Opinion ID: 75868
Heading Depth: 2
Heading Rank: 3

Heading: COBRA Claim

Text: 23 The district court granted summary judgment in favor of Scott on his COBRA claim. Suncoast then moved for reconsideration based on newly-discovered evidence. Following an employee's termination, 29 U.S.C. § 1166(a)(4)(A) requires plan administrators to notify the former employee of their right to receive continuation coverage. The notice must be sufficient to permit the discharged employee to make an informed decision whether to elect coverage. See Meadows v. Cagle's, Inc., 954 F.2d 686, 692 (11th Cir.1992). 24 In this case, a Suncoast employee simply told Scott that he would receive some COBRA information in the mail. Scott has testified that he never received any COBRA information. Suncoast claims that it had entered into a contract with First Health, under which First Health would send out the COBRA notices for Suncoast. Suncoast contends that it satisfied its obligation by providing First Health with the necessary information and instructing First Health to send the COBRA notice to Scott, as was their normal procedure. In support, Suncoast cites Smith v. Rogers Galvanizing Co., 128 F.3d 1380, 1383 (10th Cir.1997), for the proposition that a good faith attempt to comply with a reasonable interpretation of the statute is sufficient to satisfy the notice requirement. However, the issue in Smith was the sufficiency of oral notice, where important facts about the employee's rights were omitted from the notice. Here, the evidence (as summarized in the briefs and order) suggests that Scott received no notice whatsoever of his rights under COBRA. Suncoast also cites several cases in which defendants were held to have satisfied their obligations under the statute, despite the plaintiffs' testimony that they did not actually receive notice of their COBRA rights. (Suncoast Brief at 53). Jachim v. KUTV Inc., 783 F.Supp. 1328, 1333-34 (D.Utah 1992) is typical of this line of cases. In Jachim, the defendant's human resources manager testified that she prepared a letter containing notification of COBRA rights and mailed it to the last known address of the plaintiff. The court held that this was sufficient to satisfy the statute because the defendant sent the notice in a good faith manner reasonably calculated to reach the plaintiff. Here, Suncoast tries to extend the good faith language from these cases to cover a situation in which it has contracted with a third party to send the notice, but there is no evidence that any notice was ever sent by that third party. But Suncoast has cited no case where an employer or administrator was relieved of liability because it had contracted its notification obligations out to a third party. To stretch the good faith language that far would essentially permit an employer to contract away an obligation specifically assigned to it under the statute. Simply hiring an agent and then instructing the agent to send notice is not sufficient to satisfy the statute, where there is no evidence that the agent sent out a notice to the plaintiff, nor any evidence that the principal took the necessary steps to ensure that the agent would, in all cases, make such notification. 25 Suncoast also argues that the district court abused its discretion by denying the motion to reconsider based on new evidence. The new evidence in question consists of affidavits from two Suncoast employees and a First Health employee. The district court noted that the testimony of the Suncoast employees could have easily been produced prior to the close of the discovery period. As to the First Health employee, the district court noted that the subpoena duces tecum was mailed to First Health by Suncoast's counsel after the close of discovery. Further, the court noted, the affidavit of the First Health employee was insufficient to overcome summary judgment, because 1) it did not establish that she was a First Health employee at the time the notice was to be sent, 2) it did not establish that she is a proper records custodian, 3) it did not establish that she had knowledge of the company's ordinary course of business at the time in question, and 4) her testimony only related her understanding of the usual practice, rather than any knowledge that a letter was actually sent to Scott. The court also noted that the reliability of the affidavit was suspect, because she referred to Scott by the wrong gender. 26 Suncoast could have timely produced the testimony of its own employees, so there is no excuse for its failure to produce that evidence earlier. As to the First Health employee's testimony, it does not appear to establish compliance with the statute, as the district court noted. The denial of the motion to reconsider was not an abuse of discretion.
27 Finally, Suncoast argues that even if it violated the COBRA statute, the district court's imposition of a $20 per day penalty for a period of 18 months was an abuse of discretion. Suncoast contends that there was no evidence of bad faith or any prejudice to Scott. Specifically, Suncoast contends that Scott would have obviously been unable to afford the COBRA premiums, given that he did not elect to join his wife's insurance plan at a lower premium. Under 29 U.S.C. § 1132(c)(1), the court has the discretion to penalize a violation of the notice requirement by awarding the beneficiary or participant up to $100 per day from the date of failure to give notice. The statute does not require a finding of prejudice to the plaintiff, although the Eleventh Circuit has stated that prejudice is a factor to be considered in determining the appropriate penalty. See Curry v. Contract Fabricators, Inc., 891 F.2d 842, 847 (11th Cir.1990), abrogated on other grounds by, Murphy v. Reliance Stand. Life Ins. Co., 247 F.3d 1313 (11th Cir.2001). Curry, however, explicitly rejected treating prejudice as a prerequisite to a penalty. The penalty under § 1132 is meant to be in the nature of punitive damages, designed more for the purpose of punishing the violator than compensating the participant or beneficiary. See Sandlin v. Iron Workers Dist. Council Pension Plan, 716 F.Supp. 571, 574 (N.D.Ala.1988), aff'd, 884 F.2d 585 (11th Cir.1989) (cited with approval in Curry ). Suncoast has not shown that the district court abused its discretion by imposing the $20 per day penalty. We therefore affirm the district court's judgment and award on Scott's COBRA claim.