Sean Deckard v. Interstate Bakeries Corp.
486 B.R. 528
8th Cir.2013Background
- Hostess administered an ERISA plan and used CIGNA as claims administrator.
- Deckard joined the Plan in 2004 and received COBRA notices at start in the ordinary course.
- Hostess, in Chapter 11, cannot produce witnesses or documentation that Deckard received COBRA notice upon enrollment or at termination.
- Deckard’s coverage was terminated on Sept 11, 2006, but the Plan continued to pay benefits for about six months without COBRA notice.
- Coverage was retroactively reinstated Aug 2008–Feb 2009; benefits were partially clawed back and then reversed; Deckard incurred unreimbursed medical expenses.
- Deckard filed an administrative expense claim in Hostess’s bankruptcy, seeking penalties for COBRA-notice violations and reimbursement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether failure to provide COBRA notices supports civil penalties under §1132(c)(1). | Deckard. | Hostess. | Yes, penalties may be awarded for notice failures. |
| Whether the prejudice from lack of notice justifies penalties given later reinstatement of coverage. | Deckard. | Hostess. | Prejudice from the gap supports penalties, despite retroactive reinstatement. |
| Whether continuing benefits after a qualifying event bars penalties. | Deckard. | Hostess. | Not dispositive; penalties depend on prejudice and conduct. |
| Whether bad-faith finding is required for penalties to be imposed. | Deckard. | Hostess. | Good faith does not preclude penalties where notice was deficient. |
| Whether attorney’s fees were appropriate given the outcome. | Deckard. | Hostess. | No, fees denial affirmed; Deckard did not meet “success on the merits” for fees. |
Key Cases Cited
- Starr v. Metro. Sys., Inc., 461 F.3d 1036 (8th Cir. 2006) (considerations for statutory penalties and prejudice; fee-shifting on COBRA)
- Kerr v. Charles F. Vatterott & Co., 184 F.3d 938 (8th Cir. 1999) (prejudice and conduct relevant to penalties)
- In re Farmland Indus., Inc., 397 F.3d 647 (8th Cir. 2005) (abuse of discretion when relying on clearly erroneous facts)
- Geissal v. Moore Med. Corp., 114 F.3d 1458 (8th Cir. 1997) (significance of information available to employer at COBRA election; later overruled on other grounds)
- Great West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (U.S. 2002) (statutory interpretation of COBRA purposes and penalties)