Randolph v. E. Baton Rouge Parish Sch. Sys.

• Decision Date: 30 November 2021
• Docket Number: No. 21-30022,21-30022
• Parties: Kathran RANDOLPH, Plaintiff—Appellant, v. EAST BATON ROUGE PARISH SCHOOL SYSTEM, Defendant—Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

19 F.4th 749

Kathran RANDOLPH, Plaintiff—Appellant,

v.EAST BATON ROUGE PARISH SCHOOL SYSTEM, Defendant—Appellee.

No. 21-30022

United States Court of Appeals, Fifth Circuit.

FILED: November 30, 2021

Nelson D. Taylor, Sr., Esq., Chief Counsel, Law Office of Nelson D. Taylor, Baton Rouge, LA, for Plaintiff - Appellant

Courtney T. Joiner, Esq., Melissa Losch, Esq., Hammonds, Sills, Adkins, Guice, Noah & Perkins, L.L.P., Baton Rouge, LA, Carla S. Courtney, Esq., Litigation Counsel, J. Diamond and Associates, P.L.L.C., Houston, TX, for Defendant - Appellee

Before Higginbotham, Smith, and Ho, Circuit Judges.

Patrick E. Higginbotham, Circuit Judge:

This case concerns whether an employer violated the Consolidated Omnibus Reconciliation Act of 1985 ("COBRA")¹ when it failed to provide a retired employee notice of her right to continue her insurance coverage. This issue returns to this Court following a prior remand to the district court for further consideration of Kathran Randolph's COBRA claims against the East Baton Rouge Parish School System ("EBRPSS").² We reverse the district court's holding that no COBRA violation occurred; we affirm the district court's denial of Randolph's request for payment of her medical expenses; we remand the district court's decision not to award statutory penalties or attorneys' fees to Randolph; and we vacate the district court's denial of Randolph's motion to alter or amend judgment or for a new trial.

I.

Randolph was employed as a teacher and later as a principal by EBRPSS. During her employment, Randolph was enrolled in EBPRSS's self-funded health insurance plan, which was administered by Blue Cross and Blue Shield of Louisiana.

On September 4, 2014, Randolph was placed on paid administrative leave pending an investigation into a complaint against her. Randolph was taken off administrative leave on October 22, 2014, but Randolph used her sick leave to remain on paid leave. On August 13, 2015, Randolph was placed on unpaid leave after she exhausted her sick leave and other forms of leave. EBPRSS paid Randolph's portion of her insurance premiums while she was on unpaid leave until her retirement.

Randolph retired on February 15, 2016. A Blue Cross and Blue Shield of Louisiana report noted that her insurance coverage ended on February 29, 2016. On August 23, 2016, Randolph's insurer paid its final claim. On September 13, 2016, Randolph went to a doctor's office and her coverage was denied. Shortly after this denial, Randolph spoke to Anita Williams, an EBRPSS Payroll and Benefits employee. Williams told Randolph that she owed $2,900 for back payments on missed insurance premiums and $480 per month going forward.³ Randolph received her first COBRA notice in a letter dated October 3, 2016.

II.

On October 5, 2015, Randolph filed suit under 42 U.S.C. § 1983, naming EBRPSS and EBRPSS officials as defendants. After she retired, Randolph also alleged a COBRA violation in an amended complaint filed on November 14, 2016.

The district court granted summary judgment to EBRPSS and the other defendants on Randolph's § 1983 claims. The district court did not substantially discuss the COBRA claim. Randolph appealed to this Court. We affirmed the district court's grant of summary judgment with respect to the § 1983 claims and reversed and remanded for reconsideration of the COBRA claim.⁴

On remand, the district court ruled from the bench that neither Randolph's placement on unpaid leave nor her retirement constituted a qualifying event triggering COBRA because neither change was accompanied by a loss of coverage. The district court ruled that Randolph was not entitled to statutory penalties, attorneys' fees, or payment of medical bills. Randolph filed a Rule 59 motion for the district court to alter or amend the judgment or grant a new trial.⁵ The district court denied that motion. Randolph timely appealed.

III.

Following a bench trial, we review a district court's findings of fact for clear error and its conclusions of law de novo.⁶ Factual findings are clearly erroneous when, although there is evidence to support the finding, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.⁷ The district court's denial of Randolph's requests for statutory penalties, attorneys' fees, and payment of her medical bills are each reviewed for abuse of discretion.⁸ The denial of Randolph's Rule 59 motion is also reviewed for abuse of discretion.⁹

IV.

Congress amended the Employment Retirement Income Security Act of 1974 ("ERISA")¹⁰ with COBRA to create additional statutory rights, including the right to continue health insurance coverage after certain employment status changes. "The intent of Congress in enacting the COBRA amendments was to preserve employees' medical insurance as they move from job to job and prevent the loss of insurance coverage that could accompany any changes in employment."¹¹

Under COBRA, qualified beneficiaries, including employees, are entitled to continue coverage following a qualifying event.¹² A COBRA violation occurs when there is a qualifying event and no notice to the qualified beneficiary of their COBRA rights. 29 U.S.C. § 1163 provides a list of events, including a termination or reduction of hours, that constitute a qualifying event when they cause a loss of coverage.¹³ There must be a "but for" causal link between the qualifying event and the loss of coverage.¹⁴

A reduction of hours "occurs whenever there is a decrease in the hours that a covered employee is required to work or actually works, but only if the decrease is not accompanied by an immediate termination of employment."¹⁵ A termination occurs when the employee actually stops working for the employer.¹⁶ The circumstances surrounding an employee's termination or reduction of hours are irrelevant unless gross misconduct was involved, "it does not matter whether the employee voluntarily terminated or was discharged."¹⁷

A loss of coverage occurs when an employee ceases "to be covered under the same terms and conditions as in effect immediately before the qualifying event."¹⁸ However, "a loss of coverage need not occur immediately after the event, so long as the loss of coverage occurs before the end of the maximum coverage period."¹⁹ The maximum coverage period is generally the 18 or 36 months following a qualifying event.²⁰

Employers must notify plan administrators that a qualifying event occurred within 30 days of the qualifying event.²¹ Plan administrators are in turn required to notify covered employees of their COBRA rights within 14 days of receiving notice from employers.²² Thus, employees should receive notice of their COBRA rights within 44 days of a qualifying event. Failure to provide notice constitutes a violation.

Following a COBRA violation, qualified beneficiaries may bring civil actions to recover benefits under the health insurance plan and to seek relief including a civil penalty of $110 per day.²³ Qualified beneficiaries bringing a civil action can also recover attorneys' fees at the discretion of the court.²⁴

V.

Randolph argues that both her placement on unpaid leave and her retirement were qualifying events under § 1163. We affirm the district court's holding that the placement on unpaid leave was not a qualifying event; we reverse the district court's holding regarding Randolph's retirement and find that her retirement was a qualifying event and insufficient notice was given following her retirement.

A.

Randolph first argues that a qualifying event occurred when she was placed on unpaid leave on August 13, 2015. The district court correctly held that Randolph's placement on unpaid leave was not a termination, but the district court failed to consider whether the placement on unpaid leave was a reduction of hours. Randolph's placement on unpaid leave at the exhaustion of her sick leave was a reduction of hours, a potential § 1163 qualifying event, as her hours were effectively reduced to zero and her pay was terminated.²⁵

However, no loss of coverage was caused by this reduction of hours, so the placement on unpaid leave was not a qualifying event under COBRA.²⁶ A loss of coverage occurs when the employee ceases "to be covered under the same terms and conditions as in effect immediately before the qualifying event."²⁷ Randolph's placement on unpaid leave only affected her hours and pay. It did not alter the terms of her coverage; she was allowed to continue her health insurance at the same rate. While the placement on unpaid leave was a reduction of hours, it was not a qualifying event because it did not cause a loss of coverage.

B.

Randolph also argues that her retirement was a qualifying event. Randolph's retirement was classified by EBRPSS as a separation of service and was a termination under § 1163. Retirements, as terminations, are among the changes in employment status that COBRA was intended to cover when the retirement causes a change in insurance coverage. When an employee retires and, upon retirement, is required to pay an increased amount for the same health coverage that the employee had before retirement, the increase in the premium or contribution required for coverage is a loss of coverage and the retirement is a qualifying event.²⁸ A loss of coverage is not necessarily when coverage ends; a loss of coverage occurs when the terms and conditions of coverage change.

Randolph experienced a loss of coverage when she retired as she was no longer eligible to continue her health insurance at the same contribution level. Rather than paying approximately $200 per month as an employee, Randolph was required to pay $480 per month to continue coverage as a retiree. The district court correctly concluded that COBRA does not require that an employee be allowed to pay the same contribution rate.²⁹ However, a change in the contribution level triggers the notice requirement.³⁰ Employers may change an employee's contribution rates for health...