Source: https://www.employmentlawgroup.com/resources/docs/opinions-orders/risteen-v-youth-understanding/
Timestamp: 2019-04-23 10:32:04+00:00

Document:
Before the Court is plaintiff Paul Risteen’s motion seeking a preliminary injunction against defendants Youth for Understanding, Inc. (“YFU”) and Youth for Understanding USA, Inc. (“YFU USA”] to enjoin them from denying him continuation health insurance coverage under the Employment Retirement Income Security Act (“ERISA”), 29 U.S.C. §1 140 et seq., as amended by the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), 29 U.S.C. § 1161 et seq. Risteen, a former employee of YFU, alleges that YFU USA is the successor employer to YFU following YFU’s corporate reorganization, and therefore that YFU USA must assume YFU’s obligation to provide Risteen his remaining COBRA continuation health benefits. The Court is able to reach and decide the merits of Risteen’s claims laid out in his motion for preliminary injunction and upon consideration of plaintiffs motion, the submissions of the parties, and oral] argument, the Court grants Risteen’s motion.
Located in Washington, D.C., YFU was a non—profit corporation that specialized in high school student exchange programs matching American Students with foreign families and schools, as well as foreign students with American families and high schools. Complaint 1 4. Since 1951, more than 200,000 students have participated in YFU exchanges; in the 2001 academic year more than 3,000 students in the United States participated in YFU programs. YFU USA Opp., Ex. 1 at 3. Each participating country has its own national organization that coordinates the exchange of students; YFU served as the national organization in the United States. Q at ¶ 4.
YFU hired Risteen as a Regional Director on December 12, 1994, and promoted him in January 1997 to Vice President for Programs, effectively the number two position in the YFU hierarchy just below the president. Complaint at ¶’¶ 5—6. Risteen found the environment under McNally hostile and intolerable, and tendered his resignation in April 2001. Ld, at ¶ 17. YFU’s Board of Trustees met in late April 2001 and accepted Risteen’s resignation. ld, at 1¶ 22-23. However, the Board offered Risteen a contract as a temporary employee to work from home, paying Risteen the equivalent of six months of his former salary, and it bought out his benefits package. ID at 24. in September 2001, the Board informed Risteen that they had decided not to continue his employment with YFU after the expiration of his contract. Id at ¶ 28.
2002, Risteen was hospitalized through an emergency room admission to George Washington University Hospital with a preliminary diagnosis of congestive heart failure and possibly a pulmonary embolism. Ld, at 1 i4. Because he no longer had health insurance, Risteen asked to be discharged on April 24, 2002 — against his doctors’ medical advice. ld, at ¶ 15. The medicine prescribed on his release cost $629 for a two week. supply, which, Risteen claims, he was instructed to take “for the rest of my life.” Q, at ( 16. The cost of Risteen’s hospital stay and medical tests exceeded $17,000. Q, at¶ 17. Moreover, Risteen’s urologist refused to perform necessary prostate surgery on Risteen until his heart and lungs could withstand anesthesia. Id at ¶ 1S. Risteen had follow—up appointments with his cardiologist, urologist, pulmonologist, and psychiatrist, each paid out of his own pocket. Q, at ¶ 19. Risteen claims that he is being denied (Le., is denying himself) critical medial attention because he has no health insurance. Q at ¶ 20.
Risteen has moved to amend his complaint to include two additional counts under COBRA. The proposed Count V of Risteen’s amended complaint claims that YU failed to pay benefits it owed Risteen before it ceased operations. Motion for Leave at pp. 5-7. Risteen maintains that YFU attempted to escape its COBRA liability to Risteen, and that YFU USA is “a mere continuation of the enterprise formerly known as YFU.” Id. at p. S. He contends that YFU has avoided its obligations under COBRA by “establishing a new corporate shell for the purpose of receiving the benefits, assets, and goodwill of YFU, Inc., thereby liquidating the assets of YFU, Inc. and leaving it unable to pay for its lawful obligations.” Ld, at p. 6. Therefore, Risteen claims, pursuant to 29 U.S.C. § 1 l32(a), “[a]s a successor entity, YFU USA, is obligated under every theory of successor liability to assume the obligations of YFU, Inc., including its ERISA obligations? Li; at pp. 6-7. He seeks to recover the benefits for which be would have been eligible —-approximately seven (7) months of COBRA continuation benefits —- as well as his costs and attorney’s fees. Q Amended Complaint, at ¶ 44. Under the proposed Count VI, Risteen seeks to add a claim for YFU USA’s failure “to enroll Risteen into its health care plan, pursuant to COBRA, for the remainder of his eligibility period” Ld, at ¶ 52. He maintains that YFU’s “cessation of activities on March S, 2002, and its subsequent transfer of its assets, employees, equipment, facilities, databases, clients, sponsors, and good will to Defendant YFU USA is a transaction to evade liability.”‘ Id at ¶ SO. Risteen claims that “YFU USA is a mere continuation of the enterprise formerly known as YFU, Inc.” Motion for Leave at p. 12.
A civil action may be brought — (1) by a participant or beneficiary -— (A) for the relief provided for in subsection (c) of this section, or (B] to obtain benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or; to clarify his rights to future benefits under the terms of the plan; . . . or (3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate: equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.
29 U.S.C. § 1132 (emphasis added); see also 26 C.F.R.§ 54.4980B-1, A-l(b) (beneficiaries may “file a lawsuit to redress the noncompliance”). As the Supreme Court stated in Fomag v. Davis, “[i]f the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits.” 37l U.S. 178, 182 [1962).
37l U.S. at 182. Here, Risteen moved to amend his complaint roughly livc weeks after he learned that his health insurance benefits had been cut off- and hence without “undue delay” or “dilatory motive.” Discovery had not yet begun, and there is no scheduling order in place setting a discovery cutoff] a pretrial conference, or a trial date; thus there would be no prejudice to defendants if the amendment is permitted. Given that this action is in an early stage, and there are no allegations of bad faith or prejudice to the defendants, the Court grants Risteen’s motion to amend his complaint.
ERISA, as amended by COBRA, requires that an “employer” who sponsors a group health insurance plan must offer employees and “qualified beneficiaries,” including spouses and dependent children, the opportunity to continue their health insurance coverage, at group rates but at their own expense, for at least I8 months aIter tl·1e occurrence of a “qualifying event” — such as a layoff or termination. g 29 U.S.C. §§ 1161-1168. Congress enacted COBRA so that employees who lose their jobs through layoffs and terminations can purchase continuation health insurance at a rate approximately equal to the employer’s group rate, which is normally far lower than the rate for individual coverage. g Lgg 2] Z, Hotel Q Rest. Empl. Union v. MI-IM, [nga 976 F.2d 305, 809 (2d Cir.l992). These employees thus may continue their health insurance through their former employer’s group plans by paying no more than 102 percent of the monthly premium that the employer had paid. 29 U.S.C.§ ll62(3)(A).
On January 10, 2001, the Internal Revenue Service (“IRS”) promulgated final regulations to provide guidance on issues regarding COBRA continuation coverage. _$g; 66 Fed. Reg. 1843 (Jan. 10, 2001); 26 C.F.R. § 54.498013-l through -i0. The regulations specifically address who has the obligation to provide COBRA continuation health coverage following a business reorganization. § 26 C.F.R. §54.4980B-9. The regulations relevant here have not to date been the subject of judicial examination or application.
In the case of an asset sale. if the selling group ceases to provide any group health plan to any employee in connection with the sale and if the buying group continues the business operations associated with the assets purchased from the selling group without interruption or substantial change, then the buying group is a successor employer to the selling group in connection with that asset sale …. If the buying group is a successor employer, a group health plan maintained by the buying group has the obligation to make COBRA continuation coverage available to M&A qualified beneficiaries with respect to that asset sale.
Id. at A8(c)[l). At issue, therefore, is whether YFU USA is a successor employer to YFU following YFU’s business reorganization and its asset sale to YFU USA, such that YFU USA is obligated to extend COBRA continuation coverage to “qualified beneficiaries” like Risteen.
It was clear all along that this alternative would not be possible if the new organization were a total legal successor to YFU, Inc., assuming all its assets and liabilities, because then the new organization would be in the same situation of insolvency in which YFU, Inc. would be in creating this situation. As a result, on January 3l , 2002, the international YFU organizations from Japan, Germany, and Denmark created and incorporated YFU USA “to be prepared, in the event of YFU’s insolvency, to care for and support the students currently in the program as well as those students selected and contracted for the 2002—2003 program.” Id. It became apparent that YFU would become insolvent by February 28, 2002, but in order to resolve a number of outstanding issues, additional payroll funding was needed through March 8, 2002. Id. at ¶ 12. To obtain this funding, YFU sold its trademarks, copyrights, and logos to YFU International Educational Services, Inc., (“YFU [ES”], an organization also recently incorporated to provide services to the international YFU network. Q at ¶ I3. Although YFU IES owns these trademarks and logos, YFU USA has used them since it came into being, through an agreement with YFU IES. SQ Risteen Supp. Br., Ex. 2 at pp. 15-20; YFU USA Supp. Br., Ex. 3 at ¶ 5. YFU sold these rights to YFU IES for $314,000. YFU USA Supp. Br. at Ex. 1.
On March 7, 2002, three members were appointed to YFU USA’s Board of Trustees, all with previous ties to the YFU organization. On March 8, 2002, YFU ceased operations, released its entire staff, and stopped offering health benefits. YFU Opp., Ex. [ at ¶]] l5—l6. YFU USA took over for YFU at 5:00 pm. on March 8, 2002, when YFU ceased operations. The next day, YFU USA rehired 77 of the approximately 100 former YFU employees, including the entire YFU field staff] at their same salaries, Ld, at ¶ 15; Motion, Ex, 2 (email from Jordan to Kopplinger dated April 30, 2002). These employees continue to work in their former offices at the Rosedale Estate (e building that YFU still owns). S; Motion, Ex. 4 at ¶ 4; YFU Opp., Ex. l at ¶ 19 (“YFU USA has offices in the building owned by YFU”).
YFU did not sell Rosedale Estate, which is reportedly worth $10 million, to YFU USA. However, YFU USA is working out of the YFU’s offices, and most of YFU’s former employees continue to report to their offices at the Rosedale Estate. YFU Opp., Ex. l at 11 8. Before YFU sells Rosedale Estate, YFU USA will obtain other office space to rent. Id. at ¶ 19. Furthermore, YFU USA is also using YFU’s office equipment, computers, copy machines, furniture, and phone system. See Motion, Ex. 5 at p. 2; YFU Opp., Ex. 1 at 119. YFU USA states that this equipment is being used “under a hosting agreement with YFU,” although that agreement still had not been finalized more than two months after YFU ceased operations. YFU Opp., Ex. 1 at ¶ 19.
In a sales agreement finalized on March 26, 2002, YFU sold its trademarks, corporate and company names, and logos to YFU IBS for $314,000. YFU USA Supp. Br., Ex. 1. Before the sale was finalized, however, YFU IES permitted YFU USA to use these assets through an understanding that a licensing agreement would be reached; that use has continued since March 11, 2002. S5; Risteen Supp. Br., Ex. 2 at pp. 17-20; YFU USA Opp., Ex. 1 at ¶ 13. The Court has not been informed that a licensing agreement has yet been reached. G1’ooms—Cowal, the former YFU president, pointed out that “a company like YFU, Inc. relies heavily on its trademarks and name recognition in order to generate business,” and YFU’s “trademarks are of particularly high value, that value having been built over the 50 years since its founding? Risteen Supp. Br., Ex. 5 at ¶ I3.
The fact that most of YFU’s employees were rehired at their same positions by YFU USA also supports the conclusion that YFU USA is a successor employer to YFU. YFU USA rehired 77 of the approximately 100 former YFU employees, in their former positions, including the entire YFU field staff of 50 employees. See YFU Opp., Ex. I at ¶ 15. For example, YFU’s human resources director, Jim Teleford, was rehired by YFU USA to do the same job he performed at YFU. $5; Motion, Ex. 4 at *1 3; Risteen Supp. Br., Ex. 7. Moreover, Margaret Uelner Ott, who was the Director of Contracts for YFU, was rehired by YFU USA as the Director of Programs and Contracts. YFU USA’s Supp. Br., Ex. 3 at ¶*,] l~2. In an e-mail exchange, a former YFU employee who was rehired by YFU USA told a former YFU employee that “so far, we were all rehired with the new company at the same salaries.” Motion, Ex. 2 (e-mail from Jordan to Koepplinger dated April 30, 2002).
It is also noteworthy that YFU provided YFU USA with its lists and data on volunteers. Id, eg Motion, Ex. 3 at ¶ 1; Motion, Ex. 5, Grooms-Cowal emphasized the importance of YFU’s database of its volunteers, which contains information on between 4,000 and i2,000 volunteers. Motion, Ex. 5; Risteen Supp. Br., Ex. 5 at 1¶ 3-6. Without the database and lists of volunteers, “the company: a) would not be able to communicate with this essential workforce; b) would be required to recruit an equivalent workforce of thousands of volunteers or hire paid staff to work in lieu of volunteers; and e) would be critically impeded in operating its business.” Risteen Supp. Br. at ¶ 6.
The Court finds that the sale, transfer, and use of these assets — the databases, trademarks, office equipment and furniture, volunteer network, website and domain name, company goodwill and the use of Rosedale Estate — constitutes a “transfer of substantial assets” under the new COBRA regulations.
ml 10-12, YFU USA could not operate, she has stated, without these assets transferred from YFU: These assets, individually and in combination, are critical to implementing the volunteer-based business model of YFU; Without them it would be Impossible to operate without investing extensive capital and time in developing them. A company desiring to enter the field of international student exchange and to effectively compete and provide service to 1,500 students or more, could not operate without these, and other of the assets. Id. at ¶*1 I4-15 (emphasis added).
exchange and to effectively complete or provide services to 2500 students or more, could not operate without each of they items.
Risteen Supp. Br., Ex. 4 at1¶ 15-] 6 (emphasis added]. Engebretson reiterated the same points: these assets “are critical to implementing the volunteer-based business model of YFU,” and without them, “it would be impossible to operate without investing extensive capital and time in developing them.” Id. Ex. 6 at ¶ 14. in short, Engebretson concluded, a company like YFU “could not operate without each, and aId. of these assets.” gi, at ¶ 15. This evidence is particularly helpful and deserving of credence. The fact that these individuals agreed that YFU USA could not operate without receiving these assets from YFU underscores the importance and value of the assets. These officers — who have no stake in the outcome of this case — have been either been officials at YFU with a deep understanding of the business, or work For another student exchange organization that is comparable to YFU. In Fact, even the president of YFU USA, Ulrich Zahiten, recognizes the importance of these databases: “[i]t is clear that the acquisition of these items, especially the data bases, is necessary if YFU USA is to be successful in continuing to support students, host families and volunteers, rather than leave them stranded when YFU, Inc. failed to meet its payroll.” YFU Opp., Ex. 1 at ¶ 25. If YFU USA could not operate its student exchange business without these databases, then it would seem they are “substantial” assets.
YFU USA argues that because YFU did not sell to YFU USA its most valuable asset, the Rosedale Estate, there was not a transfer of “substantially all the assets.“ However, there is more than one way of valuing an asset. A building may be a “substantial asset” to a company, for example, if that building is a plant, factory, warehouse, gas station, or restaurant —— businesses highly dependent on the particular building or site. YFU’s former interim president and former executive vice president, Peter Engebretson, stated that “YFU could operate from virtually any physical plant or location.” Risteen Supp. Br., Ex. 6 at ¶ 16. More importantly, however, the regulation only requires a transfer of “substantial assets” —- tl·1e term “substantially all the assets” is simply illustrative of what might constitute an of example of a transfer of “substantial assets.“ YFU USA has been working out of YFU’s offices at the Rosedale Estate since the reorganization, and the YFU employees who were rehired by YFU USA (almost 80% of the workforce) continue to report to those same offices. Although YFU USA did not buy the Rosedale Estate, YFU is still allowing YFU USA to use the offices at the Rosedale Estate, without paying rent, while YFU USA looks for additional space to rent elsewhere. That is, in a way, a transfer of the right to use this space. The IRS has noted that an “asset sale includes not only sales but other transfers as well.” 66 Fed, Reg. at 1846. YFU USA also claims that it “did not sell any equipment, real property or other tangible assets from YFU.” YFU Opp., Ex. l at ¶ 19 [emphasis added). But even though YFU USA did not buy equipment from YFU, the use of the equipment nonetheless has been l.l’8I`lSf`Bl`I’Ed -— through a “hosting agreement” — to YFU USA. In fact, YFU USA concedes that it may elect to purchase this equipment. ld, Nonetheless, whether this equipment and furniture was “acquired” is not determinative because asset sales under the regulations include “other transfers as well.” The fact that YFU sold its trademarks, corporate names, and logos to YFU IES — and not directly to YFU USA —— also does not mean that those assets were not transferred to YFU USA. After aId. YFU USA has the full right to use, and has been using, these trademarks and through an agreement with YFU IES. Ld, And clearly these assets are valuable (having been sold for $314,000) and thus arguably “substantial.” Again, under the regulations the touchstone is not whether these assets were “sold” to YFU USA, since asset sales include other transfers as well as sales. In the end, even though there was no “sale,” YFU USA still ended up with the use of these assets from YFU, albeit through YFU IES.
Furthermore, although there was a concrete valuation for the trademark rights, there was no valuation for the goodwill FU built up over the past 50 years in the student exchange business. When students, parents, teachers, and donors hear about YFU USA, they may well associate it with YFU. Thus, YFU USA benefits from YFU’s goodwill established over 50 years. That is an important intangible asset, partially reflected in the trademarks, given the reputation and name that YFU buiIt as a leader in the field of student exchange programs. YFU’s goodwill must therefore be considered as part of the overall transfer of assets from YFU to YFU USA.
As the comments to the regulations state, “[t]his definition [of asset sale] is intended to be flexible enough to apply reasonably to the myriad situations in which this issue arises,” and “[t]he application of this rule in any particular case depends on all the relevant facts and circumstances.” 66 Fed. Reg. at 1346. Under this “fiexib1e” standard, the Court must consider the fact that YFU USA is a non—profit service organization, in which context the databases of information and volunteer network are critical. Particularly for a small non—profit organization like YFU USA, a database of past contributors and donors is vitally important for access to the names of former donors for raising funds to help sustain the organization Similarly, YFU’s network of volunteers is a critical workforce for a non-profit organization on a limited budget. Furthermore, with YFU’s 50 years of experience, the importance of its name and reputation for leadership in the field makes its trademarks and goodwill indispensable.
The fact that YFU did not transfer the $10 million Rosedale Estate does not change this analysis, because that fact does not mean that YFU did not transfer or sell other “substantial assets” to YFU USA. That property, although perhaps more valuable in terms of dollars, is not necessarily the most important asset needed for running this particular business. YFU USA could effectively operate out of any office space. YFU USA, however, would have a very difficult time operating without the databases and other materials YFU sold to YFU USA, or without the former YFU employees it hired. Thus, under the regulations “flexible” standard, the conclusion that substantial assets have been transferred to YFU USA is not changed by the fact that the Rosedale Estate was not also transferred.
You may have heard that Youth For Understanding, Incorporated, has ceased to exist and perhaps you have been worried about where that leaves you and the students and families you represent. There is a kernel of truth in that statement, but it doesn’t tell you enough. Youth for Understanding did cease to exist as a corporation on Friday, March 8, 2002. Youth for Understanding, USA, was incorporated before then and this new organization (while distinct from YFU, Inc.] began to operate immediately. The mission is unchanged. The Field Staff remains the same. The students continue, just as before. They will leave on time, and their tickets still exist The Host Families will continue to care for their students as they have in the past. Student insurance continues, unchanged. YFU USA will operate with you, with the students, host families, and schools just like YFU, Inc did in the past. Staff are available to you an the same phone numbers, the same email addresses in the past.
Youth for Understanding USA, Inc. is alive and well. It began doing business on Saturday, March 9, 2002. It is working with our YFU partners and the present and future students, families, volunteers, and staff who transitioned into YFU USA …. Most of the change is corporate, and will not effect you. District staffs are intact, and will be available to work with you as they always have. YFU USA continues to honor some of the vendor contracts that YFU used because it wanted to continue to work with those same vendors. YFU Opp., Ex. l at 1 20. It has also accepted close to $100,000 in corporate funds and donations —— after donors were informed of the organizational change —- that were originally intended for YFU. jgl, at ¶ 21. Even YFU USA’s Board of Trustees are from the YFU organization. Mary Coffey, a YFU USA director, sent out a letter to volunteers stating that the “new Board of Trustees consists of a small crew of people who have a long history with YFU,” Motion, Ex. S (letter from Coffey dated March 25, 2002). Finally, there was no interruption of the business when YFU sold its assets to YFU USA.
As the regulation states, “if the buying group continues the business operations . . . without interruption or substantial change, then the buying group is the successor employer.” 26 C.F.R, § $4.49808-9, A·8(c)(l). YFU USA is essentially running the same business that YFU did, although with a somewhat smaller staff, and hence YFU USA is continuing the business operations that are associated with the assets and is a “successor employer” to YFU.
Business Reorganization: . . . The asset sale rules, including the definition of asset sale, are similar to the various formulations of successor employer rules that have been fashioned by the courts for various labor law purposes, adapted to the peculiar circumstances that the COBRA continuation coverage requirements create. In those cases, as in the final rule, a case-by-ease approach is favored. (see, eg., Golden State; Bottling Co. v. NLRB, 414 U.S. 168 (1973]; Howard Johnson Co. v. Detroit Local Joint Executive Boart, 417 U.S. 249 (1974); John Wiley &; Sons, Inc. , 376 U.S. 543 (1964); NLRB v. Burns International Security Services, g, 406 U.S. 272 (1972); Fall River Dyeing & Finishing Corp, y, §l,B(3_, 482 U.S. 27 (1987); EEQC v. MacMillan Bloedel Containers, Inc., 503 F.2d 1086 (6″‘ Cir. 1974); In re National Airlines, Inc., 700 F.2d 695 (1 l”‘ Cir. l983); Upholsterers’ International Union Pension Fund v. Artistic. Furniture of Pontiac, 920 F.2d 1323 (7’“ Cir. 1990); Central States , Southeast & Southwest Areas Pension Fund v. PYA/Monarch of Texas, Inc., 851 F.23d 780 (5″‘ Cir. 1988).
66 Fed. Reg. at 1846.
Hence, the focus is on whether there is “substantial continuity” between the enterprises. Under this approach, the Board examines a number of factors: whether the business of both employers is essentially the same; whether the employees of the new company are doing the same jobs in the same working conditions under the same supervisors; and whether the new entity has the same production process, produces the same products, and basically has the same body of customers. 482 U.S. at 43 (citations omitted). All the factors noted in Fall River are present in YFU’s business reorganization. The business of YFU and YFU USA is essentially the same; the production process has not changed and, indeed, YFU USA is still providing the “same product”; and YFU USA certainly still has the “same body of customers” — students and families interested in student exchange and study abroad.
Moreover, most of the former employees of YFU are doing the same jobs in the same working conditions, which is further evidence that YFU USA. is a successor employer. §e; Eau _ , 482 U.S. at 43; see also Howard Johnson Co. v. Detroit Local Joint Executive Board, 417 U.S. 249, 263 (1974) (“This continuity of identity in the business enterprise necessarily includes, we think, a substantial continuity in the identity of the work force across the change in ownership. .. . [M]ost of the lower courts have placed [emphasis] on whether the successor employer hires a majority of the predecessors employees in determining the legal obligations of the successor.”); Golden State Bottling Co. v. NLBQ, 414 U.S. 158, 182 n. 5 (1973) (“[s]uccessorship has been found where the new employer purchases a part or ali of the assets of the predecessor employer”); N[,g§ v. Burns international Security Systems, [nc., 406 U.S. 272, 229 (1972) [noting the obligations of a successor employer “if a majority of employees after the change of ownership or management were employed by the preceding employer”).
fact that YFU USA is still working out of YFU’s Rosedale Estate and still using YFU’s office equipment, computers, and furniture also suggests that it is the successor employer to YFU. g EEOC v. MacMillan Bloegel Containers, Inc.., 503 F,2d l086, i094 [6th Cir. l9′.’¤t) (factors for successorship include “whether the new employer uses the same plant” and “whether he uses the same machinery, equipment and methods of production”). Simply put, the case law cited in the regulations strongly supports the conclusion that YFU transferred substantial assets to YFU USA, and that YFU USA is therefore the successor employer to YFU. As a successor employer under the regulations, YFU USA is responsible for the COBRA obligations of its predecessor.
YFU USA contends that because it did not have a health plan in place at the time of the asset sale on March S, 2002, it is not liable, under the language of the regulations, for Risteen’s COBRA continuation coverage. The regulation states: A group health plan of the buying group has [the obligation to make COBRA continuation coverage available] beginning on the later of the following two dates and continuing as long as the buying group continues to maintain a group health plan . . . – (i) The date the selling group ceases to provide any group health plan to any employee; or (ii) The date of the asset sale. 26 C.F.R. § 54.4980B—9, A—8(c)(l). When YFU ceased operations on March B, 2002, it also ended its health plan. YFU USA Supp. Br., Ex. 4 at Q 3. YFU USA’s health plan, however, did not go into effect until May l, 2002 —- seven weeks after YFU ceased operations and transferred assets to YFU USA. g Q, at 1 10. YFU USA contends that by its language the regulation only obligates a buying group to provide COBRA continuation coverage “as long as the buying group continues to maintain a group health plan,” and that if there is no health plan —— as was the case for seven weeks — there is no obligation to provide COBRA continuation coverage.
YFU USA quotes the applicable regulatory language —— “as long as the buying group continues to maintain a group health plan” —— out of context. The language actually pertains to how long the buyer must provide insurance. In other words, on the date a buying group providing a group health plan for its own employees, its obligation to provide COBRA continuation coverage to the selling group’s former employees would end as well.
The regulation does speak as well to a buying group maintaining a health plan: “If the buying group is a successor employer, a group health plan maintained by the buying group has the obligation to make COBRA continuation coverage available …. ” 26 C.F.R. § 54.498033, A8(c)(1) (emphasis added). The Court finds that YFU USA has “maintained” (Lg, provided) a group health plan, and thus YFU USA must provide COBRA continuation benefits to Risteen.
The fact that there was a seven-week gap between the sale of the assets (or start of YFU USA’s operations) and the date YFU USA’s group health plan became effective does not aider that conclusion. Employees were told to buy their own temporary insurance until YFU USA could set up a health plan. Risteen Supp. Br., Ex. 7 at pp. S?-58. Teleford, YFU USA’s human resources director, sent out a series of c-mails to employees beginning on March 25, 2002, instructing employees that YFU USA “wants to help you with your temporary insurance that you have obtained on your own.” Risteen Supp. Br., Ex. 7 at p. 58; F’l.’s Reply, Ex. 5. Te e-mail stated that “[w]e will formulate a plan for reimbursing you for the costs you have incurred.” It; This decision by YFU USA to reimburse employees for their health insurance just two weeks after YFU USA began operations reinforces the conclusion that YFU USA “maintained” a health plan.
In order to prevail on his motion for preliminary injunctive relief, plaintiff must demonstrate (1) a substantial likelihood of success on the merits; (2] that he will suffer irreparable harm absent the relief requested; (3) that other parties will not be harmed if the requested relief is granted; and (4) that the public interest supports granting the requested relief. Taylor v. Resolution Trust Corp. 56 F.3d 1497, 1505-06 (D.C. Cir. 1995); Washington Area Metro. Transit Comm’n v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C. Cir. 1977). In determining whether to grant urgent rclieti the Court must “balance the strengths of the requesting party’s arguments in each of the four required areas.” Cityfed Fin., Corp, v. Office of Thrift Supervision, 58 F.3cl 738, 747 (D.C. Cir. 1995). “If the arguments for one factor are particularly strong, an injunction may issue even if the arguments in other areas are rather weak.” Id.
Davenport v. Int’l Brotherhood of Teamsters, AFL-CIO, 166 F.3d 356, 367 (D.C. Cir. 1999). Here, as explained in detail above, Risteen has demonstrated an overwhelming likelihood of success on the merits of his claim that YFU USA must provide him continuation COBRA benefits.
Finally, the public interest is served here by requiring YFU USA to provide Risteen continuation health coverage. The underlying purpose of COBRA is to ensure that employees who lose their jobs still receive limited health insurance benefits, and an injunction would further that legislative goal. See Phjllips v. Saratoga Harness Racing, Inc., 240 F.3d 173, 179 (2″‘ Cir. 2001) (“COBRA was enacted as a legislative response to the growing number of Americans without health insurance and the reluctance of hospitals to treat the uninsured.”); National Cos. health Ben. Plan v. St. Josggh’5 Hogg., [ne,, 929 F.2d 1558, 1569-70 (1st Cir. 1991) (“the goal of COBRA . . . is to provide continuation coverage until group plan participants are able to obtain other coverage”). An injunction is consistent with the legislative purpose of COBRA, and thus serves the public interest. See e.g. Comcast Sch. Holdings, Inc. v. City of Lake-Sumter, Inc. 168 F.Supp.2d 1338, l35l (M.D. Fla. 2001) (injunction consistent with purpose of statute is in the ‘ YFU USA’s Director of Human Resources, James Teleford, maintains that he contacted The Guardian, YFU USA’s health provider, to inquire about coverage for former employees of YFU. He states that Guardian “would not cover any former YFU employee who had not been an employee of YFU USA.” YFU USA Supp. Br., Ex. 4 at ¶ 13. YFU USA’s health plan was rated and priced by Guardian on the basis of the employee census provided by YFU USA. ld, Additions to YFU USA’s health plan are therefore “permitted under certain restricted circumstances, like a new hire” [Q, This does not alter the Court’s analysis. The COBRA regulations make no allowance for the financial ability of a successor employer or its insurance plan to assume the continued coverage of a former employee. In fact, the regulations the former employees of the predecessor company who were not hired by the successor company would be covered under that successor employers health plan. see, e.g. 26 C.F,R, § 54.498039, Example 5(ii); Example 6(iii]; Example 3(ii). Guardian is only purportedly unable to add Risteen because YFU USA did not initially include him on the original census of employees to be covered by Guardian public interest).
Accordingly, for these reasons, the Court grants plaintiff Risteen’s motion for a preliminary injunction. The Court concludes that YFU USA is -— under the IRS COBRA regulations — a successor employer to YFU. As such, YFU USA has the obligation to provide Risteen COBRA continuation health benefits. However, given the unique circumstances of this case, the Court will require the panics to discuss when YFU USA’s obligation to provide COBRA continuation coverage should commence, and to submit a proposed order, or separate proposed orders if necessary, by no later than September 20, 2002, A separate order will be issued.
Signed this 12th day of September, 2002.
1See, e.g., Haskgll v. Harvard Coop. Society, 3 F.3d 495, 498 (l“’ Cir. l993); Burgess v. Adams Tool & Engineering, Inc,, 903 F.Supp. 473, 476 (WD. Mich. 1995).
2 This “sale” was for an amount to be determined, with the assistance of an outside party, by June 30, 2002. YFU USA Supp. Br., Ex. 2 at 1 3. As of this date, the sale amount still apparently has not been determined.
3There is no doubt that Risteen is a “qualified beneficiary” under these regulations, and the parties do not dispute this. The regulations define a qualified beneficiary as an individual who is a “covered employee whose last employment prior to the qualifying event was associated with the assets being sold.” Risteen’s resignation became effective in late April 2001, see Comp]. at ¶ 22, and his COBRA continuation benefits began from that point; YFU was responsible for those benefits from April 2001 through March 8, 2002.
4See, e.g., Communication Workers of America, District 1, AFL-CIQ v. NXNQ Corp., 898 F,2d 887, 891 (2d Cir. 1990) (the threat of termination of medical benefits to striking workers constitutes irreparable harm); United Steel Workers of America; v. Textron, Inc. 836 F.2d 6, 8 8: 9 (1st Cir.1987) (loss of insurance benefits to retired workers constitutes irreparable harm); Whelan v. Colgan, 602 F .2d 1060, 1062 (2d Cir.l9?9) (“the threatened termination of benefits such as medical coverage for workers and their families obviously raised the specter of irreparable injury”); Caboal v. Olsten Corp., 843 F.Supp. 701, 703 (M. D. Florida I994) (in a COBRA case, threat of termination of health insurance benefits for uninsured breast cancer patient constituted irreparable harm); Hinkley v. Kelsey-Hayes co., 866 F.St1pp. 1034, 1045 (ED. Mich. 1993) (retirees established irreparable harm if the court did not order reinstatement of health insurance benefits); UAW. v. Exide Corp., 688 F,Supp. 174, 186-87 (E.D.Pa.), aff’d mem., 857 F.2d 1464 (3d Cir.1988); Howe v. Vavrity Corp., 1989 WL 95595, * 13 (SD. Iowa) (“As a matter of law, the termination of health insurance benefits, particularly to those on a fixed income, constitutes a threat of irreparable harm sufficient to warrant a preliminary injunction”); Johnson v., Plainville Casting Corp., 1988 WL 167346, * 2 (D. Conn. 1988) [“It is well-settled that the termination of health insurance benefits presents a threat of irreparable harm sufficient to support temporary equitable relief “).

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