903 F.3d 460
5th Cir.2018Background
- David Hager, DBG's former CFO, elected COBRA continuation after his August 15, 2014 termination and paid premiums through August 2015.
- DBG terminated its Blue Cross plan effective June 1, 2015; DBG produced a termination letter addressed to Hager’s former address that Hager says he never received.
- Hager underwent cancer treatment June–August 2015 and later discovered he lacked coverage for that period; he sued DBG in February 2016 seeking reimbursement of medical expenses and statutory relief for COBRA notice violations.
- At pretrial, Hager conceded he received initial COBRA-election notice and proceeded only on the claim that DBG failed to notify him of the plan’s termination; the district court sua sponte dismissed the COBRA claim with prejudice, concluding ERISA provided no monetary remedy.
- The Fifth Circuit reversed, holding (1) Hager has ERISA participant standing, (2) the COBRA regulation requires notice when coverage ends earlier than the maximum continuation period, (3) factual disputes precluded dismissal, and (4) monetary recovery may be available as a discretionary civil penalty under 29 U.S.C. § 1132(c).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing under ERISA to sue after plan termination | Hager was a participant eligible for benefits when DBG decided to terminate the plan, so he may sue under §1132 | DBG argued termination bars participant status (district court questioned standing) | Hager is a participant and has standing; employers cannot avoid ERISA suits by terminating benefits |
| Whether COBRA requires notice of premature plan termination | Hager: 29 C.F.R. §2590.606-4(d) requires notice if coverage ends before the maximum continuation period | DBG/district court: termination of plan ends the maximum period, so no separate notice duty | Regulation requires notice when plan ends earlier than the qualifying-event maximum (e.g., 18 months for termination) |
| Sufficiency of DBG’s evidence that notice was given | Hager: DBG’s lone unsigned letter and conduct (keeping premiums, texts) create factual dispute about good-faith notice | DBG: produced a termination letter addressed to Hager’s former address showing compliance | The letter alone is insufficient to resolve notice; factual issues remain for trial or summary judgment |
| Availability of monetary relief for COBRA notice violation | Hager seeks compensatory medical expenses as relief | DBG/district court relied on precedent denying benefits where plan is defunct; argued ERISA bars money damages here | §1132(a)(1)(B) cannot provide benefits because the plan no longer exists; but §1132(c) authorizes a discretionary civil penalty (up to $100/day and “other relief”) and court may award medical expenses as part of that penalty after factual findings |
Key Cases Cited
- Varity Corp. v. Howe, 516 U.S. 489 (1996) (employees who were misled about benefits can be "participants or beneficiaries" for ERISA suits)
- Geissal v. Moore Med. Corp., 524 U.S. 74 (1998) (COBRA is part of ERISA; addresses COBRA enforcement context)
- Peralta v. Hispanic Bus., Inc., 419 F.3d 1064 (9th Cir. 2005) (held money damages unavailable for certain ERISA fiduciary breaches after plan termination)
- Knudson v. Great–West Life & Annuity Ins. Co., 534 U.S. 204 (2002) (limits on equitable relief under ERISA §1132(a)(3))
- Mertens v. Hewitt Associates, 508 U.S. 248 (1993) (ERISA remedies are constrained by traditional equitable principles)
- Christopher v. Mobil Oil Corp., 950 F.2d 1209 (5th Cir. 1992) (ERISA standing where plaintiff would be a participant but for employer’s misconduct)