McDowell v. Krawchison

• Citation: 125 F.3d 954
• Decision Date: 17 September 1997
• Docket Number: No. 96-3457,96-3457
• Parties: 21 Employee Benefits Cas. 1689 Terry McDOWELL, Individually and in his capacity as Executor of the last Will of Sharon Sidovar, Plaintiff-Appellee, v. John Raymond KRAWCHISON; Winton Road Chiropractic Center, Inc., Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 954

125 F.3d 954

21 Employee Benefits Cas. 1689

Terry McDOWELL, Individually and in his capacity as Executor of the last Will of Sharon Sidovar, Plaintiff-Appellee, v. John Raymond KRAWCHISON; Winton Road Chiropractic Center, Inc., Defendants-Appellants.

No. 96-3457.

United States Court of Appeals, Sixth Circuit.

Argued June 10, 1997.

Decided Sept. 17, 1997.

Randy J. Blankenship (argued and briefed), Erin A. McKee, Robbins, Kelly, Patterson & Tucker, Cincinnati, OH, for Defendant-Appellant.

Deborah R. Grayson (argued and briefed), Bruce H. Meizlish (briefed), Meizlish & Grayson, Cincinnati, OH, for Plaintiff-Appellee.

Before: KEITH, KENNEDY, and MOORE, Circuit Judges.

OPINION

MOORE, Circuit Judge.

Defendants-Appellants John Raymond Krawchison and Winton Road Chiropractic Center, Inc. appeal from the district court's order entering judgment in favor of Plaintiff-Appellee Terry McDowell ¹ in this action for failure to provide health insurance benefits under ERISA, as amended by the Comprehensive Omnibus Budget Reconciliation Act of 1986, § 10002, Pub.L. No. 99-272, 100 Stat. 227-32 (codified as amended at 29 §§ 1161-1168) ("COBRA"). ²

I. BACKGROUND

At the times relevant to this case, Krawchison held an ownership interest in and operated several chiropractic clinics in Ohio, Kentucky, and Indiana. He owned half of the shares in each of three clinics, and owned all of the shares in the others, including Winton Road Chiropractic Center, Inc. Most of the clinics, including Winton Road, were separately incorporated. Krawchison also wholly owned Michiana Corporation, which provided management services for all of his clinics, such as paying bills (using the separate clinics' own funds), and provided patient transportation for the Indiana clinics. Krawchison followed corporate formalities with respect to each incorporated clinic and did not commingle their funds. The clinics provided health insurance to their employees through Medical Benefits Mutual Life Insurance Company; the plan under which employees of all the separate clinics were covered was obtained under the name "John R. Krawchison Corporation" (that name appeared on the employees' insurance cards). See Joint Appendix (J.A.) at 110 (McDowell's medical insurance identification card), 111-12 (McDowell's insurance certificate and schedule of benefits), 418-20 (employer application for participation in medical benefits plan). Krawchison obtained the insurance under a single plan for all the clinics in order to receive a lower rate (by aggregating the numbers of employees); there was no actual John R. Krawchison Corporation. J.A. at 381 (Krawchison Dep. at 14); see also J.A. at 202 (certification from Ohio Secretary of State that no record of such corporation had been filed with the state).

In late 1991, Krawchison asked McDowell to work for him at the Winton Road clinic in Cincinnati. J.A. at 400-01, 434. McDowell accepted and began work in early January 1992. J.A. at 442. In September 1992, Dr. Dennis Anderson, who had previously worked at the Winton Road clinic, returned to buy the clinic from Krawchison. He terminated McDowell's employment, effective two days later. J.A. at 459. McDowell, whose wife, Sidovar, had breast cancer, wanted to continue his and Sidovar's health insurance. J.A. at 460. Although McDowell claimed that Anderson had assured him that "we" would take care of the insurance, J.A. at 463-64, 478 (McDowell Dep. at 41-42, 56), Krawchison disputed Anderson's authority to act on behalf of either Krawchison or the Winton Road corporation at that point. R. 19, Ex. 2 (Krawchison Aff. p 5). McDowell later asked Susan Porter, the office manager for the Winton Road clinic, if he could continue on the health insurance plan. J.A. at 309. Porter told him that she believed it was possible, but that she would check with Krawchison, which she did. J.A. at 310-11. On McDowell's last day of employment, Porter told him that his health insurance would be continued, J.A. at 466-67; the parties dispute whether Porter told McDowell that he would have to pay the premiums. J.A. at 467 (McDowell Dep. at 45); J.A. at 315 (Porter Dep. at 53). Porter stated in her deposition that she had so told him, and that she also had told him that he should contact Trisha Kincer, an employee of Michiana Corporation who handled the health insurance plan, to find out the amount of the premiums. J.A. at 315 (Porter Dep. at 53). McDowell never contacted Kincer.

Porter also gave McDowell a release to sign, waiving all claims related to his employment against Winton Road Chiropractic Center, Inc. or Krawchison individually. See J.A. at 23. After consulting with counsel, McDowell signed the release.

Neither McDowell nor Sidovar sought coverage for any medical treatment from September 1992 until early June 1993. At that time, Sidovar sought pre-approval for medical treatment and learned that she had no insurance coverage. McDowell and Sidovar filed suit against Krawchison in early 1994 alleging violation of COBRA in addition to several state claims; they later added the Winton Road corporation as a defendant. In July 1995, the district court issued an order denying Krawchison's motion for summary judgment with regard to his individual liability on the COBRA claim, denying the corporation's motion for summary judgment based on its contention that it was exempt from COBRA requirements, denying the defendants' motion for summary judgment based on the signed release, granting the plaintiffs' motion for partial summary judgment based on failure to provide notice of COBRA rights, and granting the defendants' motion for summary judgment as to the allegation of an oral promise to provide continued benefits and as to the state law claims. J.A. at 240-62. After a hearing and stipulations, the court issued a final order in March 1996 entering judgment for the plaintiffs against both defendants. J.A. at 16. On appeal, the defendants base their challenge on the issues of COBRA notice, Krawchison's liability, and the effect of the release.

II. ANALYSIS

On the issue of COBRA notice, the defendants appeal from a grant of partial summary judgment in favor of the plaintiffs. Our review is de novo. Shahid v. Ford Motor Co., 76 F.3d 1404, 1408 (6th Cir.1996). On the issues of Krawchison's individual liability and the release, the district court denied the defendants' motions for summary judgment, and later held against the defendants and entered judgment for the plaintiffs. Because the issues raised on appeal depend on matters of law, review of these issues is also de novo. Delk v. Ford Motor Co., 96 F.3d 182, 190 (6th Cir.1996). We will affirm the decision of the district court if it is correct for any reason, including a reason not considered by that court. Russ' Kwik Car Wash, Inc. v. Marathon Petroleum Co., 772 F.2d 214, 216 (6th Cir.1985).

A. COBRA Notice

COBRA imposes a statutory requirement that a plan administrator notify "any qualified beneficiary" of his or her right to continue health insurance coverage for up to eighteen months after a "qualifying event" (here, McDowell's termination). See 29 U.S.C. § 1166(a)(4) (notice requirement); 29 U.S.C. § 1162 (continuation coverage); 29 U.S.C. § 1163(2) (termination of covered employee as qualifying event). "Providing appropriate notice is a key requirement under COBRA.... If the administrator fails to provide that notice [of triggering of COBRA rights] to the qualified beneficiary, it may be bound to provide coverage to her." Lincoln Gen. Hosp. v. Blue Cross/Blue Shield, 963 F.2d 1136, 1139 (8th Cir.1992). Both plaintiffs in this case were qualified beneficiaries as defined by COBRA. 29 U.S.C. § 1167(3)(A) (defining "qualified beneficiary" as including the spouse of a covered employee, if the spouse was a beneficiary under the plan as of the day before the qualifying event); 29 U.S.C. § 1167(3)(B) (including a covered employee as a qualified beneficiary in the case of a termination other than for gross misconduct or reduction of hours).

It was undisputed that McDowell and Sidovar received no written notice of their COBRA rights. McDowell claimed that he was not informed of his rights; Susan Porter stated in her deposition that she did inform him that he would have to pay his own premiums to continue coverage. J.A. at 315 (Porter Dep. at 53). Because the defendants produced no other evidence to support Porter's version, the district court stated that the evidence was "in equipoise," and that the issue must be resolved against the party bearing the burden of proof--the defendants. J.A. at 255 (Dist. Ct. Op. at 16). Krawchison and the Winton Road corporation point out, however, that the case cited by the district court in support involved a judgment after a trial. See Stanton v. Larry Fowler Trucking, Inc., 52 F.3d 723 (8th Cir.1995). In that case, the court looked to the evidence presented and held that the evidence could not meet the defendant's burden; therefore, the plaintiff prevailed. Here, the district court was viewing the evidence at the summary judgment stage, where the relevant inquiry is whether a material fact is genuinely disputed. As the defendants correctly contend, the district court, faced with conflicting testimony of witnesses, should have left the issue for the factfinding stage, where credibility could be determinative. See Stanton, 52 F.3d at 729 ("The district court determined that the evidence on this issue was in equipoise and resolved it against the party bearing the burden of proof. We are bound by the district court's assessment of the witnesses' credibility and its determination of weight of their testimony."). Had the evidence been in equipoise at the close of presentation of evidence, judgment for the plaintiffs would have been appropriate; however, testimonial evidence that is in equipoise as to a material fact precludes summary judgment.

Nevertheless, summary judgment in favor of the plaintiffs on...