Randolph v. E Baton Rouge Prsh Sch Sys

Case: 21-30022 Document: 00516111269 Page: 1 Date Filed: 11/30/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 30, 2021
No. 21-30022
Lyle W. Cayce
Clerk
Kathran Randolph,
Plaintiff—Appellant,
versus
East Baton Rouge Parish School System,
Defendant—Appellee.
Appeal from the United States District Court for the
Middle District of Louisiana
3:15-CV-654
Before Higginbotham, Smith, and Ho, Circuit Judges.
Patrick E. Higginbotham, Circuit Judge:
This case concerns whether an employer violated the Consolidated
Omnibus Reconciliation Act of 1985 (“COBRA”)1 when it failed to provide
a retired employee notice of her right to continue her insurance coverage.
This issue returns to this Court following a prior remand to the district court
for further consideration of Kathran Randolph’s COBRA claims against the
1
29 U.S.C. § 1161 et seq.
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East Baton Rouge Parish School System (“EBRPSS”).2 We reverse the
district court’s holding that no COBRA violation occurred; we affirm the
district court’s denial of Randolph’s request for payment of her medical
expenses; we remand the district court’s decision not to award statutory
penalties or attorneys’ fees to Randolph; and we vacate the district court’s
denial of Randolph’s motion to alter or amend judgment or for a new trial.
I.
Randolph was employed as a teacher and later as a principal by
EBRPSS. During her employment, Randolph was enrolled in EBPRSS’s self-
funded health insurance plan, which was administered by Blue Cross and
Blue Shield of Louisiana.
On September 4, 2014, Randolph was placed on paid administrative
leave pending an investigation into a complaint against her. Randolph was
taken off administrative leave on October 22, 2014, but Randolph used her
sick leave to remain on paid leave. On August 13, 2015, Randolph was placed
on unpaid leave after she exhausted her sick leave and other forms of leave.
EBPRSS paid Randolph’s portion of her insurance premiums while she was
on unpaid leave until her retirement.
Randolph retired on February 15, 2016. A Blue Cross and Blue Shield
of Louisiana report noted that her insurance coverage ended on February 29,
2016. On August 23, 2016, Randolph’s insurer paid its final claim. On
September 13, 2016, Randolph went to a doctor’s office and her coverage was
denied. Shortly after this denial, Randolph spoke to Anita Williams, an
EBRPSS Payroll and Benefits employee. Williams told Randolph that she
owed $2,900 for back payments on missed insurance premiums and $480 per
2
See Randolph v. E. Baton Rouge Par. Sch. Sys., 774 F. App’x 861 (5th Cir. 2019)
(per curiam).
2
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month going forward.3 Randolph received her first COBRA notice in a letter
dated October 3, 2016.
II.
On October 5, 2015, Randolph filed suit under 42 U.S.C. § 1983,
naming EBRPSS and EBRPSS officials as defendants. After she retired,
Randolph also alleged a COBRA violation in an amended complaint filed on
November 14, 2016.
The district court granted summary judgment to EBRPSS and the
other defendants on Randolph’s § 1983 claims. The district court did not
substantially discuss the COBRA claim. Randolph appealed to this Court.
We affirmed the district court’s grant of summary judgment with respect to
the § 1983 claims and reversed and remanded for reconsideration of the
COBRA claim.4
On remand, the district court ruled from the bench that neither
Randolph’s placement on unpaid leave nor her retirement constituted a
qualifying event triggering COBRA because neither change was accompanied
by a loss of coverage. The district court ruled that Randolph was not entitled
to statutory penalties, attorneys’ fees, or payment of medical bills. Randolph
filed a Rule 59 motion for the district court to alter or amend the judgment or
grant a new trial.5 The district court denied that motion. Randolph timely
appealed.
3
This number was either $480 or $490; it was not clearly established in the record
below.
4
Randolph, 774 F. App’x 861 (5th Cir. 2019).
5
FED. R. CIV. P. 59.
3
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III.
Following a bench trial, we review a district court’s findings of fact for
clear error and its conclusions of law de novo.6 Factual findings are clearly
erroneous when, although there is evidence to support the finding, the
reviewing court on the entire evidence is left with the definite and firm
conviction that a mistake has been committed.7 The district court’s denial of
Randolph’s requests for statutory penalties, attorneys’ fees, and payment of
her medical bills are each reviewed for abuse of discretion.8 The denial of
Randolph’s Rule 59 motion is also reviewed for abuse of discretion.9
IV.
Congress amended the Employment Retirement Income Security Act
of 1974 (“ERISA”)10 with COBRA to create additional statutory rights,
including the right to continue health insurance coverage after certain
employment status changes. “The intent of Congress in enacting the
COBRA amendments was to preserve employees’ medical insurance as they
move from job to job and prevent the loss of insurance coverage that could
accompany any changes in employment.”11
6
Chemtech Royalty Assocs., L.P. v. United States, 766 F.3d 453, 460 (5th Cir. 2014).
7
Providence Behav. Health v. Grant Rd. Pub. Util. Dist., 902 F.3d 448, 455 (5th Cir.
2018).
8
Wegner v. Standard Ins. Co., 129 F.3d 814, 820–21 (5th Cir. 1997); Godwin v. Sun
Life Assur. Co. of Canada, 980 F.2d 323, 327 (5th Cir. 1992); Hager v. DBG Partners, Inc.,
903 F.3d 460, 470 (5th Cir. 2018).
9
Rollins v. Home Depot USA, 8 F.4th 393, 396 (5th Cir. 2021).
10
29 U.S.C. § 1001 et seq.
11
Lifecare Hosps., Inc. v. Health Plus of Louisiana, Inc., 418 F.3d 436, 441 (5th Cir.
2005).
4
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Under COBRA, qualified beneficiaries, including employees, are
entitled to continue coverage following a qualifying event.12 A COBRA
violation occurs when there is a qualifying event and no notice to the qualified
beneficiary of their COBRA rights. 29 U.S.C. § 1163 provides a list of events,
including a termination or reduction of hours, that constitute a qualifying
event when they cause a loss of coverage.13 There must be a “but for” causal
link between the qualifying event and the loss of coverage.14
A reduction of hours “occurs whenever there is a decrease in the
hours that a covered employee is required to work or actually works, but only
if the decrease is not accompanied by an immediate termination of
employment.”15 A termination occurs when the employee actually stops
working for the employer.16 The circumstances surrounding an employee’s
termination or reduction of hours are irrelevant unless gross misconduct was
involved, “it does not matter whether the employee voluntarily terminated
or was discharged.”17
A loss of coverage occurs when an employee ceases “to be covered
under the same terms and conditions as in effect immediately before the
qualifying event.”18 However, “a loss of coverage need not occur
immediately after the event, so long as the loss of coverage occurs before the
12
29 U.S.C. §§ 1161, 1167(3)(B); Blue Cross & Blue Shield of Texas, Inc. v. Shalala,
995 F.2d 70, 71 (5th Cir. 1993).
13
29 U.S.C. § 1163.
14
Id.15
26 C.F.R. § 54.4980B-4, A-1(e).
16
Mlsna v. Unitel Communications, Inc., 41 F.3d 1124, 1128 (7th Cir. 1994).
17
26 C.F.R. § 54.4980B-4, A-2; 29 U.S.C. § 1163(2).
18
26 C.F.R. § 54.4980B-4, A-1(c).
5
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end of the maximum coverage period.”19 The maximum coverage period is
generally the 18 or 36 months following a qualifying event.20
Employers must notify plan administrators that a qualifying event
occurred within 30 days of the qualifying event.21 Plan administrators are in
turn required to notify covered employees of their COBRA rights within 14
days of receiving notice from employers.22 Thus, employees should receive
notice of their COBRA rights within 44 days of a qualifying event. Failure to
provide notice constitutes a violation.
Following a COBRA violation, qualified beneficiaries may bring civil
actions to recover benefits under the health insurance plan and to seek relief
including a civil penalty of $110 per day.23 Qualified beneficiaries bringing a
civil action can also recover attorneys’ fees at the discretion of the court.24
V.
Randolph argues that both her placement on unpaid leave and her
retirement were qualifying events under § 1163. We affirm the district
court’s holding that the placement on unpaid leave was not a qualifying
event; we reverse the district court’s holding regarding Randolph’s
retirement and find that her retirement was a qualifying event and insufficient
notice was given following her retirement.
19
Id. (internal citations omitted).
20
29 U.S.C. § 1162(a)(2); Shalala, 995 F.2d at 71.
21
29 U.S.C. § 1166(a)(2).
22
29 U.S.C. § 1166(a)(4); 29 C.F.R. § 2590.606-4; Degruise v. Sprint Corp., 279
F.3d 333, 336 (5th Cir. 2002).
23
29 U.S.C. § 1132; 29 C.F.R. § 2575.502c–3.
24
29 U.S.C. § 1132(g).
6
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A.
Randolph first argues that a qualifying event occurred when she was
placed on unpaid leave on August 13, 2015. The district court correctly held
that Randolph’s placement on unpaid leave was not a termination, but the
district court failed to consider whether the placement on unpaid leave was a
reduction of hours. Randolph’s placement on unpaid leave at the exhaustion
of her sick leave was a reduction of hours, a potential § 1163 qualifying event,
as her hours were effectively reduced to zero and her pay was terminated.25
However, no loss of coverage was caused by this reduction of hours,
so the placement on unpaid leave was not a qualifying event under COBRA.26
A loss of coverage occurs when the employee ceases “to be covered under
the same terms and conditions as in effect immediately before the qualifying
event.”27 Randolph’s placement on unpaid leave only affected her hours and
pay. It did not alter the terms of her coverage; she was allowed to continue
her health insurance at the same rate. While the placement on unpaid leave
was a reduction of hours, it was not a qualifying event because it did not cause
a loss of coverage.
B.
Randolph also argues that her retirement was a qualifying event.
Randolph’s retirement was classified by EBRPSS as a separation of service
and was a termination under § 1163. Retirements, as terminations, are among
the changes in employment status that COBRA was intended to cover when
the retirement causes a change in insurance coverage. When an employee
25
See Gaskell v. Harvard Co-op Society, 3 F.3d 495, 498–501 (1st Cir. 1993) and
Morehouse v. Steak N Shake, 938 F.3d 814 (6th Cir. 2019).
26
Morehouse, 938 F.3d at 819–21.
27
26 C.F.R. § 54.4980B-4, A-1(c).
7
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retires and, upon retirement, is required to pay an increased amount for the
same health coverage that the employee had before retirement, the increase
in the premium or contribution required for coverage is a loss of coverage and
the retirement is a qualifying event.28 A loss of coverage is not necessarily
when coverage ends; a loss of coverage occurs when the terms and conditions
of coverage change.
Randolph experienced a loss of coverage when she retired as she was
no longer eligible to continue her health insurance at the same contribution
level. Rather than paying approximately $200 per month as an employee,
Randolph was required to pay $480 per month to continue coverage as a
retiree. The district court correctly concluded that COBRA does not require
that an employee be allowed to pay the same contribution rate.29 However, a
change in the contribution level triggers the notice requirement.30 Employers
may change an employee’s contribution rates for health insurance upon
retirement, but the employer must provide a COBRA notice following such
a change.
The loss of coverage must be connected to the qualifying event by a
“but for” causal link.31 But for her retirement, Randolph would have
continued to be an employee and would have had been allowed to pay $200
per month for health insurance. Once she retired, Randolph was no longer
eligible to remain on the same plan at the same contribution rate. Because the
retirement caused a loss of coverage, a qualifying event occurred.
28
26 C.F.R. § 54.4980B-4, A-1(g), Example 2.
29
29 U.S.C. § 1162(3) (permitting the new COBRA rate to be up to 102% of the
applicable premium).
30
26 C.F.R. § 54.4980B-4, A-1(c).
31
29 U.S.C. § 1163.
8
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C.
The district court erred when it found that no qualifying event
occurred because the § 1163 events were not contemporaneous with the loss
of coverage. The district court held that “[t]here was no loss of coverage that
occurred at the time that Ms. Randolph’s status became leave without pay or
pending status in August of 2015” and “the retirement was likewise not a
qualifying event because, again, there was no loss of coverage.”
A loss of coverage does not need to be contemporaneous to the
qualifying event. Regulations interpreting COBRA specifically state that “a
loss of coverage need not occur immediately after the event, so long as the
loss of coverage occurs before the end of the maximum coverage period.”32
29 C.F.R. § 2590.606-4(b) “requires notice if the termination occurs earlier
than ‘the end of the maximum period of continuation coverage applicable to
[the] qualifying event.’”33 Thus, the relevant question is whether a loss of
coverage occurred within 18 months of a qualifying event.34 Here, the
changes in the terms and conditions of Randolph’s coverage occurred within
18 months of her retirement.
D.
Since a qualifying event occurred, the final question is whether proper
notice was given. Randolph should have received notice within 44 days of the
32
26 C.F.R. § 54.4980B-4, A-1(c).
33
Hager, 903 F.3d at 467 (quoting 29 C.F.R. § 2590.606-4(b)).
34
29 U.S.C. § 1162(2)(a). See also Gaskell, 3 F.3d at 499–501 (holding that the
qualifying event need not be contemporaneous to the loss of coverage and that the 18 month
continuation coverage period runs from the date of the qualifying event which triggers the
loss of benefits).
9
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qualifying event.35 The 44 days are measured from the qualifying event that
eventually leads to coverage loss.36 Applied here, Randolph should have been
given notice by the end of March 2016. Randolph did not receive a COBRA
notice until October 3, 2016. A qualifying event occurred and caused a loss of
coverage, and Randolph did not receive timely notice of her COBRA rights.
Thus, there was a COBRA violation.
VI.
Randolph sought three forms of relief: statutory penalties for
delinquent notice, payment of her unpaid medical expenses, and attorneys’
fees. The district court did not grant any form of relief. We remand only to
the extent that some of the relevant factors for deciding whether to grant
relief have changed in light of this opinion.
A.
Courts have discretion to impose a penalty of $110 per day for a failure
to meet COBRA notice requirement.37 We have offered district courts
“limited guidance” as to what factors should be considered when deciding
whether to impose sanctions.38 The purpose of penalty is to ensure that plan
participants know where they stand with respect to their health insurance
plan.39 Courts have found that the penalty is designed to be more punitive in
nature rather than compensatory with the aim of inducing compliance by plan
35
29 U.S.C. § 1166(a)(2); 29 U.S.C. § 1166(a)(4); 29 CFR § 2590.606-4(b)(1).
36
29 U.S.C. § 1163; Gaskell, 3 F.3d at 499.
37
29 U.S.C. § 1132(c)(1).
38
Hager, 903 F.3d at 470.
39
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 118 (1989).
10
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administrators.40 District courts have considered a number of factors in the
decision to award or withhold statutory penalties, including: prejudice to the
plaintiff, the availability of other remedies, bad faith or intentional conduct
by the administrator, and the length of the delay.41
The district court found “no evidence of any aggravating factors or
bad faith that would warrant a discretionary or fact-specific finding of the
statutory penalties.” Although the district court did not specify what
“aggravating factors” it considered, the length of delay may have been one
of them.42 Because we held that Randolph’s retirement in February 2016 was
a qualifying event, the length of the delay has changed from what was
considered by the district court. We remand the decision regarding statutory
penalties to the district court for further consideration.
B.
Section 1132 also permits courts to “order such other relief as it deems
proper.”43 District courts have interpreted this provision to enable plaintiffs
to recover the cost of medical bills that the plaintiff paid in the absence of
owed continuation coverage.44 This Court has recognized that district courts
40
Hager, 903 F.3d at 471 (citing Scott v. Suncoast Beverage Sales, Ltd., 295 F.3d 1223,
1232 (11th Cir. 2002) and Phillips v. Riverside, Inc., 796 F. Supp. 403, 411 (E.D. Ark. 1992)).
41
See id. at 470–71.
42
Id. at 470–71.
43
29 U.S.C. § 1132(c)(1).
44
See Sonnichsen v. Aries Marine Corp., 673 F. Supp. 2d 466, 474 (W.D. La. 2009)
and Miles–Hickman, 589 F. Supp. 2d 849, 882 (S.D. Tex. 2008). See also Fisher v. Trutech,
Inc., No. 5:04-CV-109, 2006 WL 3791977, at *3 (M.D. Ga. Nov. 17, 2006); Chenoweth v.
Wal–Mart Stores, Inc., 159 F. Supp. 2d 1032, 1042 (S.D. Ohio 2001); Hamilton v. Mecca,
Inc., 930 F. Supp. 1540, 1555 n.24 (S.D. Ga. 1996).
11
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grant this form of relief and has not found it untoward.45 Plaintiffs’ recovery
has been limited to “an amount equal to medical expenses minus deductibles
and premiums that the beneficiary would have had to pay for COBRA
coverage.”46 Where the total of monthly premiums a plaintiff would have
owed under COBRA exceeds the medical costs incurred, district courts have
found no damages are owed.47
The district court determined EBRPSS continued to pay Randolph’s
medical bills, making the total amount of unpaid medical bills less than the
unpaid premiums. This factual finding presents no clear error. The district
court did not abuse its discretion in denying Randolph’s request for unpaid
medical expenses. We affirm the district court’s denial of Randolph’s request
for payment of her medical expenses.
C.
In an ERISA proceeding, a court “in its discretion may allow a
reasonable attorneys’ fee and costs of action to either party.”48 Wegner v.
Standard Ins. Co. provides five factors to determine whether a court should
grant attorneys’ fees.49 As a result of our decision, some of the Wegner factors
likely shifted. Specifically, the fourth factors asks, “whether the parties
requesting attorneys’ fees sought to benefit all participants and beneficiaries
of an ERISA plan or to resolve a significant legal question regarding ERISA
itself.”50 Randolph presented a significant legal question regarding the
45
Hager, 903 F.3d at 471.
46
Sonnichsen, 673 F. Supp. 2d at 474.
47
Miles-Hickman, 589 F. Supp. 2d at 881–82.
48
29 U.S.C. § 1132(g).
49
129 F.3d at 821.
50
Id.12
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interpretation of the COBRA amendment to ERISA. The fifth Wegner factor
asks a court to weigh the relative merits of the parties’ positions, which favor
Randolph following a reversal. We therefore remand the district court’s
denial of attorneys’ fees for further consideration.
VII.
We REVERSE the district court’s ruling that no COBRA violation
occurred. We AFFIRM the district court’s denial of Randolph’s request for
payment of her medical expenses. We REMAND the issue of whether
Randolph should be awarded the statutory penalty or attorneys’ fees for
further consideration. We VACATE as moot the district court’s denial of
Randolph’s Rule 59 motion.
13