No. 03 C 2122 Page 4

The union did not serve as the exclusive bargaining agent for Williams on any matter
at the time his membership was terminated. As the amended complaint states, Williams was
no longer an employee, nor was he the member of any collective bargaining unit represented
by the union. Since the union did not represent Williams as a member of any collective
bargaining unit, it did not owe Williams a duty of fair representation.

Williams argues that the union’s constitution and collective bargaining agreement
evidence its duty to fairly represent him. The constitution opens union membership to
“workers... without limitation” and the collective bargaining agreement grants funeral home
owners membership when they perform work for a home or corporation other than their own.
These provisions do not impose a duty of fair representation, for mere membership in a union
does not give rise to this duty.

Williams cites Retana v. Apartment, Motel, Hotel and Elevator Operators Union, 453
F.2d 1018 (9 Cir. 1972), in support of his contention that the union owes him a duty of fair
representation. In Retana a Spanish-speaking former hotel employee represented by a union
brought a claim that the union did not fairly represent her and other Spanish-speaking
employees during the negotiation and administration of a collective bargaining agreement.
The court denied a motion to dismiss the claim, finding that the duty of fair representation
applies not just to breaches of specific provisions of the collective bargaining agreement, but
also to union actions that “‘concern’ matters related to the negotiation or administration of
the collective bargaining agreements... .” Id. at 1023. Unlike Williams, the plaintiff in
Retana sufficiently pleaded a breach of duty of fair representation because the union was her
exclusive bargaining agent for the collective bargaining agreement, thus she was owed a duty

of fair representation.



No. 03 C 2122 Page 9

care coverage within 63 days of the termination of their union benefits. Thus, the trustees’
refusal to provide COBRA notification to Williams did not impede the plaintiffs from
exercising their HIPAA rights.

While it is certainly regrettable that Laura Williams has been unable to obtain health
care coverage since the discontinuation of the family’s union fund benefits, plaintiffs have not
pleaded actionable claims against defendants,

CONCLUSION
For the foregoing reasons, both the union’s and the trustees’ motions for partial

dismissal are granted.

Mor

SAMES B. MORAN
r Judge, U. S. District Court

Och.A2_, 2003.


No. 03 C 2122 Page 6

payments with a monthly statement, and providing him with the benefits of membership. None
of these allegations amount to a knowing misrepresentation in writing by defendants.

The only written documents, the monthly statements, did not make any representation
regarding plaintiffs’ eligibility for continued benefits. Plaintiffs acknowledge in their amended
complaint that the funds’ plan documents limit eligibility for benefits to “employee[s] in a
Teamsters Local Union No. 727 collective bargaining unit of a contributing employer.”
Plaintiffs do not allege any written misrepresentations by the trustees that could reasonably
cause them to believe that they were entitled to benefits for as long as they chose to enroll. The
mere fact that plaintiffs received these monthly statements as evidence of their continued
enrollment in the funds after their eligibility had ended did not constitute a knowing
misrepresentation that they could now receive benefits as long as they wanted, despite the
language of the funds’ plan documents. In their own response to the trustees’ motion for
partial dismissal, plaintiffs acknowledge that they did not expect benefits forever, but, rather,
they expected to receive COBRA notification when the benefits were finally cancelled.

a’ -IX: Esto: CoO

In Claims VI-IX, plaintiffs allege that the trustees refused to issue Williams a COBRA
notice in violation of 29 U.S.C. § 1166. Plaintiffs maintain that Williams’ termination of
employment when he became owner-operator of the funeral home was a qualifying event
triggering the trustees’ obligation to provide him with COBRA notification, They allege that
as a result of the trustees’ failure to provide COBRA notification, plaintiffs were unable to
secure rights under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
Plaintiffs seek to estop the trustees from denying them COBRA notification and seek a

restoration of their health benefits, so that they may be eligible for benefits under HIPAA.



No. 03 C 2122 Page 5

Jaims 1-V: Equ Est ler
In Claims II-V, the Williams family members allege that defendant trustees breached
their fiduciary duty to plaintiffs by causing them to detrimentally rely on the trustees’ written
confirmation that they were to receive health care and pension benefits. Plaintiffs state that
their reliance on the trustees’ conduct and written statements led to plaintiffs’ good faith belief
that they would continue to receive health and pension benefits as long as Williams continued

to pay union dues and fund premiums. Plaintiffs seek to estop the trustees from denying them
fund benefits.

In their motion for partial dismissal, the trustees argue that the amended complaint
fails to state a claim because the Seventh Circuit has expressly declined to extend a cause of
action for equitable estoppel against funded multi-employer benefit plans, and the amended
complaint fails to allege the required elements of equitable estoppel. In Davis y. Combes, 294
F.3d 931 (7* Cir. 2002), the Seventh Circuit did not reach the question of whether equitable
estoppel actions apply to ERISA plans other than unfunded single-employer welfare benefit
plans, because it found that the plaintiff failed to establish the four elements of equitable
estoppel. Likewise, in this case, plaintiffs failed to plead the required elements of equitable
estoppel, so we need not address the trustees’ first argument.

To survive a motion to dismiss a claim of equitable estoppel, plaintiffs must plead “(1)
a knowing misrepresentation by the defendants; (2) in writing; (3) with reasonable reliance by
the plaintiff on the misrepresentation; and (4) to the plaintiff's detriment.” Id. at 939. In their
amended complaint plaintiffs allege that the trustees misled them to believe they would continue
to receive fund benefits as long as they paid their dues by accepting Williams’ union dues and

fund payments for over four years after he became owner of the funeral home, confirming those



No. 03 C 2122 Page 8

address the status of benefits coverage. However, § 1163's opening paragraph, which modifies
subparagraphs 2-6, does address the status of benefits coverage, limiting qualifying events to
thoseevents for which there would be loss of health insurance but for the provision of COBRA
coverage. In plaintiffs’ case there was no loss of coverage until over four years after the
termination of employment.

Plaintiffs’ argument regarding damages also fails. They argue that the trustees’ refusal
to provide COBRA notification resulted in their inability to exercise their HIPAA rights.
Under HIPAA health insurers may not exclude an individual with a preexisting condition if he
has 18 months of creditable coverage with a prior insurer and has not gone without insurance
for more than 63 days. 29 U.S.C. § 1181. An individual proves his eligibility with a certificate
that lists the duration of creditable coverage and the date on which coverage ended. HIPAA
provisions make clear that COBRA coverage is not required to benefit from HIPAA and that
the certificate of creditable coverage is distinct from COBRA notification. Section 29 U.S.C.
§ 1181(e)(1)(A)() notes that a group health plan shall provide a certificate of creditable
coverage when an individual ceases to be covered or becomes covered under a COBRA
continuation provision, and section 29 U.S.C. § 1181(e)(1)(B)() requires that the certificate of
creditable coverage include “the period of creditable coverage of the individual under [his
insurance] plan and the coverage (if any) under such COBRA continuation provision.” These
sections illustrate that an individual exercising his HIPAA rights may receive COBRA
continuation benefits. COBRA benefits are not, however, a prerequisite to HIPAA rights.
Williams could have exercised his family’s HIPAA rights by obtaining a certificate of creditable
coverage (which he had a right to receive from his former insurer upon request up to 24 months

after the family’s benefits ended, see 29 U.S.C. § 1181(e)(1)(A)(iii)), and seeking out new health



.

Minute See Form
No United States District Court, Northern District of [linois

Nameotanine inte: | James B. Moran _| Stig ai her
CASE NUMBER 03 C 2122 DATE 10/22/2003
CASE CHARLES WILLIAMS, et al vs. TEAMSTERS LOCAL UNION NO. 727
TITLE
motion. ta the folowing! box (inlet the pany Gling the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MEMORANDUM OPINION AND ORDER
DOCKET ENTRY:
q@) oOo Filed motion of [ use listing in “Motion” box above.]
(2) Oo Briefin support of motiondue___.
@) im] Answer brief to motion due__. Reply to answer briefdue__.
(4) a Ruling/Hearingon__setfor__at
(5) Oo Status hearing[held/continued to} {set for/re-set forlon__—ssetfor_ saat
(6) oO Pretrial conference[held/continued to] [set for/re-set for]on__———ssetfor_——sat_
(7) o Trial{set for/re-set for] on at
(8) o (Bench/Jury trial] [Hearing] held/continuedto__at
(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) OLocal Rule 41.1 OFRCP41(a)(1) OO FRCP41(a)(2).
ao) of [Other docket entry] | Enter Memorandum Opinion And Order. Both the union’s and trustees’
motions for partial dismissal are granted.
ad [For further detail see order attached to the original minute order.}

No notices required, advised in open court,

No notices required.

Notices mailed by judge’s staff.
Notified counsel by telephone.
ao | Docketing to mail notices.

ov | Mail AO 450 form.

Copy to judge/magistrate judge.
74:9 |, 5
_— Fd 22 La9e9
te depuy’s wii

= it a a.
Date/dme feeived in

central Clerk's Office

initials



No. 03 C 2122 Page 7

The trustees argue that plaintiffs fail to state a claim because no qualifying event
triggered an obligation to provide plaintiffs with COBRA notification and plaintiffs did not
plead the required elements of equitable estoppel. We agree that plaintiffs did not allege a
qualifying event that mandates COBRA notification.

Section 29 U.S.C. 1163 defines a “qualifying event” as “any of the following events
which, but for the continuation coverage required under this part, would result in the loss of
coverage of a qualified beneficiary ....” One of the events listed is “[t]he termination (other
than by reason of such employee’s gross misconduct), or reduction of hours of the covered
employee’s employment.” 29 U.S.C. § 1163(2). While Williams’ employment did terminate
when he became owner of the funeral home, this did not result in a loss of coverage for the
plaintiffs. As the plaintiffs state in their amended complaint, after Williams’ loss of
employment they continued to receive benefits for over four years. In Fenner v. Favorite
Brands Int’l, Inc., 1998 WL 249232 at *5 (N.D.IIL 1998), Judge Gettleman stated that “a
termination that does not result in a loss of coverage does not constitute a qualifying event and
does not trigger the notice requirements of § 1166.” This interpretation of the law is further
supported by regulations of the Internal Revenue Service, which find no COBRA qualifying
event “if neither the covered employee nor the spouse or a dependent child of the covered
employee loses coverage before the end of what would be the maximum coverage period ....”
26 C.F.R. § 54.4980B-4. The plaintiffs’ coverage continued long after the 18-month period of
COBRA coverage would have expired following Williams’ termination of employment.

The plaintiffs argue that the IRS and Judge Gettleman have strayed from the plain
language of 29 U.S.C. § 1163, which defines a “qualifying event.” Plaintiffs point out that

subparagraph 2, which identifies termination of employment as a qualifying event, does not


No. 03 C 2122 Page 3

Pipefitters Welfare Educ. Fund, 25 F.3d 417, 420 (7 Cir. 1994), The court should dismiss a
claim only if It appears “beyond doubt that the plaintiff can prove no set of facts in support
of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
Claim I: Breach of Duty of Fair Representation

In Claim I, plaintiff Williams alleges that the union breached its duty of fair
representation by terminating his membership because he refused to sign a bargaining
agreement. Williams states that the union has maintained the memberships of other business
owners who signed the bargaining agreement. He further alleges that the union’s own
constitution and collective bargaining agreement permit funeral home owners to be members.

In its motion for partial dismissal, the union argues that Williams fails to state a claim
for breach of duty of fair representation because the allegations in his amended complaint
reveal that the union did not owe Williams a duty. The union asserts that a duty of fair
representation arises not from union membership, but only from an exclusive collective
bargaining relationship, and that by Williams’ own admission the union no longer represented
him once he became the owner, rather than an employee, of the funeral home. We agree that
the union did not owe Williams a duty of fair representation.

In Toth v. USX Corp., 693 F.Supp. 693, 700 (N.D.II. 1988), Judge Bua stated, “The law
has long been settled that a union owes a statutory duty of fair representation only to those
employees for whom the union serves as exclusive representative.” Citing Schneider Moving
& Storage v. Robbins, 466 U.S. 364, 376 n.22 (1984); Vaca y. Sipes, 386 U.S. 171, 177, 180
(1967). The union’s duty to fairly represent those employees extends only to those matters for
which the union serves as the employee’s exclusive bargaining agent. Freeman v. Local Union

No. 135, 746 F.2d 1316, 1320-21 (7 Cir. 1984).



No. 03 C 2122 Page2

funeral home on April 1, 1998. Despite Williams’ change of status from employee to owner-
operator of the funeral home, he continued to pay union dues, insurance premiums and
pension contributions, and, in return, he and his family continued to receive fund benefits.

Once Williams became owner of the funeral home, the union asked him to sign a multi-
employer funeral director bargaining agreement. Williams, who had no employees, refused
to sign the agreement on several occasions. As a result of Williams’ refusal to sign the
agreement, the union and the trustees threatened to terminate plaintiffs’ fund benefits and
Williams’ union membership. On July 30, 2002, the union refused to accept Williams’
payment for his health insurance premium and pension contribution. The union and the
trustees terminated plaintiffs’ health care and pension benefits on October 8, 2002, and a few
weeks later issued a COBRA notice pursuant to 29 U.S.C. § 1166. In November 2092,
defendants withdrew the COBRA notice, stating that the notification was an error and that
no qualifying event had triggered the availability of COBRA coverage.

Plaintiffs Charles and Lynne Williams have been unable to obtain new medical
coverage for Laura Williams, who suffers from nephrotic syndrome, and were unable to insure
Jack Williams, their newborn son until he was two months old. Plaintiffs have also been
unable to exercise their rights under the Health Insurance Portability and Accountability Act
of 1996 (HIPAA), allegedly due to the lack of COBRA notification.

DISCUSSION
A Federal Rule of Civil Procedure 12(b)(6) motion to dismiss tests the sufficiency of the

complaint, not the merits of the case. Triad Assocs., Inc. v. Chicago Hous. Auth., 892 F.2d 583,

586 (7" Cir. 1989). In deciding a motion to dismiss, the court must assume the truth of all well-

pleaded allegations, making all inferences in the plaintiff's favor. Sidney S. Arst Co. v.



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
CHARLES WILLIAMS, et al., )
Plaintiffs, ;
vs. ; No. 03 C 2122
TEAMSTERS LOCAL UNION NO. 727, et al., ;
Defendants. )

MEMORANDUM OPINION AND ORDER

Plaintiffs Charles and Lynne Williams, and their minor children, brought this action
———~against Teamster Local Union No. 727 (the union) and the trustees of the union’s health,
welfare and pension funds (the funds). Plaintiff Charles Williams (Williams) alleges breach
of duty of fair representation against the union (Claim J), while all plaintiffs seek declaratory
relief and other damages against the trustees on the basis of equitable estoppel for the denial
of benefits from the funds (Counts II-V), and failure to provide COBRA notification (Claims
VI-IX). The union filed a motion for partial dismissal of Claim I and the trustees filed a

motion for partial dismissal of Claims II-IX. Both motions are granted.

BACKGROUND

Plaintiff Williams was a member of the union from 1983 until January 23, 2003, who,
along with his wife Lynne and their three children, Laura, Kevin, and Jack, received benefits
from the union’s funds. The funds’ plan documents limit eligibility for benefits to employees

in a union collective bargaining unit of a contributing employer. Williams was employed for

several years by Drechsler Brown Funeral Home in Oak Park, Illinois, before purchasing the

Qa