GOMEZ v. ST. VINCENT HEALTH (August 15, 2011)
St. Vincent Health operates a number of hospitals and health care facilities in central Indiana and employs thousands of people. Federal law obligates it to give timely notice to any qualified person who leaves it employ of his or her right to extended health insurance coverage under COBRA. St. Vincent uses a third-party administrator to manage the process of sending out these COBRA notices. To monitor and ensure its compliance with this requirement, St. Vincent also established an oversight system, pursuant to which an outside accounting firm audited its program, and a call center, where current and former employees can get benefits questions answered. Notwithstanding these safeguards, three former employees filed a class-action against St. Vincent in February of 2006 alleging that many employees received their COBRA notices late or not at all. St. Vincent conducted an internal investigation and concluded that over 200 individuals in the preceding 21 months failed to receive timely notices. It provided notices to each of those individuals, allowed a retroactive benefits selection, and even offered a payment plan if the individual had trouble becoming current with premium payments. Meanwhile, the district court declined to certify the class for several reasons, including inadequate class counsel, and granted summary judgment to St. Vincent on the individual claims. The plaintiffs filed an appeal, but later withdrew it. Undaunted, plaintiffs' counsel solicited new class representatives from information it acquired in the first case and filed a new, almost identical, class action. The two named plaintiffs are Blanca Gomez and Joan Wagner-Barnett. Gomez received her COBRA notice 17 months late but she testified that she would not have elected to extend her benefits. Wagner-Barnett also received notice 17 months late, testified that she would have extended coverage, and contends that she incurred almost $1000 in out-of-pocket expenses that she would not have otherwise incurred. Judge Barker (S.D. Ind.) denied class certification on inadequacy of counsel grounds. On the individual claims, the district court concluded that the circumstances did not warrant a statutory penalty, that Gomez suffered no damage since she would not have elected extended coverage anyway, and awarded Wagner-Barnett $396 in damages, the difference between her out-of-pocket prescription costs and the premium she would have paid. Gomez and Wagner-Barnett appeal.
In their opinion, Seventh Circuit Judges Cudahy, Kanne, and Tinder affirmed. The appeal raises three issues: the amount of Wagner-Barnett’s damages, the propriety of a statutory penalty, and class certification. The Court first questioned the propriety of any damages. ERISA’s enforcement provision does not authorize compensatory damages -- only equitable relief and "such other relief" as is proper. Here, the district court followed a practice used by other district courts (and at least condoned by Courts of Appeals) to include, as "such other relief," a party's medical expenses less the premiums that would have been paid. Although "reticent" to condone such an approach, the Court found no error. The amount was small, it did not contradict ERISA’s plain language, and St. Vincent did not appeal on that ground. With respect to Wagner-Barnett’s request for additional medical expenses, the Court concluded that the district court did not abuse its discretion in denying those expenses. The Court turned to statutory penalties. Under the statute, the district court could have imposed as much as $110 a day in statutory penalties. The Court found no error in the district court's approach. It considered the right factors, including any prejudice to the former employee and the nature of the company’s conduct. There is no evidence of bad faith or gross negligence on the part of St. Vincent. Furthermore, there is no evidence of any prejudice to the plaintiffs. When same Vincent discovered its noncompliance, it contacted the former employees, provided notice, allowed for a retroactive election, and even offered a payment plan to catch up on the unpaid premiums. Finally, the Court turned to the class certification issue. Again, it found no error. It noted that counsel did not even address much of the district court's rationale with respect to his diligence, respect for judicial resources, and promptness.