Linda Brown v. Aventis ( 2003 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 02-4063/03-2084
___________
Linda Brown, *
*
Plaintiff-Appellee, *
* Appeal from the United States
v. * District Court for the Western
* District of Missouri.
Aventis Pharmaceuticals, Inc.; *
Helen Hefner, Plan Administrator *
*
Defendants-Appellants. *
___________
Submitted: June 13, 2003
Filed: September 9, 2003
___________
Before MELLOY, BEAM and SMITH, Circuit Judges.
___________
MELLOY, Circuit Judge.
Defendants-Appellants Aventis Pharmaceuticals and Helen Hefner appeal the
orders of the district court1 requiring them to pay the plaintiff, Linda Brown, $8030
in statutory penalties for a violation of COBRA notification, $11,550 in statutory
penalties under ERISA for failure to supply summary plan documents after a written
request, and a certificate of life insurance for $39,000 minus the amount of premiums
1
The Honorable Fernando J. Gaitan, Jr., United States District Judge for the
Western District of Missouri.
that would have been incurred by the plaintiff in exercising her life insurance
conversion rights. We affirm.
I.
Linda Sue Brown began working for one of the defendant’s predecessor
companies in 1986. She continued to work for the company until 2000 when she
received a 180-day period of disability leave. When Brown was unable to return to
work at the end of this period she was terminated. Brown’s termination letter was
sent on November 15, 2000. It informed her that the effective date of her termination
was October 29, 2000. The letter also indicated that Brown would receive further
information regarding the impact of termination on her benefits.
Brown’s benefits as an Aventis employee included health, dental, and life
insurance coverage. Employees also had the right to convert their life insurance
benefits upon leaving the company. This conversion right allowed employees to
maintain their current level of coverage without having to provide additional evidence
of insurability. This is significant because Brown has health problems making it
difficult to get insurance from a new provider. To qualify for conversion and maintain
the life insurance benefits, an employee must fill out the necessary paperwork and pay
a fee within thirty-one days of termination.
This process of conversion and the deadlines involved are explained in a
Summary Plan Description (SPD), contained within Aventis’ Employee Yearbook.
Aventis provided Brown with an Employee Yearbook, but Brown did not possess it
at the time of her termination. She had left it in her employee locker when she went
on disability leave. While she was on leave, the company’s maintenance staff cleaned
out her locker and did not return the contents to her.
2
When Brown did not receive the information promised in her termination letter,
she, on at least two occasions, called representatives in Aventis’ Human Resources
Department, who assured her that the information would be forthcoming. When the
information had not arrived nearly two months after her termination, Brown hired an
attorney in an attempt to obtain it.
Brown’s attorney mailed two letters requesting this information on January 23,
2001 and February 7, 2001. Although these letters did not specifically ask for a
“summary plan description,” the district court found them to constitute a request for
the SPD based on their language requesting information about “all benefits.” Brown
received COBRA information and insurance conversion forms, but not a SPD, on
February 23, 2001. Upon receiving these forms, Brown attempted to convert her life
insurance coverage. This application and the subsequent appeal were denied.
UNUM, the insurance provider, is not a party to this action.
After a bench trial, Brown was awarded $8030, the maximum statutory
damages allowed, for Aventis’ failure to provide COBRA notification within the
required time period. Brown also received $11,550 in civil penalties authorized by
ERISA for Aventis’ failure to supply a SPD upon receipt of Brown’s written request.
Aventis was additionally required to provide Brown with a life insurance certificate
for $39,000–the amount of coverage Brown was unable to convert–minus any costs
Brown would have incurred in the process of conversion.
II.
This court reviews the decision of the trial court to grant or deny civil penalties
under ERISA for abuse of discretion. Wilson v. Moog Auto., Inc. Pension Plan, 193
F.3d 1004, 1010 (8th Cir. 1999). Aventis argues that it was an abuse of discretion to
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award Brown the maximum damages allowed because (1) there was no evidence of
bad faith and (2) Brown suffered no harm as a result of receiving her COBRA
notification late because Aventis provided her health benefits retroactively.
Although an “employer’s good faith and the absence of harm are relevant in
deciding whether to award a statutory penalty,” Chesnut v. Montgomery, 307 F.3d
698, 704 (8th Cir. 2002), “neither [a defendant’s] good faith nor the absence of actual
injury to [the plaintiff] precludes the award of a statutory penalty.” Id. at 703. There
is no evidence that Aventis’ failure to provide the necessary information was anything
other than an administrative error–ostensibly caused by the company moving its
offices during this time period. Even so, Aventis’ failure to act for a period of several
months, despite Brown’s repeated phone calls, could be considered bad faith.
Additionally, although Brown did not suffer any loss of health benefits due to the
delay,2 she was forced to invest time, effort, and money in hiring an attorney to gain
access to information that she was legally entitled to. Thus it was not an abuse of
discretion for the district court to award maximum damages.
III.
Aventis also contends that it was an abuse of discretion to award the plaintiff
statutory penalties under 29 U.S.C. § 1132(c)(1)(B) for Aventis’ failure to provide a
SPD upon written request as required by 29 U.S.C. § 1024(b)(4). The first rationale
for Aventis’ claim is that Brown did not plead or contend that she had made a written
demand for the SPD under 29 U.S.C. § 1024(b)(4) nor that she was seeking civil
penalties under 29 U.S.C. § 1132(c)(1)(B). Aventis also argues that these claims
were not tried with the consent of the parties. However, Brown’s first amended
2
In March 2001, after the second attorney letter, Aventis acknowledged its
err in not providing COBRA information. It allowed Ms. Brown to convert her
health insurance and make it retroactive to the date of termination.
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complaint (Paragraph 20) does reference civil penalties available under ERISA §
1132(c)(1). Also, in response to Aventis’ summary judgment motion, Brown
specifically raised issues of fact regarding Aventis’ failure to provide the Employee
Yearbook which contained the SPD. This was adequate to put the defense on notice
that Brown sought damages for the failure to provide the SPD. Furthermore, Aventis
never raised any objections in the district court regarding the introduction of evidence
about the SPD. “The appellate court will not entertain such objection [regarding the
admission of evidence] on appeal for the first time.” United States v. Price, 464 F.2d
1217, 1219 (8th Cir. 1972).
Aventis’ second argument against civil penalties for failure to provide the SPD
is that an employer is not required to provide information about life insurance
benefits upon termination as long as it previously provided a SPD to the employee.
While this principle is generally true, it does not apply in this case because Aventis
prevented Brown from accessing the SPD it had given her. While Brown was on
leave, the company’s maintenance staff removed the SPD from her employee locker
and did not return it to her. No additional copy was provided.
Lastly, Aventis cites Fisher v. Metropolitan Life Ins. Co. in an attempt to show
that Brown’s written request was not specific enough to put Aventis on notice to
provide a SPD. 895 F.2d 1073, 1077 (5th Cir. 1990). Fisher was denied statutory
damages because his written request for information was deemed insufficient.
Fisher’s request was
nothing more than a scribbled note at the bottom of a Social Security
award certificate requesting, not Plan documents, but rather “a copy of
the policies covering my contract for salary continuation.” . . . Nothing
in either the request or the response indicates that Metropolitan knew or
should have known that Fisher had requested a copy of any document
related to [the company benefits] plan.
5
Id. Brown’s request is distinguished from Fisher’s in two key respects. First, it was
a formal letter, sent to two separate individuals in the company. Second, although
Brown’s letter did request specific information regarding COBRA, it also requested
“notice of termination of any of her other benefits.” The district court issued a
finding of fact that this constituted a request for the SPD. As this finding was not a
clear error, it was not an abuse of discretion for the district court to award civil
penalties under 1132(c).
IV.
Whether the order to provide a certificate of life insurance is an appropriate
equitable remedy under ERISA is primarily a question of law reviewed de novo. See
Kerr v. Charles F. Vatterott & Co., 184 F.3d 938, 942 (8th Cir. 1999) (finding that an
appeal as to whether lost interest is an equitable remedy involved primarily issues of
law). To the extent that the decision rests on any underlying facts, we review the
district court’s findings of fact for clear error. Greater Kansas City Laborers Pension
Fund v. Superior General Contractors, Inc., 104 F.3d 1050, 1054 (8th Cir. 1997) (en
banc).
Brown’s effective date of termination was October 29, 2000. Thus she had to
apply for conversion of her life insurance by November, 29, 2000 (within thirty-one
days).3 Aventis argues that because the time period for conversion expired before
Brown’s written request for information on January 23, 2000, its failure to provide
the information did not “cause” Brown to lose her benefits. This argument is flawed.
3
Ms. Brown actually had only 14 days to convert because she was not
notified of the termination until November 15, 2000, with a retroactive termination
date of October 29, 2000.
6
Brown clearly would have applied to convert her benefits if she had been aware of
the procedures and deadlines for doing so. She did apply for conversion after Aventis
provided the necessary forms, and there is no evidence to indicate she would have
acted differently if the forms were provided earlier. Additionally, Brown did not
receive notice that she was fired until November 15, 2000. Thus, even if she had filed
a written request for information as soon as she learned of her termination, she would
not have received the necessary information and forms within thirty-one days of
termination–assuming Aventis would have taken thirty-one days to get her the
information as they did when they received the written request from Brown’s attorney
in January of 2001. In fact, under Aventis’ logic, if it is not required to provide the
necessary conversion forms until after receiving a written request, it would be
practically impossible for terminated employees to convert their life insurance
benefits within the necessary time period.
Brown also reasonably believed she would receive information about her
benefits without having to take additional action. Her termination letter states: “You
will receive a packet of information describing the effect of termination on all of your
benefits.” It is unfair for Aventis to lead an employee to believe she would be
provided important information and then claim that the cause of her inability to
exercise her rights was her failure to request that information. Furthermore, Aventis
concedes that Brown did not get her insurance portability and conversion forms “due
to an error made by Aventis Pharmaceuticals.” Trial Exhibit # 16, Appendix Volume
II, (July 12, 2001 Letter from Aventis Benefits Analyst to UNUM Insurance
Company).
Aventis argues that it had no duty to provide Brown with the necessary
conversion information because the information was contained in the SPD. Castello
v. Gamache, 593 F.2d 358, 361 (8th Cir. 1979) (“[A]n insured is presumed to have
constructive knowledge of the terms of a group policy.”). This case is distinguishable
from Castello, however, because in that case there was no evidence that the employee
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had requested a copy of the SPD. Here, the district court made a finding of fact that
such a request existed. Until Brown was terminated, she had no reason to memorize
the procedures required to convert her benefits. Once the need to learn these
procedures arose, she contacted Aventis, but was unsuccessful in her attempts to have
her copy of the SPD replaced. Putting important information in a SPD may fulfill a
company’s duty to inform its employees, but it does not meet this burden when an
employee does not have meaningful access to that document.
Although Aventis is not a life insurance company and thus cannot directly
provide Brown with coverage, the district court’s order can be read to require Aventis
to purchase insurance from an outside provider and present proof of such insurance
to Brown. Aventis has already demonstrated the feasability of this course of action
by presenting Brown with a $10,000 certificate of life insurance as a retiree of the
company. The district court subtracted this $10,000 in coverage from Brown’s
previous coverage level of $49,000 to arrive at $39,000 as the value of the certificate
of life insurance that Aventis must provide. Aventis argues, however, that this
remedy goes beyond the limitation of ERISA equitable remedies.
The key issue is whether the restoration of the life insurance coverage is
“restitution,” which is allowed, or “compensatory damages,” which are not allowed.
Aventis cites Kerr for the proposition that a “restitutionary award focuses on the
defendant’s wrongfully obtained gain while a compensatory award focuses on the
plaintiff’s loss at the defendant’s hands.” 184 F.3d at 944. We believe the
requirement in this case is consistent with the holding in Kerr where we stated:
Equitable relief clearly includes injunctive and declaratory relief. We
held in Howe that . . . the employees in question . . . were entitled to an
injunctive order reinstating them as members of the plan. . . . The
monetary portion of our award reflected the benefits that the employees
would have earned if they had remained plan participants. The
injunction did not provide retrospective relief for the period in which the
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employees were not covered under the plan. Thus, our “restitutionary”
award was necessary as a corollary to the injunction–restoring the
plaintiffs “to the position they would have occupied [as participants in
the plan] if the misrepresentations ... had never occurred.”
Id. (last two alterations in original) (internal citations omitted). This statement
demonstrates that the court is concerned not only with the technical differences
between the types of awards, but also with restoring plaintiffs to the position they
were in before the defendants’ actions. Here, as in Kerr, if not for the improper
actions of the defendant, the plaintiff would have continued to enjoy the benefits of
the plan.
Additionally, the district court did not enter an award for monetary damages.
It ordered Aventis to procure a life insurance certificate. The value of this life
insurance certificate was reduced by the costs Brown would have incurred during
conversion. Brown is not receiving compensation for any past or future losses or
expenditures. The order simply restores her benefits to the level they would have
maintained if not for Aventis’ failure to provide crucial information. Thus the order
is more similar to Howe v. Varity Corp., 36 F.3d 746, 756 (8th Cir. 1994) (affirming
the judgment of the lower court and modifying the remedy to include injunctive
reinstatement of benefits), than Novak v. Anderson Corp., 962 F.2d 757, 759 (8th Cir.
1992) (denying compensatory damages when a failure to provide notice of a “roll-
over” provision in a pension plan resulted in an increased tax liability). Aventis
argues that because it must purchase a policy to give to Brown, the award is
necessarily a compensatory award for “money damages” and is thus prohibited. This
is not the case, as noted in a different context by the Supreme Court, Bowen v.
Massachusetts, 487 U.S. 879, 893-95 (1988), and, in an ERISA action, by this court.
Howe, 36 F.3d at 756 (“The relief awarded includes payments of money that plaintiffs
would have received if they had remained members of the M-F Plan, but we do not
think these payments can properly be characterized as ‘damages,’ and thus
unavailable under Section 502(a)(3). Rather, we view the payments as restitution.”).
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For the above reasons, the award of the life insurance certificate is properly
characterized as equitable relief and is affirmed.
V.
Subsequent to oral argument, the panel agreed to take up and consolidate the
issue of attorney’s fees in this appeal. The award of attorney fees under ERISA is
reviewed for abuse of discretion. Geissal v. Moore Med. Corp., Nos. 02-2255 & 02-
2256, 2003 WL 21755925, at *7 (8th Cir. July 31, 2003). The award of fees in
ERISA cases is discretionary and there is no presumption favoring the award of fees
to either party. Martin v. Arkansas Blue Cross and Blue Shield, 299 F.3d 966, 971-2
(8th Cir. 2002) (en banc), cert. denied, 123 S. Ct. 967 (2003).
In determining whether to award fees, courts should consider the five factors
this Court set out in Lawrence v. Westerhaus:
(1) the degree of the opposing parties’ culpability or bad faith; (2) the
ability of the opposing parties to satisfy an award of attorneys’ fees; (3)
whether an award of attorneys’ fees against the opposing parties could
deter other persons acting under similar circumstances; (4) whether the
parties requesting attorneys’ fees sought to benefit all participants and
beneficiaries of an ERISA plan or to resolve a significant legal question
regarding ERISA itself; and (5) the relative merits of the parties’
positions.
749 F.2d 494, 496 (8th Cir. 1984). The district court analyzed each of these factors
separately and found that, on the whole, they weighed in favor of the plaintiff. The
court awarded Brown $23,471.63 in attorney fees, representing a lodestar fee of
10
$31,295.50 less twenty-five percent to eliminate any duplication of efforts or
redundancy. The court’s methods in awarding fees were proper. Thus, the award for
attorney fees was not an abuse of discretion. We affirm.
A true copy.
Attest.
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT
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