Delaughter v. Esa Management Llc

MOTION to dismiss for failure to state a claim Plaintiff's Second Amended Complaint

M.D. Fla.March 21, 2017

1 UNITED STATE DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION CYNTHIA DELAUGHTER, individually and on behalf of all others similarly situated, Plaintiff, v. ESA MANAGEMENT LLC, Defendant. Case No.: 8:16-cv-03302-MSS-AEP DEFENDANT’S MOTION TO DISMISS PLAINTIFF’S SECOND AMENDED COMPLAINT Defendant ESA MANAGEMENT LLC (“ESA” or “Defendant”) moves, under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), to dismiss the Second Amended Complaint of Plaintiff CYNTHIA DELAUGHTER (“Ms. Delaughter” or “Plaintiff”). INTRODUCTION The operative complaint in this matter is now Plaintiff’s Second Amended Complaint (“Complaint”) for a putative class action, filed on March 7, 2017. (D.E. 23). Therein, Plaintiff claims that ESA failed to provide her with a sufficient form notice regarding continuing healthcare coverage, allegedly in violation of the Employee Retirement Income Security Act (“ERISA”), as amended by the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), 29 U.S.C. § 1166(a). Plaintiff’s Complaint is misconceived. As the analysis below demonstrates, the Complaint fails to establish subject matter jurisdiction because: (i) Plaintiff has not suffered a cognizable injury-in-fact; and (ii) she has failed to exhaust her administrative Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 1 of 25 PageID 175 2 remedies before pursuing this action. Moreover, the notice she received from ESA complies with the U.S. Department of Labor’s model COBRA notice as a matter of law; therefore, she fails to state a claim upon which relief can be granted. Defendant addresses each of these deficiencies in Plaintiff’s case in turn. COMPLAINT ALLEGATONS AND LEGAL STANDARDS I. Material Allegations in the Complaint Plaintiff asserts one claim under 29 U.S.C. § 1166(a), alleging that Defendant failed to comply with COBRA’s continuing coverage notice requirements in several ways. She makes the following material allegations and one key omission: Defendant is the sponsor and administrator of a Health Plan (“Plan”) within the meaning of 29 U.S.C. § 1002(16)(B) and § 1002(16)(A), respectively. (Compl. ¶ 8). Plaintiff is a former employee of Defendant and was a covered employee and participant/beneficiary in the Plan before her termination on September 21, 2016, which was a qualifying event within the meaning of 29 U.S.C. § 1163(2). (Id. ¶¶ 19-20). Following Plaintiff’s termination, Defendant mailed Plaintiff a COBRA notice (“Notice”), but willfully failed to furnish all the required information about continuing healthcare coverage. (Id. ¶¶ 16, 55). “At the time Plaintiff was terminated . . . she was scheduled to have brain surgery for late September/early October.” (Id. ¶ 2). The Notice omitted certain information, and “caused Plaintiff to [lose] her insurance coverage,” because “she was unable to decipher it . . . [and] nearly died . . . from bacterial meningitis.” (Id.) The Notice allegedly did not: (a) Comply with 29 C.F.R. 2590.606-4(b)(4) because it is not written in a manner calculated to be understood by the average plan participant. (Id. ¶ 18). Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 2 of 25 PageID 176 3 (b) Provide the name, address, and telephone number of the party responsible under the plan for the administration of continuation coverage benefits because the Plan Administrator is not unambiguously identified. (Id.) (c) Provide a statement that each individual who is a qualified beneficiary with respect to the qualifying event has an independent right to elect continuation coverage, that a covered employee or a qualified beneficiary who is the spouse of the covered employee (or was the spouse of the covered employee on the day before the qualifying event occurred) may elect continuation coverage on behalf of all other qualified beneficiaries with respect to the qualifying event, and that a parent or legal guardian may elect continuation coverage on behalf of a minor child. (Id.) (d) Provide an explanation of the consequences of failing to elect or waiving continuation coverage, including failure to provide notice of the plan’s procedures for revoking a waiver of the right to continuation coverage before the date by which the election must be made. (Id.) (e) Provide the length of any such extension of continuation coverage due either to the occurrence of a second qualifying event or a determination by the Social Security Administration that the qualified beneficiary is disabled. (Id.) (f) Include a notice of the responsibility of qualified beneficiaries to provide notice that a qualified beneficiary determined to be disabled during the continuation coverage period has subsequently been determined to no longer be disabled. (Id.) From these purported omissions, Plaintiff alleges to have suffered three discrete injuries: an informational injury from Defendant’s failure to provide an “ERISA- compliant COBRA notice” (id. ¶ 37); a “tangible injury” from loss of insurance coverage (id. ¶ 39); and medical expenses incurred from the treatment of bacterial meningitis, which developed after she was unable to undergo scheduled brain surgery from the alleged loss of insurance. (Id. ¶ 40). The Complaint, however, never alerts the Court that Ms. Delaughter’s employment was reinstated by ESA on or about October 16, 2016, and she never needed COBRA coverage because ESA maintained her on regular healthcare Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 3 of 25 PageID 177 4 coverage under the Plan. See Declaration of Joy-Lynn Tyler (“Tyler Decl.”), attached hereto as Ex. 1. For the reasons set forth below, Plaintiff has not suffered an injury-in-fact traceable to the alleged COBRA violations in order to establish the Court’s subject matter jurisdiction, she never filed a claim with the Plan to resolve any disputes or misunderstandings she has about healthcare coverage or COBRA, and the material allegations fail to state a valid COBRA claim. II. Two Legal Standards Under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) Apply to this Motion and the Complaint. A Rule 12(b)(1) motion directly challenges the district court’s subject matter jurisdiction. McElmurray v. Consol. Gov't of Augusta-Richmond Cnty, 501 F.3d 1244, 1251 (11th Cir. 2007). The burden of proof on a Rule 12(b)(1) motion is on the party averring jurisdiction. Thomson v. Gaskill, 315 U.S. 442, 446, 62 S. Ct. 673, 86 L.Ed. 951 (1942). Here, that is Ms. Delaughter. A motion to dismiss for lack of subject matter jurisdiction may be determined either facially or factually. Makro v. Capital of America, Inc. v. UBS AG, 543 F.3d 1254, 1258 (11th Cir. 2008) (citing Morrison v. Amway Corp., 323 F.3d 920, 925 n.5 (11th Cir. 2003)). A “facial attack” is based solely on the pleadings and requires the court to assess whether the plaintiff has alleged a sufficient basis for subject matter jurisdiction. Stalley v. Orlando Reg. Healthcare Sys., 524 F.3d 1229, 1232-33 (11th Cir. 2008); Morrison, 323 F.3d at 925 n. 5. A “factual attack” can be based on the pleadings, attachments, and any other evidence outside the pleadings. Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir. 1990). At present, ESA makes a factual attack because the Complaint Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 4 of 25 PageID 178 5 allegations as to Plaintiff’s healthcare coverage and any connection thereof to the COBRA Notice are provably erroneous. To survive a motion to dismiss for failure to state a claim under Rule 12(b)(6), the plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). In considering a defendant's motion to dismiss, the “court must view the complaint in the light most favorable to the plaintiff and accept all the plaintiff's well- pleaded facts as true.” Am. United Life Ins. v. Martinez, 480 F.3d 1043, 1057 (11th Cir. 2007) (citing St. Joseph's Hosp. Inc. v. Hosp. Corp. of Am., 795 F.2d 948, 954 (11th Cir. 1986)). “Conclusory allegations, unwarranted deductions of facts or legal conclusions masquerading as facts [however,] will not prevent dismissal.” Jackson v. BellSouth Telecomms., 372 F.3d 1250, 1262 (11th Cir. 2004) (quoting Oxford Asset Mgmt., Ltd. v. Jaharis, 297 F.3d 1182, 1188 (11th Cir. 2002)). Thus, a complaint should be dismissed “when the allegations in a complaint, however true, could not raise a claim of entitlement to relief.” Twombly, 550 U.S. at 558, 127 S. Ct. at 1966. Furthermore, “this basic deficiency should ... be exposed at the point of minimum expenditure of time and money by the parties and the court.” Id. (citations omitted). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555, 127 S. Ct. at 1964- 65 (citations omitted). Factual allegations must be enough to raise a right to relief above the speculative level. Id. It is not enough that the pleadings merely “le[ave] open the Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 5 of 25 PageID 179 6 possibility that the plaintiff might later establish some set of undisclosed facts to support recovery.” Id. at 561, 127 S. Ct. at 1968 (internal quotation and alteration omitted). Finally, it is well-settled in this Circuit that when there is a conflict between the allegations in a complaint and the exhibits attached to it, the exhibits control. Griffin Industries, Inc. v. Irvin, 496 F.3d 1189, 1206 (11th Cir. 2007). This principle applies in particular to the sufficiency of the COBRA Notice allegations. ARGUMENT I. The Court Lacks Subject Matter Jurisdiction Because Plaintiff Has Not Suffered a Cognizable Injury-In-Fact. The U.S. Supreme Court consistently recognizes that “[n]o principle is more fundamental to the judiciary’s proper role in our system of government than the constitutional limitation of federal-court jurisdiction to actual cases or controversies.” Spokeo, Inc. v. Robins, --- U.S. ----, 136 S.Ct. 1540, 1547, 194 L.Ed.2d 635 (2016) (quoting Raines v. Byrd, 521 U.S. 811, 818, 117 S.Ct. 2312, 138 L.Ed.2d 849 (1997)). A key component of this limitation is standing to sue. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). A named plaintiff in a putative class action must establish the “irreducible constitutional minimum” elements of having: (1) suffered an injury-in-fact; (2) that is fairly traceable to the challenged conduct of the defendant; and (3) that is likely to be redressed by a favorable judicial decision. Spokeo, 136 S.Ct. at 1547 (internal quotation and citation omitted); Griffin v. Dugger, 823 F.2d 1476, 1483-84 (11th Cir. 1987) (holding a named plaintiff must meet Article III standing requirements for each claim asserted against the defendant). A plaintiff bears the burden of establishing the requisite Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 6 of 25 PageID 180 7 standing elements, and, at a minimum, “must clearly . . . allege facts demonstrating each element.” Id. (internal citation omitted). In Spokeo, the Supreme Court examined whether the plaintiff-a consumer who claimed that a website operator had willfully violated the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq., by publishing inaccurate information about him- had sufficiently pleaded standing. Spokeo, 136 S.Ct. at 1545. The defendant website operator generated an alleged consumer report that, according to plaintiff, inaccurately reported his marital status, age, employment status, salary, and educational history. Id. at 1546. The plaintiff alleged that the website operator violated the FCRA by generating this report, but failed to allege that he had suffered any financial or other harm as a result of the claimed FCRA violation. Id. In examining the injury-in-fact requirement for a technical or procedural violation of a statute, the Court reaffirmed that, for an injury to be “concrete,” under Article III standing, it “must be de facto; that is, it must actually exist.” Id. at 1548. Relevant to the claim advanced in this action, the Court acknowledged that intangible harms, like a statutory right to receive certain information, may constitute a concrete injury. Id. at 1549 (“Congress may elevat[e] to the status of legally cognizable injuries concrete . . . injuries that were previously inadequate in law.”). Critically, however, a plaintiff alleging a bare statutory violation is not a sufficient condition to satisfy the injury-in-fact requirement. Id. Rather, the plaintiff must plausibly connect the harm the statute seeks to prevent with a real, concrete injury-or, demonstrate that the violation poses a “material risk” of real harm. See id. at 1550 (“[The plaintiff] could not, for example, allege a bare procedural Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 7 of 25 PageID 181 8 violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.”).1 In the context of the FCRA, the Court found that inaccuracies in a consumer report constituting a procedural violation, such as the plaintiff challenged, may indeed “result in no harm[,]” nor present a “material risk of harm.” Id. at 1551 (remanding to the Ninth Circuit to reexamine sufficiency of pleading under these principles). The principles announced in Spokeo can be applied to harm, risk of harm under COBRA, and Ms. Delaughter’s healthcare coverage. “Congress enacted COBRA because it was concerned about the fate of individuals who, after losing coverage under their employer’s ERISA plan, had no group health coverage at all.” Nat'l Companies Health Benefit Plan v. St. Joseph's Hospital of Atlanta, Inc., 929 F.2d 1558, 1569-70 (11th Cir.1992), abrogated on other grounds, 524 U.S. 74 (1998). “Continuation coverage would afford these individuals group health coverage until they were able to secure some other coverage.” Id.2 Obviously, no loss of coverage, or successfully continued coverage, would not constitute harm or risk of harm traceable to a COBRA notice. Yet, this is the case Ms. Delaughter presents to the Court to exercise its jurisdiction. COBRA and its implementing regulations provide that the plan sponsor or plan administrator of a group health plan subject to COBRA requirements shall provide notice to each qualified beneficiary of the right to continuation coverage under the plan. 26 C.F.R. § 2590.606-4(a). The notice requirement is triggered by a “qualifying event” 1 Providing an example applying the foregoing principles, the Supreme Court noted that it would likely be inconceivable for a violation of the FCRA’s procedural provisions relating to an inaccurate zip code to result in harm, and further, may present no “material risk of harm.” Id. 2 By way of background, while colloquially referred to as “COBRA coverage,” ERISA, § 1161(a), describes this interim election as “continuation coverage.” Powers v. United Health Plans of New England, Inc., 979 F. Supp. 64, 66 (D. Mass. 1997). Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 8 of 25 PageID 182 9 under ERISA, which includes when a covered employee, as Plaintiff was here, is terminated. (Compl. ¶ 6 (citing 29 U.S.C. § 1163(2)). ERISA and its regulations provide for a penalty of up to $110 per day, the imposition of which is in a court’s discretion. 29 U.S.C. § 1132(c); 29 C.F.R. § 2575.502(c)-1 (adjusting the statutory penalty under 29 U.S.C. § 1132(c)(1)). The unusual circumstance here, though, is that ESA reinstated Ms. Delaughter’s employment about three weeks after her termination, on its own initiative. In doing so, ESA ensured that she never lost healthcare coverage. (See Tyler Decl., ¶¶ 4-5). Although there was an approximately three-week period when Ms. Delaughter may have thought she lacked coverage, the reinstatement ensured that her healthcare claims falling in this period were covered. In fact, she has submitted such claims and had them covered. (Id. ¶ 6). As a result, although the Complaint may accurately state her health conditions and treatments in the termination-to-reinstatement timeframe, Plaintiff’s allegations concerning lost healthcare coverage are indisputably wrong. Thus, Ms. Delaughter cannot connect any loss of coverage with her COBRA Notice. Indeed, COBRA is irrelevant to her healthcare coverage. (Id. ¶ 10). As such, she can show no harm traceable to the Notice, and the Court lacks subject matter jurisdiction. II. Plaintiff Failed to Exhaust Her Administrative Remedies. Plaintiff’s Complaint must also be dismissed for the independent reason that Plaintiff failed to exhaust her administrative remedies. Eleventh Circuit case law is clear that a plaintiff seeking to impose liability under ERISA may not do so without first exhausting her administrative remedies. Perrino v. S. Bell Tel. & Tel. Co., 209 F.3d 1309, 1315 (11th Cir. 2000). This requirement is strictly enforced, with courts recognizing only Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 9 of 25 PageID 183 10 narrow exceptions “when resort to administrative remedies would be futile or the remedy inadequate, or where a claimant is denied meaningful access to the administrative review scheme in place.” Id. at 1316 (internal citations and quotation marks omitted). The Complaint invokes none of these narrow exceptions. The exhaustion requirement is based upon several important policy considerations, and has been found to be consistent with Congressional intent. Id. at 1315. As the Eleventh Circuit explained, in Mason v. Continental Group, Inc.: Compelling considerations exist for plaintiffs to exhaust administrative remedies prior to instituting a lawsuit. Administrative claim-resolution procedures reduce the number of frivolous lawsuits under ERISA, minimize the cost of dispute resolution, enhance the plan's trustees’ ability to carry out their fiduciary duties expertly and efficiently by preventing premature judicial intervention in the decision making process, and allow prior fully considered actions by pension plan trustees to assist courts if the dispute is eventually litigated. 763 F.2d 1219, 1227 (11th Cir. 1985). Contrary to prevailing Eleventh Circuit case law, Plaintiff alleges in her Complaint: “No administrative remedies exist as a prerequisite to Plaintiff’s claim on behalf of the Putative Class.” (Compl. ¶ 42). It is unclear if this allegation is meant to suggest that a claim to the plan administrator would not have led to an explanation that Ms. Delaughter was continuously covered, as if she had never been terminated. Perhaps, it is meant to suggest that Ms. Delaughter could not receive assistance in processing claims. Yet, neither suggestion is true. (Tyler Decl. ¶¶ 7-8). In any event, Plaintiff cannot seek judicial review without first exhausting her administrative remedies, and such failure serves as an independent basis for dismissing the Complaint. Martin v. Ingersoll-Rand Co., No. CIV. 2:93-CV-169-WCO, 1995 WL 776944, at *6 (N.D. Ga. Sept. 28, 1995), Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 10 of 25 PageID 184 11 aff'd F.3d 25 (11th Cir. 1997) (finding plaintiff failed to exhaust claims for continuation of COBRA coverage and that no futility exception applied). III. The COBRA Notice Attached to the Complaint Complies with ERISA § 1166(a) as a Matter of Law. Because the Model Notice and the Notice, respectively, are attached to the Complaint, they are properly before the Court on a motion to dismiss under Rule 12(b)(6). Rule 7(a) defines “pleadings” to include both the complaint and the answer, and Rule 10(c) provides that “[a] copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes.” Fed.R.Civ.P. 7(a) and 10(c)). Thus, the Court may consider the two exhibits attached to the Complaint, without converting this Motion to Dismiss into one for summary judgment. See CWI, Inc. v. LDRV Holdings Corp., No. 8:13-CV-93-T-35-MAP, 2014 WL 12573016, at *9, n.8 (M.D. Fla. Mar. 26, 2014) (J., Scriven) (internal citation omitted). As discussed above, it may also consider the Tyler Declaration accompanying this Motion as evidence showing a lack of jurisdiction. In her Complaint, Plaintiff alleges six discrete violations of 29 C.F.R. § 2590.606- 4(b). (Compl. ¶¶ 18a.-f.). However, Sections III.B.(i)-(ii) of this Motion demonstrate that the Notice complies with the Model Notice in all material respects, or the allegations in the Complaint conflict with the content of the Notice. Section III.C. of the Motion demonstrates that the allegations, independently and cumulatively, fail as a matter of law because the Notice permitted Plaintiff to make an informed decision whether to elect continuation coverage, if she had needed it. A. Background on COBRA and Its Implementing Regulations COBRA provides the Secretary of Labor with interpretive authority to carry out COBRA’s continuation coverage provisions. 69 F.R. 30084-01, Healthcare Continuation Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 11 of 25 PageID 185 12 Coverage, 2004 WL 1159115, at *30084 (May 26, 2004); 131 Cong. Rec. H130932-02, 1985 WL 724562. To that end-and following a notice-and-comment period during which interested parties submitted potential changes to the proposed COBRA notice regulations-the Department of Labor (“DOL”) in 2004 promulgated, inter alia, 29 C.F.R. § 2590.606-4 and the Model Notice at issue in this action. 2004 WL 1159115, at *30084. Specifically, section (b)(4) of the final regulation details the content requirements for the COBRA continuation notice. 29 C.F.R. § 2590.606-4(b)(4). In assessing the need for section (b)(4) and its companion subsections, the DOL summarized its objectives as follows: These rules . . . provide model notices for use by administrators of single- employer group health plans to satisfy their obligation to provide general and election notices. The regulatory standards promulgated in these regulations will benefit both plan sponsors and participants. They will dispel plan administrators’ uncertainty about how to comply with COBRA notice provisions and reduce the risk of inadvertent violations. They will help participants and beneficiaries understand how to exercise their COBRA rights, thereby averting costly disputes and lost opportunities to elect COBRA coverage. . . . Providing greater certainty to plan sponsors and plan administrators as to how their notice obligations can be met should also limit risks to both plans and qualified beneficiaries. Plan sponsors and plan administrators who comply with this guidance will be less likely to be subjected to costly disputes, litigation, or penalties as a result of their compliance with this guidance. Health Care Continuation Coverage, 69 F.R. 30084-01, 2004 WL 1159115, at *30084, 30092-93 (May 26, 2004) (emphasis added). Consistent with these objectives, in creating the Model Notice in section (b)(4), the DOL received “a number of comments suggesting modifications to the model election notice to improve its clarity and readability.” Id. at *30089. In the final, promulgated notice, the DOL considered all of the interested parties’ suggestions and “made a variety of revisions to improve, clarify, and simplify the model notice.” Id. at *30089-90. Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 12 of 25 PageID 186 13 Importantly, the DOL expressly stated that use of the Model Notice is “not mandatory,” but that “use of the model notice, appropriately modified, will be deemed to satisfy the notice content requirements of paragraph (b)(4) of this section.” 29 C.F.R. § 25960.606-4(g) (emphasis added). In short, the DOL’s Model Notice does not cover every single detail of the regulations, but an employer’s substantial compliance with the model is supposed to relieve it of the burden of legal challenges, such as this one. B. ESA’s Notice and the Model Notice i. ESA’s Notice Tracks the Model Notice. There can be no real doubt that juxtaposing the Model Notice (D.E. 12-1) and the Notice provided by ESA (D.E. 12-2) shows that Defendant used the Model Notice, appropriately modified, and should therefore be deemed to have satisfied the content requirements of section (b)(4) of the regulations without further litigation. The Notice recapitulates the entire Model Notice in both form and substance: each question in the Model Notice appears in substantially the same sequence in the Notice, and Defendant recites verbatim the explanatory answers in the Model Notice, while also incorporating pertinent, specific Plan information. Reviewing the introductory section illustrates this point; the Model Notice reads: [Enter date of notice] Dear: [Identify the qualified beneficiary(ies), by name or status] This notice has important information about your right to continue your health care coverage in the [enter name of group health plan] (the Plan), as well as other health coverage options that may be available to you, including coverage through the Health Insurance Marketplace at www. HealthCare.gov or call l -800-318-2596. You may be able to get coverage through the Health Insurance Marketplace that costs less than COBRA continuation coverage. Please read the information in this notice very carefully before you make your decision. If you choose to elect COBRA Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 13 of 25 PageID 187 14 continuation coverage, you should use the election form provided later in this notice. (D.E. 12-1 at 3). The introductory section of ESA’s Notice, in turn, reads: Dear CYNTHIA L. DELAUGHTER: This notice has important information about your right to continue your health care coverage in the ESA Management LLC Group Health Benefits Plan (the Plan(s)) as well as other health coverage options that may be available to you, including coverage through the Health Insurance Marketplace available at www.HealthCarc.gov or by calling 1-800-318- 2596. You may be able to get coverage through the Health Insurance Marketplace that costs less than COBRA continuation coverage. Please read through the information in this notice very carefully before you make your decision. If you choose to elect COBRA continuation coverage, you should use the election form provided later in this notice. (D.E. 12-2 at 2). As compelling, the information Plaintiff claims the Notice omits is also conspicuously absent from the Model Notice. For example, Plaintiff alleges that the Notice was deficient under 29 C.F.R. § 2590.606-4(b)(4)(ix) “because it fails to provide the length of any such extension of continuation coverage due either to the occurrence of a second qualifying event or a determination by the Social Security Administration that the qualified beneficiary is disabled.” (Compl. ¶ 18(e.)). Under 29 C.F.R. § 2590.606- 4(b)(4)(x), the Notice is deficient, according to Plaintiff, “because it fails to provide all the explanatory information. There is no notice of the responsibility of qualified beneficiaries to provide notice that a qualified beneficiary determined to be disabled during the continuation coverage period has subsequently been determined to no longer be disabled.” (Compl. ¶ 18(f.)). (Oddly, this alleged omission would benefit a disabled beneficiary at a plan’s expense, so it is not Plaintiff’s complaint to make, but a concern Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 14 of 25 PageID 188 15 for benefit plans.) And, under 29 C.F.R. § 2590.606-4(b)(4)(vi), the Complaint asserts, the Notice fails to notify Plaintiff of her right to revoke a waiver of the right to elect coverage. (Compl. ¶¶ 35-36). On these topics generally, the Model Notice reads: Can I extend the length of COBRA continuation coverage? If you elect continuation coverage, you may be able to extend the length of continuation coverage if a qualified beneficiary is disabled, or if a second qualifying event occurs. You must notify [enter name of party responsible for COBRA administration] of a disability or a second qualifying event within a certain time period to extend the period of continuation coverage. If you don't provide notice of a disability or second qualifying event within the required time period, it will affect your right to extend the period of continuation coverage. For more information about extending the length of COBRA continuation coverage visit http://vvww.dol.gov/ebsa/publications/cobraemployee.html. For more information This notice doesn't fully describe continuation coverage or other rights under the Plan. More information about continuation coverage and your rights under the Plan is available in your summary plan description or from the Plan Administrator. If you have questions about the information in this notice, your rights to coverage, or if you want a copy of your summary plan description, contact [enter name of party responsible for COBRA administration for the Plan, with telephone number and address]. For more information about your rights under the Employee Retirement Income Security Act (ERISA), including COBRA, the Patient Protection and Affordable Care Act, and other laws affecting group health plans, visit the U.S. Department of Labor's Employee Benefits Security Administration (EBSA) website at www.dol.gov/ebsa or call their toll-free number at 1-866-444-3272. For more information about health insurance options available through the Health Insurance Marketplace, and to locate an assister in your area who you can talk to about the different options, visit www.HealthCare.gov. (D.E. 12-1 at 6) (emphasis added). Again, Defendant’s Notice tracks the Model Notice in these respects. (D.E. 12-2 at 6). Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 15 of 25 PageID 189 16 Plaintiff additionally claims that the notice violates 29 C.F.R. § 2590-606- 4(b)(4)(i) because it fails to unambiguously provide the name, address, and telephone number of the party responsible under the plan for the administration of continuation coverage benefits. (Compl. ¶ 18(b.)). Plaintiff’s allegation, here, too, ignores the content of the Model Notice and the Notice. The Model Notice reads: This notice doesn’t fully describe continuation coverage or other rights under the Plan. More information about continuation coverage and your rights under the Plan is available in your summary plan description or from the Plan Administrator. If you have questions about the information in this notice, your rights to coverage, or if you want a copy of your summary plan description, contact [enter name of party responsible for COBRA administration for the Plan, with telephone number and address]. (D.E. 12-1 at 6) (emphasis in original). The Notice, in turn, reads: This notice doesn’t fully describe continuation coverage or other rights under the Plan(s). More information about continuation coverage and your rights under the Plan(s) is available in your summary plan description or from the Plan Administrator. If you have questions about the information in this notice, your rights to coverage, or if you want a copy of your summary plan description, contact: ESA Management LLC 525 North Community House Road Charlotte, NC 28277 (980) 345-1600 (D.E. 12-2 at 6). Thus, the Notice tracks the Model Notice in this respect, as well. The Eleventh Circuit has expressly held that, within the context of ERISA regulations, such as the one at issue here, “great deference is owed to the . . . . regulations of the . . . Department of Labor, which [is one of] the administrative agencies responsible for enforcing and interpreting ERISA.” Lyons v. Georgia-Pac. Corp. Salaried Employees Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 16 of 25 PageID 190 17 Ret. Plan, 221 F.3d 1235, 1245 (11th Cir. 2000). Because the DOL promulgated the Model Notice without the level of detail Plaintiff allegedly seeks, under 29 C.F.R. § 25960.606-4(g), Defendant’s Notice cannot violate ERISA § 1166(a).3 ii. The Allegations in the Complaint Conflict with the Content of the Notice. In the Complaint, Plaintiff’s allegations also materially conflict with the content of the Notice. Again, by way of example, Plaintiff alleges that the Notice violates 29 C.F.R. § 2590.606-4(b)(4)(iv) “because it fails to provide a statement that each individual who is a qualified beneficiary with respect to the qualifying event has an independent right to elect continuation coverage . . . .” (Compl. ¶ 18(c.)). The Notice provides: This notice has important information about your right to continue your health care coverage in the ESA Management LLC Group Health Benefits Plan (the Plan(s)) . . . . (D.E. 12-2 at 1) (emphasis added). And, it continues: What’s COBRA continuation coverage? COBRA continuation coverage is the same coverage that you had immediately prior to the qualifying event. It is the same as the Plan(s) provided to other participants or beneficiaries who aren’t getting continuation coverage. Each "qualified beneficiary" (described below) who elects COBRA continuation coverage will have the same rights under the Plan(s) as other participants or beneficiaries covered. Name Date of Birth Relationship to Participant CYNTHIA L DELAUGHTER REDACTED Employee (D.E. 12-2 at 3) (emphasis added).4 3 The Model Notice contemplates six qualifying events under the section titled “Why am I getting this notice?” and provides boxes that can be checked to identify the qualifying event(s) triggering the notice. ESA’s Notice appropriately modifies the Model Notice and notifies Plaintiff she is receiving the Notice because of “End of Employment,” which verbatim tracks the description of that qualifying event in the Model Notice. Compare (12-1 at 3) with (12-2 at 2). 4 The Model Notice contemplates four categories of “qualified beneficiaries” (e.g., employee or former employee, spouse or former spouse, dependent children, or child who is losing coverage under the Plan Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 17 of 25 PageID 191 18 Because allegations in the Complaint materially conflict with an exhibit annexed to the Complaint, the exhibit controls. Griffin Industries, Inc. v. Irvin, 496 F.3d 1189, 1206 (11th Cir. 2007). Thus, Plaintiff fails to state a claim as a matter of law under ERISA § 1166(a) because the Notice Defendant provided tracks the Model Notice in all materials respects, and the allegations otherwise conflict with the exhibit to the Complaint. C. The Notice Permitted Plaintiff to Make an Informed Decision Whether to Elect Continuation Coverage, and Therefore the Complaint Fails to State a Claim. Plaintiff claims Defendant failed to provide a notice that could be understood by an average plan participant because it altered the font size from 12 point Times New Roman in the Model Notice to 9.5 Times New Roman and failed to unequivocally identify the Plan Administrator. (Compl. ¶¶ 26-27, 35-36).5 The Eleventh Circuit has yet to address this precise issue, that is: in an action claiming a violation of ERISA § 1166(a), where the model notice and the notice the employer provided are properly before the Court, whether a plan administrator can be subjected to potential liability for minor deviations from the DOL’s Model Notice. Plaintiff’s allegations in her Complaint, in essence, invite this Court to adopt a strict liability standard for compliance with COBRA notice requirements contained in the Model Notice. Such strict adherence is contrary to COBRA case law, specifically, and analogous decisional law, generally (see FN 6 infra). because the child is no longer a dependent). ESA’s Notice appropriately modifies the Model Notice and notifies Plaintiff that she is a “qualified beneficiary” because she is an employee. Compare (12-1 at 3) with (12-2 at 3). Plaintiff makes no allegation that the Notice omitted any “qualified beneficiary” who was entitled to continuation coverage under the Plan. 5 In the interest of completeness, Defendant addresses the allegation that Defendant failed to unequivocally identify the Plan Administrator under the informed decision standard as well. Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 18 of 25 PageID 192 19 As Plaintiff herself alleges, the proper inquiry for determining Defendant’s compliance with ERISA is an objective one, that is, whether the Notice is comprehensible “to the average plan participant.” Compl. at 8 (heading). Indeed, the Eleventh Circuit requires that the COBRA notice must be “sufficient to permit the discharged employee to make an informed decision whether to elect coverage.” Scott v. Suncoast Beverage Sales, Ltd., 295 F.3d 1223, 1230 (11th Cir. 2002). By the Eleventh Circuit’s standard, a qualified beneficiary is not entitled to a perfect notice, simply one that is objectively reasonable. See id. As here, when there is no dispute that a plaintiff received the notice and no real dispute about the content of the attached notice, whether it was “sufficient to permit the discharged employee to make an informed decision . . .” is for the Court to determine as a matter of law. See Franks v. Cent. Garden & Pet Co., No. 3:06-CV-68-CDL, 2007 WL 2320624, at *6 (M.D. Ga. Aug. 10, 2007) (citing Scott, 295 F.3d at 1230) (finding defendant’s notice sufficient despite technical deficiencies because the plaintiff continued her coverage)); accord Palmer v. Champion Mortg., 465 F.3d 24, 27 (1st Cir. 2006).6 6 Determining compliance with a federal agency’s model notice from the vantage point of a typical affected individual, rather than through a party’s subjective understanding, is firmly established in decisional law. The model notice, for example, under the Truth in Lending Act (“TILA”), 15 U.S.C. § 1635(f), and case law addressing allegations similar to Plaintiff’s, is instructive. TILA, like COBRA, imposes disclosure obligations on certain parties, which, under TILA, apply to creditors and mandate disclosure of material terms in certain credit transactions. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998). Just as Congress empowered the DOL to promulgate content requirements in the COBRA notice, the interpretive authority in TILA is lodged with the Board of Governors of the Federal Reserve System (the “Board”). The Board issued a model form for compliance with TILA’s rescission notice requirements with respect to consumer loans. Regulation Z, 12 C.F.R. § 226.23(a). In the Palmer case, the First Circuit addressed the district court’s granting of a motion to dismiss based on the plaintiff’s allegation that the TILA notice she received was “defective” and “confusing.” Palmer v. Champion Mortg., 465 F.3d 24, 27 (1st Cir. 2006). Specifically, the plaintiff “point[ed] to [the] inclusion of a date-certain deadline for rescission (April 1, 2003) and complained that the designated date already had passed by the time she received the [n]otice.” Id. The defendant argued that its notice was identical to the notice promulgated by the Federal Reserve Board. Id. at 28. Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 19 of 25 PageID 193 20 Analyzed within this framework, Plaintiff’s allegations that the Notice prevented her from making an informed decision whether to elect continuation coverage are mere cavil. (Compl. ¶ 23). Plaintiff claims that a 2.5 point font size reduction in the Notice is actionable under ERISA § 1166(a). This allegation has no legal support. Nowhere in section (b)(4) of the regulation, the appendix thereto, or in the final rule itself, did the DOL specify font size or prominence for any content in the Model Notice. See 29 C.F.R. § 2590.606-4; 69 F.R. 30084-01; Healthcare Continuation Coverage, 2004 WL 1159115, at *30084 (May 26, 2004). When the DOL requires prominence of information in its regulatory framework, it knows how to mandate it. Cf. 29 C.F.R. § 825.300(a)(1) The court made three related observations which are pertinent to the disposition of this Motion. First, the court found that, despite the principle that the well-pleaded facts in a complaint are entitled to a deferential view on a motion to dismiss, courts “need not “swallow [the plaintiff’s] invective hook, line, and sinker.” Id. (quoting Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir.1996). The Eleventh Circuit, notably, has cited approvingly to this standard of review. Marsh v. Butler Cty., Ala., 268 F.3d 1014, 1036, n.16 (11th Cir. 2001) (en banc), abrogated in part by Bell Atl. Corp. v. Twombly, 550 U.S. 544, 561-63, 127 S.Ct. 1955, 1968-69, 167 L.Ed.2d 929 (2007) (citing Mass. School of Law v. American Bar, 142 F.3d 26, 40 (1st Cir.1998) (a reviewing court need not “swallow plaintiff's invective hook, line and sinker; bald assertions unsupportable conclusions, periphrastic circumlocutions, and the like need not be credited”)). Second, and relying on the Eleventh Circuit’s guidance on the proper inquiry for mandated disclosures, the court found that the “text of the disclosures themselves,” reviewed under an objective reasonableness standard, rather than “plaintiffs’ descriptions of their subjective understandings,” is the controlling inquiry. Id. (citing Zamarippa v. Cy's Car Sales, Inc., 674 F.2d 877, 879 (11th Cir.1982); id. (citing Edmondson v. Allen-Russell Ford, Inc., 577 F.2d 291, 296 (5th Cir.1978). With these rules in mind, the court found: Although the Notice does state in part that rescission has to occur “no later than midnight of APRIL 01, 2003,” the plaintiff wrests this statement from its contextual moorings. The statement is followed immediately by a parenthetical reading “(or midnight of the third business day following the latest of the three (3) events listed above).” We fail to see how any reasonably alert person-that is, the average consumer-reading the Notice would be drawn to the April 1 deadline without also grasping the twice-repeated alternative deadlines. Third, that the notice the defendant utilized, the court held, “closely track[ed] the model language” of the Board’s form, was, “at the very least, prima facie evidence of the adequacy of the disclosure.” Id. at 29 (emphasis added). Other courts have found that a party’s compliance with the Board’s model form invariably foreclosed a right of action under TILA. See Gibson v. Bob Watson Chevrolet-Geo, Inc., 112 F.3d 283, 286 (7th Cir. 1997) (citing 15 U.S.C. §§ 1604(b), 1640(f); 12 C.F.R. Pt. 226, Supp. I Introduction para. 1) (“A disclosure that complies with the form is not actionable.”) Murphy v. Empire of Am. FSA, 583 F. Supp. 1563, 1566 (W.D.N.Y.), aff'd, 746 F.2d 931 (2d Cir. 1984) (“The right to rescind notice sent by the lender to the consumers . . . is a model form issued by the Federal Reserve Board which carries with it that regulating body’s approval as in compliance with the TILA and its applicable regulation.”) Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 20 of 25 PageID 194 21 (employers must post a conspicuous and prominent notice explaining the Family and Medical Leave Act’s provisions and procedures).7 Even accepting as true Plaintiff’s claim that the font size is 9.5 point, such an allegation has no support for imposing liability under comparable case law. Chalfonte Condo. Apartment Ass’n, Inc. v. QBE Ins. Corp., 695 F.3d 1215, 1231 (11th Cir. 2012) (analyzing Fla. Stat. § 627.104 regarding property insurer’s obligations to comply with language and type size requirements in the statute and relying on Florida appellate decisions holding 9.5 point font size sufficient when statute required 12 point); Pettineo v. GE Money Bank, No. CIV.A. 10-2569, 2011 WL 1163308, at *5 (E.D. Pa. Mar. 30, 2011) (analyzing complaint alleging use of 8 point font size set in Equal Credit Opportunity Act under a “least sophisticated” consumer standard, and dismissing plaintiff’s claims alleging violations of the ECOA’s disclosure requirements). Plaintiff additionally quibbles that, in alleged violation of § 2590.606-4(b)(4)(i), ESA’s Notice fails to unambiguously identify the plan administrator. Plaintiff points to language in the Notice that reads: “Please note: Although ADP COBRA Services has contracted with the employer to provide various COBRA administration services, ADP is not the Plan Administrator.” (Compl. ¶ 27) (citing Notice at 3). The language is “confusing,” Plaintiff claims, because the Notice names ADP COBRA Services and the employer, but never the Plan Administrator. (Id. ¶ 28). Again, Plaintiff tilts at windmills. The focal point of the Court’s inquiry is whether the Notice permitted Plaintiff to make an informed decision whether to elect continuation coverage. Scott, 295 F.3d at 1230. 7 The DOL is tasked with administering the Family and Medical Leave Act. Smith v. BellSouth Telecommunications, Inc., 273 F.3d 1303, 1305 (11th Cir. 2001). Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 21 of 25 PageID 195 22 As an initial observation, neither the language in ERISA § 1166, the regulation itself, COBRA case law, nor the DOL’s final rule provide any requirement that the notice identify the Plan Administrator with any prominence or conspicuity. 29 C.F.R. § 2590.606-4(b)(i). Most important is the Notice, and as stated supra, it identifies quite clearly the Plan Administrator, provides contact information, and precisely tracks the Model Notice’s language in the appropriate section. See Section III.B.(i). In any event, it is clear that the Notice provided all the pertinent information for Plaintiff to make an informed decision. The Notice’s content bears this out, as it provided inter alia: the name of the ERISA health benefit plan (12-2 at 1); the plan types eligible for continuation coverage (id.); the coverage end dates for each plan type (id.); a list of the qualified beneficiaries who could elect COBRA continuation coverage (id. at 2); the start dates, monthly costs, eligibility periods, and eligibility end dates for the available plan types (id. at 2); and, when the election period opened and closed (id. at 10). The Notice then supplemented the Model Notice by furnishing a “Quick Start Guide” to assist Plaintiff in electing coverage, paying the first month’s premium, and providing the completed election form. (Id. at 7). Critically, Defendant’s Notice far exceeds the minimum content federal courts have found to satisfy the “informed decision” standard under ERISA § 1166(a). Geissal ex rel. Estate of Geissal v. Moore Med. Corp., 338 F.3d 926, 934 (8th Cir. 2003) (holding “adequately informed” standard satisfied where qualified beneficiary notified of coverage entitled to receive and premium amount) (internal citation omitted); Smith v. Rogers Galvanizing Co., 128 F.3d 1380, 1384 (10th Cir. 1997) (holding “informed decision” satisfied where COBRA notice included notification of right to elect individual coverage, premium amounts, and election period Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 22 of 25 PageID 196 23 window); Larsen v. Roche Laboratories, No. 204-CV-00263-JWS, 2006 WL 2668984, at *8 (D. Ariz. Sept. 18, 2006) (finding “informed decision” satisfied under oral notice despite absence of premium due dates for continuation coverage, where oral notice provided election period, approximate premium amounts, and identity of medical/insurance carriers); DeSimone v. Siena Coll., No. 90-CV-1058, 1991 WL 64857, at *5 (N.D.N.Y. Apr. 25, 1991) (finding no violation of ERISA § 1166(a) where defendant’s notice was “almost identical” to the DOL’s then-model notice, and provided coverage length, obligation regarding premiums, and election period window); Brown v. Bd. of Educ. of Shelby Cty. Sch., 47 F. Supp. 3d 665, 707 (W.D. Tenn. 2014) (finding “informed decision” satisfied where notice provided right to elect continuation coverage, election period window, coverage period of 18 months, and obligation to pay premiums) (internal citation omitted); Joiner v. Dreisenga & Assocs., Inc., No. 1:04-CV-437, 2005 WL 2090899, at *3 (W.D. Mich. Aug. 29, 2005) (finding “informed decision” where qualified beneficiary orally notified of right to continue coverage and employee notified of responsibility of premium payments). Had Ms. Delaughter needed to make a decision about continuation coverage (and she didn’t), she could have done so adequately informed by ESA’s Notice. Based on the foregoing analysis and precedents, because Plaintiff received the Notice in a timely manner and because there is no true dispute as to its contents, the Court should dismiss the COBRA count for failure to state a claim upon which relief can be granted. Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 23 of 25 PageID 197 24 CONCLUSION WHEREFORE, Defendant ESA Management LLC requests that the Court dismiss Plaintiff’s Complaint for lack of subject matter jurisdiction, or, alternatively, for failure to state a claim upon which relief can be granted, with prejudice. Defendant requests oral argument under Local Rule 3.01(j) and estimates 45 minutes for argument. Dated: March 21, 2017 Respectfully submitted, LITTLER MENDELSON, P.C. Littler Mendelson, P.C. 111 North Magnolia Avenue Orlando, Florida 32801 Telephone: (407) 393-2900 Facsimile: (407) 393-2929 /s/ Ben K. Schott Jeffrey B. Jones, Esquire Florida Bar No.: 039950 Email: jbjones@littler.com Ben K. Schott, Esquire Florida Bar No. 107756 E-mail: bschott@littler.com /s/ Joseph P. Harkins______________ Joseph P. Harkins (Lead Counsel) District of Columbia Bar No. 394902 Admitted Pro Hac Vice E-mail: jharkins@littler.com Littler Mendelson, P.C. 815 Connecticut Avenue, N.W. Suite 400 Washington, D.C. 20006 Telephone: (202) 842-3400 Facsimile: (202) 842-0011 Counsel for Defendant ESA Management LLC Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 24 of 25 PageID 198 25 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on this 21st day of March, 2017, I electronically filed the foregoing with the Clerk of the Court by using the E-File system and a correct copy of the foregoing has been furnished by electronic mail to: Luis A. Cabassa, Esquire Donna V. Smith, Esquire, and Brandon J. Hill, Esquire, Wenzel Fenton Cabassa, P.A., 1110 North Florida Avenue, Suite 300, Tampa, Florida 33602-3343, email: lcabassa@wfclaw.com; dsmith@wfclaw.com; bhill@wfclaw.com. /s/ Ben K. Schott Ben K. Schott Firmwide:146312321.1 052026.1126 Case 8:16-cv-03302-MSS-AEP Document 29 Filed 03/21/17 Page 25 of 25 PageID 199 Case 8:16-cv-03302-MSS-AEP Document 29-1 Filed 03/21/17 Page 1 of 4 PageID 200 Case 8:16-cv-03302-MSS-AEP Document 29-1 Filed 03/21/17 Page 2 of 4 PageID 201 Case 8:16-cv-03302-MSS-AEP Document 29-1 Filed 03/21/17 Page 3 of 4 PageID 202 Case 8:16-cv-03302-MSS-AEP Document 29-1 Filed 03/21/17 Page 4 of 4 PageID 203