Faegre Drinker Biddle & Reath LLP, a Delaware limited liability partnership | This website contains attorney advertising.
May 17, 2021

ERISA Litigation Roundup: Eastern District of Michigan Weighs in on Allegations of COBRA Notice Violations

On May 4, 2021, the United States District Court for the Eastern District of Michigan granted in part and denied in part a motion to dismiss in a class action lawsuit regarding the adequate notice of the right to continued insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Green v. FCA US, LLC, No. 20-cv-13079 (E.D. Mich. May 4, 2021).

In the complaint, a terminated employee and his wife (the plaintiffs) sued the employer on behalf of a class, alleging that the COBRA notice sent to the employee after his termination was deficient because:

  1. The notice failed to provide the name and contact information of the plan administrator.
  2. The notice was not drafted to be understood by the average plan participant because it contained the “unnecessary and confusing” statement that filing an application with incomplete information “is a fraudulent act” that may result in criminal or civil penalties.

The employer filed a motion to dismiss both causes of action based on a lack of standing under Federal Rules of Civil Procedure (FRCP) 12(b)(1) and failure to state a claim pursuant to FRCP 12(b)(6).

The court dismissed the claim that the notice failed to provide the name and contact information of the plan administrator, reasoning that the plaintiffs had not alleged any injury resulting from the failure to provide this information. The plaintiffs claimed that they suffered an “informational injury,” but the court quickly dismissed this argument, finding that they failed to allege any “actual consequences or a real risk of harm” flowing from the lack of information.

The court, however, declined to dismiss the claim that the COBRA notice was not drafted to be understood by an average plan participant. The court found that the plaintiffs had standing because the injury is traceable to the misleading notice because the plaintiffs alleged that part of the reason they did not elect COBRA coverage (and incurred medical expenses) was due to the language in the notice. In considering whether the claim should be dismissed under FRCP 12(b)(6), the court noted that it is “perhaps a close call.” However, the court determined that the plaintiffs did state a claim upon which relief may be granted because it was “not a strictly accurate statement of the law” for the COBRA notice to say that “incomplete information” on an application is a “fraudulent act.” As the plaintiffs’ allegation was based upon a purported misstatement of the law, the court found that the plaintiffs plausibly alleged that the COBRA notice was not written in a way that could be understood by the average plan participant. The court concluded that the defendant’s arguments were more properly pursued in a motion for summary judgment.

This decision is the latest in a string of class action lawsuits alleging deficient COBRA notices by employers. While most of these cases have settled and we still do not have a decision on the merits, the partial denial of the employer’s motion to dismiss here emphasizes the importance of reviewing COBRA notices to ensure compliance with the law.

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

The Faegre Drinker Biddle & Reath LLP website uses cookies to make your browsing experience as useful as possible. In order to have the full site experience, keep cookies enabled on your web browser. By browsing our site with cookies enabled, you are agreeing to their use. Review Faegre Drinker Biddle & Reath LLP's cookies information for more details.