respectively. The statute
`
`providing remedies for a failed COBRA notice states:
`
`Any administrator (A) who fails to meet the requirements of paragraph (1)
`or (4) of section 1166 of this title .
`.
`. with respect to a participant or
`beneficiary, or (B) who fails or refuses to comply with a request for any
`information which such administrator is
`required by this subchapter to
`furnish to a participant or beneficiary (unless such failure or refusal results
`from matters reasonably beyond the control of the administrator) by mailing
`the material
`requested to the last known address of
`the requesting
`
`10
`
`

`
`Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 11 of 18
`Case 2:12—cv—OO416—MMD—GWF Document 114 Filed 06/16/14 Page 11 of 18
`
`£5
`
`CJKJO3\iC)')O‘l-b(»Jl\)
`
`25
`
`26
`
`27
`
`28
`
`participant or beneficiary within 30 days after such request may in the
`court's discretion be personally liable to such participant or beneficiary in
`the amount of up to $1002 a day from the date of such failure or refusal,
`and the court may in its discretion order such other relief as it deems
`proper. For purposes of
`this paragraph, each violation described in
`subparagraph (A) with respect to any single participant, and each violation
`described in subparagraph (B) with respect to any single participant or
`beneficiary, shall be treated as a separate violation.
`
`29 U.S.C.§1132(c)(1).
`
`Dignity argues that§ 1132(c)(1)(B) only pertains to an administrator’s failure, after
`
`written request,
`
`to provide a participant a copy of the summary plan description as
`
`mandated by 29 U.S.C. § 1024(b)(4). Dignity further argues that simultaneous claims
`
`under § 1132(c)(1)(A) and (B) are not permitted by the statute because § 1132(a)(1)(A)
`
`specifically covers a failed COBRA notice, so any additional claim under § 1132(a)(1)(B)
`
`would be redundant. Dignity’s arguments are unsupported by any authority and directly
`
`contravene the plain language of the statute, which would permit recovery under both §
`
`1132(c)(1)(A) and (B) for the acts alleged here.
`
`Plaintiffs, however, did not properly request relief under § 1132(c)(1)(B) before
`
`their Motion for Summary Judgment, even though the allegations in Plaintiffs’ FAC are
`
`broad enough to state a claim under § 1132(c)(1)(B).
`
`Indeed, both the FAC and
`
`Plaintiffs‘ computation of damages only reference $110 per day as the total penalty
`
`sought. The calculation for § 1132(c)(1)(B) damages — which entails an additional $110
`
`per day and an entirely separate analysis for applicable dates and durations — first
`appears in Plaintiffs’ Motion for Summary Judgment. The Court finds that as Plaintiffs
`
`failed to previously assert a claim to relief under § 1132(c)(1)(B), Plaintiffs have now
`
`waived this claim and may not supplement their FAC through a motion for summary
`
`judgment. See Wasco Prod., Inc. v. Southwa/I Techs., Inc., 435 F.3d 989, 992 (9th Cir.
`
`2006) (“[T]he necessary factual averments are required with respect to each material
`
`element of the underlying legal
`
`theory.
`
`.
`
`.
`
`. Simply put, summary judgment is not a
`
`2This amount has been adjusted to $110. 29 C.F.R. §2575.502c—3.
`
`11
`
`

`
`Case 2:12-cv-00416-MMD-GWF Document 114 Filed 06/16/14 Page 12 of 18
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`
`4.
`
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`procedural second chance to flesh out inadequate pleadings." (quoting Fleming V. Lind-
`
`Waldock & Co., 922 F.2d 20, 24 (1st Cir.1990))).
`
`b.
`
`Beneficiaries’ Claims
`
`The parties dispute whether COBRA provides a claim only for Regina as the
`
`employee and participant under the Plan, or whether beneficiaries may maintain actions
`
`as well. Dignity argues that § 1132(c)(1)(A) limits recovery to the plan participant. Dignity
`
`relies on Wright v. Hanna Steel Corp., 270 F.3d 1336, 1343 (11th Cir. 2001), where the
`
`Eleventh Circuit determined that the phrase, “[f]or purposes of this paragraph, each
`
`violation described in subparagraph (A) with respect to any single participant .
`.
`in §
`1132(c)(1) restricts the ‘availability of a § 1132(c)(1)(A) claim to the plan participant.
`
`Several
`
`lower courts have adopted this interpretation. See, e.g., CurbeIo—Rosario v.
`
`lnstituto de Banca y Comercio, /nc., 248 F. Supp. 2d 26, 31 (D.P.R. 2003); Slipchenko v.
`
`Brunei Energy, Inc., No. H-11-1465, 2013 WL 4677918 at *12 n.11 (S.D. Tex. Aug. 30,
`
`2013); McConnell v. Costigan, No. 00 Civ. 4598(SAS), 2002 WL 1968336 at *5
`(S.D.N.Y. Aug. 23, 2003). However, other courts have awarded statutory penalties under
`
`§ 1132(c)(1)(A) to individual beneficiaries. See, e.g., McGoIdrick v. TruePosition, Inc.,
`
`623 F. Supp. 2d 619, 634 (E.D. Penn. 2009); Torres-Negron v. Rama!/o, 203 F. Supp. 2d
`
`120, 122 (D.P.R. 2002). The Ninth Circuit has not directly addressed this issue.
`
`Although the above-cited cases are not binding on this Court, the Court finds the
`
`latter approach — allowing claims from beneficiaries — to be more persuasive. The plain
`
`language of the statute’s main clause states that "[a]ny Administrator .
`
`.
`
`. may .
`
`.
`
`. be
`
`personally liable to [a] participant or beneficiary.” 29 U.S.C. § 1132(c)(1). Further, the
`
`secondary clause, on which the Wright court focused, simply prescribes the treatment of
`
`subsection (B) violations in relation to subsection (A), as the same action giving rise to a
`
`violation of subsection (B) (refusal to provide information after a request) could very well
`
`entail a violation of subsection (A) (failing to provide notice generally).
`
`in other words,
`
`failing to provide notice to participants or beneficiaries after a qualifying event — which
`
`only happens “with respect to any single participant” — is deemed a separate violation
`
`12
`
`

`
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`
`than refusing to provide statutorily mandated information after a request, which either a
`
`participant or beneficiary may make, even though both claims may be based on identical
`
`facts. Interpreting the statute to provide remedies to qualified beneficiaries aligns with
`
`the statute’s imposition of duties on employers to provide notice to those beneficiaries
`
`upon a qualifying event. The Court therefore finds that Addison and Lucas may maintain
`
`independent claims against Dignity.
`
`Dignity, however, had no statutory obligation to provide notice to Adam. Under
`
`COBRA, only qualified beneficiaries must receive notice after a qualifying event. 29
`
`U.S.C. § 1166(a)(4). The statue defines “qualified beneficiary” as any individual receiving
`
`benefits under the plan as of the day before the date of the qualifying event, and who is
`
`either a spouse or dependent child of the employee. 29 U.S.C. § 1167(3)(A).3 Although
`
`Adam was a beneficiary under the plan before Regina's termination, he was not a
`
`spouse or dependent child. As such, Adam was not a qualified beneficiary entitled to
`
`receive notice under COBRA. See Rodriguez, 364 F. Supp. 2d at 45. Accordingly, Adam
`
`cannot maintain an independent claim for statutory penalties.
`
`c.
`
`Penalty Assessment
`
`Because the parties dispute the applicable dates for calculating delay, the Court
`
`will first determine the length of Dignity’s delay. Although Plaintiffs argue that January
`
`24, 2011, should be the applicable date for determining the end of the delay, the Court
`
`finds that the December 7, 2010, notice was a "good faith attempt to comply with a
`
`reasonable interpretation of the statute.” See Smith v. Rogers Galvanizing, 128 F.3d at
`
`1383. The December 7, 2010 notice provided Plaintiffs with the information they needed
`
`to make a determination about coverage, and although they were temporarily prevented
`
`from electing coverage, the deadline for extending coverage was extended to remedy
`
`3Dignity additionally argues that it was not required to send notice to Lucas.
`However, the statute also defines a qualified beneficiary as "a child who is born to .
`.
`.
`the covered employee during the period of continuation coverage.” 29 U.S.C. §
`1167’(3)(A). Lucas is therefore a qualified beneficiary entitled to notice.
`
`13
`
`

`
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`
`4.
`
`OLOCD\lO3U‘l-|>OOl\)
`
`the situation caused by Dignity’s transition from Conexis to Payflex. The Court finds that
`
`the length of Dignity’s delay was 168 days for Regina, Addison, and Lucas.4
`
`The district court has discretion to impose a penalty and to set its amount, subject
`
`only to a $110 per day statutorily set maximum. 29 U.S.C. § 1132(c)(1)(A); 29 C.F.R. §
`
`2575.502c-3.
`
`In deciding the penalty to assess, courts consider "bad faith or intentional
`
`misconduct on the part of the administrator,
`
`the number of requests for compliance
`
`made, and the existence of prejudice to the plan participant." Lloynd v. Hanover Foods
`
`Corp., 72 F. Supp. 2d 469, 480 (D. Del. 1999). The absence or presence of one or even
`
`multiple factors is not dispositive. See, e.g., Underwood v. Flour Daniel, Inc., 106 F.3d
`
`394, *4 (4th Cir. 1997)
`
`(awarding the m